THE HEADLINES AT THE END of 2008 were scary. Citigroup shelved 50,000 jobs. The Big firee auto makers came to Capitol Hill begging for a saving grace. And economists speculated that unemployment could pass the 10 percent mark if the layoffs continue.
But the issues that ignited this crisis began in real estate, and while multifamily may still be the best sector, it hasn't been untouched. Many companies, especially those with large development platforms, have eliminated jobs. And the bottom line is that your employees know what's going on. “These are not the times when people are feeling happy, energized, and content,” says Greg Mutz, CEO for AMLI Residential, a Chicago-based apartment owner and developer with 23,500 units.
In fact, Larry Connor expects that kind of reaction. “If they weren't nervous, I'd kind of wonder how they're self-medicating,” jokes the CEO of Dayton, Ohio-based apartment owner and manager The Connor Group. “That's human nature and it's understandable.”
While it's impossible for executives to totally allay these fears, there are things they can do to ease tensions in what looks to be a brutal 2009. “You have to communicate, communicate, communicate,” Connor says. “This is where leadership has a responsibility to get out there and talk to people.”
Your message is important as well. You have to be realistic but not dour. “You don't want to be a Pollyanna, and you don't want to try and fool yourself or anyone else on your team. But you also won't do the organization any favors by being depressed all of the time,” Mutz says.
Often, the communication starts with how you handle employees who are losing their jobs. “People talk about over communication,” says Bill Donges, CEO of Lane Co., a multifamily owner and builder based in Atlanta that has had to cut about 75 jobs this year. “You have to do so with these people.”
Frank Apeseche agrees. The CEO at Boston-based Berkshire Property Advisors has reduced his firm's workforce by about 3 percent this year. “If you're honest and communicate early, the ability of people to handle bad news is very impressive,” he says.
It's also important to address the concerns of those who remain in your organization. Multifamily executives are using a number of avenues to deliver their message. In the past, Connor has used Webcasts. He and Donges have also relied on holding town hall-style meetings with employees. “There are no topics that are off -limits,” Connor says. “We talk about whatever they want to talk about.”
Donges and Christy Freeland, CEO of Dallas-based Riverstone Residential Group, a multifamily fee manager with nearly 200,000 units nationwide, also communicates with middle managers. Apeseche, meanwhile, makes sure his entire senior team interacts with employees. “We make it a point for our senior executives to go out and see as many properties as possible each quarter,” Apeseche says.
Despite the gloomy picture, Donges sees one silver lining in tough times such as those he anticipates in the coming months: He knows who his performers are. “You find out who your really good people are during bad times,” he says.
And, you'll want many of these people to stick around when the market comes back—after all, bad times don't last forever. “You always need to hold your core team—multifamily is still the best product type,” says Ron Terwilliger, chairman and CEO of the country's largest multifamily builder, Atlanta-based Trammell Crow Residential.
RIVERSTONE RESIDENTIAL GROUP
No, they're not on steroids. But Riverstone Residential Group, which formed in January 2006, is definitely pumped up. Through acquisitions and organic growth, the Dallas-based firm increased its portfolio 250 percent in 2007 and 2008. Now, as things slow, so will their growth. “I think we will still buy based on the right opportunities,” says Christy Freeland, the company's CEO. “I don't think we'll do it at the same rate as the past couple of years.”
Still, the company will remain opportunistic. Instead of buying other platforms, for instance, it will try to grow organically as well as via distressed opportunities from lenders.
Despite having such a large organization, Freeland talks regularly with senior leaders, who are expected to be open with associates. “Doing budget reviews this year, I took the opportunity to meet with regional managers, vice presidents, and directors to remind them that this is a different time and opportunity,” she says.