Kevin Timochenko wanted Wyomissing Gardens badly. He wanted the 156-unit property in Reading, Pa., so badly, in fact, that he offered the Department of Housing and Urban Development $2.2 million for the complex. But, after the agency made a last-minute request for $200,000 in back property taxes as a condition of the deal, Timochenko pulled out. Six months later, Timochenko got a second chance when HUD put the property up for auction. Timochenko joined the bidding from the beginning and, when the property hit $1.3 million, his competition bowed out. "I was thinking I would never get this place. Besides the birth of my children, that was the most exciting day in my life," says Timochenko, president and founder of Metropolitan Management Group, a Reading, Pa.-based company that buys and repositions properties.

It was also an exciting day for his business. The acquisition of Wyomissing Gardens in 1995 doubled MMG's size. The purchase, Timochenko's first of a building with more than 100 units, also represented a huge change for the entrepreneur, who had done everything from repairing properties to giving tours. By purchasing Wyomissing Gardens and other bigger properties, he knew he would be lifting his business to a new level. No longer would he be able to work side-by-side with his people at the property level. Instead, he would need to make executive decisions and rely on senior managers to filter the company values through the ranks. He would also need to decide how much control the central office would exercise over the daily operations of each property.

Kevin Timochenko President and founder Metropolitan Management Group.
Kevin Timochenko President and founder Metropolitan Management Group.

As Timochenko continues to grow, he has encountered other obstacles, a big one being finding affordably priced properties. This is a problem for other growing companies, as well. For some, the best way to expand has come through acquisitions. Others have captured a product and operating niche that generates regular capital for reinvestment and growth. Still others have chosen organic growth, a route that offers its own rewards and challenges. But even after finding avenues for growth, many small companies must deal with competing motives. And, often these decisions pit long-term growth versus short-term gain. Do they build and hold their properties or do they build and sell them so they can turn around and build even more? If they have a broker's license, do they complete their own deals and save money, or do they work with brokers and cement long-term relationships? The correct answers to these questions can help lay the foundation for long-term growth, as the companies highlighted here are discovering.

Brokering Relationships Like MMG, MBK Management Corp. in Calabasas, Calif., buys and repositions properties. But the company, which has six employees, faces a different growth challenge: acquiring properties in the competitive Southern California market. A lack of land to build on, combined with low interest and low vacancy rates, has rocketed acquisition prices into the stratosphere.

"Everyone out here thinks they have gold right now," says president Mark Kanter, whose portfolio numbers about 900 units. "The deals that are available are so overpriced that they don't make sense. If a deal does hit the market properly, there can be multiple offers, making it difficult to buy."

To improve his chances, Kanter has developed good relationships with brokers. He is one of the first people brokers call when new properties come on the market, which has helped him grow his company from 100 units to 900 units in the past eight years after he bought his first property in 1994. His secret: Be an easy buyer. That means he makes large deposits, has short contingency periods, and has a history of not renegotiating deals. "He may be the easiest buyer I work with," says Greg Harris, a vice president of investment at the Encino, Calif., office of Marcus & Millichap, a multifamily broker. "He was a broker himself, and a lot of his friends are brokers. He knows the kind of crunch brokers are under."

Kanter also lives up to his promises, which is important to brokers. "If he puts something under contract, he'll close," says Victor Tashkoff, a loan consultant with the Santa Monica, Calif., office of Washington Mutual, one of Kanter's lenders. "If you're a broker and you take a deal to someone, you want them to close."