Since beginning his career in 1991 with Seattle-based HSC Real Estate, Pål Ottesen has built a reputation for multifamily operations and administrative management based on the power of personnel who are invigorated to come to work and succeed. When HSC was purchased by Dallas-based Riverstone Residential Group in 2008, Ottesen took over as chief operating officer of the firm’s West division and assumed the role of chief administrative officer for the entire company.
This month, he was officially appointed CFO (he remains CAO as well), a position that comes at a time when apartment markets across the country—and many of Riverstone’s fee management clients—are in full recovery mode and looking to push rent fundamentals to new heights. Ottesen stopped by Multifamily Executive this week for an exclusive interview on employee empowerment, portfolio renovations, and spending money to make money.
MFE: Congratulations on your appointment to the CFO post at Riverstone. Considering your experience as both a CAO and COO on the operations side, what are the top capital needs right now at the community level?
Ottesen: There’s no question that one of my strengths is having been in the business at the operational level as long as I have, versus someone who has CFO experience but not industry experience. At the property level today, the needs are almost everything because we have had zero spend in the last three or four years. Across our portfolios, our clients are starting to see a pop in rents on properties that are in good shape, and we also have clients that have deferred maintenance for several years and need roofs, paint jobs, parking lot resurfacing, and even structural repairs because they were forced to get through the recession with as little as they could get away with.
MFE: So you think there are broad opportunities in addressing deferred maintenance?
Ottesen: Yes. That’s where I see strong capital needs for the next couple of years, and clearly our renovation experience will come into play there. We retained our regional maintenance managers despite not having as strong a need for them over the past few years. But our clients are starting to rely on their expertise and services again, and that is a huge advantage for us over those firms that had let those maintenance people go over the past several years because there was not a high need for those services.
MFE: Will increased rent fundamentals translate to better fee management margins?
Ottesen: I think everyone in property management saw decreased margins over the past several years. We saw our fee go down, not just as a true dollar figure but also as a request to take a cut in the percentage that we were getting, and in some cases, those decisions were really hard to make. Some were made with an understanding that the fee percentage would be raised or somehow made up later. We’re certainly not being asked to cut our fees anymore, and we are also seeing those players in the market that are traditionally low bidders not winning out business without having a full complement of services like we do. One of things we are trying to do is distinguish ourselves from the rest with higher, different, and more plentiful levels of service. If you want it, we can provide it. That comes, understandably, with a price.
MFE: Are you ready to spend money to invest in those service capabilities?
Ottesen: We have added most of our available resources to the property level over the past several years. We are trying to hire highly trained professional marketing people to help the property managers and regional managers market and sell their properties. We’ve also partnered with several different vendors to develop a true online leasing product where you can go through the entire rent process in your living room and the only thing you have to do is come in and pick up the keys. No visits, no printing. That has taken us a long time and a lot of our vendors were very challenged by the initiative. But that’s where we have invested time and money over the past several years: talent retention and the addition of extra talent and capabilities in the marketing part of our business. That was not an inexpensive proposition, but I think it is going to pay off.
MFE: Will investments in employees and site-level operations define your tenure as Riverstone’s CFO?
Ottesen: Wow, that’s a big question. I’ve always been with firms that take pride in having people that want to work for you and weren’t just there because they needed a job. You need to create an environment where people enjoy coming into work. Without that, I don’t think you get the necessary loyalty that you need when people move around from job to job a little bit more easily than they do today. What I do is to support that by providing the best services through accounting, through IT, through whatever falls under my responsibility, and that’s where I think my experience form the operations side helps. It’s not the end-all, but it certainly helps that I understand the property management side. And hopefully I’ve got some time to pull all of that together.
Editor's note: Look for part two of our exclusive interview with Pål Ottesen in the September/October issue of Apartment Finance Today magazine.