Gerald Ogier has found that in every business cycle there is a development cycle, and within that there is a boom and bust period in which companies stop and start building new product.
That type of investment theory has continued the stop and start cycle which has been seen throughout every economic recession. Ogier, however, discovered that "if you could develop counter to that cycle – basically build new product and acquire land when the cycle was down ... you could enjoy the benefits of that reverse cycle," says Ogier, president of ContraVest Inc., a multifamily developer, owner and manager. So, Ogier and his original partner, John McClintock, formed the company under the contrarian investment philosophy – in other words they would invest countercyclically.
"We felt that there was a tremendous herd mentality that existed within our industry, primarily on the part of our institutional investors," he explains. "But, we found that if we could convince the investors to invest countercyclically, there were great opportunities when things were out of favor."
While some in the real estate industry might call this philosophy risky, the company, which was formed in 1986 and is based in Heathrow, Fla., has successfully developed more than 18,000 units in six states – Arizona, Colorado, Florida, Georgia, North Carolina and South Carolina – for its own account and for third-party clients.
Stay in the Game ContraVest's philosophy stems from the belief that by purchasing land during a down cycle, the company will be able to get cheaper prices. But the real key to being successful in the real estate business is to continue to be an active player, says Ogier. The company plans to continue to be a consistent participant. Waiting for the perfect time to participate is a good excuse and perfect rationalization to remain stuck where you are. ContraVest won't do that, says Ogier.
To succeed with this strategy, it's crucial that developers believe in the long-term viability of the U.S. economy and the housing market, explains David McDaniel, executive vice president in charge of development and construction at ContraVest.
Trying to do a deal as the real estate cycle is changing is as hard as trying to time the stock market, explains McDaniel. "It's extremely difficult to be successful [that way]. If a market is struggling and you believe the market will turn, the question is when. If you get in and stay in over a steady period of time you will be successful. You may not hit a home run every time, but you will hit a lot of singles, doubles and triples, and, eventually, you will hit a couple of home runs," he says.