Legacy might seem like a presumptuous name for a company that only was formed in 1998. But, when the founder and CEO has more than 30 years of experience, it seems a fitting title.
For C. Preston Butcher and the original team members of Legacy Partners Residential Inc., a division of Legacy Partners, the name represents the past. But, for the younger employees, the name represents the future.
Either way you look at it, Butcher has been able to put together a team to continue the tradition of high-quality multifamily housing, which he began in 1967 at Legacy's predecessor, Lincoln Property Co. Legacy Residential has changed from building assets and owning them for the long term to building assets and owning them for a relatively short term – less than 10 years. Now, the company is a merchant builder, which has developed more than 55,000 units in high-barrier-to-entry markets on the West Coast – Arizona, California, Colorado, Nevada and Washington.
Butcher has built a reputation for knowing the business and the markets, says John Stuart, senior executive vice president and chief lending officer at Guaranty Bank, which has worked on several deals with the company. "[It has] a reputation to deliver high-quality product," he says.
Butcher's experience and Legacy's current development strategy is the reason why he and Legacy Residential was chosen as the 2002 Multifamily Executive Builder of the Year.
Steady Ahead While the company's goal is to build an average of $250 million in units per year, it recognizes that 2002 will be a slower year. In off years, some development companies may start only about $100 million in units. Then, in a better economy, they try to make up for it by starting $500 million. Legacy, however, plans to avoid the peaks and valleys in building by maintaining a steady number of development starts, says Dean Henry, president of Legacy. "When you start doing more than you are capable of doing you'll make mistakes," he says.
In addition to mistakes, peaks and valleys cause staffing problems, says Butcher. "When you staff for $500 million, eventually you'll have to trim back to your normal size and lay people off," he says.
And Legacy doesn't want to get involved in that cycle. "Our business is really driven by two things – job creation and competition," says Henry. "The amount of competition being built in a market is far more important to us over a longer period of time than job creation."
The reason for this is because in the markets in which Legacy builds, it takes a considerable amount of time to put a deal together, sometimes as long as four years, says Butcher. "Because it takes so long from the time you contract for the land to the time you have units available to lease, it means you can't predict starts and you can't predict job formation," he says.
One of the reasons Legacy can continue to build at the same pace without these limitations is because there isn't adequate housing being provided in the markets that the company develops.
For example, in Los Angeles County, where Legacy is doing most of its work in Southern California, the construction of new apartments has clearly not kept pace with new job growth.
"I would maintain that a company with a building program should start X number of units every year, regardless of the economy. Because, as you begin these projects, you're looking out two, three, four years ahead," says Butcher. "So, you don't have the ability to predict competitive starts or job formations, which means usually if you have a recession ... you may have a year in which leasing is slower than normal. But, over a 10-year period, or a seven-year period, it's not significant."