Bryce Blair has a plan to house nearly your entire family. For your kids who've just left college and gotten their first jobs, the chairman of the board, CEO, and president of AvalonBay Communities offers economical AvalonBay studios and two-bedrooms in some of the hottest markets in the country. For your adult children, who may be married with good jobs, he has bigger apartments and townhouses in places where buying a single-family home is very expensive. Finally, for your retired, fun-loving parents who want to be free from home maintenance at last, he has spacious rental units near golf courses and other amenities.
Blair, MULTIFAMILY EXECUTIVE's 2004 Builder of the Year, wants AvalonBay, which brands all of its properties with the Avalon name, to eventually be like auto manufacturers, providing different levels of luxury. “BMW has the 3 Series, 5 Series, and 7 Series, and you move up the food chain as your life changes,” he says. “We hope to be able to capture people when they're 23 in a studio apartment with basic finishes, 28 years old when they're married and move up to a two-bedroom, and we hope to capture them as empty nesters.”
AvalonBay meets the needs of these renters with a simple plan: It focuses on 16 economically diverse and predominantly coastal cities around the country. Inside those markets, it builds a wide variety of products that not only fit the tastes of a changing demographic but also dovetail with the expectations and architecture of each community. The company does this through a decentralized approach, where local developers, who know the pulse of their markets, make many of the key buying and development decisions.
This approach has paid off handsomely during the past few years. In 2002, AvalonBay's stock price was $38. Late this fall, it stood at roughly $70. The company generated $105.7 million in net income last year (as of September's end) and boasts a $3.1 billion development pipeline. “These guys stack up very well,” says Craig Leupold, an analyst with Green Street Advisors in Newport Beach, Calif. Though AvalonBay assets achieve yields comparable to the company's competitors, “they are in high barrier-to-entry places so they tend to garner higher cap rates,” Leupold says.
From the Ground Floor Up
With his Harvard MBA and CEO suits, Blair mixes well with Wall Streeters and other finance types. But he started on a very different side of the business, earning his undergraduate degree in civil engineering from the University of New Hampshire. He put both those credentials to use at Trammell Crow's Boston office, where he began working in 1985. “I really liked the physical act of creating things,” Blair says. “The idea of creating physical space where people could live definitely motivated me.”
Once at Trammell Crow, Blair got his orientation to the multifamily business from David Dressler, who hired him, and industry icons Richard Michaux and Ron Terwilliger. “It was a great ground-floor opportunity,” Blair says. “It was an entrepreneurial opportunity. Trammell Crow fit all of my goals.”
And Blair took advantage of the experience, building condos and apartments in the 1980s. As the public markets became attractive for multi-family companies, Trammell Crow spun off its Northeastern and Mid-Atlantic divisions in 1993, creating Avalon Properties, where Blair became senior development director. When Avalon merged with West Coast counterpart Bay Properties in 1998, Blair took over as head of development and construction for the newly formed AvalonBay Communities.
As Blair moved up, Michaux was giving the young executive increasing responsibilities, including more exposure to the investment community and the company's board. “Dick was grooming me before I knew I was being groomed,” says Blair, who became president in 2000. “By the time I was named president, the wheels had already been in motion. It was a seamless transition for the company and the investment community.”
Recession Response But no training program could have prepared the new CEO for 2001. The recession was beginning to hit, resulting in huge job losses in AvalonBay's markets. Then came 9/11 and the low-interest-rate craze that boosted home-buying while depressing renting. “Early on, I was a little shell-shocked by the weakness of the economy, the loss of jobs, and the weakness in our markets,” Blair admits.
But Blair soon realized that he and his senior leadership couldn't dwell on factors—such as job losses in their markets—that they couldn't control. “They've learned that no matter how hard you try, you can't buck what's going on the broader markets,” analyst Leupold agrees.