Click here to download the 2007 Top 50 Multifamily Managers chart (PDF).
In the world of multifamily deal-making, everyone in the industry focuses on the owners, as they sell this property and buy that one.
But in 2006, multifamily managers got into the act, with about half of the MFE Top 50 managers growing their management portfolios. Fee managers pursued new business and even purchased smaller companies. (In April 2007, CAS Riverstone announced it had bought fellow MFE Top 50 manager Stratus Real Estate, which added more than 20,000 units to the Riverstone portfolio.)
Five newcomers joined the list. These growing companies relied on a range of opportunities, from third-party relationships to niche markets.
Among those firms, JPI of Irving, Texas, registered the biggest leap. Last year, the company didn't even qualify for this annual list of the country's largest multifamily managers, but this year, it soared to No. 29, thanks to a 139 percent hike in its management portfolio. That's what happens when you land a major deal, which is what occurred at JPI, thanks to somewheeling and dealing by JPI Divisional President and Managing Partner JoAnn Blaylock. “What turned the corner on our management is that we were named preferred managers by RREEF Residential,” Blaylock says. “It was quite a jump.”
How did JPI win the deal with the big institutional owner? “RREEF saw us putting investment into people and technology,” Blaylock says, explaining the impetus behind the arrangement. “We were in the same markets already, our culture and philosophies aligned, the stars just lined up, and it was a good partnership for both organizations.”
JPI also secured 16 additional third-party relationships in 2006, further boosting its management portfolio to more than 30,000 units.
Michaels Development of Marlton, N.J., also moved up on the list through a strategy of capitalizing on niche markets such as military and affordable housing. (Michaels also develops such properties.)
“We find that the demand for affordable, workforce housing is just incredible and getting bigger and bigger every year,” says Michaels Development President Bob Greer, who credits that demand for the company's surge in management business. “We're doing 17 Hope VI developments around the country,” he says.“Many of those which have finally been financed and completed went to full occupancy, and that increased our management.”.”
Military privatization deals helped too, and Michaels portfolio grew by to 30 percent, vaulting it into the top 20 on the Top 50 managers list.
Other multifamily managers had a tougher year. A sizable percentage of this year's MFE Top 50 managers saw their unit count either hover at 2005 levels or drop significantly. Lane Co.'s portfolio shrank by about 25 percent. Gables, GMH, and AMLI also dropped units, each by more than 20 percent from 2005. More than a handful of other managers reported a dip in portfolio size as well.
Lane Co. CEO Bill Donges blames an active selling environment for the management slowdown. “In 2005 and 2006 it was definitely the time to sell,” Donges explains. “Lane sold a significant number of units—which affects our management portfolio.”
Third-party clients were also “hyperactively selling,” Donges says. “When you have -party clients selling, you aren't guaranteed you're going to be kept on as management.”
Lane plans to change that direction this year in an effort to become a premier acquisition company through the newly formed Lane Strategic Investments.
“We're starting to buy back properties this year,” Donges says. “We'll clearly be over 30,000 units by the end of the year, if not sooner.”
As for JPI, Blaylock says the company is just getting started. RREEF plans major acquisitions in 2007, which is expected to translate into even more management business for JPI. By 2009, Blaylock expects the company to manage between 90,000 and 100,000 additional units.
Mikaela Bufano is a freelance writer in New York.