There’s a new No. 1 player on the Top 50 Managers list. By adding 36,041 units in 2010, Charleston, S.C.–based Greystar moved past its third-party, fee-managed competitors—Dallas-based Pinnacle (No. 3) and Dallas-based Riverstone Residential Group (No. 2)—to become the largest apartment property manager in the land.
Pinnacle and Riverstone had taken the top two spots on the 2009 and 2010 lists (Greystar was third last year). But both companies shed units in 2010, with Riverstone shedding 10 percent of its units to land at 162,182 last year, and Pinnacle dropped nearly twice that, selling off 18 percent of its units to come in at 151,367 in 2010.
For Riverstone, the reason was the economy, though CEO Walt Smith is quick to point out that it wasn’t necessarily his company that had issues. “The main contributor was we resigned on a number of properties in the early part of the year that were having financial difficulties,” Smith says.
Pinnacle had similar reasons for its unit count decline. For one, it sold some of its military business to its financial partners. Second, “the decrease in our unit count is attributed to a shift to quality versus quantity,” says Rick Graf, president of Pinnacle. “We are very focused on increasing our roster of quality institutional clients. As part of this effort, we shed some business that does not fit our long-term plan as a company.”
In fact, now that several management firms have cleared out problems with troubled owners, they can focus on revenue growth in 2011. With acquisition and development picking up, there will be ample opportunity for third-party managers—as well as smaller operators—to gain mass. What’s more, these companies will finally be poised to take advantage of a rising rental market.
Ready to fill the top spot left by Pinnacle and Riverstone was Greystar, which jumped a whopping 24 percent from 151,319 units to 187,360 units in 2010. That was after making a more modest 5 percent leap the year before. Andrew R. Livingstone, an executive director for Greystar, attributes the growth to acquiring Seattle-based Glacier Real Estate Services; winning the management contract of Irving, Texas–based Archon’s portfolio; and making a private-label deal for an owner on about 15 properties. Greystar also saw growth in its bank and agency client portfolios during 2010.
Other companies further down the manager list jumped as well in 2010. Folsom, Calif.–based FPI Management (No. 11) grabbed 3,000 units, pushing it up two spots on the list. The growth came as FPI expanded its presence in Southern California and ramped up in Washington state and New Mexico. “Our growth is expanding in additional geographic areas,” says Dennis Treadaway, president of FPI Management.
After gently making its way onto the list last year at No. 42, The Laramar Group, based in Greenwood Village, Colo., catapulted 18 spots this year to No. 24. Picking up units from special servicers, as well as entering new locales, such as Manhattan, fueled Laramar’s growth from 29,508 units to 40,521 units. Though some managers are concerned about the long-term sustainability of managing units for special servicers who will eventually sell, Laramar CEO Dave Woodward says he’s getting a lot of business from the eventual buyers of the properties. “We think we’re in the early stages [of getting units from servicers],” he says. “For the next couple of years, we’ll add more than we subtract.”
Going forward, the big guys will get bigger. Greystar expects to add more units in 2011, thanks to the growth forecast in the new development sector. “We’re working deeply with developers to get their sites underwritten and get them capitalized,” Livingstone says.
Smith thinks Riverstone is primed to add units as well, adding that the company has worked through the backlog of issues with problem owners in its portfolio and also has developers asking his team to look at new deals. “We’ve started to see land plays and started underwriting a lot of apartment sites for developers,” he says.
But established players know that they need to look over their shoulders—start-ups can join the field at any time. If there’s any facet of the multifamily industry where companies have added units quickly, it’s in management. But Livingstone thinks technology and systems (which only owners of a certain size have the capacity to add) will make it harder for smaller operators to catch up. “We can attract top people and give them the top tools and technology,” he says. “That’s where smaller operators continue to fall behind.”
Despite the word of caution, there are plenty of companies out there shooting for the Top 50. For instance, Irvine, Calif.–based Western National Group just missed the survey with 23,338 units, but it has added more than 500 units this past year and is aiming for the list next year by growing in the West. “Some firms have long-term clients and continue to do what they normally do,” says Laura A. Khouri, president of Western National Property Management. “I find that the clients require a little more attention. We took over entire portfolios because management wasn’t fulfilling their needs. That’s where our opportunities were.”
And that’s why top manager Greystar should continue to stay on its guard. In this business, there’s always somebody ready to take away your growth. [M]