For 42-year-old John Korman, president of Korman Residential Properties Inc., continuing the tradition of growth in the family business is paramount. As a fourth generation leader, he has taken on the role of maintaining the reputation that his great-grandfather began in 1919.
While Korman Residential, an offshoot of Korman Co., concentrates its business on the management and ownership of more than 7,000 apartments, the company's reputation stems from the single-family market, for which it has developed 30,000 homes in the greater Philadelphia area.
Maintaining growth and quality through acquisitions and development has been a challenge, especially with current economic pressures and the lack of available land in the area. But John Korman and his 35-year-old brother, James Korman, executive vice president, found an alternative way to grow the company – the brothers expanded the company's third-party management service, extended-stay options and relocation service. "We're not just going to grow for the sake of growth, because that's when you get yourself into trouble," says John Korman. "We've seen it too many times. We're going to stretch, absolutely, but we're not going to go overboard."
Alternate Solution In 1970, Korman Co. pioneered the concept of the furnished apartment in the Philadelphia market, says John Korman. It began with the Plaza Apartments, a high-rise apartment complex in Center City Philadelphia.
When the building opened, the leasing agents found there was a need for short-term furnished apartments, and the concept was born. It was so successful that the company decided to implement the plan in its Philadelphia suburban markets.
Through that community – which later was sold and converted into a hotel – the family learned the pros and cons of corporate housing. "We made some mistakes along the way, but ... it allowed us to develop systems which we still use today, making sure that [we] are really providing the best furnished apartment [we] can," says John Korman.
And while the company has been providing extended-stay options in its apartments since the '70s, Korman Residential, under the leadership of the two brothers, has expanded that segment of the business.
The key to integrating extended-stay units into market-rate apartment complexes is managing the flow of residents that occupy the units, says John Korman. "You have to have good systems [to] do it properly. With our current portfolio of apartments, one of the things that we do well is manage the flow." The company's systems allow a unit to be rented unfurnished on an annual basis and, the day the lease ends, converted into a furnished apartment. Thirty days later, that same unit can be converted back to an unfurnished unit, depending on market demand.
"Managing the flow through changing seasons, the changing economy and the property's submarket is one of the key things that we do which really makes us darn good apartment managers," says John Korman.
While the advantage of offering extended-stay is obvious – an increased revenue stream – the disadvantages are not so apparent. Furnished apartments compete with hotel rooms. While the company believes it has an advantage – hotels have higher per-day costs and Korman Residential offers a full apartment suite, with a living room and a full kitchen – it's also a greater risk.
"If you don't have that unit filled, you lose a lot of money," says John Korman. To avoid vacancies, the company manages lease expirations. During certain times of the year, furnishing has great demand, he explains. For example, Meadowbrook, a 532-unit community, is a popular summer place because it has an 18-hole golf course. Repeat customers may live in Florida during the winter months and stay at the property in a furnished suite during the summer.