In the past two weeks, three large apartment companies have made major announcements that could have wide-ranging implications across their portfolios.
Hunt, LEDIC Ink Deal
On Jan. 7, El Paso, Texas-based Hunt Cos. announced that it had made a “strategic investment” in Memphis-based LEDIC Management Group. LEDIC CEO Pierce Ledbetter wouldn’t disclose the percentage of ownership that Hunt has acquired, but said it was “significant but not controlling.” He also insisted that the company didn’t need the investment to stay afloat. Instead, he wants to keep pushing the company’s frantic growth pace. (LEDIC has added units to its portfolio each of the past four years, pushing it to the No. 46 spot in Multifamily Executive's 2010 ranking of the industry's Top 50 Managers.)
In the next three to five years, Ledbetter wants to push even more to reach 10,000 units in each of the 10 regions he’s targeting around the country. That would put the company well above 100,000 units, moving it into the Top 10 on the managers list. The nearly 40,000 units that Hunt owns (according to its most recent Top 50 filing), along with the additional units that its TRECAP Partners manages for 30 institutional investor clients, provides that opportunity. The capital infusion from Hunt will help LEDIC grow its technology platform by investing in anti-crime systems and compliance systems for affordable housing.
“Hunt Cos. made a strategic investment in LEDIC to help us with that platform,” Ledbetter says. “They’re helping us expand.”
LEDIC says it was interested in the partnership with Hunt because of its administrative, treasury and financial services, and growth capital. Hunt Cos.' affiliates represent key elements of LEDIC’s core client types, including affordable housing clients, institutional clients, and development clients.
LEDIC could manage for Hunt “when and where it makes sense,” Ledbetter added.
Security Expands to New Platform
Speaking of property management, Seattle-based Security Properties got out of the property management business in 1993. But this week, the firm re-entered the operational arena when they announced the formation of Madrona Ridge Residential, which will be an affiliated business of Security.
Security’s aim in launching the company is to take on management of its wholly or partially owned properties or assets that it manages for partnerships in-house.
“Where Security Properties has a controlling interest, those are properties we would look to bring in-house,” says Gail Duke, managing director of Madrona. “By the time we assume those properties, it would total approximately 6,300 units. Nothing is a sure thing, but we feel confident that our investors and partners will approve this. We’ve begun to go about gaining those approvals.”
The transition to Madrona will phase in over 2011, according to Duke. She says the competitive fee structure in the property management business means that Security won’t save a lot of money by managing itself. But there are other benefits.
“Security Properties closely manages its properties from an asset management standpoint,” Duke says. “I think this gives them better real-time information and closer proximity to residents and day-to-day operations of a property so they can make better business decisions for the properties.”
Duke admits there aren’t plans to expand outside of Security’s portfolio right now. “There will always be properties that are outside of that, where we are investors but we don’t have controlling interest,” she says. “Our goals would be that we provide such outstanding service to those people that were already partners with that they would translate us into more. But we have to earn that.”