Admitting that something is wrong and you need to make improvements is a hard thing for any executive to do. Yet Thomas W. Toomey, president and CEO of United Dominion Realty Trust (UDR), one of the largest multifamily real estate investment trusts (REIT) in the country, comes by it naturally. He has a vision for a leaner and more focused company and a plan in place to get there.
Toomey wants to return UDR to the prominent position in the industry it once enjoyed. In its hey day, UDR was a model company that executives from other companies would study, especially when they wanted to know how to form a REIT. "People don't recall that this company was a leader in the industry," says Toomey.
"When you wanted to become a REIT in the early '90s," Toomey recalls, "you went to talk to John McCann [the former CEO]. To return the company to that prominence when people say, if you want to know how to run apartments go talk to the team at UDR – that's where we are headed. We are not going to be the company that does the big mega deals. We are not going to be the consolidators. We are going to be the company that knows how to run apartments – and runs them better than anyone else."
While UDR has already started to implement an operational strategy to help it reach its goals, the company faces a long road ahead. The long, hard journey was part of what attracted Toomey to the company. "Certainly the challenge had a lot of appeal," he says. "We had a chance to make an institution – a quality company – rise again to be the leader in the industry."
The Road Ahead When Toomey took over in January 2001, the board of directors felt shares of the company were undervalued. They had to make the decision: Sell the company or to bring in new leadership, explains Rod Petrik, managing director and senior analyst following apartment REITs for Legg Mason Inc. "Prior to Toomey joining the company, UDR made a number of mistakes – several ill-advised mergers," says Petrik. "I don't think they did a good job of integrating the companies and portfolios that they merged."
Petrik is not alone in this performance evaluation. "Prior to the new management team, [the company] was always a below-average operator of multifamily assets, with no coherent strategy for operating, adding, and disposing of assets," says Robert Stevenson, equity research analysis at Morgan Stanley. "The [company] now has a fairly coherent strategy and is executing it in a decent manner."
UDR's long-term strategy hinges on operational excellence, says Martha R. Carlin, senior vice president of operations at the company. Its focus is streamlining processes and procedures and linking performance evaluation to meaningful and measurable goals. In Toomey's mind, that means consistently adding value to each property owned by UDR. It doesn't mean running out and buying a lot more buildings.
"When we can buy [a property] and run it better than the last guy and create value, then we might look at being a net buyer of real estate. But today, if you were to distract our team and say, 'guys let's start buying real estate or let's start buying companies,' we would stumble and we would fail. I want to stay focused on fulfilling the operations. When I look at this business, it's a business that we could run better than what we do today."