In the REIT world, where the message is usually controlled and changes are anticipated well in advance, this week’s announcement from Arlington, Va.-based REIT AvalonBay Communities that its chairman and CEO Bryce Blair would retire from his role at the end of 2011, came as a surprise to both analysts and industry executives. “It was a shock to hear that somebody as young as Bryce is moving on, but they’re well-positioned,” says Doug Bibby, president of the Washington, D.C.-based National Multi Housing Council.
The one thing that wasn’t a surprise was that Timothy J. Naughton, the company's president, will add the title of CEO to his business cards after Blair’s departure. Naughton has served as the company's president and a director since 2005. Since joining the REIT in 1989, he has held the titles of chief operating officer, chief investment officer, and development and acquisitions officer.
“We are well-positioned for the future,” Blair said in the press release announcing his departure. “Consequently, I felt that the time was right for me personally and for AvalonBay to initiate a leadership transition.”
The timing also made sense to Michael J. Salinsky, director of multifamily REITs for RBC Capital Markets. “From Bryce’s standpoint, do you give it up now, or do you realize three really good years and then head into a downturn?” he says. “You don’t know. You don’t know what three years holds. So you hand the reins over when everything looks good.”
Blair will remain chairman through 2012. During that time, Blair “will devote at least half his work time on AvalonBay matters, particularly with respect to development and construction activities,” according to the press release.
“The board is confident that Bryce’s ongoing role, combined with Tim’s long tenure and experience at AvalonBay, will ensure a smooth executive transition,” said Lance Primis, lead director of the AvalonBay board in the press release.
Industry Reaction
Though the announcement surprised Bibby, he nevertheless expressed confidence that there would be no hiccups in the succession plan at AvalonBay, which is widely regarded as one of the top REITs in the space.
“Bryce and Tim have built a fabulous team,” he says. “They have great bench strength, and they have a great culture there.”
Analysts expressed the same feelings in their research notes, published after the announcement. Milwaukee-based Robert W. Baird & Co. said that AvalonBay remained its top pick because the executives had worked together for two decades. “Fall-out would surprise us,” the note from Robert W. Baird & Co. said. “We've always had the sense that AvalonBay's executive team was a well-oiled machine, and thus we suspect that Naughton was likely being groomed as an heir-apparent. As such, we do not expect any high-level departures on this news.”
New York-based Sandler O’Neill + Partners expressed similar sentiments in a note that mentioned AvalonBay's previous CEO Richard L. Michaux, who retired at age 55 after eight years leading the company. Blair, retiring at 52, has served as CEO for 10 years.
The Sandler note went on to compare the transition to the transition at Palo Alto, Calif.-based REIT Essex Property Trust, where president and CEO Keith R. Guericke recently retired and longtime executive vice president and chief operating officer Michael J. Schall stepped in to take over. “Rather than exiting at an inopportune moment, both have chosen periods of success to step aside,” it said.
