Last week marked the six-month anniversary of Charleston, S.C.-based Greystar Real Estate Partners’ acquisition of JPI Management. Since the beginning of the year, Greystar has been working on a list of “integration complete” items, says Greystar executive director of real estate and management Andrew Livingstone, including migrating all front-line tech systems to Yardi for core property management operations; reconciling back-end accounting procedures; getting everyone on the same internal email systems; not to mention settling into a geographic footprint of 143,783 units across 20 states and 90 submarkets.
“We are really right now at the conclusion of trying to digest JPI and complete those 'integration complete' items,” Livingstone says. “Some of them were hard-hitting, some a little softer. But they were all key goals to be able to say we are integrated and operating as one business going forward, and the leaders of that business are now ready to take on challenges. It is a pretty big day for us.”
So now the fun part starts. Like other notable fee management companies that have made key acquisitions or entered new markets in 2009—including Greenwood Village, Colo.-based Laramar Group; McLean, Va.-based Kettler; and Irvine, Calif.-based Western National Group—Greystar is finding the obvious economies of scale that come with acquisitive fee management expansion. But the company is also gaining an additional edge: strategic visibility into markets and submarkets for the eventual purchase of hard real estate assets and portfolios.
Considering average JPI personnel tenure is 10 years, it’s a huge difference compared to trying to jump into submarkets cold. “On the acquisition side, when you have this hyper growth, you have people coming to you with a pipeline of identified opportunities,” Livingstone says. “We have way more opportunities that we otherwise would have had. What we have to do is determine what the right opportunities are and execute.”
The same is true at Western National Property Management, albeit with a different tack. While the company has not made significant acquisitions thus far, its intentions were clear when it opened up a regional office in Phoenix, Ariz., on June 1 and announced an expansion effort across Arizona, Nevada, and Colorado to complement its core California assets. Sandi Cashen, a 20-year Phoenix apartment market veteran (and, coincidentally, a former Greystar associate) will head up the new shop.
“It is tough to just parachute into a market and buy anything more than a one-off transaction without having someone physically there,” says Western National CEO Tom Shelton. “Anytime that you have operations on the ground—and I mean real day-to-day operational expertise—it certainly helps when you go to underwrite acquisition deals. You just have a better ability to understand the fundamentals better.”
While deals are still few and far between as players wait for compression in the bid/ask spread or the distressed floodgates to bust open, fee management companies with an ownership component are prepping not only by raising cash, but by getting local as well. Western National has raised $250 million to that end and is poised for purchase as the right opportunities reveal themselves, an eventuality that Shelton thinks could be accelerated with ground-level expansion. “Establish operations from a management perspective and follow that footprint of going in and starting a service business before buying deals,” Shelton says. “If you buy a deal in a market where you don’t have banked strength, the learning curve seems to be steeper than it might be otherwise.”
Livingstone agrees on the mantra, and the probable possibility of an acquisition advantage into 2010 and beyond. “We’re opportunistic,” he says, “and the opportunities are coming.”
