In 1977, Bob Kettler and his brother-in-law bought 77 single-family home lots in Centerville, Va., and developed a suburban community as the newly formed Kettler & Scott, which became KETTLER in 1983. In the years that followed, KETTLER expanded from home building and land development into multifamily development, management, and acquisitions.
This year, KETTLER celebrates its 40th anniversary with over 46,000 lots developed, more than 18,000 apartment units developed or renovated, and over 30,000 units under management in both KETTLER and third-party properties along the East Coast and in Texas. The developer is most active in the Mid-Atlantic region, especially in McLean, Va., and the Reston Town Center and Tysons Corner areas of Northern Virginia.
Multifamily Executive sat down with Bob Kettler in his McLean office to take a look through the company’s past, present, and future, and to discover how the past 40 years have allowed KETTLER to make its mark on the Mid-Atlantic region and beyond.
MFE: How did KETTLER begin, and how did you expand to where you are today?
Kettler: I come from a real estate family. Kettler Brothers was my father’s firm, and he was partners with three of his brothers and another individual. They had a rule that it wasn't a family business; it wasn't something they wanted people to move up into. But I loved real estate. I worked construction in the summers, and I had summer jobs where I’d do accounting and job-cost reviews and audits. When I went to college, I took real estate classes and I started doing remodeling while I was in school.
In 1977, which is what we call the beginning of this company, my brother-in-law and I bought 77 lots in Centerville, Va., to do a suburban home building project. We had to do the land development and the construction. Around that same period, we incorporated into a company called Ketter & Scott, which was the original company. In ’83, I bought my brother-in-law Scott out of the company, and since then, I’ve basically owned 100% of the firm.
We bought our first big tract of property in 1982, zoned it, and then, through the '80s, we grew to be the largest land development company in the Washington metropolitan area. At our peak, we had developed about 15,000 acres and had five or six large-scale planned communities going at the same time, the largest of which was 6,000 units. Through the '80s, we developed and/or zoned and acquired 15,000 to 18,000 acres and about 46,000 units. We’re still in the land development business, so we zone suburban land, sell lots to big builders, and then either sell off the retail or develop the retail into multifamily.
That business grew until the savings and loan crisis hit [in the 1980s]. We had to restructure everything, mostly because all of our partners, which were savings and loans, failed. That was an existential moment for our company because all of our capital sources dried up over a one- to two-year period. The value of property fell, and there was no available financing for that business.
So we said to ourselves, we need to be in another line of work. That’s when we went into the tax-credit apartment business. At that time, you could get really good values on land; construction costs were reasonable; and the amount of money you could get per dollar of credit was high. We built a grand total of 6,000 tax-credit units, mostly in the '90s and early 2000s. We still own about 50 of those projects. It was the core of our multifamily business, and we capitalized that business through the sale of tax credits.
In the late '90s, we bought our first site where we went to the other end of the spectrum and started doing high-rise luxury multifamily. We’ve developed 10,000 to 12,000 high-end Class A multifamily units.
To fill out the story of how we grew to where we are, when we started building multifamily, we started our management company. Up until 2008 or 2009, we didn't do third-party management. We went all-in on the third-party business for a number of reasons: It brought in more revenue for the platform, and we could see it was a way for us to enter new marketplaces. It was part of a larger strategy that we’ve developed in the last decade but have really refined in the last three years.
Since 2008, we’ve grown the management company from just running what we have, which was 9,000 or 10,000 units, to 30,000 or 32,000 units now. We want to grow our management company considerably larger than it is right now.
MFE: How did your experiences lead you into the multifamily business, and furthermore to success?
There’s an all-encapsulating way to look at it. We view our company as being in the housing business, so when home building’s going really strong, it tends to dampen multifamily for-rent development and vice versa. So we felt like we wanted to be on both sides of the business.
The management business levels it out that much more, because that's recurring income. The development business, whether it’s for-sale, for-rent, retail or industrial, is highly cyclical. The only way to level the whole thing out is to increase the amount of recurring income you’ve got on a routine basis. That underlies the financial stability of the company.
MFE: Looking back on the past 40 years, what do you think are KETTLER’s greatest successes?
We were an innovator in the land development business here in this market, in the Mid-Atlantic, in terms of the way we amenitized our projects, the diversity of housing, and the way we merchandised and marketed our communities.
Back in the '90s, your typical high-rise was a pretty vanilla product. We did just the opposite. We started having rooftop amenities, we had large gyms, and we did a lot of programming. We went from just having a central lobby to having multiple rooms. We were a pioneer in all of those sort of new amenities, from the business centers rooftop amenities, that kind of thing, in a high-rise environment.
And we not only did that in the high-rise apartment business, we did that in the high-rise condominium business, as well. We won a lot of awards, we broke records in terms of pricing our products, and we were breaking ground where you could make high-rise work. We were the first developer to successfully develop high-rise condominiums and apartments outside the Beltway in D.C.
Now, the whole market has moved there, and we’re on the other end of that now, where people have grossly over-amenitized products. We’re trying to design now to a more affordable price point.
MFE: You’re under way on several projects in Tysons Corner. What are your hopes for these projects and for this area?
One unique thing about KETTLER’s 40-year history is that we’ve been headquartered in Tysons all 40 years. We've been within walking distance of where we are right now the entire time. So we know Fairfax County and we know Tysons Corner because that’s where our origins are; that’s where we did all of our growth; that’s where we’ve done most of our development, when you get right down to it. So we’ve been fortunate enough to get three major projects, and we have more on the way here in Tysons.
We developed Vita with Macerich, which is at Tysons One. It’s an incredibly successful apartment building. We’re working with PS Business Parks; they own seven contiguous office buildings across from the Hilton on Westlake Drive. We’re redeveloping 40 acres into about 3,500 apartments, plus some mixed-use retail and office, and putting in all-new public streets and a big central park.
That’s called the Mile because it’s got a one-mile perimeter. We just delivered our first building there, called Highgate. I think it’s the fastest lease-up we’ve ever had. We’ve leased about 120 units in two months. That's triple to quadruple the average rate of leasing in Tysons.
We’re [also] part of a group building a project called The Boro. The first phase has two apartment projects and a high-rise condominium project coming out of a nine-story podium with a public park on the ninth floor. It’s a nearly $1 billion first-phase project, and we’re developing it with the Meridian Group. It’s probably the most significant project to be built in Tysons and will be for the foreseeable future.
MFE: How has your marketing and expansion strategy evolved over the years?
In previous years, we looked at expanding outside of the market primarily to North Carolina and to Tidewater and Richmond [Va.] and Baltimore. We were just looking at incremental expansion, because we found ourselves in all of the local markets fairly heavily, and we felt like we had reached into some of the submarkets in the D.C. metropolitan area [such] that we felt like we had hit a saturation point. I would say our expansion philosophy strategy was incrementally to move out.
Our expansion strategy today, and for the past three years, has been that we want to expand along the East Coast and into the South, because we find that’s where the marketplace wants development entities to be. With a bigger geographic footprint, we’re going to be more attractive to capital, lenders, and third-party clients for our management company.
We’ll also be able to achieve scale more rapidly, being in multiple submarkets. We'll spread our risk over a number of marketplaces. We won’t be subject to the sort of downturns that can happen in individual cities. If you look at Las Vegas or Phoenix during the financial crisis, or Miami, those types of marketplaces were eviscerated, whereas other markets stayed more stable. They didn’t rise as high, [so] they didn’t fall as far.
MFE: What do you see in KETTLER’s future?
It’s really exciting here. I feel like I’ve just gone into business again, because our model before had plateaued. Around 2009 or 2010, we were basically building apartments and doing development projects here in the Washington metro area, and, now, I see a future for KETTLER that's more of a national platform. It’s sustainable through multiple generations.
I see it remaining private, in the hands of my family but professionally run. And we’re really looking to grow the company to another size. And that would be [through] acquisitions of apartments, development and mixed-use, and [through] staying in the land development business.