PHOTO: Neil Webb
Charleston, S.C.-based Greystar made a power move earlier this year when it purchased Equity Residential’s portfolio, but taking over the management of 27 properties at once proved to be one of its most challenging endeavors.
Because the properties were so geographically disbursed, they needed to break the transition down into two waves–13 assets in one day, and 14 assets two weeks later–giving the operators enough time to create a seamless transition for a takeover.
“Communication was the key to that one,” says Jackie Rhone, Greystar’s senior managing director of real estate. Managers spent plenty of time on conference calls with staff in the middle of the transition to get feedback in preparation for the next wave. “We were making sure that the new team members were giving us some good critical criticism for future transactions,” Rhone says. “It went well.”
Greystar isn’t new to this game, though. As the industry's largest manager, they’ve gotten pretty good at the takeover process, diligently planning the transition so each property was able to go live on all websites in 24 hours. But sometimes, planning isn’t enough.
“When there’s new management, all of the demons come out of the closet,” says Julie Manthey, vice president of operations at Irvine, Calif.- based Western National Property Management. From day one, new managers can be left with a rousing to-do list. Announcing the transition to residents is the easiest on the list; a simple notice the day the new management takes over will suffice.
From there, managers' best bet is to evaluate staffing and the building’s occupancy and availability, while also managing built up work orders.
A takeover can happen for many different reasons, and how it occurs will determine how management companies need to approach the situation.
While an acquisition will allow for a critical due-diligence period where the company can assess a property months in advance, many times, property management firms have much less time to complete a transition.
“When it’s an owned asset, we go through a sales process,” Rhone says. “But there are occasions where we’re notified 30 days in advance, or even a week.”
In those cases, due diligence must be completed on the fly after the takeover, requiring a timeline adjustment to hit all of their points. The previous management will have just 30 days to tie up bills, and appropriately transition financing to the new company.
Even with an acquisition, critical details that might not have come out during the sale could come to light the first day a new management company steps in the office.
“It all boils down to organization,” Rhone says. “The way we approach it is we look at every takeover and try to determine through the due diligence process, we try to prepare for items that may pop up on day one.”
Greystar puts together a critical path timeline, identifying everyone’s responsibility in the organization, so that software, in-house systems and marketing capabilities, for instance, are working from day one.
The most important piece of a takeover is determining if the right team members are in place. Part of the transition is determining whether onsite staff should be kept, requiring immediate interviews for all of the team members.
“It can be difficult for the onsite team to adapt,” Manthey says. “You generally see within 60 to 90 days whether people will jump aboard or just jump ship.”
Ideally, new managers will want to keep some key players that already have knowledge of the building and the market during the transition, and in some cases they can offer these transitional employees permanent jobs.
“We don’t want the building to be hugely impacted,” Manthey adds.
Western National offers stay packages for some team members impacted by a takeover, enticing them to stay during the transition with extra compensation paid on their last day of employment. And for the original staff that does stay, it helps to have mentors in place and a strong training program to bring them quickly up to speed.
“We have people set up to help with transition and takeover,” Rhone says. “We have a takeover team that carries property to the point where we’re able to hire all of the critical employees.”
Because takeovers don’t always stem from a clean-cut sale, a fee management company getting the ax can certainly create hostile environments.
“It can be a bitter or hostile takeover, where everyone doesn’t play nice in the sandbox,” Manthey says, as Western knows all too well.
Two years ago, the outgoing management at a new property Western acquired did not keep their word on porting over all the tenant and building records. So when the former managers left, Western teams were locked out of the system, unable to access any property information for nearly 24 hours, and unable to service residents. But with a little planning, the faults of a former management company won’t impact the new one too much.
“You feel through the transition how you’re being received, how people are acting toward you,” Manthey says. “And you take those steps behind the scenes.”
Luckily, Western obtained records well in advance, and nothing severe happened during the staff’s lockout period. But it did make for a pretty uncomfortable introduction, she says.
—Linsey Isaacs is an assistant editor with Multifamily Executive magazine. Follow her on twitter @LinseyI to continue this conversation.