In some ways, the Greystar–Riverstone marriage was rooted in the same family tree.
While June's landmark deal between the country's top two apartment managers sent the industry rumor mill buzzing with talk of an almost 400,000-unit management colossus with tentacles reaching into every major market, one of the under-the-radar aspects of the merger was the intellectual capital involved.
Bob Faith, CEO of Charleston, S.C.–based Greystar, had worked with key members of Riverstone's executive team at Trammell Crow before leaving to build his own empire. And he admired their ability to develop talent.
"It's just really about having the highest quality of people," Faith says. "One of the hardest things we do is to find highly motivated, intelligent people. This deal brings together two great groups of folks, and that's really what we believe it's all about." Now, the hard part begins—unifying all of that talent together under one large umbrella.
Culture Club
Terry Danner is proud of the team he built at Riverstone. He established the firm in 2006 by buying out Trammell Crow Residential Services with Riverstone's other founder, Christy Freeland. Freeland retired as chairman of the company in 2010 and Danner became CEO last year.
And Danner never stopped building that team. Riverstone has sharpened its focus on recruiting the best and brightest over the past year, hiring several recruiting managers and launching a comprehensive outreach effort to sell the company's opportunities to a new wave of young professionals.
"I think there are so many bright kids coming out of school," Danner told MFE earlier this year. "And our industry is poised to be a great place for those kids. So, last year, we hired three recruiters. And we're going to try and bring more young talent into this industry … ."
Approximately 4,700 Riverstone employees were set to join the Greystar team, which stood at approximately 5,900 staff members nationwide, when the sale closed on June 4. As Riverstone's foot soldiers move under the Greystar tent, Danner is accelerating the transition process by leading team and group sessions across the country.
As of early July, Danner was in the midst of visiting and meeting with associates, city by city, to foster collaboration and programming to promote cohesive company culture.
"Company culture is one of those things that may be best learned through experience and interactions with other team members and the leaders of the company," Danner said in an e-mail. "We've been conducting joint town-hall meetings across the country to discuss the integration with team members in a personalized and intimate setting. This has given team members a chance to meet one another, and has given us an opportunity to introduce ourselves in person, discuss our shared vision and the integration process, and field questions."
Andrew Livingstone, Greystar's executive managing director of real estate, is the point man at his company for the integration. A 20-year industry veteran (and 15-year Greystar staffer), Livingstone is up to the task after playing a prominent role in establishing Greystar's long-term strategic direction.
In fact, Livingstone led the integration efforts following the company's acquisition of JPI Property Management Co. in 2009 and the Archon and Glacier portfolios in 2010. He's even gone international, supervising the establishment of Greystar's operations in both the United Kingdom and Mexico.
Livingstone says the goal is to make the transition as seamless as possible for everyone involved, which includes about 120 of Riverstone's regional managers.
"During the transition period, most existing programs, policies, and business processes that are in place at Greystar and Riverstone will continue as is," he said in an e-mail. "This provides for continuation of our business while the integration teams collaborate to understand and compare our respective operations, explore best and market-leading practices, and establish processes for the combined companies."
Fitting the Pieces
Though Greystar had a national platform to begin with, the acquisition of Riverstone provides the firm much more depth in several key markets, such as Seattle; Portland, Ore.; and parts of California. But blending two cultures will be a challenge.
"Fortunately, this is a competency that both companies have honed over the years," Livingstone says. "We both have established integration practices, tools, and subject-matter experts who have performed these tasks before, in taking on new management assignments and property portfolios, and integrating smaller management companies."
Addressing operations has been the most immediate task in the initial integration effort. As soon as the sale was made public, the company assembled "joint integration teams," based on areas of expertise, to help bridge the divide between the different staffs and get everyone on the same page.
"Over the coming months, these teams will continue to meet regularly to develop strategies for a smooth integration," Livingstone says. "While it will be challenging, the rewards that come from our combined organizational knowledge, expertise, and greater efficiency will make it well worth the effort."
Greystar hopes to be fully integrated by the end of the year. Danner will continue as Riverstone CEO through the integration. Then, once the company's ultimate structure is determined, his leadership role will become more defined, according to Greystar.
Industry Aftershocks
While Danner and Livingstone have undoubtedly answered important questions about the transition for anxious employees, the ramifications of the Greystar–Riverstone union are still up in the air for both competitors and clients.
Publicly, Riverstone's clients have remained tight-lipped about news of the sale.
As CEO of Dallas-based Pinnacle, the fourth-largest manager in the apartment space, Rick Graf may feel the ramifications of the sale as much as anyone.
"Many of our clients are shared clients with Greystar and Riverstone," Graf said on the day the transaction was announced. "My phone is blowing up, as you can imagine, with people in the industry wondering what's the deal."
Graf's clients aren't alone in wondering about the marriage of the two multifamily giants. Some managers wonder how much Greystar paid for Riverstone, thinking it could set a new benchmark in pricing.
Traditionally, apartment management firms have been valued at two to four times their EBITDA (earnings before interest, taxes, depreciation, and amortization), but this deal could change that calculation.
"Not that we're for sale, but if someone would come along and pay six [times earnings], it might get interesting," said one apartment manager who preferred to remain anonymous.
For those that aren't thinking about selling any time soon, the more pressing matter is competition. In the end, there are more questions than answers about the newly announced merger of the industry's two biggest managers.
"Will it change the landscape?" Graf asks. "Obviously. But, what will it mean? How will it shake out? Time will tell."
Heightened Competition
While the nearly 400,000-unit Greystar–Riverstone colossus could, on the surface, create problems for both national and regional property managers, those competitors publicly say the merger will create opportunities.
"We at Laramar [Group, based in Chicago] always sold David against Goliath," says Dave Woodward, now president of New York–based property management firm CompassRock Real Estate. "My gut reaction is this helps [do that]."
Back in the late '90s, after a period of initial public offerings and mergers and acquisitions, several companies built massive portfolios, but none approached 400,000 units, according to the National Multifamily Housing Council (see sidebar, right).
Ultimately, owners pared down these large, unruly holdings. Many wonder if Greystar will face similar challenges, with more than 390,000 units and 10,000 employees.
"You have 10,000 employees," Graf says. "That's a huge number of properties, employees, and relationships. I'm sure the Riverstone guys would say that one of their challenges in acquiring companies was creating culture and creating systems."
Dennis Treadaway is confident the merger will bring more opportunities his way. Treadaway, president of Folsom, Calif.–based FPI Management, doesn't believe bigger is always better.
"It really limits your ability to be completely flexible client by client," he says. "[Greystar will] need to run to create efficiency, and that might create opportunities for companies like mine."
And while FPI does business in both affordable and market-rate product across all styles of portfolios, Treadaway believes Greystar's best bet is with institutional clients rather than small-scale, homegrown, affordable communities. "I think Greystar will have their sweet spot, and that will be in institutional product," Treadaway says.
In addition to business opportunities for his company, Treadaway thinks some of the current Greystar–Riverstone talent may look for other work as the integration effort exposes where employee overlap exists.
"I also think, because both companies are big and both will bring resources together, they'll probably be consolidating some of their efforts," Treadaway says. "So, good talent may come to the market."
But Danner believes the past absorption of large portfolios gives Greystar the advantage. "Both companies have experienced rapid growth throughout our respective histories," he says. "This has built a certain discipline within our organizations that is a part of our shared DNA.
"We have both become accustomed to rapid growth and understand its challenges and opportunities. While this integration may lead to some greater efficiency, it's not about streamlining. It's really about combining the top talent and business practices in our local markets so that we can deliver the best services to our clients and residents."
