Say what you will about the overdevelopment of the Florida apartment market, but the Cornerstone Group has found a home there. With more than 10,000 affordable, market-rate, and luxury apartment units built–and 5,000 more on the way–this development company is very bullish on its home state.
In order to be successful in an area that is full of competition, a company must be innovative and savvy at finding sites, says Jay Massirman, senior vice president at CB Richard Ellis Institutional Group. "Cornerstone [does that] and is able to find sites in which others don't see value," he says.
The company's strategy is simple: "To vertically integrate the development, construction, and leasing and management process of the company," says Stuart I. Meyers, chairman and CEO of Cornerstone.
And with more than $750 million in real estate assets, Cornerstone is meeting its goal and increasing production by 15 percent to 20 percent per year, says Meyers. "In 2000, we closed approximately 1,500 units, and in 2001 about 1,800 units–which ranked us 13th in Builder magazine's Top 50 Multifamily Rental Builders," he says. "In 2002, we're going to close about 2,200 to 2,300 units. That number is going to increase in 2003 to somewhere in the range of 3,000 units."
And because of all this activity over the past nine years, the company has grown from four people to more than 350 employees. The company is successful because it's able to focus on details and has the vision to see the bigger long-term picture. That is why Meyers was chosen as the 2003 Multifamily Executive Builder of the Year.
Affordable Housing Foundation The company's foundation is in affordable housing. Prior to starting the company, Meyers and his partner, Jorge Lopez, worked for The Related Cos. of Florida where they concentrated on the development of affordable housing.
The year after Hurricane Andrew hit Miami in 1992, Meyers and Lopez, president and COO of Cornerstone, were helping to rebuild the area. By the summer of '93, the two men realized that there was a tremendous opportunity to go out on their own. "There was a lot of capital being made available to the rebuilding effort, and we had the experience and the exposure to be able to bring some real capabilities to the market," explains Meyers. "That was why we formed the Cornerstone Group, to take advantage of those opportunities and to assist the community in getting back on its feet."
By entering the market at an opportune time, Cornerstone was able to get financing during its early days. "For five or six years, we worked at a breakneck pace taking on every reasonable opportunity that was given to us," says Meyers. "We were able to close, deliver the product on time, and lease up before the units were completed. That compounded our credibility as developers.
"You know, success breeds success," says Meyers, "and the more successful we were, the more opportunities we had to select from, the more capital and resources were put to our use and that led us to where we are today."
Expansion Begins The company's strategy always was to get into every aspect of the multifamily business that its capabilities would allow. Before entering any new business, Meyers and Lopez made sure that not only was the staff in place, but that the people working on the project had the background and the experience in both management and development of the new businesses.
Consequently, about three years ago, Cornerstone made an effort to enter the upscale, market-rate rental business, Meyers says. As a result of that effort, the company has completed three projects–San Marino located in Naples, Fla.; San Marino at Laguna Lakes located in West Palm Beach, Fla.; and Villa del Sol located in Boynton Beach, Fla.
In 2000, Cornerstone began to examine other areas of the multifamily business that it could enter. "We looked at a series of businesses," explains Meyers. "We looked at military housing and student housing. We seriously considered other markets beyond Florida in the affordable area. But, we finally settled on the condominium business, primarily because we saw the economics and the demand in the South Florida area were very resilient to the downturn that we're experiencing in the economy."
While the company had a deep knowledge of that market, it wanted someone to lead the new division who had a wealth of experience. Richard Lamondin was that person. Prior to joining Cornerstone, Lamondin worked in condo development for 25 years and had completed more than $3 billion worth of projects. "We decided to approach the condominium marketplace together," explains Lamondin, president of Cornerstone Premiere Communities.
The new division is about to break ground on La Perla, its first high-rise condominium tower–43 stories–in Sunny Isles Beach, Fla. Out of La Perla's 326 units, 75 percent of the units have been sold and are under contract.
While it might have been difficult to find financing for a project that was so different from the company's niche, Bank of America wasn't nervous about the switch, says Mario A. Facella, senior vice president of real estate banking.
"Meyers and Lopez are very devoted to their work and do a lot of the research and analysis for future developments," says Walter de Villiers, senior vice president of real estate lending at Ocean Bank. "There was no hesitation [on our part] to get involved in something other than its core business."
In addition, Cornerstone had the reputation of standing behind all of its projects, says Facella. "If there is a problem, they will fix it and make sure everything is OK. Their properties are done very well and on time."
When someone drives by one of Cornerstone's properties, "they can't tell the two property types (market-rate vs. affordable housing) apart," says Massirman from CB Richard Ellis. "They put a lot of thought into the design and landscaping of all of their projects."
Tackles Tough Projects The expansion into other market segments helps Cornerstone continue to operate and grow in a region that is running out of land. In the past, Cornerstone would find a property, make a deal with the owner to buy the land, and wait to see if zoning was approved and the subsidy was awarded, explains Meyers.
These days, owners aren't willing to wait and see if the financing is going to go through. They want to make the best and the fastest deal. Now, Cornerstone needs to commit to the property before having everything secured up–however, the company does its research beforehand and is relatively certain that the deal will get done.
"We are aggressively buying property well out in front of the actual date of construction and the date of bond and financing closing," says Meyers. "We try to do our homework in advance. We want to know all the issues and what's going to transpire."
But even after the homework is done, surprises happen. In Palm Beach County, Fla., the company was about to start an affordable housing development when it found itself in opposition to local government leaders. "We met with the leaders and addressed their concerns head on and basically won the day," says Meyers.
The company was able to show that there was no difference between its community, Portofino Apartments, and market-rate projects, explains Lenny Wolfe, president of Cornerstone Group Development LLC. "We assured them that the rents were comparable, if not higher than anything in the area, and that the project would help revitalize the corridor.
The company specializes in going to tougher areas and turning them around, explains Mara Mades, executive vice president of Cornerstone Group Development. "We'll take trailer parks that were left to decay and turn them into quality housing." When looking for a site, the company makes sure the property has good visibility–a lot of drive-by traffic–and that it's close to jobs, day care, and retail, says Mades.
Cornerstone often goes out and does the legwork, says de Villiers. "The company finds and identifies undervalued properties with an upside potential. It is Cornerstone's primary focus."
When looking for a new location, Cornerstone carefully examines the local market. It looks for a property that will lend itself to 250 to 300 units. "Larger properties are much more economical to manage," says Meyers. "And, that's the real key to success, how it's managed after it's built."
The company offers a package of amenities at all of its properties. For instance, at its affordable communities it provides a full sports package for children. In addition, it holds educational programs on homeownership and credit. There is a clubhouse at each property, which offers a pool and usually a Jacuzzi and, in some cases, tennis courts, volleyball courts, and barbecue areas.
The extra touches that Cornerstone puts into its projects makes it very easy for investors and banks to want to work with the company. In addition, the company's reputation for building quality product on time helps the company continue its reach in the Florida market.
But, "besides being really good developers, they are excellent entrepreneurs," says Massirman. "They bring that spirit and touch to every development. That is what will ensure their future success."