Jonathan Morgan was born a multifamily executive. Well, he was born the year his father launched Morgan Properties—1985—so he’s at least been exposed to the business his entire life. The eldest child in a family of three wanted to join his father at the firm for as long as he can remember.
“I always knew I wanted to be in the family business,” Morgan says, “but I wanted outside experience first.”
After graduating from the University of Pennsylvania, Morgan worked at Bear Stearns for nearly two years until the private equity firm went bankrupt. He then joined Apollo Real Estate Advisors and earned his MBA from Columbia University. In 2011, he joined Morgan Properties.
From his first days, Morgan influenced the company’s future in a big way. The company had already filed an S-11 to become a public REIT when he started; the management team had felt the move made sense as a way to access more capital.
Morgan wasn’t happy.
“I quickly realized this wasn’t what I wanted to do,” Morgan explains. “It took away a lot of my entrepreneurial spirit. I wanted to stay private, because I felt it played to my strengths.”
Making the case to his father and other management involved, he convinced them the company could source the capital it needed to grow. Once Morgan committed to keeping the company private, he figured out exactly how and where he wanted to execute the growth he fought for so passionately.
“I sat down with my father to discuss my vision,” Morgan says. “We formed Morgan Properties JV—joint venture. This gave us the chance to get back to basics in forming joint-venture partnerships and acquiring units.”
Since launching in 2012, the joint-venture division has more than doubled the company’s total holdings. Morgan and his team have partnered with only seven different equity investors to close 35 transactions, resulting in the acquisition of approximately 23,000 units.
The value of those 35 purchases totals nearly $3.5 billion today, and Morgan Properties now owns about 45,000 units.
And Jonathan Morgan’s momentum keeps building. In the past year alone, his team closed on five transactions worth $1.2 billion to acquire 8,700 units. The largest property they bought added 2,664 units to their portfolio, which spreads across 150 contiguous acres in Alexandria, Va.
“Last year was our largest year of acquisitions since I entered the business—the second-largest in the history of the company,” says Morgan, who manages the day-to-day operations of the joint-venture division in addition to staying involved as a principal of Morgan Properties.
Most of the units purchased in the past seven years—nearly 20,000 of them—are located in the Mid-Atlantic in primarily suburban communities of Baltimore and Washington, D.C. A historic, inner-ring suburb of the nation’s capital, Alexandria marks the company’s first acquisition in Virginia, although Morgan’s team recently began to scout opportunities farther south, near Miami; Nashville, Tenn.; and Atlanta.
Surpassing the Competition
Targeting large mid-range properties in suburban markets surrounding major cities is Morgan’s key business strategy. He believes providing updated, family-friendly, amenity-filled housing accessible to mass transit and in walkable neighborhoods fills a major gap in the country.
“I know new urbanism is a hot trend, but we choose to be contrarian,” Morgan says. “Workforce housing is always needed and often impossible to find. While the product we target might not be sexy right now, the returns definitely are. We have a real affordability issue in this country.”
In addition, Morgan sees these Class B properties as the rental-market sweet spot: In thriving economies, consumers are looking to move up; in a declining market, those living in luxury, Class A properties might need to move down.
“We always provide a nice place for people to live, and we like what we do,” Morgan adds. “Our business philosophy has that feel-good story [aspect to it], but the business end of it is also a great story.”
The company looks for large assets with 500 to 2,000 units, with particular interest in what Morgan calls vintage properties, built from the 1960s to 1980s. These large properties also often price out local competitors.
Morgan shares the three main attributes the firm targets for each acquisition. First, the purchase price should total around 50% of the replacement cost to build new. Second, the company needs to know it can manage the property better than the seller given its market knowledge. The third attribute involves calculating value added for renovating kitchens and baths, installing washers and dryers, and creating the experience renters want—dog parks, outdoor fitness areas, and clubhouses, for example.
The approach of only moving into a new market, like Virginia, once Morgan can acquire a large geographic mass of units there also adds to the good business part of the equation. This allows the company to gain efficiencies when making renovations and enables the team to get to know design and construction firms with which it can create long-term relationships. Forming lasting relationships with business partners is also a key business philosophy of Morgan’s. Since coming aboard, he’s worked on multiple deals with five of the firm’s capital partners. This approach helps the company win bids over the competition.
“The seller needs execution certainty and knows we can bring that to the table,” Morgan says.
In addition to building long-lasting relationships with outside partners, Morgan’s leadership style also centers around maintaining the feel of a family business within the company—even with hundreds of employees. He strives to lead by example in continually honing his professional skills and giving credit to the people around him.
He also makes sure the company helps its employees thrive and motivates them to advance within the firm.
Morgan and the rest of the management team purposefully use the word “career” instead of “job” for all positions. They build the company culture around this philosophy of each employee becoming part of the family and growing his or her career with Morgan Properties.
Employees are also encouraged to share new ideas, which Morgan and his counterparts consider carefully. He says the company’s view on strong ethics and its family-focused, growth culture remain the only unchanging concepts.
“I think having a family-business culture offers a small-team feel with a large-market reach,” Morgan says.
Maintaining the small-team feel is particularly impressive given the nearly 200 employees the company hired last year alone. New hires included Morgan’s younger brother, Jason, who now heads the acquisitions and investment management team.
For Morgan, maintaining that family feel also means keeping property management in-house.
Hiring the best local people to manage their new properties allows even upper management to connect with renters. This vertical integration gives Morgan—and the entire leadership team—a direct understanding of what appeals to customers.
Infusing this supportive, family-business culture into each property makes the company’s communities stand out, according to Morgan.
“I don’t think it’s the amenities that differentiate Morgan Properties from our competitors,” he says. “We shine because of our people and the culture that inspires them.”