Tom Toomey, CEO of Highlands Ranch, Colo.-based UDR isn’t running scared during this economic downturn. He sees opportunity.
Toomey sees the downturn as a chance to revamp his operating platform by improving things such as how UDR communicates with its residents and leverages its people. For example, it’s incorporating kiosks in the leasing process. “We’re changing the way we do business,” he said.
Toomey isn’t alone. The other two CEOs speaking during the “CEO Power Panel: Top-Line Strategies for Survival” session at the 2009 MFE Conference, Dave Woodward at Denver- and Chicago-based Laramar Communities, and Christy Freeland of Dallas-based Riverstone Residential Group.
The trio is being responsive to the market in an effort to prepare their companies for what they hope will be better days ahead in a couple of years. “2011 through 2015 could be boom years for the industry,” said Woodward, who thinks the lack of new construction right now will allow rental owners to set their prices in the years to come.
Still, neither Woodward nor any of the other panelists was ready to say that happy days were here again. “The demographics are compelling, but don’t be misled,” he said. “Jobs are the driver.”
Woodward and Freeland, who are seeing their fee management business growing, said they’ve used other's distress as a way to bulk up their management platform by working for banks and special servicers. “The opportunity has been to grab fee management and have that cover our costs and overhead,” Woodward said.
Toomey sees an opportunity to grab something of value as well. “We’ll probably buy dirt from banks and lock it up,” Toomey said.
Freeland, whose company sits in the second spot in the industry in terms of number of units managed, is still looking to grow, but it’s not just with more units. The company is also adding arms that provide services such as renter’s insurance and collections. “We want to be a one-stop shop,” she said.
But none of the CEOs seem to expect the glut of distress that everyone is talking about actually hitting the market, primarily because banks continue to work with their borrowers. “When 38 people show up [to buy], it doesn’t look like distress to me,” Toomey said.
Toomey thinks that will eventiually cause those equity investors chasing deals to change their expectations. Toomey is changing his. Instead of making buys based on an internal rate of return (IRR), he’s looking at price-per-door.
The CEOs also increased their focus on technology. Woodward anticipates making WiFi a staple at Laramar Communities and using text marketing even more, while Freeland is looking at things like streaming video and Webinars to cut costs in her corporate office.
Toomey is re-evaluating how his customers, many coming from the burgeoning Gen Y group, are making decisions. “What does our 25-year-old customer think about us?” he asked. “What do they want?”
One thing Toomey's already discovered is surprising: “People are making a decision [on where to live] based on Internet speed."
All three CEOs are also using the downturn as a way to leverage better pricing with their vendors. Woodward is focused on getting the best per-unit prices by buying in bulk. After getting price cuts last year, Toomey expects more this year and said he’d now be willing to sign three contracts off of those further reductions. “The cost side in the public companies is being cut,” he said.
But despite their responsive, even opportunistic attitude, the three CEOs see concerns. Freeland’s debating how to right-size her company, while Woodward still wants to solve how to properly staff the communities he manages for special servicers.
Toomey seems to have one eye on Washington, D.C. Like everyone in the industry, he’ll be watching how the GSEs—the lifeblood of the multifamily business—are reformed, but also how tricky issues like consumer protection and health care play out. While under the radar for most CEOs, how the government handles those issues could ultimately have a huge impact on jobs and even how the industry operates. “How these things play out will be very important,” Toomey said.