If GPS had been available in cars back in the 1980s, it probably wouldn’t have been too pleased with the Bell family’s beach outings. Instead of going straight from their home in Greensboro, N.C., to the pristine shores of North Carolina, Steven D. Bell, chairman and CEO of Greensboro-based Bell Partners, took his clan, including his three children, on some detours. “Our trips to the beach weren’t from destination A to destination B,” says Jon Bell, president of Bell Partners and Steven’s oldest son. Instead, the family stopped and visited Bell properties along the way. Most kids would have gotten fussy. Not the young Bell. He absorbed the industry like a sponge. In his teens, he read trade magazines and wrote letters to industry bigwigs such as Henry Faison, a leading Southern developer and CEO of Atlanta-based Faison & Associates, expressing interest in a future job. “I knew my entire life that I wanted to work in real estate,” Jon says. “I started charting out my course early on.”
Growth Zones
As Bell Partners plans to expand in the next couple of years, it sees three distinct acquisition opportunities.
1. Retiring Owners: There’s been a lot of talk about baby boomers leaving their homes to move into multifamily. Bell sees scenarios where there are boomers who own properties and will want to sell their units and retire. “We are interested in acquiring quality portfolios, particularly from aging real estate owners who want to retire and, possibly, keep a partial ownership interest,” says Steven Bell, chairman and CEO of the Greensboro, N.C.–based firm.
2. Partnering With Developers: Like many REITs, Bell says it has the balance sheet power to help out struggling developers. It has provided equity for Atlanta-based Wood Partners in places such as Greenville, S.C.; Knoxville, Tenn.; and Durham and Raleigh, N.C. “We are seeing some very good opportunities from developers who need equity,” Steven says.
3. Renovation: When the Class A market got overheated during the boom, Bell became one of the biggest renovators in the country, rehabbing 2,432 units in 2008 (putting it at No. 12 on Multifamily Executive’s list of the top 25 renovators). Now, it’s focused on future opportunities in this sector. “We have in-house renovation expertise and will upgrade properties as needed,” says president Jon Bell.
And things are going almost entirely according to plan. Since Jon moved into the president’s spot last year, he has taken a growing role in steering the company into the future. Today, Bell Partners has a portfolio of 43,000 of mostly Class A and B units, with some Cs, spanning across the Eastern United States, from Boston to Columbus, Ohio, from Texas to Florida, with plans to grow by 2,500 to 3,500 units in 2011. Despite this, his father’s influence as the company patriarch remains large.
Meanwhile, Bell is adding REIT-level talent to its team and upgrading its systems and processes while trying to maintain a dedicated site-level approach to operations that Steven Bell has cultivated in 37 years in commercial real estate. Add in the ability to satisfy employees, residents, and a large number of investors and owners, and you have the makings of a top-notch operations platform. But what the Bells have to figure out now is where to take that platform next—and maintain a balance between astronomical growth and a personal, familial approach to business.
Bell’s Building Blocks
Much like his oldest son, Steven Bell had a keen interest in real estate in his youth. “I knew as a teenager that I wanted to go own and operate investment properties,” he says.
Steven wanted to own real estate, but first he went to Raleigh, N.C.–based Cameron Brown Co. to understand the mortgage business and Greensboro-based Richardson Corp. to understand the brokerage business. In 1976, he started Steven D. Bell & Co. with what he says were “a few employees and a few properties.” Since the company didn’t have the money to chase trophy deals, it focused on smaller, older properties.
Bringing Assets Online: A Primer
Bell’s experience buying units from UDR helps it integrate properties quickly.
When Bell Partners bought 25,684 units from UDR in 2008, the Greensboro, N.C.–based company learned a lot of lessons about how to bring new properties online. That served Bell well in late 2009 and 2010, when it added an additional 11 properties (totaling 3,069 units). Here are Bell’s senior vice president and director of multifamily Erin Ditto’s tips for absorbing new properties seamlessly.
1. Listen to the Staff. Whether the company is adding a property under management or buying it, Ditto always starts with a conference call between all key departments. “That way, everyone knows their responsibilities, and a regional manager is assigned early on,” she says.
2. Get the Materials There. The company makes sure its signage is on site when a deal goes down. “We go onto Bell’s marketing site and click for transitioning boxes, and everything is shipped,” Ditto says. “We have a very regimented approach with all of the propaganda. It just comes in one click of a button. Everyone knows what to do [when that button is clicked].”
3. Deploy on the Ground. Once the sale is inevitable, Bell has teams on the ground that move quickly to make sure the property management team is assimilated in the Bell culture. “We have the systems up within 24 hours,” Ditto says. “We make sure they’re ready for business the day we take over.”
4. Stay Connected. When an acquisition occurs, Bell wants the systems at the property to be online and ready to go. “At any given time, we can see who is connected and who is not,” Ditto says. “If you don’t have access all the time, you lose business. We have business-class service at every apartment community.”
5. Expect Results. Ditto says Bell works so quickly that she expects to show strong results at the properties pretty quickly. “You can’t lose three months,” she says. “You have to be ready on the ground to run. For the most part, we have a really good process in place, and you get pretty good at it when you do it quite often.”
By the time the RTC (Resolution Trust Corp.) meltdown hit in the early ’90s, Bell had generated a strong investor following and began to secure larger properties in larger markets, such as the 300-unit Townpark Crossing in Atlanta. His sons—Jon and younger brother, Durant—were interested in the business, but Steven didn’t just hand them jobs. “We all agreed that it was important to develop skills on their own before they joined the company,” Steven says.
In 1994, during his senior year of college, Jon met his real estate icon, Faison, and “fought his way” into a job at the company. Seven years later, after doing everything from being an investment analyst to representing clients in the sales process for Faison, Jon received a call from Steven asking him to come to Bell. “Before I joined the company, I wanted to prove to [my father] and others that I was worthy and capable of doing it on my own,” Jon says.
Meanwhile, Durant spent his post-college years at Atlanta-based Wood Partners, becoming the youngest development partner in the history of the company and helping Wood open its Washington, D.C., office. Durant then came to Bell in 2006. His father felt he had a future in operations and had him handle that section of the company. “I spent my first year and a half being immersed in operations,” Durant says. “[My father] referred to this 18-month period as my MBA. It was really learning from the ground up, because 95 percent of our employees are in the field.”
The Bell Footprint
Bell Partners maintains a focused geographical footprint.
Though Greensboro, N.C.–based Bell Partners’ portfolio reaches out to Columbus, Ohio, and Boston, its greatest concentration is in what president Jon Bell calls the “Southern Triangle”—the block of states from Texas to Maryland to Florida.
“We’re focused on having a deeper presence in our target markets. We expect to expand, but we will not do so merely for growth’s sake,” Jon says.
To move into a new market, the company needs critical mass. Of course, with a growing third-party management platform, it’s easier for Bell to gain that management mass by picking up new contracts. “We’re one of the largest landlords in Atlanta, Charlotte, and Raleigh, and the 10th-largest apartment management firm in the United States. Given our size, we have a competitive advantage that allows us to access current in-depth research within our markets,” Jon explains.
Bell used that intelligence a lot in 2010, buying more than $300 million worth of assets. It focused on properties that were anywhere from five to 15 years old. “They’ve been very focused on quality,” says Malcolm McComb, vice chairman of investment properties for the multihousing group in the Atlanta office of CB Richard Ellis. “They’re looking to assets that are in high demand by renters and have the locations and physical attributes that will be a great [draw] in three years, five years, and 10 years.”
Bell doesn’t have a magic number of units that it wants to get to. Instead, the company wants enough critical mass to obtain pricing power in its markets, have continued buying power, and provide mobility for its employees. “We want to maintain a critical mass to continue to attract and retain great people,” Jon says.
When Jon joined the team, Bell managed 10,220 units. By 2008, the firm’s holdings of assets owned and/or managed swelled to 61,000 units. In March of that year, just as the economy was falling apart, Bell partnered with New York–based DRA Advisors, an institutional investor with national holdings, to buy 25,684 units in 86 properties across the United States for $1.71 billion from Denver-based REIT UDR. “To take on 86 properties and add 600 employees in one day is a massive challenge,” Steven says.
The company prepared for the overnight expansion by holding conference calls with these employees and doing lots of on-site preparation, particularly on the technology side. While the integration was hard, it also made Bell a stronger company. UDR had its property operations on Carrollton, Texas–based RealPage’s OpsTechnology and YieldStar systems (which moved all 86 UDR assets onto the Bell system in just six weeks). Bell rolled out the rest of its portfolio on those same platforms in 2008. “UDR is a strong company with solid practices that we were able to build upon,” Jon says.
Best People, Best Practices
After closing on the UDR deal, the Bell management team looked inward, trying to get a handle on where exactly they wanted to take the firm and what their goals were. They knew they would need to look for talent and guidance from outside, however, to do that.
The family hired Los Angeles–based consultancy CEL & Associates to help it pinpoint its long-term goals, home in on its core competencies, and plan the eventual succession process from Steven to Jon and Durant. “I think they’ve done a great job,” says Chris Lee, CEL’s president and CEO. “Steven has enthusiastically supported the transition to Jon and Durant.”
Bell Partners
The executive team of Bell Partners at their offices in Greensboro, N.C., on Jan. 5, 2011. Left to right: Robert Slater, John Tomlinson, Lili Dunn, Steve Bell (chairman and CEO), Jon Bell (president), Durant Bell, Erin Ditto, Dhrubo Sircar, and Mary Copeland. Photos by Darron R. Silva
Credit: Darron R. Silva
Headquarters: Greensboro, N.C.
Year Founded: 1976
No. of Employees: 3,000
No. of Units Owned: 43,000
No. of Units Managed: 17,000
Market Coverage: Eastern United States, from Boston to Columbus, Ohio, and from Texas to Florida
One of the first steps in this process was a rebranding move: The company changed its name from Steven Bell & Co. to Bell Partners. Next up was building a high-quality team. While other companies struggled in 2008, Bell made itself a desirable place to work, thanks in large part to making sound financial decisions when the market was at its frothiest. Bell had very few construction deals; its markets weren’t as hard-hit as the Miamis and Phoenixes of the world; and it sold $900 million worth of assets in 2007. It is also a generally risk-averse company, preferring long-term, fixed-rate debt and borrowing 65 percent to 70 percent LTV.
The hiring spree began just before the UDR transaction. Bell brought on senior vice president and director of multifamily Erin Ditto from UDR (she had worked for Bell briefly in the early part of the decade). In late 2008, Bell pulled former AvalonBay Communities head of property operations Bob Slater out of his consultant’s role; he would eventually become a mentor to Durant. A year later, the company hired former Birmingham, Ala.–based REIT Colonial Properties Trust executive vice president and chief accounting officer John Tomlinson to take the helm as Bell’s CFO. A few months later, Bell went back to the UDR well, hiring away the REIT’s well-respected chief information officer, Dhrubo Sircar, who immediately assessed the company’s IT systems and began upgrading to broadband connectivity for site-level operations. Sircar is now developing e-payment systems for vendors (which rely on electronic invoices) and doing pilots with online leasing.
The hiring of REIT-level talent continued into 2010 with Lili Dunn, who joined Bell as chief investment officer after a long run as senior vice president and managing director of Alexandria, Va.–based REIT AvalonBay Communities. And most recently, former Marriott senior director of global brand and management learning Christine Gilmore joined Bell as vice president of training. Today, the synergies and strengths of this team are beginning to gel. For example, the company will soon combine Sircar’s technology platform and Gilmore’s training system with a film studio where it can record subject matter experts instructing employees on best practices. Jon Bell says the team has helped in restructuring, implementing best practices, and driving the implementation of core technology such as revenue management, e-procurement, e-invoicing, reportings, and business intelligence.
“They’re clearly putting together an all-star lineup of talent,” says Malcolm McComb, vice chairman of investment properties for the multihousing group in the Atlanta office of CB Richard Ellis.
While the brothers admit that change and personnel decisions have been difficult, the additions were necessary for Bell to continue growing. “On an evolutionary basis, it was the next step,” Durant says. “Bringing in these senior leaders allowed my dad, Jon, and me to let go of some of the details in many of the departments. That dynamic has allowed us to continue growing and become more sustainable.”
On-the-Ground Basics
Steven has been passionate about operations since he founded the company in 1976. Instead of sleeping at four-star hotels when touring properties, Steven has always insisted on staying in vacant units or on-site guest suites. He saves letters from residents and employees. And he’ll suggest fixing on-site problems—like the time he suggested a property manager was using too many lightbulbs per floor. Or when he thought another property had too many flowers.
“The people at the top don’t just sit in the office at Bell,” says David Luski, president and COO of DRA. “Steven and Jon and the operations people are in the field working with their people, training, visiting the properties, and learning the position of their assets in the market.”
That spirit resonates through the company, according to Pete Serodino, a 25-year investor in Bell properties. “I think Steven’s very fortunate to have the crew that he does, even down to the maintenance men at the apartments,” he says. “They all feel that they’re part of the organization.”
That’s because from the top down at Bell, there’s one mantra: “In our world, it’s ‘every asset counts,’?” Ditto says.
And indeed, every asset must count. Unlike other large owner/operators, Bell can’t hide its outliers or underperformers in a large portfolio and hope the other properties compensate for the lackluster numbers. The company has too many partners with various equity investments on different deals. In addition, about 30 percent of the properties it manages are for third parties. That can make it difficult to plant its latest branding initiative, “Apartment Living at Its Best,” across its portfolio, which it wants to do with Bell Fund II. “One of the challenges for us is that we have different ownership groups,” Jon says. “When we have what we think is a powerful initiative, we must first obtain owner approval.”
Jon Bell
Jon Bell , President, Bell Partners
Credit: Darron R. Silva
AGE: 38
FIRST PROFESSIONAL JOB: Investment analyst for Faison & Associates in Atlanta
BEST BUSINESS DECISION: “Moving back home to work with my father at age 29.”
FAVORITE QUOTE: “To whomever much is given, of him will much be required.” —Luke 12:48
GREATEST BUSINESS CHALLENGE: “Letting go. I’m getting better at it!”
BEST ADVICE EVER RECEIVED: “Work hard, play hard.” —My father
LAST BOOK READ: Night, by Elie Wiesel (1999, Steck-Vaughn)
PLAYING ON HIS iPOD: Kanye West, Jay-Z, Sugarland, The Band Perry, John Denver
But Bell’s management team can work within those confines. When the economy was tanking in September 2008, Ditto created a “menu” of options (called the Bell Assurance Program) for owners to offer their residents—including job interruption rent relief; reduction in hours rent relief; the ability to downgrade their apartment; the option to double up; roommate matching; and rent deferral programs that would prorate missed months.
“We acted quickly,” Slater says. “The Bell Assurance Program consisted of resident retention ideas that owners could choose from. Each owner chose as they saw fit.”
As the market turned this year, Ditto focused on pushing higher rents, cutting expenses, and pushing for tax refunds. Clients were impressed by this quick thinking. “They’re not complacent,” says Adam Breen, director of acquisitions for DRA. “They are thinking ahead, whether it’s about new technology or pricing models or different ways of doing things to maximize rents.”
Charting a Course Ahead
When Bell was evaluating where it wanted to go after the UDR transaction, the company, which also has retail, commercial, and senior housing assets, also needed to decide which asset category it wanted to specialize in. “We concluded that it’s tough to be great at one thing, much less different things,” Jon says.
Out of all of its asset classes, multifamily certainly stood out. Jon liked it the best, and apartment fundamentals looked good for the future. So Bell began to move out of its other commercial holdings, selling off two assets in 2009 and four assets in 2010. Though not a fire sale, the firm does plan to continue to wind that portfolio down. “The larger investor will diversify their capital into regions and real estate sectors for themselves,” Jon says.
What does stand out going forward, however, is the implications of the team Bell has assembled. The industry is ripe with rumors—from colleagues to Wall Street analysts—that an IPO could be in the cards. “I wouldn’t sell them short on anything,” says Michael D. Berman, president and CEO of Needham, Mass.–based CWCapital, which has been a lender for Bell. “When you bring in the kind of talent that they’re bringing in, they’re obviously looking to grow.”
But Dunn says Bell just wants to find the most efficient sources of capital. “We want to broaden our access to cost-effective capital so that we can be more efficient,” she says. “You can do that by being public or by partnering with large institutions and/or pension funds. At the same time, we value and appreciate our high-net-worth investor base. That’s a big part of what made us successful.”
What’s more, Steven investigated the possibility of going public in the early ’90s but wasn’t in a position where he had to have capital from the public markets. Now, nearly 20 years later, Jon echoes his father, saying that he’s not plotting to take Bell public. But he won’t discount the possibility, either.
“I want to build a great company,” Jon Bell says. “I’m 38. We can do that by either accessing private capital or public capital. How we get there remains to be seen.”