That’s the number of employees Charleston, S.C.-based Greystar Real Estate Partners president and CEO Bob Faith will count out this year. And still, what Faith wants and needs most is more people power. Following the landmark acquisition earlier this year of Irving, Texas-based JPI Management Services—along with its 41,000 units and 1,150 associates—Greystar is looking to further invest in an already thick roster of “local, experienced leadership” for real estate operations in some 88 markets across the country. Even as those asset management teams solidify, best practice squads are combing through business ops across the Greystar portfolio to identify best-of-breed systems tactics. Particularly on the back end, Greystar is looking for efficiencies in systems and a more progressive evolution of its technology platform.
“We believe this business is consolidating, both on the ownership and management side, and we think the ranks of industry service providers are shrinking,” says Faith, who has been at the helm of Greystar since founding the company in 1993 after 5 years at Dallas-based Trammell Crow Co. “Capturing market share has always been one of our strategies, and now it’s definitely the way that we are going to be able to grow.”
For this to happen, Faith says Greystar must hire creative, career-driven self-motivators. But Faith also needs everyone to apply a consistent cultural mantra across 143,783 units while adroitly leveraging what might not be the same methods or technologies they’re familiar with. Fundamentally, the company continues to be driven by an entrepreneurial spirit of meritocracy, but when it comes to daily operations and long-term strategy, there are indications that the old ways are over. Consider headquarters. Greystar expanded into new offices back in May 2007, moving from a small, colonial brick house where the company had operated for more than a decade, into the entire fifth floor of the Victor Frohling-designed People’s Building. Erected in 1901 as Charleston’s first “skyscraper,” the building architecturally parallels Greystar a century later as both a symbol of progress and a prominent regional achievement. Inside, the new Greystar offices are modern—dark woods and glass compliment an open, collaborative floor plan.
Greystar’s accounting team has taken over the original building, but Faith’s old office has yet to be assimilated into the new, otherwise buzzing headquarters. There are dusty blueprints and old papers on his desk, packs of gum and pens and pencils in half-open drawers. Next to a cold, ashy fireplace is a dog’s bed, where Faith’s black lab Goose grabs a snooze. The entire office looks frozen in time, as if Faith and Goose have stepped out the door for a second, and walked into something big.
That something big was a national corporate footprint. Propelled by organic growth well before the JPI acquisition, Greystar had grown into a 94,000-unit property management behemoth with a regional stronghold in the South and Southeast. Over the past decade, the company has maintained a robust development pipeline and an investment services division to complement its core property management acumen. Largely decentralized and low-profile, Greystar was nevertheless beginning to come to terms with the notion of brand identity and the availability of economies of scale via a standardization of business systems and practices. The JPI deal merely sealed the deal.
• Age: 45 • Favorite Quote: “Good night, dad. I love you.” —My kids
• Best Business Decision: Joining Trammell Crow Co. in 1986 to learn the real estate business
• Greatest Business Challenge: Maintaining the creativity and entrepreneurial spirit we had as a small company now that we are a large company
• Best Advice Someone Ever Gave You: If you manage for the downside, the upside will take care of itself.
• Someone You Admire: Jesus Christ
• Favorite Business Book: Results That Last by Quint Studer (Wiley, 2007)
• playing on your iPod: A lot of good country music
“We used to just be financials-consistent; now we are systems-consistent,” says Greystar COO Bill Maddux, who has been witness to the firm’s evolution since coming over from Trammell Crow Co. in 1999. “Greystar was a looser confederation, and it used to be however you could get it done was fine with us as long as you were adhering to our financial requirements and making margin. Now, we want you to make margin, and we want you to make it with this recipe.”
That recipe is less prescriptive and more philosophical. Over the past year, Greystar has internally developed and begun applying six “pillars of excellence” to everything from employee reviews to deciding when to roll out revenue management programs to making the call on acquisition opportunities. Inspired by Franklin Covey and Quint Studer, among others, the six pillars are: People, Customer Satisfaction, Operational Excellence, Growth, Profitability, and Community Outreach. (For more on the pillars, see “Out-of-Box Attitudes” on page 33.)
No mere mantra, Faith says adopting a company-wide culture is the only way a national firm can retain its identity and simultaneously realize scale without becoming a bureaucracy that stifles entrepreneurial ideas and team morale. “When you have 4,200 people in a company, getting everyone to pull behind the same things is critical,” he says. “Successful companies pick a manageable number of objectives and focus like a laser on those objectives. We will evolve how we measure within those pillars, but we think the categories themselves are timeless. Now, the goal is to push the concept through the organization so we can have a common performance-based language that everyone is using.”
That process is being referred to as “pillarizing” the company and involves best practice teams within the divisions of real estate, operations, technology, accounting, human resources, communications, and insurance to identify ways to integrate both Greystar’s and JPI’s skill sets and allow operational leverage of the pillars’ philosophy. “It’s really a way to determine the best of what both we and JPI bring to the table,” says Greystar CFO Derek Ramsey. “The committees are engaged across the divisions in a collaborative effort to comb through the organization and let the best ideas bubble up to create the Greystar way.”
A great example of Greystar’s pillarizing efforts is the reinvention of the company’s technology platform. The acquisition of JPI brought industry-recognized tech leader Tom Bumpass onboard as chief information officer and also cleared the way for Greystar to fully commit to standardized systems across its portfolio. “Our technology group has been a massive area of investment for us but became more decentralized than we would have hoped for,” Faith says. “JPI is obviously recognized for being very tech-driven and tech-proficient. Being able to bring that to our IT infrastructure is a huge win for us. It’s paying off in spades across a list of projects.”
Case in point: revenue management. “We were piloting YieldStar’s Price Optimizer system at a couple of properties, but a good portion of the JPI assets are already on YieldStar,” Ramsey explains. “So we can get more immediate feedback and consider with greater clarity how to deploy that system positively across the entire portfolio.”
Faith sees great alacrity within Greystar to adapt operationally to the systems coming out of the pillarization effort, and likewise doesn’t expect the need for shock trauma prevention among the newly incorporated JPI teams, either. “The pillars were how I knew we were simpatico with JPI,” he says. “When I went to the JPI offices for merger discussions, the JPI diamond with their culture and mission was on full display. They were talking about it everyday, just like we are, so it’s not going to be new to everyone at JPI when we come in and say, ‘Hey, let’s now focus on operating by thesebusiness principles.’” Acquisitive AIMS
Principles aside, company vets and initiates alike are experiencing not only the relative challenges of a large-scale corporate integration, but the simultaneous weight of a national recession. Like many companies, Greystar has scaled back its development activity, although the company still has some selective ground-up and value-add projects active across its geographic footprint. But primarily, Greystar will rely on the strength of its property management division until the economy begins to show some correction.
“Owners want their portfolios in safe harbors, and developers are getting more cognizant of their assets under management because nothing is rolling off of the assembly line. Operational excellence and maximizing rents and cash flow is becoming the No. 1 objective,” Ramsey summizes. “We’re eager to tell the market the value of our new scale in the more challenging operating environments, and this is one of the most challenging environments that we have ever seen.”
So what, exactly, is scale value? It’s addressing the cost-consciousness that all companies are feeling in multifamily, Faith says, and it starts with bulk-buying capacity, which lowers costs on everything from computer hardware to office materials to maintenance supplies and Internet advertising rates. “When you are operating 140,000-plus units, you tend to get best-in-class pricing opportunities—of that, I am sure,” Faith says.
Greystar Real Estate Partners
• Founded: 1993 • Headquarters: Charleston, S.C.
• No. of employees: 4,200
• 2008 Revenue: Undisclosed
• No. of units: Own 13,225; manage 143,783
• Markets: National presence across 29 states
Scale value also lies in the geographic opportunities to sign up fee management deals with national owners of multifamily real estate and also gain regional market penetration. By way of the JPI acquisition, Greystar immediately benefits from a strong presence in the D.C. to Boston corridor; California; and Chicago and Minneapolis—all markets where the company had little or no presence previously. The company also now has a toe-hold in Seattle. Despite this expansion, Greystar lays claim to only a 7 percent market share in its best markets of Houston and Austin, Texas, and an average of2 percent market share elsewhere across the portfolio.
“I don’t think there’s any secret that the big are getting bigger,” Faith says of the fee-management sector comeuppance. “When I originally called [JPI Management Services’ president] Joanne Blaylock, I said ‘You know, we’ve certainly seen [Dallas-based] Riverstone Residential aggressively grow their property management business. Don’t you think there is an opportunity for there to be another very large, national company focused on using high-quality people to deliver high-quality service to institutional customers?’”
Clearly, the answer was yes. Shortly after the JPI acquisition, Faith indicated that the company wasn’t done with growth yet. Even now, company executives don’t seem to balk at the prospect of turning around and completing another deal of equal size. Although Greystar does not disclose financials, Faith says that the company did not take on any debt to complete the JPI acquisition and remains in the black across its general ledger, dry powdered like most progressive multifamily players for acquisition opportunities coming out of the recession. Since its founding in 2001, Greystar’s multifamily investment division has surpassed $1.4 billion in investments. The company is currently in the market working on the equity raise for Greystar Equity Partners Fund VII, a $300 million co-mingled equity fund that will target “opportunistic” multifamily buys.
Still, Greystar isn’t looking for just any distress deal du jour, and even large-scale mergers would have to fall in line with what Faith calls a “beautiful match”—one of cultural synergy and complementary geographies. “We’re not on the acquisition war path looking to buy up every existing property management company,” Ramsey explains. “JPI was a great fit for us, and future deals will have to meet the identical acquisition standards.”
Making it Work
One of the key challenges left to hammer out between JPI and Greystar is the firms’ respective centralized and decentralized regional and market-level asset management models. While JPI tended to run mid-level strategy and operations from Dallas, Greystar prefers putting veeps on the ground in their markets. Even as the company looks to become more standardized, Greystar will continue to keep upper echelon management in the field. In that effort, Faith sees an equally ripe opportunity to continue to grow via aggressive submarket competitiveness.
The main transition that is occurring right now is an investment in beefing up leadership on the ground that is responsible for real estate oversight as well as growing the business,” Faith says. “We have a ton of running room, and we think there is tremendous opportunity for immediate organic growth with leaders on the ground plugged-in day in and day out.” In that effort, Faith again acknowledges the consolidating state of the property management sector and Greystar’s need for people power to realize its objective to remain an A-list industry player, supported by its pillars of excellence. “We are going to continue to do nothing but grow and gain market share,” Faith promises. “But we won’t be able to do it without a lot of talented people, and especially a lot of talented people who don’t work for us right now.”
Greystar Real Estate Partners is guided culturally and operationally by the company’s six “Pillars of Excellence.”
Likely the only University of Oklahoma petroleum engineering grad who found his way to Harvard Business School and then to a career in multifamily real estate, Greystar Real Estate Partners’ founder and CEO Bob Faith is hardly your run-of-the-mill multifamily executive suit. His dog Goose spends the day under his desk or follows him around the office. His last vacation was an Anglican Church missionary trip to Uganda. And for Lent, Faith decided to give up all business electronics—including his Blackberry and e-mail.
Recently, Faith, inspired by the philosophies of Results That Last by author Quint Studer, created six pillars of excellence to help Greystar Real Estate Partners’ team of 4,200 employees think strategically about company operations. Here, Faith weighs in on the importance of Greystar’s six keys to success.
1. People. Have the very best individuals in positions across the company. “That means we will recruit well, and we will train well,” Faith says. “How human resources addresses the people pillar might be quite different from how property management addresses it, but in every part of our business, we’ve got to be focused on the people.”
2. Customer Satisfaction. Make sure all efforts ultimately lead to absolutely delighted customers. “That includes internal and external customers,” Faith says, adding that today’s multifamily customer includes a broad range of people from institutional investor financiers to individuals walking into the leasing office. “Whether it is partners, clients, employees, or on-site residents, identify your customers and come up with quantitative measurements as to how you are going to keep them satisfied.”
3. Operational Excellence. Simply put, operational excellence is about getting things done. “As a property manager, are you generating traffic and getting good closure ratios?” Faith asks. “Are you an accountant providing accurate and timely financial statements? What are the measurements that point towards consistently getting the job done?”
4. Profitability. Profitability has to be measured, addressed, and talked about, Faith says. “At the end of the day, we still have to make a profit so we can be a successful company and invest in our systems and people to continue to be the very best that we can be.”
5. Growth. If a company isn’t growing, it’s in trouble, Faith says. “Growth is critical because it creates opportunity for people,” he explains. “If you are not growing, you are facing the beginning of stagnation, and the beginning of following the status quo. And that does not contribute to a healthy organization.”
6. Community Outreach. Activism within the industry and within the public is a critical component of Greystar’s success. “We believe we have a responsibility to give back to our community and our industry,” Faith says. “We don’t just stress involvement; we grade every Greystar office on it.”