“They’re only going to give you 110 percent over the long haul because they want to,” explains Bolton. “So, I think that you have to approach your leadership of the company and your leadership of the people with the realization that you’ve got to motivate them to want to give 110 percent.”
As a result of this thinking, the company has been able to deliver just under 13 percent compounded returns since going public in 1994. Bolton has kept the stock even, when others in the industry have fallen off, says Jay Harris, vice president of property management at the National Multi Housing Council.
One of the ways Mid-America has continued to bring value to its shareholders is through its acquisition strategy. “Eric can look at an opportunity and find new and creative solutions to benefit from it,” says Pettigrew.
Currently, Mid-America is acquiring properties in the Southeast. The company has an ownership interest in 33,000 units in the Southeast and South Central United States. It looks for properties to which it can add cash value through rehabs. The company has found opportunities in large markets like Dallas and Atlanta as well as mid-tier markets such as Jacksonville, Fla.; Memphis.; Nashville, Tenn.; and Austin, Texas; and small-tier markets, such as Gainesville, Fla.; Jackson, Miss.; and Chattanooga, Tenn.
Usually, the company starts with exterior enhancements, including landscaping upgrades, a paint job, and new shutters and leasing centers. “All you need to do is go to one of our properties and you will see our award-winning landscaping,” says James Maclin, vice president of the company. “That’s money in the bank. That’s the greatest draw to bring in prospects and keep them. It’s one of the reasons we outperform our competition.”
If interior upgrades are needed, typical improvements include new cabinetry, counters and upgrading the appliances and light fixtures. In addition, Mid-America looks at acquiring new properties that are having problems leasing up. “Owners of these properties have the timing of their delivery in the cycle wrong, and thus they’ve become distressed,” explains Bolton. “Financing is due and the developers have to get out, so we can make an attractive acquisition.”
The company has spent up to $10,000 per unit to reposition a property, but the amount varies based on the age and condition of the property. The amount of rehab performed depends on what people will pay for in rent increases. In the past, the company has been able to bump up rents anywhere from 10 percent to 15 percent in the first year. “When we put our capital to work, we’re looking to get at least a 17 percent internal rate of return on our money,” says Bolton.
“While you’re only in business if you make money, beyond that is the caring for individuals and people,” says Roberts. And when disaster happens on-site, the entire company rallies to help out, including Bolton.
After a tornado displaced 70 residents and caused the Township in Hampton Woods in Hampton, Va., to be condemned in 1999, Melnick called Bolton to tell him what happened. “The first thing he said was, ‘Was anyone hurt?'” recalls Melnick. “He came down to the site and met with contractors and supported us setting up the new office. We spent a lot of time working though details. He helped me write a letter to residents to reassure them and tell them what we were doing to get things back to normal and them back to their homes. He was a calming influence to help take care of residents.” And that’s why Mid-America is in this business – to serve its residents.