Growth Factors While adding staff or enlisting consultants and partners helps the company reach from market to market, Wood Partners also relies on other factors to grow the company.
One of these is financing. The company usually relies on institutions for equity, asking them to provide about 90 percent of the equity with a return of 8 percent to 9 percent. (Wood contributes the remaining 10 percent equity as needed.) This equity covers anywhere from 20 percent to 30 percent of the deal, with the rest being financed by companies like Real Estate Capital Partners, AIG, Prudential, and Tuckerman.
But the company’s investors often vary by product type. Pension funds may not want to build risky infill high-rises, but they might like garden-style apartments. For high-rises, Wood Partners may go to European syndicators, who are used to high-density projects. If the company moves into a new product type, it generally puts more money down. For instance, it normally won’t contribute more than 25 percent to safer garden-style apartments, but will put up as much as 35 percent into riskier high-rises. “We are trying to have financial structures that are safe,” Wood says.
Wood’s local employees, many of whom came from Trammell Crow, also give the company a strong network of roots that supports the company’s growth. Their knowledge of their markets, including available land, the entitlement climate, and product needs, can help Wood Partners move from niche to niche. It uses consultants, partners, or specialized employees to fill in the gaps. “The guys in the local offices know their markets, and that gives us a lot of inside information on those markets,” Simpson says.
Much of their success stems from their familiarity with each other. “A lot of them were part of the team already,” says Paul J. Doocy, chief investment officer for Real Estate Capital Partners, a capital source for Wood Partners. “They are people who are used to working together.”
Seeding Leaders One of the things Leonard Wood, director of Wood Partners in Atlanta, learned at Trammell Crow was to give decision-making responsibilities to partners in local Wood offices. “We operate locally with local partners who can keep their fingers on the pulse of the local market and know when things are changing, what the trends are, and where we want to be,” Wood says. For example, partners are given a fair amount of opportunity to evaluate and acquire land. Proposals are discussed informally with Wood, Jim Simpson or Jerry Durkin, but local partners are generally the ones finding and presenting sites to the leadership.
Giving partners autonomy and financial rewards ensures that everyone shares the same principles, according to Wood. “The partners’ financial rewards are only limited by their ability to do profitable business,” Wood says. “It is a great reward system that keeps partners focused and our interests aligned.”
It also helps groom partners for the day Wood and senior leaders Jim Simpson and Jerry Durkin leave. “Many of our partners today, in effect, run their own business and operate as entrepreneurs so they will be in a position to move up over time,” Wood says.
As a result, in the five or so years when Wood Partners’ founders begin to step down, the company will reap the benefits of such a culture. “We believe we are a lasting organization,” Wood says. “The senior partners are actively working on succession planning. We work hard to identify and bring along new leadership.”
Wood Partners at a Glance
- What: Owner and builder of multifamily and commercial real estate
- Founder: Leonard Wood
- 2004 Revenue: $218 million (projected)
- 2004 Starts: 4,000 (projected)
- Headquarters: Atlanta
- Founded: 1998
- Employees: 152
- Units Built: 18,252 apartments and condos in the Southeast and Southwest, including Atlanta, Washington, D.C., and Phoenix
