So if Behringer Harvard’s multifamily platform is a model built on cold calculation, what, then, is Alfieri’s next intricately orchestrated move? The answer—to evolve that platform into a vertically integrated firm with acquisition, operations, and development units similar to a traded REIT—tells as much about Alfieri’s achievements as it does about what the firm had planned for its multifamily future all along. And it’s a mission that will likely define him as an apartment executive.
The Deal Grinder
Although Alfieri traces his apartment roots back some 25 years to include leading the Dallas-based regional operator Revest Group, his real dealmaker pedigree—not unlike the majority of Behringer Harvard’s senior management team—comes from AMLI Residential (see “AMLI 2.0?”), where Behringer Harvard president and co-chief operating officer Bob Aisner, then–executive vice president for the Chicago-based apartment REIT, hired Alfieri after a chance résumé crossed his desk.
AMLI 2.0?
Behringer Harvard’s multifamily platform will be guided by a core management team that once worked together at the Chicago-based firm.
It’s no secret that AMLI blood runs deep in the management of Addison, Texas–based Behringer Harvard’s multifamily portfolio. It’s not by accident, either. In addition to Behringer Harvard president Bob Aisner and EVP Bob Chapman (who served as AMLI’s EVP and CFO, respectively), Behringer Harvard’s de facto multifamily leader, Mark Alfieri, was a top deal guy at AMLI until 2006. So it was no surprise that when Behringer Harvard moved to bring the operational management of its Class ?A multifamily units in-house, the firm turned to a familiar face in former AMLI national director of property operations Peggy Daly.
“I think we all bring some integrity out of that background,” Aisner says. “AMLI was a company built on a double foundation of integrity and creating shareholder value. Those are still the two things I think about the most. I give AMLI a lot of credit for that.”
The hiring of Daly also signified that the Behringer Harvard multifamily platform—until then, an apartment portfolio investor with outsourced operations—was serious about building a vertically integrated platform of ownership, operation, and even development expertise, and the similarity of that model to the traded REITs and institutional-level apartment owner isn’t lost on any industry watchers, including AMLI CEO Greg Mutz. “Behringer Harvard is working hard on building a vertical platform,” Mutz says. “Fundamentally, it is difficult to create value without having at your disposal all the various levers of value creation, including acquisition, finance, property management, technology, and development.
“Simply being a great acquisition and finance shop without management, technology, and the rest of the puzzle makes it hard to compete with those that are fully integrated and able to squeeze value out of every aspect of the life cycle of a property. There’s a lot going on underneath the tent at Behringer Harvard. Mark and Peggy are rolling up their sleeves and working on people, process, policy, technology, expense management, discipline, and focus. I really think the world of both of them, and my bet is that they drive performance and ultimately succeed.”
According to Alfieri, speed in assembling an institutional-quality senior management group became critical as Behringer Harvard built out the REIT’s platform and scale and began looking at creating brand, operating for revenue, and opening up additional acquisition and development growth channels. “It was a major benefit to be able to use our contacts and relationships in the business to assemble a team very quickly, particularly a team that was primarily from a self-managed background rather than a fee-management background,” Alfieri says. “At a senior level, I would put my core management team up there with anybody right now. We’ve got a good nucleus to build from, and that’s got to be the focus for the next four to six years.”
So, could an exit strategy for the firm even mirror that of AMLI, which went public via IPO in 1994 and was reprivatized by Morgan Stanley in 2006?
Regarding exit strategies, Alfieri is vague but pointed. “There are a lot of opportunities on the exit front. Anything could happen,” Alfieri says. “I think there’s a lot of demand for Class A multifamily in the traded markets. The world has really opened up, and I think there could be plenty of buyers over the next several years that would love to acquire our platform.”
“I hired Mark in 1999,” Aisner recalls. “I got a blind résumé and called him in for an interview. He had just finished up with Revest and I loved what I saw. I thought he was terrific. He sat in the office right next to me, and I would listen to him working the phones. Nobody works the phones better than Mark; he just grinds out deals.”
Over the next seven years, Alfieri did just that, completing more than $1.4 billion in apartment transactions in the lead-up to AMLI’s $2.1 billion privatization by Morgan Stanley’s Prime Property Fund in February of 2006. What’s more, Alfieri was working extra hours beyond the daily deal grinding, taking an industry leadership role by serving on the National Multi Housing Council’s board of directors from 2004 until AMLI’s privatization in 2006. That’s when the phone rang and Aisner, who had left AMLI in 2003, offered Alfieri an opportunity that the dealmaker couldn’t pass up—the chance to come to Behringer Harvard and build an entire multifamily apartment portfolio and operating platform from the ground up.
“Considering my background, the opportunity to come to Behringer and run a fund at this level was a step up for me—a major step up,” Alfieri says. “I’m probably not a conventional top-down leader. I view all growth as team growth, so I spend a lot of time talking to everybody in the offices and at the properties, because I think it is very important that they know what my goals and objectives are, and, even more importantly, what opportunities have been presented to me. That’s really part of what I sell: Look at what was offered to me, and what has happened, and how I’ve been able to grow and accelerate my career under this amazing platform.”
Class A All the Way
“What has happened” is, of course, the story of how Behringer Harvard went from an office investor known to relatively few in the apartment sector to becoming a multifamily brand name in just five years. But the candidness that the senior managers exhibit when telling of Alfieri’s stretch assignment hire also offers some new transparency into the Behringer Harvard business model. Although the multifamily portfolio is a closed-end investment vehicle, from the outset it was planned as no mere holding company but as a stepping stone to a full-fledged apartment operator platform. While its specific exit strategy remains uncertain—Alfieri says the options range from a sale of assets to a public listing to a merger—what is clear is what the firm will look like when an exit is made: a fully fledged, national owner and manager of core Class A multifamily real estate.
What is less obvious is how the hiring of Alfieri in 2006 was a deliberate move to create that eventual entity. “When I met Mark, he was strictly a deals guy, and he was a great networker, and fun to listen to as he worked his contacts,” Aisner says. “But one of the things we thought when we brought him on to the fund is that he was more than just a deals guy, that he had more talent than that, and he’s gone from being an acquisitions executive to becoming a fund manager. He runs a big team and has become very sophisticated on the operations side. Yes, his reputation on the street is as a great buyer of real estate, but I think that underestimates what he has done in putting this fund together.”
Alfieri’s first deliberate move in that direction was booking a flight to the Netherlands, where he spent the better part of a year pitching Dutch pension fund PPGM on Behringer Harvard’s Class A investment strategy, culminating in PPGM’s May 2007 initial $100 million investment as a co-investor in Behringer Harvard’s multifamily strategy.
“PPGM was the launching pad for our platform, and to sign them up essentially before we had raised any money and made any investments was really a remarkable thing,” Alfieri says. “Everything aligned well: They were looking for a six- to 10-year hold; we were looking for a six- to 10-year hold, and they were interested in core real estate assets. We put on a terrific show, predicated on previous experience in the Netherlands with Dutch pension funds via AMLI. I was the front man, but we could not have done that without [Behringer Harvard founder and CEO] Robert Behringer, Bob Aisner, [executive vice president and co-chief operating officer] Bob Chapman, [chief administrative officer] Jason Mattox, and the whole team.”
A Step Ahead
