Gardner, 47, has spent the last several years focused on the tools and techniques the company needs to move forward. He’s building up the company’s back-office operations which, as often happens in entrepreneurial companies, had been overlooked as the company grew over nearly 30 years. To help support JSCo’s substantial growth, Gardner established a human resources department when he came on board and is expanding the company’s back-office IT operations.
Gardner also is working to diversify the company’s services and revenue streams to maximize JSCo’s profits. Property management, once 99 percent of the firm’s operations in terms of gross revenue, is now only about 85 percent of the overall mix. The firm also is expanding into the development arena for both new construction and rehabs ( JSCo has developed about 2,700 multifamily units since its inception).
Such diversification helps the company manage one of its greatest challenges: Balancing its social mission with the need to make money and the desire to prosper as a business. “We are not so profit-driven,” says Gardner. “We like doing things that have great community impact and help people. I don’t want to be some bleeding heart, but we feel good about what we do and make money.” (Ironically, Gardner’s office offers a sweeping view of the city’s financial district.)
The company tackles many projects with the goal of just breaking even. A good example is San Francisco‘s North Beach Place, a $100 million HOPE VI redevelopment of a dilapidated public housing complex into a 341-unit vibrant mixed-use community. The company split the development fees with two other partners and ended up making only about $1 million (but is now earning money through the management of the property and retail stores and net cash flow from those operations). The John Stewart Co. is also the largest private manager of supportive and special needs housing in California, programs which certainly are not big moneymakers. JSCo manages SRO units for a wide range of target populations, including the formerly homeless, physically disabled, and those with HIV/AIDS.
“Some projects we do well on, others we lose money on,” says Stewart. “You are not going to make money on the projects for the developmentally disabled or HOPWA housing for people with AIDS. Those are small, inefficient, and labor-intensive, and in order to survive in the business you have to offset them with larger projects.”
The company does just that, offsetting its affordable initiatives with the development and management of market-rate and luxury product. Its two largest market-rate clients: The Presidio Residences, a former military post in San Francisco and now a national park with a wide-range of housing (monthly rents go as high as $10,000), and The Villages at Treasure Island, nearly 625 units (renovated by JSCo) on a former U.S. Navy housing site. In addition to its management services, the company reaps revenue through its third-party development, construction, and financial and syndication services.
MANAGEMENT EXPERTS JSCo is well-diversified in its offerings, but the company’s core backbone is management. It comes as no surprise that the company is focused on one of the most challenging components of affordable housing. “What they do is the toughest part of our industry; they are right there in the operational mix,” says Kingston of Century Housing. “It’s one thing to get a place built. To ensure that it operates in an economically feasible way and at the same time for the benefits of whomever is living there, that’s an ongoing issue and takes the patience of a saint.”
Over the years, the company has developed the endurance and fortitude to tackle properties ridden with crime and gangs. JSCo recently signed on to manage a heavily distressed 90-unit property in Stockton, Calif., for BRIDGE Housing Corp. “It’s the worst multifamily property in Stockton from the perspective of police calls,” says Galante of BRIDGE. “The John Stewart Co. rolled up their sleeves and jumped right in.” And that’s exactly what the company also did during the redevelopment of Pullman Point Apartments in Richmond, Calif., outside of San Francisco. Gangs traded gunshots as Gardner and his team cut down the landscaping that had been serving as snipers’ nests.