[LEADERSHIP LESSONS] – David S. Kim
Credit: Robert Benson/Aurora
TITLE: Managing Partner, Operations
AGE: 43
FIRST PROFESSIONAL JOB: State of Wisconsin Investment Board
BEST BUSINESS DECISION: “To pursue a practice that is multidimensional and ever-evolving.”
FAVORITE QUOTE: The poem “If” by Rudyard Kipling
GREATEST BUSINESS CHALLENGE: “Managing expectations and staying relevant during this market downturn.”
PEOPLE YOU MOST ADMIRE: “My father and my mother.”
LEADERSHIP PHILOSOPHY: “Help people get to where they are supposed to be. It pays tenfold.”
BEST ADVICE EVER RECEIVED: “From my old boss, who told me, ‘It’s highly improbable that you will succeed in your own business.’ I resigned the next day.”
LAST BOOK READ: Lincoln on Leadership: Executive Strategies for Tough Times, by Donald Phillips (Warner Books, 1992)
PLAYING ON YOUR iPOD: Jerry Garcia Band, Santana
So what’s an apartment renovator to do when renovation opportunities are on economic pause? If you’re The Bascom Group, you find more creative ways to pull value-add returns out of the acquisition market by targeting purchases with distressed rent fundamentals, often due to an owner’s financial or professional inability to keep pace with regular asset maintenance and management. Bascom did just that across three deals consummated in 2010. For an inclusive total of $65.4 million, the purchases crossed asset classes and came via receivership, foreclosure, and trustee sales. (For more on these acquisitions, see “Triple Play.”) The one thing all three assets had in common: They were operationally dysfunctional.
Indeed, what seemed like an insurmountable hurdle—the turnaround of long-neglected properties—has become a profitable niche opportunity for Bascom. And until the greater economy has improved sufficiently to justify traditional repositioning efforts, this strategy is one that Bascom, which is eyeing a $300 million pipeline of potential investments, plans to pursue for the remainder of 2011.
Survival of the Fittest
Today’s renovations have a different purpose: “The value-add now isn’t going in and upgrading all of the units to granite; it’s about getting units up to a functional par,” Kim explains. “Today’s concept is locating a property with 30 down units, where you spend $150,000 to bring back the inventory that is off line because of functional neglect, deferred maintenance, and lack of replacement capital. All we are doing from a value-add standpoint is bringing the asset on line and getting it to market so it can be rented.”
