In the past two years, thereâs been a massive consolidation under way in the apartment industry. Last year, MAA bought Colonial Properties Trust, Essex Property Trust purchased BRE Properties, and Equity Residential and AvalonBay Communities devoured what was left of Archstone. And that was just apartment owners. A historically significant deal brought together Greystar and Riverstone Residentialâthe two biggest managers in the country. After a slow start, 2015 has seen Brookfield Asset Management purchase Associated Estates, with deals involving Home Properties and Wood Partners rumored to be in the pipeline too.
As the big just continue to get bigger, itâs easy to wonder if smaller, regional players will be buried under larger competition. Up until the rise of the REITs in the â90s, the apartment industry was dominated by these entrepreneurial, local sharpshooters who knew their markets and served their customers well. And, while these firms might not get the headlines their larger peers command, regional power players like Drucker & Falk on the East Coast, RMK Management and JC Hart in the Midwest, and FPI Management on the West Coast have set themselves apart in other ways.
Here are their stories:
J.C. Hart
Although John C. Hart builds and manages homes, he thinks developing a connection between renters and a place to call home is the most important thing his company is building.
Hart believes his firm, J.C. Hart, and those of a similar size are special because theyâre able to deliver on a homegrown scale, instead of on a national platform.
Since Hart started the company, in 1976, itâs built 7,095 apartment units and currently manages 4,536 units, 96% of which it owns.
In 2007, Hart considered expanding into the Charlotte, N.C., market, which is about a nine-hour drive from the companyâs Indianapolis headquarters. âBut with the credit crunch and the [conduit] markets imploding, we got concerned with the financial institutions and decided that perhaps that expansion wouldnât be a good thing at the time,â Hart says. âWe ended up pulling out of the two opportunities we were aggressively into at that time.â
Since abandoning the East Coast expansion plan, Hart has never looked back. Heâs comfortable in Indianapolis as well as nearby markets.
Hart, who grew up in Indianapolis with his nine siblings and graduated from Indiana University, says his knowledge of those markets helps him compete against the larger players. Indeed, Indy is part of his DNA, and he knows the personalities of the neighborhoods.
âWe want to be in markets we can drive to that would be similar to Indy,â he says. âWe want that so we can keep control on whatâs going on.â
In addition to having a dominant presence in the Central Indiana market, the companyâs footprint covers Louisville, Ky.; Dayton, Ohio; and Cincinnati, all of which are less than two hours from Indianapolis.
âIf I were to wander off to Charlotte or Columbus, it would just take so much more time to get my arms around whatâs going on there,â he says. âHow could I get comfortable enough to say that if I built a project there, it would be a success?â
Hart also says heâs not interested in becoming a large-scale public because he prefers to call the financial shots and says he can understand why other similarly sized companies want to stay the size that theyâre at.
âThere are a lot of people who donât want to deal with the minutia and challenges of reporting,â he says. âYou want to be making the decisions that you think are best, without stockholders.â
Ultimately, Hart wants to deliver a place his residents can call home.
âItâs really fun and exciting to do what we doâto create [apartment buildings] where more than 200 families can call home,â he says. âItâs a responsibility as a manager to make it a special place for people to want to call it home. I think thatâs what makes it fun for me and JC Hart. We donât want to go outside the realm of that and lose that fun part.â
Drucker & Falk
Kellie Falk doesnât think the largest management companies really compete with her company, Drucker & Falk.
âThose guys are big-time wheelers and dealers,â she says. âTheyâre buying and selling and buying and selling and getting bigger and bigger and bigger. Weâve been in this business since 1938, and thatâs not how we do things.â
Newport News, Va.âbased Drucker & Falk manages more than 30,000 units for long-term investment holders while bigger companies compete for the institutional clients.
âOne isnât better than the other, itâs just a different investment philosophy,â she says.
Falk has no interest in diving into the competition for institutional clients with the gigantic firms.
âThere comes a point where you ask if theyâre managing a commodity or an asset,â she says. âI know weâre managing an asset, for sure.â
She also notes that her business is different because she and her business partner, Wendy Drucker, often pop up at sites to check on things. With a larger company, an owner probably couldnât be as hands-on, Falk says.
RMK Management
Ask Chicago-based RMK Managementâs executive vice president, Diana Pittro, what sets her firm apart and sheâs quick to cite the âwarm and fuzzyââÂessentially, the interactions between site-level associates and residents.
âThe national companies do a great job with customer service, but I think what weâre able to do better is bring a face to the business versus sending an e-mail or notice,â she says.
For instance, RMKâs maintenance supervisors visit each resident during move-in, a practice thatâs clearly paid off: The company, which manages about 8,200 units across 32 properties, was named the 2015 Management Company of the Year by the Institute of Real Estate Management.
Pittro also gets to personally meet with vendorsâsomething unheard of at larger firms. She says being able to meet with the vendors whoâll be hands-on at each site is a huge competitive advantage because it enables her to get to know them. Additionally, some local vendors offer discounts for large-portfolio contracts, saving the management company money when it can sign on for several sites in the same city or local area.
âTheyâre all doing volume pricing,â she says. âI think thatâs one of the things you have to do to keep yourself competitive.â
Pittroâs presence in the community where RMK operates also helps the company secure talent. As a director and advisor on the board at Rasmussen College in Naperville, Ill., Pittro can recruit and attract some of the best and brightest students to work for her.
âWhen youâre a local company, youâre able to spend that time out there and develop those relationships,â she says. âA national company may not have the ability to do that. Someone in a corporate office in Denver isnât going to sit on a college board in Naperville.â
As Pittro has added talent, sheâs kept turnover low. âI have dedicated employees,â Pittro says. âAbout 35% of my staff has been with me for over 10 years.â
FPI Management
With 78,000 units across 12 states under its belt, FPI Management is hardly an upstart. But unlike its larger competitors, the Folsom, Calif.âbased company, which ranked No. 8 on the 2015 NMHC 50 Managers list, isnât chasing exponential growth.
âWe like controlled growth with the ability to ensure the success of the acquisition,â says Julie Brawn-Whitesides, the companyâs executive vice president. âIf, for some reason, we donât think we can fully assist in success, then we may refer them to another company.â
Having offices spread across the country isnât part of FPIâs strategy. Instead, the firm wants to outperform others and establish a strong reputation.
FPI takes a very selective approach with new opportunities, seeking scale before going to new places. âThe lone soldiers often donât work out,â she says. âWe need them to feel like theyâre a part of our company. We have about 1,000 units on the East Coast and [thatâs] for a client that is based out of California; we do it as a courtesy, as more of an asset-management role.â
Other than that one foray to the East Coast, FPI plans to stick to its Western core.
âWeâre going gang busters here,â Brawn-Whitesides says. âSo thereâs no particular reason why weâd have to venture into a market we donât know.â
Even at almost 80,000 units, Brawn-Whitesides says, FPI can accommodate specific requests from clients. âWe really have flexibility in what we can do for a client,â she says. âYou tell us what your need is and weâll find a way to do that for you.â
