The decision of whether or not to open a regional office in a new market is often determined by set unit counts. Woodward, for instance, needs about 1,000 units to establish a regional office. If he gets more than 3,000 units, he’ll look for a second regional manager. Pinnacle will usually put a regional manager on the ground at 1,000 to 1,500 units, but that person usually works out of a property. With 2,500 to 3,000 units, the firm will open a regional office, and at 5,000 to 7,000 units, it will add a regional vice president. At 5,000 units and above, Pinnacle will also secure additional resources for marketing, training, and construction management. “Once that number gets above 2,500 or 3,000 units, we need to really support that person with some administration,” Graf says. “That office will have an investment manager or two and some admin support. When we grow that office to between 5,000 and 7,000 units, we will have three or four investment managers.”
A regional office, however, doesn’t necessarily need to be housed in a physical office. The term “regional office” means different things to different companies. For Woodward, “regional office” refers to a regional manager who mainly works from his or her car. If the manager requests a desk, he or she may set up one in a property, but 90 percent of what the manager does is mobile.
Barnes employs a similar strategy. “Ideally, a regional office would be located at one of our properties,” he say. “In the case that this isn’t feasible, we would look for available commercial space in the nearby area.”
4. Choose complimentary markets.
In addition to selecting regions based on where you will have enough critical mass, make sure the markets mesh well with your firm’s background and experience. For example, Fogelman is hesitant to enter markets where he won’t be able to hold properties long term, which is the company’s typical management philosophy. He is especially wary of advancing into new markets at the request of banks or special servicers when the business will likely be fleeting.
“We’re in the business for the long term,” Fogelman says. “We don’t think it’s a good use of our time and efforts to put all of our resources into a 100-unit, 1970s property that may be sold in 90 days.”
Following your instinct is key to finding a market that suites your management abilities. Danuser thinks Mark-Taylor’s experience in the Phoenix market will help the company in the Pacific Northwest. “We’re accustomed to having to work harder to get a renter,” she says. “We survived three down cycles in Phoenix and learned a few things by being in a down market.”
Specifically, Danuser thinks the company’s resort-style brand could play well in Portland, despite the fact that it isn’t quite as ritzy as Phoenix. “Mark-Taylor is a company that brands resort-style living,” she says. “That’s what we cornered the market on in Phoenix. We saw a big opportunity to do that in Portland.”
