But Northland won’t just go to lenders. It relies on a vast array of sources, including brokers, title companies, local contacts, and its own managers to find deals. “We’re going to be very aggressive when there’s an appropriate opportunity,” Rosenthal says. “There may be all kind of opportunities, not just buying notes. For instance, some of the smaller REITs have to sell property. Maybe there’s an opportunity to take a small REIT private.”

As it continues to add units and grow, there are sure to be questions. Is Northland buying too soon? Is it paying too much? Rosenthal admits that no one really wants to venture into the field first to buy right now. Part of that is fear. “The buyers and sellers are not meeting in the marketplace,” Rosenthal says. “Sellers are in denial. They just hold on. Buyers don’t want to overpay.” Gnazzo agrees, adding: “No one wants to catch the falling knife.”

McCabe is one of those who think some buyers will jump in too soon. “There will be false bottoms in this downturn,” McCabe says. “There will also be people that jumped in early in the game—the knife catchers. It may be the second or third ones in the game that realize the profitable workout opportunities.”

Northland insists it hasn’t jumped in too soon. Peter Standish, the company’s senior vice president of acquisitions and development, warns that anyone judging Northland’s buys in Florida needs to realize that the company isn’t just buying in hopes of cap rate compression. “We want to make sure we understand and are realistic about what we’re buying,” Standish says. “We believe we haven’t overpaid and have positioned [our assets] for long-term holds.”

If Northland sticks to its script and continues to get deals at a discount, Rosenthal thinks there’s potential for a great reward. “Fortunes will be made during this time,” he says.

Underwriting Challenge

At Northland, property managers and acquisitions frequently get together.

WHEN NORTHLAND Investment Corp. in Newton, Mass, looks at purchases, it doesn’t just call up the acquisitions people. Its management team plays a big role as well, doing lease audits and market surveys.

“We literally do up to a one-year budget from the property management folks, and we match it [with the budget from acquisitions] and see how far apart they are,” says William M. Thompson, vice president of asset management for Northland. “Typically, property management is more conservative, and acquisition folks are more optimistic. It’s a good balance for what the pro formas are in the broker packages.”

It’s not hard to understand why management is hesitant. “Sometimes, management will come back and say they can get $100; sometimes they’re hesitant,” Thompson says. “They have to execute.”

At this point, Thompson pulls each team in to see which line items are causing the difference in opinion. “We’ll discuss who’s right and who’s wrong, if it’s a happy medium, and if it makes sense to still move forward,” he says.

Often the management team can help make a deal work, though. They’ve been able to execute a money-saving initiative to boost NOI at existing properties and can plug that into a potential buy. “They will add what they think they can do to better those operating expenses,” Thompson says.

Three To Watch

Northland names its favorite markets.

NORTHLAND INVESTMENT CORP. is watching three types of markets very carefully. They are widely different, but the company sees success in each one. Here’s why.

• The Contrarian Play. Last year, most everyone was looking to get out of Florida. Northland decided to go back in. As prices fall, the company will seek more opportunity in the Sunshine State. “We think South Florida will eventually be a good place to be,” says David M. Frieze, director of multifamily acquisitions for Northland. “We want to get our toes wet and tread carefully, but there are indications that cap rates will get compelling.”
• High Barrier-to-Entry Markets. Northland likes being in markets where the permitting process or lack of land makes it hard to develop new competition. You can see that with the three infill developments it’s planning in the Boston area and in New Haven, Conn. However, it isn’t alone pursuing these sites. “The REITs are moving to high barrier-to-entry markets,” says Lawrence R. Gottesdiener, founder and chairman of Northland.
• The IT Markets. Although Northland doesn’t play in the big West Coast tech markets such as San Francisco and Seattle, it loves tech hubs. “With places like Austin, Charlotte, or Raleigh, you see a real concentration of brain power,” says Steven P. Rosenthal, Northland’s CEO. “You have a lot of smart people living in the same place. That will drive the economy.”

• NORTHLAND INVESTMENT CORP.

• Year Founded: 1970
• Headquarters: Newton, Mass.
• No. of Employees: 470
• 2007 Revenue: Declined to state
• 2008 Units Owned: 16,671 (as of Nov. 1; 100 percent self-managed)
• Most Recent Projects Completed: Hartford 21 (262 units); Endicott Green (258 units)
• Geographic Coverage: New England, Carolinas, Florida, Texas, Tennessee, Arizona
• Title: CEO
• Age: 50
• Previous Gig: Co-Managing Partner at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
• Favorite Quote: “It is all in the state of mind.”
• Best Business Decision: Joining Northland
• Greatest Challenge: Making sure my Little League team wins
• People You Most Admire: My three great kids
• Best Advice Ever Received: It is better to go 0-20 than 0-0.
• Leadership Philosophy: Do all your talking on the field.
• Last Book Read:Atlas Shrugged by Ayn Rand