Q&A with Behringer Harvard’s Jason Mattox
- Jan 25, 2011
After the impressive year that Behringer Harvard had in 2010, Chief Administrative Officer Jason Mattox talks to MHN about the company’s strategy.
MHN: Behringer Harvard invested nearly $900 million in commercial real estate assets in 2010—nearly double what it invested in 2009. What made the difference? Has capital been less difficult to find?
Mattox: We made a number of strategic additions to our company’s portfolio last year. Each transaction was subject to rigorous underwriting, and many were sourced through our existing relationships within the industry. We believe these acquisitions are well positioned to achieve our investment goals.
I feel that one of our strengths is our ability to source great real estate opportunities even in a period of adverse market conditions. While 2010’s year-over-year improvement in commercial real estate market fundamentals and the availability of capital were welcomed, the recovery has been tempered and investment activity still has not returned to pre-recession highs. In spite of these challenges, we were successful in raising capital and our acquisition pace accelerated as we identified attractive investment opportunities to capitalize on the continuing market distress.
MHN: What kind of long-term results do you expect from capitalizing on recent market distress?
Mattox: Our newly acquired assets generally were purchased at significant discounts to replacement value and well below the peak market prices of recent years. We are confident that these investments are well positioned for value creation as our economic recovery progresses.
MHN: The firm has ramped up its investment in the multifamily sector, acquiring 4,389 apartment units in the last year. You also received $300 million from PGGM Private Real Estate Fund to be invested in your multifamily portfolio. The reports we’re reading have shown multifamily outperforming other areas of commercial real estate. Is that in line with the indicators you’ve been seeing, and does that help explain your expansion in this area?
Mattox: Yes, I believe the multifamily sector is a very strong performer in today’s market. This means the future likely bodes well for apartments. Sustained demand driven by favorable demographics in the age groups most likely to rent—echo boomers and baby boomers—is expected to provide a firm foundation for growth. New construction has been at a historical low, and the near-term additions to supply are not likely to be sufficient to meet this anticipated growth in demand.
Since the beginning of our successful partnership with PGGM, we have co-invested in high-quality multifamily communities in 10 states representing thousands of apartment homes. Behringer Harvard provides strategic management for each joint venture, including acquisition, asset management and disposition services; legal and accounting services; and property management services.
We have been pleased to partner with an institutional real estate investor of the highest caliber. We believe that PGGM’s decisions to incrementally increase its investment in our U.S. multifamily platform have been a vote of confidence in the quality of the diversified portfolio we have built together. The portfolio of our joint investments includes multifamily communities in major metropolitan areas including Washington, D.C., Las Vegas, Atlanta, Dallas, Houston, Denver, Fort Lauderdale and Los Angeles.
MHN: By launching Behringer Harvard Residential, your new property management arm for multifamily, what do you hope to accomplish?
Mattox: Behringer Harvard Residential enables Behringer Harvard to bring to the market an integrated, end-to-end solution for the acquisition and management of high-quality multifamily communities. We believe this new business is a logical extension of the Behringer Harvard brand.
Behringer Harvard Residential brings us into more direct contact with tenants, resulting in stronger consumer insight. It also enables us to control and standardize all related business policies and practices and enhance quality control. As part of this process, we are establishing standardized management processes based on proven best practices, and integrating on one system standardized accounting and support functions.
MHN: The firm showed a commitment to green building in 2010, with two LEED Gold multifamily constructions, several other LEED certifications and an ENERGY STAR label on nearly half your office buildings. Building green has moved past an altruistic pursuit to almost one of necessity. How close is your firm to the point where it would consider only construction that has sustainability in mind?
Mattox: Sustainability is considered in every investment we make. However, we evaluate many factors during our rigorous underwriting process, and every investment must make good business sense first. Although sustainability alone is not a controlling factor, it is always an important consideration for us.