Wood Partners Executive on Rethinking Multifamily Operations
- May 27, 2020
Wood Partners was established 22 years ago by Leonard Wood, a former partner at Trammell Crow Co. Since its inception, the company has been a merchant builder, focusing on highly amenitized Class A properties in up-and-coming neighborhoods and core areas, and working with top companies like Goldman Sachs and AIG in joint venture partnerships.
As executive vice president of operations for Wood Residential Services, the company’s property management arm, Steve Hallsey oversees management, leasing, maintenance and marketing of Wood Partners’ portfolio across the country. Multi-Housing News spoke with Hallsey about what has changed in these eventful past few months and what the industry should prepare for over the longer term.
(Note: The interview was conducted at the end of April.)
With so much pressure on the economy, even before the pandemic, is Wood Partners changing its strategy?
Hallsey: Most of our fees are generated from construction and development. The slowdown that we’re expecting for the short term with construction and development puts more focus on management fees.
Luckily, two years ago we started a fund with some very large institutional investors to build and hold a certain number of assets. So, we will continue to do our merchant building focus, but we are now build-to-hold also for a portfolio of assets that will be held long term.
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What is the status of your development projects?
Hallsey: I know that a number of developments across the U.S. are being mothballed, but ours aren’t. Our joint venture partners are still very committed to the ones that are already in development. Equity is pulling back a little bit in terms of new deals we are bringing them, but in terms of the 41 properties we have in the pipeline, all of them are moving forward.
Development may slow down for the next eight or nine months, but there is such a huge emphasis by our federal government and local governments to get housing out there that I think we will always be deemed an essential business that needs to be protected, as well as financed. In fact, we got two term sheets this week, which were still very competitive to what you would have thought pre-COVID-19.
How does demand look right now?
Hallsey: Even during shelter-in-place restrictions, when people don’t want to be out, our leasing has only dropped off about 30 percent, which is unbelievable. Because you would have thought, “nobody’s going to want to look at an apartment.”
Another surprising thing is that demand has not dropped. The number of first inquiries we have now is almost the same as the number of first inquiries that we had prior to this. So, there is a pent-up demand. Once sheltering in place is over with, I think demand is going to be right back there, and we’re going to pick up that 30 percent.
Millennials are breaking into homeownership. Does that hurt the demand for multifamily?
Hallsey: From my perspective, Millennials want flexibility more than they want stability. They watched their parents go through the 2008 downturn and probably go through some real financial issues. They’re finding that rentals, especially in downtown, exciting areas, appeal to them. They also know that if there’s an economic downturn and there are more jobs in California than there are in Atlanta, they can certainly move more quickly by getting rid of that lease rather than getting rid of a mortgage.
I’m not so sure that homeownership is as critical as it was to generations prior to Millennials. I think it all stems from this whole concept of interconnectivity. That’s why we so highly amenitize our buildings.
Once the pandemic is behind us, do you see lasting effects?
Hallsey: Absolutely. I’ve been putting together the lessons learned from this process—what protocols worked, what protocols didn’t. My biggest takeaway is that perhaps we have been staffing our properties incorrectly. Perhaps we have not been leveraging technology at the level we have been forced to do in this crisis. How do we pay our rents? Are we going to be taking ACHs instead of rent checks?
Our service teams don’t feel comfortable going into some of these units, and some of our residents don’t feel comfortable having our people come into theirs. So, we’ve been doing a number of Skype and Zoom repairs, where we drop off the supplies in front of that person’s door, then the tech gets on a computer or on his phone and walks the person through the repair.
Maybe we don’t need as many leasing people as we thought. Maybe we can set up a call center that takes a call and turns it over to one person in that community to just walk that person virtually—with a phone or an iPad—through a tour of the amenities and into their unit.
These issues are going to be conversations for many, many years. People are really going to take their emergency plans seriously like: What happens if it’s a natural disaster? What happens if there’s a long power outage? What happens if there’s a pandemic? How do I shield my residents? How do I shield my employees? There are going to be monumental conversations coming out of this event. We absolutely need to be much better at that.