Q&A: How Cortland Is Elevating the Resident Experience
Cortland CEO Steven DeFrancis dishes on his major deals of 2019 and what’s next for DFW’s largest apartment owner.
Now managing 60,000 units across more than 180 communities in the U.S., Cortland has continued its strategic growth, primarily throughout the Sunbelt region. The company focuses on a mix of value-add opportunities, core-plus communities and ground-up developments, as well as senior housing within its Attiva brand. This year, however, brought new opportunities for the firm with its recent acquisition of LIV Group, a U.K. based build-to-rent company, and its $1.2 billion purchase of Canadian REIT Pure Multi-Family. Cortland has no plans for slowing down in 2020. Cortland’s CEO Steven DeFrancis took us inside some of those complex deals and explained how they contribute to Cortland’s evolution.
What was Cortland’s growth strategy in 2019?
DeFrancis: There are several key drivers behind our growth both now and as we look toward 2020 and beyond: (1) a dedicated focus on the resident experience, truly owning what it means as a company to place the resident at the center of our business decisions; (2) continued growth in our current markets with an ongoing focus on the suburban areas of those submarkets, where we continue to see the majority of household growth; (3) a longer-term hold approach with our assets, which will ultimately allow us to plan more intentionally for the resident experience of the future; (4) a growing brand awareness and reputation through our acquisition strategy as well as our marketing and branding efforts.
In September, Cortland completed the acquisition of Pure Multi-Family REIT and in August it was LIV Group. What were the value propositions there?
DeFrancis: These deals were very unique opportunities. LIV Group was one of the earliest entrants to the build-to-rent sector in the U.K. and created the first fully integrated operating model for BTR assets. It has gained vast experience mobilizing, leasing and operating BTR homes in the U.K. We saw a unique opportunity to partner with an expert in BTR management and expand on our offerings in this emerging rentership culture. We continue to move forward on our development efforts and aim to bring a more resident-centric mindset to the apartment industry in the U.K. We look forward to helping lead the conversation around the renter experience in the U.K. alongside our new LIV associates.
With Pure Multi-Family, the market overlap and asset mix of their portfolio were the primary drivers behind that acquisition. Our acquisition strategy as a whole is focused on both value-add and core-plus assets that are strategically positioned within high-density suburban submarkets that we believe have favorable growth demographics. We plan to continue growing in our focus markets and taking advantage of the operational efficiencies created through that density—efficiencies which we believe ultimately lead to a better living experience for our residents. The acquisition of Pure Multi-Family presented a prime opportunity to build on their operational foundation in markets where we already have a growing presence.
What changes does this expansion bring to the company?
DeFrancis: In the U.S., this expansion brings increased concentration in several key markets, particularly in DFW where we’re now the largest apartment owner in the Metroplex. Higher concentration means a stronger brand reputation, better operational efficiencies, and therefore, a better resident experience.
Why the U.K. market?
DeFrancis: We started researching international expansion opportunities several years ago. We found one of the most compelling environments for expansion in the U.K., where there is an ever-growing demand for housing alongside a vast opportunity to bring a resident-centric mindset to what it means to rent or “let” an apartment. Our strategy in the U.K. is based on our knowledge that ownership in the residential sector, coupled with an intentional, robust operating platform creates an excellent customer—and in our case, resident—experience.
There’s been a lot of buying and selling activity this year. What is the reason behind Cortland’s rapid transaction activity?
DeFrancis: We set growth goals as a company each year, but we’re very intentional in how we evaluate opportunities and approach our underwriting. We look at a variety of opportunities, from individual assets to portfolios, both as value-add and core-plus opportunities. Because of our vertical integration and regional presence in our core markets, we are able to scale efficiently. With housing in the U.S. still undersupplied, we continue to see opportunity to grow in those markets. The decision to buy or sell is very unique to each deal. We don’t grow purely for the sake of growth. We assess each opportunity and if the value is there, we believe we offer a unique approach to creating additional value, both for our residents and our partners.
How has Cortland changed as a company and a multifamily brand over the past 15 years?
DeFrancis: We’ve had quite the evolution, particularly within the past five years. When we started in 2005, we were a small, development firm focused on in-town multifamily housing in Atlanta. During the economic downturn in 2008, we decided to shift our focus from developing communities to acquiring and renovating existing multifamily communities—all with a vision to challenge the conventions of the traditional multifamily industry. By 2011, we owned and managed 5,000 apartment homes and meaningfully accelerated our plans to build a company that could deliver unique value to both our residents and partners.
Once we decided to pivot to primarily acquiring and renovating communities, we realized we could have better control over the living spaces and experiences we offered by insourcing our key functions. So, in 2013, we integrated construction, interior design, and property management into our platform. Since then, our approach to vertical integration has continued to evolve, even as we’ve grown to a global company of 2,000 associates with more than 180 apartment communities and 60,000 apartment homes.
Five years ago, our focus was more centered on the spaces our residents call home. Now we’re more focused on elevating the experiences our residents have in those spaces through programing, service, and amenity offerings that help cultivate a sense of community and anticipate the needs and wants of the people who come home to a Cortland community every day—from health and fitness to front-door trash service. To support this resident experience approach, we’ve also invested in our marketing efforts as we aim to be the brand synonymous with excellent living experiences—the brand renters search for when looking for their next home.
How do you view the senior housing sector, being that Cortland has a 55+ niche in the form of Attiva?
DeFrancis: We view the 55+ “Active Adult” sector as a natural extension of our multifamily brand with a specific focus on a different demographic and their renting preferences than is widely seen in multifamily. The current 55+ cohort is the largest and fastest growing segment in today’s renter landscape and is expected to be a core resident base over the next two decades. With the projected population growth in the Active Adult category, coupled with their increased propensity for renting, we believe we’ll continue to see a strong demand for housing that caters to this demographic over the next 40 years.
What is next for Cortland in 2020?
DeFrancis: Generally, we’ll continue to build on the strategies and key business drivers we have in place today–particularly our focus on our residents and their living experience. We’re also continuing to ramp up our efforts on the development front while remaining bullish on our current acquisition and value-add strategies. Ultimately, the key to our success will be our ability to deliver a living experience that goes beyond the standard, transactional nature of renting—an experience of interactions that create happy, delighted residents.