When you visit our website, you’ll notice the first thing it says is that “We are a Boutique Real Estate Investment Firm Operator based in our hometown of Austin, Texas.”
Our General Approach on Asset Management
The key word in that statement–and what we’re going to focus on today–is “operator”. Multifamily is an operations heavy asset class, and it requires a strong ground game to execute your business plan. Every day, leases are signed, residents move-in and move-out and market rents change. It is not a turnkey operation where you buy an asset and after you close on it you don’t have to do much work on it. It’s also not an asset class where you’re hoping to sign 1-2 leases in a year like office or retail and has a little slower pace to it. Multifamily is a hand to hand combat sport, and you have to stay on top of each asset’s performance and business plan on a constant basis.
In today’s article, we’re going to focus on Asset Management–our general approach and the investments we’re making in the area. Given where the market sits, we think it’s as important as ever to be focused on the operating side of the business. And if you go back to read the article where we talked about the importance of Construction Management, you’ll see the parallels and overlap between these two disciplines and their overall impact on our business plan. Both are key elements to keeping us Vertical integration in real estate investing is the strategy of owning and managing multiple stages of the process, from acquisition to management. Vertical Integration refers to a strategy where a company expands its business operations into different steps on the same production path. In simpler terms, it's when a company owns or controls its suppliers, distributors, or retail locations to con... View Definition as much as we can be.
Why are we harping on Asset Management so much?
Because we believe that in today’s market, to generate the types of returns we project and investor’s expect, we have to be excellent in operations. We have to nail our business plan, with confidence. The Central Texas multifamily market is hot. And with good reason. With the job announcements (Oracle, Tesla, Samsung, etc etc), population growth and rent growth we’re experiencing (all of which project to continue), investor interest is extremely high. And Cap Rates are low–somewhere close to 3.0%.
None of that scares us. We’re long on Austin and believe the growth does continue. The fundamentals are extremely strong. What it does mean though, is that the market can’t bail you out. You’re not going to get lucky and see Cap Rates compress where your value is elevated simply because the market got tighter. It is hard to envision cap rates going much lower than where they currently sit. And if we start to talk about interest rates rising, it’s not a far leap to see cap rates rising out on the horizon.
All of which brings us back to Asset Management.
We just made a big investment on our team and brought in a Director of Asset Management. He comes with lots of experience managing a huge portfolio across multiple states. By having him focus on our geographically concentrated Central Texas portfolio, we believe he’s going to elevate the performance of each asset, and the portfolio as a whole.
This hire and investment is something we’re really excited about. It continues to elevate our internal team’s capabilities as we recognize the importance of building a best in class organization and surrounding ourselves with folks smarter than we are. It also prepares us for (and allows us to continue) the growth trajectory that we’re on by having dedicated resources to oversee each and every asset.
It’s part of the continued evolution that Wildhorn is on as we grow and mature as a company. Overall, this allows us to take our game up a notch and better serve our investors’ interests. Our reporting will be elevated to true institutional level reporting, and we’ll be demanding more and different things from our onsite teams. The cadence and rhythm of the communications with the teams will shift some as well, all in an effort to both empower them and hold them accountable to our budgets and business plans. This certainly isn’t to say we’ve haven’t been doing that—because we’re on calls each and every week for all our assets—but we do think it’s about to get a lot better and detailed.
Stepping Up Our Game at the Portfolio Level
Outside of asset performance, this allows us to step up our game on the portfolio level as well. In addition to just looking at each asset, we’ll have a more detailed review on the macro level portfolio. The advantage of having over 3,000 units within 100 miles is we have actionable market knowledge to take advantage of—and we will be doing so. If one asset isn’t performing to the level of the others, we can ask tougher questions and offer advice on what we’re seeing work at assets nearby. We’ll be able to compare different parts of town, or track trends between markets—all in an effort to maximize the collective performance of each asset.
The other piece of this role that we’re excited about is creating a focus on finding and executing portfolio level enhancements. Again, with the scale we have there are opportunities to take advantage of and we now have the resources in place to execute these—which are already bearing fruit for the portfolio and assets. In our first 30-days, we’ve successfully renegotiated and struck new partnerships with our landscaping and trash valet vendors. In both cases, we’re creating savings on site for our assets and getting better coverage/support from strategic partners. We’ve also dug into our utility bills and, leveraging the institutional knowledge he had, identified a bill back program saving us $400/month. (While that doesn’t sound like much, in today’s 3.0% cap rate market that equates to $160,000 in increased value on each asset). We’ve also rolled out a new renter’s insurance and security deposit provider that provides our assets and residents with greater protection and coverage at reduced pricing.
Many of these things are initiatives we’ve been working on and thinking about for a while. Some of them are concepts we weren’t even aware of. In both scenarios, having an experienced and dedicated Portfolio Manager has allowed them all to be executed.
We are extremely excited about this hire, and our investment in the discipline of Asset Management. As we continue our growth, we’re confident it will continue to pay dividends for our assets and our investors on each and every deal.
Ladies and Gentlemen, please welcome Sean Davy to the team.
Andrew Campbell is a native Austinite and Managing Partner at Wildhorn. He is a real estate entrepreneur who first broke into the business in 2008 as a passive investor. In 2010 he transitioned into active investing and management of a personal portfolio that grew to 76 units across Austin and San Antonio. He earned his stripes building and managing his personal portfolio before founding Wildhorn Capital and focusing on larger multifamily buildings. At Wildhorn, he is focused on Acquisitions and maintaining Investor Relations, utilizing his marketing and communications background to build long-term relationships.