← The Rent Roll with Jay Parsons
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Welcome, welcome. It's episode number 86 of the rent Roll your podcast on all things rental housing, apartments, San Antonio Rentals and Build to rent. So today's topic is to self manage or to outsource to third party management. That's the question for today. And of course by that I mean for apartment and really BTR and SFR owners as well. Is it better to manage your own properties in house with your own teams or is it better to hire somebody else to do it for you? And this of course is not a new question, it's an age old question and the answer's probably evolved a little bit over the years depending on who you talk to and what the situation that you're in. But I remember not that long ago it was pretty common to have institutional owners that wanted to find the very best third party manager in each individual msa, each individual market. What's the best manager in that market? And that was always a big question, hey, who's the best in this market? Who's the best in that market? And that may mean if you have a national footprint that might, that might mean working with 10, 20 plus different third party managers. And some still do that. But the times are also changing. We've seen some owners that are now been putting, been pushing to do more management in house. They want to take management in house, they see the fees that they're paying and the performance they're getting and they think surely we can do better. Some of you listening have probably had that conversation yourself. Plus there's probably some incremental value for some people and being able to say that we're vertically integrated, we could own it and manage it in house. And that certainly may be real in some cases. Any others that point out, well, hey, property management is a tough business, it's a low margin business. We got to deal with repairs and leasing and turning units and rent collections, resident communications, all the new prop tech to keep up with vendor management, online reputation, staff turnover, it's a big one, marketing, et cetera, et cetera. We go on. Obviously, property management is hard. Regardless of where you are in this debate, everyone will agree that property management is hard. And for some, maybe it's better to outsource those functions to a third party that's fully focused on it. So the reason I bring this up today is I saw some news a while back that Land Tower Residential was making a switch. They were going from in house property management to third party. And I thought, well, I got to talk to my friend Emily Watson who's the chief operating officer at Landtower and ask her to come on the podcast to talk about it. And thankfully, she very graciously not only agreed to do that, but was also remarkably candid and transparent that conversation as well. And so she's, as I mentioned, COO at landtower today. Previously, she's worked at Equity Residential and Berkshire, among other places. And so she's seen all sides of this debate. And so she's agreed to again, she come on and talk about the process they went through, the results they're seeing so far, and really some of the nuances that maybe some of us aren't fully aware of when this conversation comes up. So I think you're going to enjoy this discussion, whether you're on the owner side of the business, the management side of the business, or neither. You're just somebody who's interested in the rental housing space or in another capacity. I think you'll benefit. You'll benefit from better understanding the nuances of what is a very important topic for the industry. And by the way, this is not to say that everybody in the business should do what Landtower did. Not at all. It's really just one perspective on a hot topic. And beyond that debate, we've also got a lot more to cover. As always, we had some huge news headlines in the last week. We had the the announcement of the largest apartment REIT merger in U.S. history. That of course, between Avalon Bay and Equity Residential. And of course, we had the US House representatives passing their major housing bill and now that going back to the Senate for some kind of reconciliation. So we got a lot to cover and let's jump right in. First and foremost, a big thank you to our sponsors. Big shout out to jpi, a leading Harvard developer with a state of purpose to transform building, enhance communities and improve lives. Check them out@jpi.com, check. JPI is the cutting edge of some really exciting innovations in apartment development and construction. Also, a big thank you to Madera Residential. Check them out@maderaresidential.com and to funnel the AI and CRM platform that you could find@funnelleleasing.com all right, so we're going to kick it off with a section we call Here's a Chart. So I got one chart for you this week. But before I show you the chart for those watching the video and before I walk you through the chart for those just listening, I want to give you some context here because I'm going to share some data that I think is going to surprise A lot of you, even for you industry veterans who think you know it all with this stuff, I say it tongue in cheek. None of us know it all. I think this is going to surprise you. And it's about market share. We're going to look at the market share of the combined NMHC top 50 largest apartment owners and the largest top 50 managers in the United States from 2000 y2k 2000 versus today here in 2026. Now some of you may remember I talked about this topic a little bit, a little, I don't know, six, seven episodes ago when we broke down the NMHC top 50 lists. And I'm bringing this up again and sharing a new chart. This isn't one I shared previously because it really helps tee up the conversation we're going to have with Emily about self managed version versus third party management. So bear with me a minute on this because this is gonna be good, okay? Or at least I think it's good. You can judge it for yourself of course, but here's the chart. Okay, here's the chart. Now for those of you who can't see the chart again, it goes back to 2000, the new millennium. And let's start with apartment owners. Okay, so back then the 50 largest owners had 15% market share. Okay, so top 50 largest owners combined own 15% of the U.S. apartments. And back then there are about, I think 17 million or so apartments in the U.S. now fast forward to today and guess what? This one may surprise you. Okay, the top 50 owners actually own a smaller market share than they did in 2000. They're down from 15% in 2000 to, to now 11% here in 2026. Isn't that wild? I don't think anybody, I don't know, I shouldn't say anybody. I think most people probably are not aware of that stat. 11% today versus 15% 26 years ago. Now I'm sure some of you listening are going to say, but Jay, those lists that probably, that doesn't include Blackstone and some others who don't participate on NMHC surveys and. Okay, sure, okay, but let's do some math. NMHC is top 50 owners according to NMHC have about two and a half million units. Now let's assume that number should be three million. Okay, so let's add a half million and it's, that's probably generous to go that high based on looking at the number of groups that are that size. Not participating probably don't get you to half million units. Let's just say that they do. Okay, that would take us all the way up to 13% market share. Okay, that's still below the 15% that the top 50 had back in 2000. All right. And oh by the way, Equity Residential had 228,000 units back in 2000, which is below the 180,000 units that they'll have once combined with Avalon Bay. Assuming that merger goes through. That's another crazy stat peak. Equity Residential had more units than Avalon Bay plus Equity Residential combined today. And people forget that EQR was far bigger than it then that back then than it is today, at least in terms of unit count. And, and also another crazy stat equity with 220,000 units wasn't even number one back in 2000. Aimco was even bigger with 240,000 plus units. Okay, so now let's go, that was owners, those people who, those are companies that own the apartments. Now let's go to the managers, groups that manage these. Now some manage them, some of these owners manage their own like the REITs. Others will rely on or will hire a third party manager. So back in 2000, the top 50 property managers had 14% market share. Now what do you think that number is today? Well, it's gone in the opposite direction. Of the top 50 owners today they own 22% market share collectively. So they went from 14% to 22%. So that means that nearly one in two, I'm sorry, not one and two, that means that nearly one in four apartments in the US is managed by a top 50 sized property manager. And that obviously is a material change. Now of course we should point out that apartment management is still incredibly diversified relative to pretty much any other major industry. I mean, how many industries out there would even have a legitimate top 50 list to show? I mean most industries are probably top five, top 10 that are even know worth showing in terms of meaningful size and scale. And so property management is still incredibly hyper fragmented business, but it is becoming steadily more consolidated over the years. And why is that? Well, that's part of what we're going to talk to Emily Watson at Landtower about today. But I think the things that Emily talks about are likely contributing to this trend. And obviously Landtower just contributed to this trend by shifting from in house management to third party management. And again, and I don't want to take away too much thunder from what Emily's going to share, but I think you'll find that a lot of it just boils down to scale. And when I say scale, I don't mean pricing power in terms of rens because it's just too fragmented for that. But it's about scale of operating efficiency, everything from marketing reach to operating efficiencies in terms of things like more favorable pricing with vendors and being able to have the scale and the resources to best utilize all the technologies now needed to manage modern apartments and single family rentals and build trail units for that matter. So again, stay with us for that conversation. It's going to be a good one. But next up, it's time for rental housing Trivia. Today's trivia is presented by Foxen, which provides a suite of value add solutions designed to improve operations compliance and property performance, rethink renters insurance compliance, rent reporting and pet management with Foxen. Check them out@foxen.com that's fox.com okay, so most of you listening probably know that Gracetar is the nation's largest apartment property manager and they've been number one in the NMHC list for largest number one every year since 2011. So the question is, who was number one prior to Gracetar? Who was number one back in 2010? And I'm going to give you five choices. Was it AIMCO, FPI, Lincoln, Pinnacle or Riverstone? Okay, so give that some thought. Some, some of those. Some of you who've been around for a couple of decades will remember most of those. I'll probably remember all those names and we'll give you the answer here in a bit. But next in the news, This segment is presented by Authentic. If you're an owner, asset manager or developer running multifamily, here's the truth about leasing in 2026. A couple of ILS accounts and cross fingers won't get you to stabilization. The properties that are winning are running a tight ship across paid search and social retargeting, email and SMS nurture, all coordinated with one accountable team. Authentic built that system. They call it demand to door and it's one platform, one partner, one monthly number that scales to your velocity targets. Pod listeners get 50% off setup fees for a limited time. Head to auth ff.comd2d to see how it works again. That's auth a u t h f-ff.comd2d all right, so a lot of big headlines cover this week. We're going to try to do this efficiently, but the first one does require a little bit more time. So let's give it that. Okay? The merger of Avalon Bay and Equity Residential was of course announced last week. And by now I'm sure everybody listening has heard that news, or at least it's been officially agreed to, I should say it's expected to close in the second half of this year. Now of course, we don't know if federal regulators may try to intervene, though my understanding is their influence may be limited to some degree when it comes to REITs and to properties. But we'll see what happens. Well, let me give you five quick thoughts though on this merger. Number one, you know, I saw this headline from CNBC that said what what the Avalon Bay Equity residential mega merger means for the apartment industry and rents. Now the article goes on to point out what I'm going to tell you, which is that while everyone's talking about rents on social media, whatnot, and if regulators do take an interest in it, I'm sure that's what they'll bring up. That's really not going to be a factor. Their scale is still just too small. They're combined for just 0.5% of the market and obviously they're concentrated in a handful of MSAs but in predominantly the coastal ones, DC, Boston, NY, San Francisco, Seattle, Southern California. But even in those markets they're less than 4% everywhere. So they still got to compete. And as I mentioned earlier, you know, EQR had more units in the early 2000s than the combined firms will have once they come together. So it's not really a rent issue. But two, will it lead to operating efficiencies? Well, and the two firms are saying it will. They're expecting 175 million in synergies. Now a lot of that comes from overhead and management salaries and whatnot compensation, but also from leasing synergies as well and from using technology across the platform. But the question a lot of the analysts have brought up is that they're going to have to the REITs are going to have to prove that this is more than just a one time benefit, but there's truly a long term benefit in being together. Third question, who's going to lead it? Well, they're calling it a merger of equals and they're even going to have a new name. And so when they talk about they call it Newco. Now obviously they're going to call it Newco, but they're going to have a new name, new identity, new culture and they've clearly gone to great lengths to emphasize the equals part. The CEO is going to come from Avalon Bay side. Ben Shal, board chair comes from the EQR side. Steve Starrett, Mark Perel, the EQR CEO and past guest of the podcast. He is going to retire, by the way. I'd love to get Ben on one of these days. Hopefully he will at some point. I'm sure not soon, but hopefully once the dust settles, maybe we get him on. But even look at more details of this. The call was kicked off by EQR's head of investor relations, Marty McKenna. Of course, Marty's been around for a long time. It's always done a great job. But the slide deck, it actually looked more like Avalon Bay's template and style. So again, kind of this, it's a little bit of both sides. And then they also even said they're going to be headquartered both in dual headquarters, both in Chicago and in Northern Virginia. Now, of course, again, no inside information here. It's hard to see Chicago winning the headquarters debate long term, if for not tax purposes and nothing else. But we'll see. Fourth thing, what's the strategy? Well, we don't have a lot of details on that yet. A lot of it's just doubling down on what they're doing right now, focused on similar markets and both, both are heavily coastal but expanding in the sun belts. And everything we've been told suggests more the same. However, a couple things I want to point out, number one, they said they're going to double down on development and they really made a point to say that they're going to meaningfully increase construction starts. I think they're already building something like 10,000 units combined. A lot of that's from the Avalon Bay side. But they really made a point to say, hey, we want to build more supply. And part of that, you know, of course they've been doing this anyway. But the part of it's also, I think just telling the story, hey, we want to part of the solution from a supply standpoint. So if there is regulatory interest is emphasizing we're going to be adding housing. The other thing that they mentioned is they're going to expand focus on affordable housing. And this was also interesting because neither one of them have really emphasized affordable housing in recent years. You know, some of them have, you know, some mixed income parts of their properties that's, you know, through inclusionary zoning required to have a certain percentage of units in a property that have an affordability component to it. But that's just kind of the cost of operating in certain cities. They don't typically emphasize a true focus on affordable housing. But in this case they really are. And it was more than just sort of a cursory part of it too. It's like they're really emphasizing that they want to be part of the solution, is what they said, and have a heavier focus on affordable housing. So again, probably a smart move from a PR perspective, but it obviously serves a real need as well. We do need more affordable housing in the US and fifth, the last thing I'd point out, and many have already pointed this out, is that the merger of AVB and EQR is something of a reunion of sorts for the old Archstone portfolio. Now, EQR and Avalon Bay got together back in 2013 to buy Archstone from Lehman Brothers. Archstone was a REIT, got taken private by Lehman Brothers. I think many people may remember the Lehman Brothers story coming out of the great financial crisis, obviously one of the big names in that crisis. And so they bought EQR and Avalon Bay came together to buy Arstone from Lehman. And that acquisition was particularly critical for equities pivot from being this big national ABC portfolio to really being heavily focused on class A urban coastal assets. And that's what Archstone largely was. And so Archdone was a 43,000 unit portfolio at the time. And I'm sure many of the at least some of those assets have probably since been sold off. But certainly there's got to be a nostalgia factor here for the many alumni of Archstone out there. Anyway, those are some quick thoughts. If you want to dig in more, I've got a more extended newsletter on this topic@jparsons.com Newsletter all right, next up, this related headline from the Wall Street Journal. It says the apartment mega merger that shows up Landlords are in trouble. And just a quick thought on this one from the Journal. I think this is a bad headline. This merger to me is more about a continuation of a long trend. We're down from 30 plus apartment REITs, sizable apartment REITs in probably what, 15, 20, 25 years ago to now. We're just at 6. And that's an issue that's specific to publicly traded REITs for a variety of reasons, most recently due to REITs trading at big discounts relative to their net asset value, meaning that the apartment buildings are worth more in the private market than what Wall street investors will give them credit for. And in this article John Burns has a has a great quote basically saying that Wall street has a lack of respects for REITs. And I think that's a good way to put it. All right, next up from npr, bipartisan Home Affordability bill passes the House. Okay, so we've talked about that this topic a lot in this podcast, including last week when this House legislation was released just prior to the vote. And I've also written about it extensively in the newsletter as well. Again, shameless plugs jparson.com Newsletter if dive in a lot in a lot more depth. But but key point here is it did pass with overwhelming support from both parties. Now the White House has thrown its support behind the House bill as it heads back to the Senate either for a vote or for some kind of reconciliation. We'll see where it goes. But it does seem to have some momentum. Okay, so I'm not going to go into a ton of depth on this just again I've talked about this so much in recent months, but just two quick thoughts. Number one, the big thing is everyone's talking about is that yes, it is better than the Senate bill and we've talked a lot about that Senate bill. The Senate bill had the forced divestiture requirement. So it meant that any firm with 350 plus homes that builds or buys a house, they'd have to sell it after seven years or navigate a very complex web of possible exceptions. The House bill removes the for sale requirement and that is a major improvement. It would unfortunately freeze most of the build to rent construction market if it goes through the build trend market we've talked about previously that's been pretty much frozen and also carves out renovate to rent and so you can buy houses that you're doing. Major repairs has to be really major. There's some has to be a big number. Something like 20, 25% of the costs have to be of the purchase costs have to go to repairs. You can do that and then lease it back out. However it's I think it's important. Remember as much as the I think we've seen a lot of people celebrating that this bill is so much better than the Senate version. That does not mean it's a good bill. Now there's some things unrelated to the SFR topics that are pretty good. There's some pro supply in this in this bill for sure, but it's still a bad bill for the SFR BTR industry. And just for context, if this legislation had come out prior to the Senate passing its bill and prior to the President's tweet calling for a ban institutional investors back on January 7, the industry would still be hotly against it. This bill adds a lot of new red tape and regulation to the SFR business, adds a big spotlight to it. There's some ambiguity around some of the exceptions. Plus there's a $1 million per house fine if regulators think you've misinterpreted the rules. And there are quite a lot of rules associated with it. And it still has a ban on investors with three Infinity plus homes from buying additional houses unless they qualify for certain exceptions. And so again, covered a lot of the details in that in my newsletter if you want to dive into more. So is it better than the Senate? Absolutely. But it's hardly a win. It's still probably going to create some challenges for investors raising capital to buy or build single family rentals. But again, the bar was just so low from the Senate bill. It was, that Senate bill was just so, so crazy that by that standard, it's probably a win. All right. Speaking of crazy, I actually laughed out loud when I saw this next headline. It says private equity firms now own 13 of apartments. Private equity firms now control nearly 3 million US apartments, with Sunbelt seeing the biggest ownership concentration. Okay, so again, I laughed out loud and I read this one. I mean this, I mean, guys, regardless of what you think about private equity, if you love it or you hate it or neutral, this is just plain dumb. It's goofy, it's silly. You know, it's just someone trying to stir up some fake controversy with some clickbait activist research. And I'm sure it worked because several publications actually picked up on it. And what makes it so funny to me is is is in trying to stir up fake controversy, it's actually grossly underestimating the share of apartments owned by private equity. It's no way. It's 13%. It's probably closer to 90%, at least for large modern apartment buildings. And you know, I mentioned like the higher share in the Sunbelt. Well, why do you think that? Because the Sunbelt doesn't have a lot of mom and pop four unit multifamily buildings built in 1932. Most of these cities barely were on the map back then. And so most of the market is just older buildings that are really expensive and beyond what a typical family investor could buy. And so the reason I say it's close to 90%, especially for larger modern apartment buildings. It's just math. You know, these buildings cost eight or nine figures. You know, that means tens of millions of dollars, if not hundreds now. So here's the math. So the average price per unit in the US for an apartment is $220,000 according to MSCI. So if you have 100 unit apartment building, that's a $22 million price tag. And we look at newer construction, these more modern apartments we build it built a ton of them these last few years. You know, you're looking at, you know, 300, 400 plus unit buildings. The price tag could be $100 million and up. So, and that's even for like a, you know, a garden or a rap property. And I'm talking about not even for towers. So then the obvious question is who can afford that other than private equity? That's why this is so laughable. Private equity, Remember, private equity is just private capital pooling money together from different people or businesses. And so a public REIT or a family office, that wouldn't be private equity if they're buying the apartment building on their own. It'd be a very ultra high net worth family office. But you know, there's only so many public REITs and obviously few of them now. And ultra high net worth family offices that can do that. And oh, by the way, how are they functionally any different from quote unquote private equity? Right? I mean, private equity is just a, just a fancy word that's been used to scare some people. I mean, the reality is that private equity is not some monstrous singular entity with a singular strategy. I mean, sure, we've all had bad experiences. I could think of a bad example of private equity. But again, it's not a singular entity or a singular strategy. It's thousands of different groups located all over the country with all types of different strategies. And so it's an, obviously it's a real range. And so this type of stuff is just, it's wild that these things gain traction without any real. Just, just take 30 seconds to think about it. Right, of course. That we have private equity owning apartments because who else can afford buildings that cost tens or hundreds of millions of dollars? Okay, last headline, back to the Wall Street Journal. This one says Mamdani says these New York landlords will be exempt from his own rent freeze. Okay, so obviously the new mayor of New York has called on a rent freeze for rent stabilized apartments. Now he's one of the criticism has been, hey, we got units that are sitting vacant because the buildings, the doing the repairs would cost more than we can recoup from the rent we get because the rents are capped upon turn, not just for renters renewing their leases. So it's vacancy control. Right, and so we had an episode on that on this topic a few months ago. All right, so now Mamdani's saying he's going to exempt certain landlords from this rent freeze. Now we don't have many details on this yet and I'm not going to rush to judge, but I just want to say this. I'm very curious to see if the mayor's team meaningfully took input from property managers, I'm sorry, property owners, when they designed this program. And if so, it dramatically increases the odds of success because remember, this is a, again, we had a lengthy topic or we had a full episode on this in a full interview with New York's, the head of New York's Apartment association on this topic. And it's, it's a very complex and very expensive crisis. And so if you're not involving the people who are experiencing this crisis, the, the owners who can't manage these units, then you're not going to solve the problem. So we need collaboration to get more realistic, thoughtful solutions and that brings buy in that's really needed to solve this. Otherwise, without real buy in, it's just a headline to get some credit for something that you may or may not actually accomplish. I mean, ideas aren't worth anything if they don't sol thing. But let's hope that it does. I hope that it's a win win for the city, for renters and for the owners to actually get these units up to these vacant units back occupied again in, in livable conditions. Okay, next up, it's a segment that we've not done in a while. This fact has been a little bit too long. It's a section we call New Digs. This is where we highlight cool and unique construction projects for apartments and single family rentals foreign. So this section is going to be presented by Telecloud. If increasing noi is a priority, your telecom contracts may be one of the easiest opportunities in your portfolio. Telecloud helps multifamily asset managers consolidate Internet voice and dial tone across properties. The average cost reduction is 40% and it is often higher than that. To make it easy, they'll start with a free telecom audit to show you exactly where savings exist before you make a move. Learn more@telecloud multisite.com okay, so the project I want to focus on today's new digs. This is, this is, this is an office to residential conversion. These projects are always a lot of fun and the bigger ones make for big news. And this one's really big. It's one of the defining towers of the Milwaukee skyline. It's called 100 East. It's a 34 story vacant office tower that just got a huge HUD loan to get converted into 373 apartment units, 75 of which will be set aside for middle income workforce housing and obviously a very complex deal given its size. $114 million HUD loan, the guys in this deal said the largest multifamily HUD loan ever for Wisconsin, the largest ever approved by HUD's Midwest Regional Office as well. The project will also get federal and state historic tax credits as well as a tif, some TIF benefits from the city of Milwaukee. Amenities for the building will include a fitness center, yoga studio, spa co working space, game room and a rooftop deck with a swimming pool. That's going to be a sweet rooftop deck from 34 stories up in Milwaukee. And the project is scheduled to complete at the end or by the end of 2027. So big congrats to my friend Johnny Fasallo and to Klein Development who are partnering on this project. Johnny V. All right, next up, it's good news. And that's to highlight the good news happening across rental housing because there's plenty of good happening too, even if the good news rarely gets as much attention. And good news is presented by my friends at Apartment Life. Apartment Life coordinators help owners care for residents by connecting them and meaningful relationships. And this benefits everybody from the residents well being to this on site staff to the apartment community's bottom line. So if you're not already working with Apartment Life, check them out@apartmentlife.org this week's Good news comes from Columbia Residential. So they've got a community in Athens, Georgia and they launched a resource pantry to help residents in a tight spot financially. And what makes this especially meaningful is that it focuses on items that many typical assistance programs don't cover. Things like laundry detergent, body wash, trash bags, toilet paper. You know, these basic essentials that families need but sometimes struggle to afford when money gets tight. So with support from a local church, the Pantry now serves 40 to 60 residents every single week. The program has been three years in the making and thanks to community partnerships and additional support, it continues to grow. So a big shout out to Columbia Residential and thank you to Pete Kelly for sharing this story with me. And if you've got good news story to share, send it to info parsons.com all right, so now let's get back to today's trivia question presented by Foxen. Again, the question was Graystar is ranked as the largest property manager every year since 2011. Who was number one in 2010? Was it AIMCO, FBI, Lincoln, Pinnacle or Riverstone? Well, if you guessed D Pinnacle, then give yourself a pat on the back. You got it right. Pinnacle, of course, was later acquired by Cushman and Wakefield and it's since taken on the. The. The. The. The Cushman name. But back in 2010, Pinnacle managed 184, 184, 000 units. Excuse me. Riverstone was second 178, 000 and Greystar had 154,000. They were in third place. And of course, great, Greystar went on to acquire Riverstone, kept growing from there, and today manages more than 1 million apartment units. Next up, it's time for today's interview sponsored by funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Cortland. To learn how Funnel can help your property centralize operations and automate everyday tasks, visit funnelleleasing.com okay, so our guest today is the chief operating officer at Landtower Residential, Emily Watson. Landtower is based in Dallas and operates apartments across the Sun Belt, but also is part of a parent company that has publicly traded in Canada and they're called H&R REIT. Previously, Emily also served as an executive at Equity Residential, Berkshire communities, and McDowell properties. And Emily helped steer Landtower's recent decision to close down its in house property management arm and instead to hire Graystar for property management. And so Emily will share what went into debt did that decision in today's conversation. So let's jump in. All right, welcome to the interview portion of today's podcast and I am honored to welcome in my friend Emily Watson, the COO at Landtower. So Emily, thank you so much for coming on the podcast today.
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B
Thanks very much. An honor to be here. So thank you for inviting me.
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A
All right, so Emily, for those who don't know you, tell us a little about your story and how you ended up in the wonderful world of multifamily.
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Sure, it's not all that exciting. It's a lot like most of us, we just kind of accidentally grew up here, started leasing apartments at North Texas because it was fun and I got a 50% discount on my rent and my roommate did it as well, so we didn't have to pay rent and we were kind of hooked. It was only supposed to be for the summer, but as this industry kind of sucks you in, you get addicted to it. And followed the same kind of traditional path that used to be anyway, the assistant manager and then a property manager, regional manager, but then jumped over to asset management and now ultimately the CEO of Fine Tower.
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A
Great. And Then tell us a little about Land Tower, the ownership unit, count, markets you're in, just strategy, asset types, et cetera, whatever, whatever you'd like to share.
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So we are a subsidiary of Toronto reit. We're traded on the Toronto Stock Exchange, total assets are about 9 billion. But we are the. About 60% of the REIT is comprised of Land Tower. So we only have assets in the US and mainly in the Sunbelt markets. So we're in Dallas, Austin, Tampa, Orlando, Charlotte and Raleigh. And then we have some one off on, well, one in Miami, one in New York, the Bay Area and SoCal. So typically in our gateway cities we'll do a JV partnership. But as far as long term investing, we look for Sun Belts that have high growth, you know, business friendly climate. So mainly, mainly we have deals that are garden suburban, but we do have a couple of towers we have probably about a third of our portfolio actually is in the drive, a B plus portfolio. So long term hold because of our REIT status for the most part. But yeah, it's, it's a nice little multi, multifamily kind of mutual fund if you will. So when our 10 belt isn't performing, our gateway cities kind of offset and vice versa.
- [35:56]
A
Yeah, great. So Land Tower obviously was in the news recently, put out a press release saying that you were shifting from in house management to outsourcing that to third party management. And you know, when I saw that I thought it was just very timely because this is a decision that I think a lot of groups think about at some point. And on the flip side you have many owners who are using third party managers and they're thinking about taking management in house. So it's very timely topic and so I'd appreciate if you could take us a little bit into that decision process for Land Tower, starting with what drove the initial decision to look at third party management as an option and what that evaluation process look like.
- [36:38]
B
Yeah, if it's definitely not for the faint of heart. It was a hard process. On our executive team we have 70 out 70 years of REIT experience, whether equity residential or invitation homes. So it was, you know, we had a lot of pride in our own platform. But the past couple of years, as you know this real estate cycle been really tough. So it was really hard to kind of get your best in class when we're not bringing in the same amount of people into the industry that we're delivering units. So and then that along with the industry employee turnover is 40 ish depending on who you talk to. So it was a really. It was very difficult. But one of the things that we did when we brought our first lease up is on online in Dallas. We had one deal in Miami that we outsourced to Grace Star at that time, and really just so we could ensure that our first lease up out of the. Out of the box were, you know, our sole focus. Not our sole focus, but a big, big amount of our focus to be able to make sure that we got it, got it right. And at that point, we had to have, you know, a regional manager get on a plane to go visit the Miami assets. So that was the first one that we outsourced to Graystar. And we. It went really well. They kept our team, so it was our. The continuity was there. They performed at a very high level. They stayed occupied. And we did see a savings of 400. $400 a unit, actually kind of the first year. So while it was never really about the savings, it was about, could we outperform. That was a big, you know, we weren't hurt by it. In fact, actually benefited from doing the outsource there. And kind of fast forward to we do 100 days of selling where during, from Memorial Day to Labor Day, our teams, you know, we don't do a lot of training during that time. We don't do a lot of video call during that time. So we took the team, we took the office team to be able to say, all right, go. This is the perfect time to stay out of their hair, but go shop our competitors. So August, September, I spent in every single one of our markets going and shopping, blind shopping our competitors and realized we are every bit as good, if not better than all of them. There were a handful. I could have counted on one hand how many people I came in contact with that I felt like, wow, I want them on my team. And yet we weren't getting what I felt like we should out of the market. So that is really what drove my introspection, I will say, to be able to say, all right, what. What's in the best interest for our shareholders? You know, where will we optimize value? What's in the best interest for our employees? You know, what gives them more opportunity and growth opportunities, both financially, but also just adding to their tools. Get tool set. And then lastly, what optimizes the resident experience? And after some really hard introspection, I thought to be able to keep a platform because that's the way I've done it. And building vets and class and we've poured a lot of energy into it. The only reason not to do it was ego. So it's just, it's extra expensive. If you're, you know, anything, 20,000 units, you got payroll. There's a baseline, baseline number right. For payroll for office space or, you know, you can have regional managers, but to be able to have them in the city where they can pop in at any given time. So financially you don't get the best pricing. Like I thought that I had really great relationships in the industry for doing it for so long. But I'll tell you that after we transitioned, we saw our paint discount go from 40 to 80 for our employees. We saw when we. They transitioned to their health care cost group insurance went down 30%. So it was. And if we were short a person, it was really difficult to redistribute that workload to the other team members because we only had three or four in each of our markets. So it. And then that's obviously not good for our resident face. So that was what drove it. But scary, you know, you, I, I like to be in control. I want to know where the dead bodies are as opposed to have to go and hunt for them. And hopefully that, you know, people are honest with me and kind of tell you this is where we're struggling and sometimes it is a people issue. But yeah, it was a lot of discussions and then taking that decision to our parent company in Toronto to say, hey, I have an idea, I think it's in the best interest for the company. What do you think was also pretty scary as well?
- [41:56]
A
Oh, yeah. Especially since, I mean, I know I've known you long enough to know that you know this business so well, you put a lot of pride into making sure these papis are well run. So to hand over the keys, I'm sure knowing it was the best decision, but still having to do that. And you said putting ego aside and all the other things, that had to be a really hard thing to do, I imagine.
- [42:18]
B
Yeah, yeah. I mean, you build a team, you want to make sure that they are well taken care of, which was part of a decision on. Okay, who had a culture that could really walk into our team and take care of our. The folks that were in our nest.
- [42:35]
A
So it sounds like what you described, that obviously the revenue side is part of it, but also like the expense side seems to. Is it fair to say the expense side is really what moves the needle in the scale of a larger manager?
- [42:48]
B
Well, not totally. I mean, income is still king. Right. But even when you think of driving that Driving income. It, you know, your SEO goes farther with somebody that has greater scale, cross reference cost referrals to be able to drive the income. So we think that there's going to be an occupancy lift as well as, you know, pricing power from a, from a revenue management side with a bigger structure than, or bigger platform than what we had.
- [43:22]
A
Okay, so it's not just the ability to turn a lead into a lease necessarily because you have a good team that can do that. It's the, the, it's the marketing funnel you're pulling into the property.
- [43:31]
B
Correct? Yeah.
- [43:32]
A
Yeah. So I want to ask you another question. So we recently had The NMAC top 50s come out and you know, you know, you know me, Emily, I'm a nerd for these things. So I'm diving into it and I'm really struck by you look at the, the share of the, the top 50 has of all US apartments and it really hasn't changed that much. Somewhere like 11% of apartments are owned by the top 50, 50 combined owners. But what's really has changed is the top 50 managers. And there's been much more consolidation on the management side than on the ownership side. And so I'm curious, you know, you've seen this from the REIT side, you've seen this as an owner manager. Now as an owner, you know, why do you think that is, has scale just become so critical to achieving profitability given that management itself is a relatively low margin business?
- [44:21]
B
Well, I do think scale is important and I think that you get a lot more. You don't have, you have to work hard, everybody's working hard. But you get more of your pie when you have scale. And I do think that we'll continue to see the ownership consolidate as well. You know, probably not to the extent. I think we'll get some political headwinds if we consolidate too much from that realm. But I do think that we will continue to see that because scale is important because before this business was really easy, you know, you, you, if you didn't, if you needed traffic, then you went out and you had a human directional, you put up a banner and you had the, there just wasn't the amount of tech that was involved in it. So adding that arm and it's really two different business models. Right. So when you, when you're the owner, you, you're obviously driven by the numbers and the acquisitions and so forth. Well, it's also very much a people business because that's how you get through to your results. So. But Those are two different business models and it's really hard to find a good blend. So you have to have scale. You have to have enough scale to be able to say I want my acquisitions development team, I need my asset managers and then I need the people and that's expensive enough. But now you add the tech realm to it and it's moving so fast and you have to have enough scale to be able to have little petri dishes, if you will, of trying things out because the customer's demanding it. Right. We live in an Amazon world of one click shopping and they want to, they want an answer whether it's 2 o' clock in the morning or 2 o' clock in the afternoon. And you're going to be left in the dust if you're not able to accommodate that because there's tech solutions that allow for that now easier. But if you pick the wrong one, particularly if you are a smaller shop, it's really punitive. And the learning curve, even if it is a win at the end of the day, the learning curve when you're implementing that tech is punitive. In some of the smaller shops, it's so new, there's not really. How do you know that your person or your team are the subject matter expert? Because it's, it's, everybody's learning it. So I think that that's made it a lot more difficult for some of the smaller shops to be able to compete at the level that you have to. The margins are really thin. So if you don't have that expertise on your or the scale to be able to test it, to know that it's the right answer before it's rolled out, I think it just makes it really difficult. So. And personally when I was thinking about, you know, outsourcing, I wanted to be able to say, you know, who has the ability to have those kind of incubators in the back and try it either on their own property portfolio or have more experience than we will have. So I could move a little bit faster.
- [47:32]
A
Yeah, you know, as you're talking, my mate, I had a flashback. I remember one of my, I remember going to a conference for an institutional investor probably early on in my career, maybe, you know, 10 plus years ago, 15 years ago, and they were, it was with all their fee managers were there and there was probably 20 different groups. And back then, which isn't that long ago, I remember a lot of the institutional model was we want to find the best operator in every individual in msa and you had a lot of kind of Local specialists. And now there's been a lot of consolidation. Is it, is it technology that's really kind of taken away the the or kind of outweighed the local so called expertise, which to me always seemed a little bit overvalued, overrated anyway. But is technology what really changed that?
- [48:23]
B
Maybe That's a great question. I might have been one of those people in that audience at that time because back in a prior life I outsourced property management and intentionally had like three or four different ones just to kind of make sure nobody got that happy and wanted to compete for business. And that sounded really good and frankly started the search this past time with that same sentiment and thought I'm too busy to have to consolidate different reporting and say things to the saint, you know, the different groups. And not to mention you don't have as big of a voice when you are in, in, you know, I wanted to be able to have 10,000 units and be one of their bigger owners than have just a diluted watered down voice. So for me it was, it took a lot of time in my prior life to talk to that many management companies or to understand what their thought process is and kind of get everybody marching in the same direction. But technology maybe probably did play a bit of that as well. Like I want to be able to get into one system and get what I need to get. So more one stop shopping for me because we're all, we're now we're really in group that going to different, going to different companies just seemed like that that would be an exercise of futility.
- [49:49]
A
Yeah, yeah. And I remember back in those days it's got actually gotten better. But like compiling all those reports from different places, different languages and different metrics is tough. You make a good point too. Just being able to have a bigger voice within one shop obviously has some real value regardless of what technology is doing. So. Emily, I know there's probably owners today that are using third party managers. In fact, I hear this, I don't want to say often but at least fairly regularly that they're thinking about bringing management in house. And the thesis seems pretty simple. It's like we want more control over the staffing, the processes, the airborne talks about being vertically integrated. Like it's always, it seems to be like some kind of like magical term that gets thrown around a lot. It's going to make us more efficient. But for. I know I'm generalizing here, but just broadly speaking, when groups think like this, what are they underestimating and what do they need to really consider and solve for prior to taking management in house.
- [50:51]
B
I think the most, the hardest thing that I see for people to be able to come to do well is the people side of it. And it's the most critical piece. Right. If your team doesn't believe in what you're doing and your long term vision, then it doesn't matter what your underwriting said, it's not going to be achieved. And spending the amount of time on the people side of it is. It's not for everybody. And a lot of times that skill set is very different. And you know, the folks that are underwriting the deal and then being able to execute the deal, it's a unique skill set to have both of those. And it takes a long time. And a lot of times it is, in my opinion, it allows us to be able to let the people that are drawn to that career, that do well in that career focus on that and be able to translate kind of the vision to their teams in a way that they need to hear it. And being the team that likes to look at the numbers and then be able to kind of understand the people side of it, but not necessarily, necessarily have to do it. And I think it's really easy for people to think, oh yeah, I can do both. I thought that our analysts would be upset about, you know, we weren't going to be vertically integrated anymore and they never missed a beat. Like not one of them had a concern about it. So I don't know if that is just losing its favor or you could put up the numbers and nobody really cares how you get there. But I would say think twice. If that's not an industry that you are drawn to, it's probably not going to be one that you are going to excel in. And, and it's, it's expensive if you get it wrong. So in an, in a industry that has a 40% turnover, it's going to be really difficult to, to do well to bring it inside if you don't have kind of everything aligned.
- [53:01]
A
That's such a great point. Yeah, I like that too. Because the people who really thrive at property management tend to be people who are very different than investment management. Right. Like the ability to want to really spend time with the people and being people people and high touch is a different skill set for sure.
- [53:21]
B
Right. Well, another thing too, when we came to, because we all came from larger portfolios. So we're like, why is this 10 units so much harder than it was when we, you know, ran 80,000 units? Why I don't understand. And you're not the 800 pound gorilla anymore. So unless you do have, you know, 30, 40,000, you know, then you, then you do have some negotiating power. And it wasn't even just pricing, it was also supplier partners. The cadence is a little different when you have 10,000 units versus when you're with a management company that has a lot more. So that took some, it took some getting used to. And waiting on phone calls or waiting on returns or waiting on whatever is definitely harder than just being able to have a management company that raises a finger and somebody's at their beck and call.
- [54:11]
A
Yeah, that's amazing. And just, I guess just to think, think a little bit back, we go back a little bit, like 10,000 is not small. And so to think most of the industry is actually way smaller than Land Tower. And so if that's harder for you guys, it's, I mean, I can't imagine how much more difficult it is for, you know, the typical group that's, you know, two or three thousand units or less.
- [54:32]
B
Right? Yeah. I was surprised. Grace R shared a statistic that like a large percentage of their portfolio, the owners only have like one or two assets.
- [54:43]
A
Yeah, yeah. We had Tony Eubanks on the podcast earlier this year and I think it was something like 50% of their properties or one or two owner, or one or one property owners, one or two properties. It's pretty wild.
- [54:55]
B
Yeah, I would have locked a bet on that for sure.
- [54:58]
A
I definitely would have lost that bet. So what about at a local level? I mean, do you think there's a point at which within an msa is there a number of units or a number of properties you think an owner needs to really make sense to operate that in house?
- [55:18]
B
I do. I think, you know, it's difficult well within the msa, so like even in Dallas, so it could take you 45 minutes or hour and a half. Like it's an hour and a half drive for me just to get to the office within the same msa. So depending on, depending on a lot of different factors actually. So if you, if it's close within a, you know, five, 15 minute drive, you're able to pod, you're able to share resources, of course. So if you get 15, 15 properties within that kind of ecosystem, then you have a really more efficient. So I think back when I was regional manager I had 13 properties. You would never have 13 properties today as regional manager, but they were all within a 10 mile radius of each other. I had some, what I called Free passes where my turnover was really low and I had the same these folks that worked for me for a long time. So if you have that and we were also long term holders. So if you're a merchant build that goes out the window when you're always moving. If you are, you know, value add, I think that is a little bit more difficult and needs a little bit more hand, you know, handholding and ensuring that you're getting your tracking your returns and your inventory for that matter. It really depends but kind of status quo everything, all things kind of the same 15, 15 assets I think probably is a sweet spot in any MSA as long as you're kind of close to each other. And even when I had the downtown San Francisco market, you could be across the bridge and it on paper it looks really good but you wouldn't odd those properties so drive time. Lots of different things go into that but if you can easily get to them, cross refer and share some payroll costs and share some marketing cost across 15 properties, it's probably the. Now you also have all your bits and one nest. Right. So that I don't know if you're gonna get the yield that you want if you're. If that's all you have. But if, if you're kind of spreading them out across MSAs that have high population growth and kind of all of those things that Land Tower looks for, then that would be. That would be the ultimate goal.
- [57:38]
A
Yeah. In fact we've seen some multifamily and SFR portfolios that have intentionally sold in some part of an MSA to really begin more more consolidated in a smaller geographic area for exactly that reason. So that makes a lot of sense. Well, I'm going to shift gears for the tail end of this because I want to ask you about the spring leasing season right in the heart of that right now. And obviously it's been a rough few years for apartment operators, especially in the Sunbelt. Given all the supply competition, it doesn't matter if you're the, you know, the best operator or the worst. It's tough just because the supply is has been what it is. It's supply is now receding, demand starts to catch up. Occupancy rates are still down for most portfolios given that supply. So I'm curious, you know, what are you seeing in the data for the spring leasing season so far? Because you know, and I'll preface it by saying to me it feels like it's been pretty good. It's okay. Certainly not as strong as maybe we'd like to see and hope for, but curious what, what you're seeing in your portfolio.
- [58:39]
B
Yep. Well, our portfolio might be a little bit tinted because we were in the middle of the transition. April 1st was when we finished the transition and I'll tell you, April was very strong. So in fact, and I don't know, is that a function of the, of the market or is it a function of our marketing dollars going a lot farther with Gracetar. But our applications were actually up 70% over April last year. Wow. You know, April last year we had a little curveball thrown at us. But they, they have, you know, our traffic is actually up 18, which gotta start there. So we were really encouraged with our April results. Like we, we see a lot of green shoots in there for many reasons. There's more concessions in the market than I think there needs to be. And I'm not sure is that sluggish because of the market or because we've now trained our prospects to expect it or trained our on site teams to need it. So back in the day, Fred Tuami, I worked for him, he's a legend in the industry and one of his main things was like, confessions are like medicine. You use them when you need them and they'll get you better. But if you use them when you don't need them, they'll make you sick. So it has always me like, okay, it's probably time when we have stable traffic and we have thinning supply. It's time to start weaning ourselves off of the concessions or they will make us sick.
- [60:14]
A
Yeah, no, I, I say this all the time, but I feel like it's just renters today have an expectation that there's a concession because their buddy got a concession. It's not necessarily a need, it's more of an expectation that, that as a function of this high supplied market these last few years. So it'll maybe take some time to fully wean off of that, but I think you're right. Well, Emily, thank you so much for your time today. Thanks for sharing your candor about the transition of third party management and the details about spring leasing. Well, hopefully that holds up and best of luck navigating the rest of 2026.
- [60:45]
B
Thank you. Pleasure to be here. Have a great summer.
- [60:49]
A
You too. Big thank you to Emily for being our guest today. Thank you also to jpi, Madera Funnel, Authentic Foxen Telecloud and Apartment Life. And thank you to all of you for spending part of your day with us. We'll see you next time.