Sweat and Focus in U.S. Multifamily

Griffis Residential invests in 15-year-old multifamily assets, with deals in just four markets in the U.S. Such a high-focused strategy on “near-core” apartments requires lots of asset and property management sweat says the firm’s co-CEO David Birnbaum.

PrivcapRE: Griffis Residential has a very specific, highly focused strategy. Tell me about it.

David Birnbaum, Co-founder and co-CEO, Griffis Residential: We acquire recent vintage, near-core, multifamily properties, most of them 2001—2002 construction, and we currently operate in four markets: Denver, Austin, Seattle and Las Vegas. All of our target markets are in the western half of the U.S. and all are hubs of innovation and entrepreneurship. [The strategy is to] invest in cosmetic enhancements to make the properties more competitive with newly constructed product in their markets. We have followed the same strategy for decades; we don’t chase yield or explore new asset classes. We focus on what we do well and that’s creating value.

Asset management seems a fundamental component to your process; is that a fair statement? 

Birnbaum: Because we buy newer, near-core assets, we use asset management to create value, and a lot of effort goes into that process. Our first two funds are both reasonably mature; about half the value created in each was generated through hands-on asset management and property-level improvements and initiatives. We have to sweat our assets so both the asset management and the property management functions are critical. We take advantage of every revenue opportunity, both apartment rent and smaller, less obvious revenue streams, like garage rent, that can be maximized even if market rents are slowing.

Which improvements give you the best return?

Birnbaum: We’re not developers and we don’t take construction risk. The properties we buy are competitive with newer product in terms of floor plans and amenities so our enhancements are designed to make them more contemporary. We do this by improving finishes, upgrading appliances and technology, and creating common areas that support collaboration by replacing walls with glass to add light and increase the interaction millennials prize. We create a home and a place where our residents want to live.    

Griffis handles the asset and property management functions in-house. Is this cost effective? 

Birnbaum: Excellence in property management is vital to our business so we’ve deliberately tied asset and property management together. [By doing] both in-house [we feel] it creates a virtuous circle. In practice, asset management is often pushed down to the property level since it is such an important part of our model. Operationally, we focus on our residents and survey residents continuously to measure performance and identify areas for improvement. We’re very proud of the fact that 100 percent of the assets held for more than a year were top-rated by their residents. We are owners for the longer term so we have to focus on the value of our brand.

What makes a great asset manager? 

Birnbaum: The best asset managers put residents first; they’re problem solvers, analytical, smart and persistent. We put a lot of effort into increasing the financial literacy of our property managers since budgeting and performance relative to budget are integral to the value creation process.