The CompStak Blog is dedicated to stories of success in the commercial real estate industry. We are impressed when small organizations recognize the value of their nimble nature, and strategize accordingly. The following guest post by Joe Stampone, VP of Investments for Atlas Real Estate Partners, illustrates this sort of thinking.
I work for Atlas Real Estate Partners, an entrepreneurial real estate investment firm based in NYC. Over the past 4 years we’ve acquired 26 properties valued at over $400M. We have four full-time employees.
While our resources are limited, we’ve found our lean structure to be our biggest competitive advantage. We’ve intentionally stayed lean, growing only as needed, which allows us to cultivate a culture that encourages out-of-the-box thinking and focuses on top quality talent.
Here are some reasons we stick to a lean business model:
We define value as adding benefit to our investors -- everything else is a waste. Our investors are our customers: they enable us to grow. It’s our goal to do everything in our power to ensure they achieve outsized returns while still receiving quality, transparent reporting. Being lean allows us to focus on this goal and frame everything we do around accomplishing it.
We focus on our strengths and outsource the rest. As a lean team, we don’t have the resources to control every little aspect of a deal. We focus on the things we’re good at and surround ourselves with the best people for everything else. We’ve realized that we’re good at identifying opportunities, formulating and executing business plans, raising capital, and investor relations. We often hire construction management companies to ensure a smooth renovation, since we're not construction experts. If the product is niche, we will bring on a specialty third party property management company. Finally, we hire the best brokers to ensure we’re maximizing the value of an asset. Good people add value far beyond their fees.
We view risk differently. Executives in large bureaucratic companies may not innovate since they are risk averse. Our structure allows us to test out new technologies and innovative tools because the costs are much lower. We don't have to bet the farm on everything we do and if we test more products, we're more likely to be successful. The approval process is also easy because we all sit within 10 feet of each other and get together as a team at least a few times per week. How many companies can make team decisions on the spot?
As an example, we’ve recently crowdfunded a small portion of equity on three deals. While we easily could have raised the equity through our existing investor network, we wanted to brand ourselves as a forward-thinking, innovative group and benefit from the media storm around real estate crowdfunding. In doing so, we’ve gained 10 new investors who we can turn into Atlas advocates.
We only take on projects we love. As a small team, we limit our overhead. We’re not tied to a long lease in a big Midtown office, we don’t have a massive payroll, or investor capital that we have to put to work. With our current recurring fees, we more than cover our costs so we have the luxury of only taking on projects we think will be successful for our investors. This practice allows us to build trust with our investors and during the next market disruption we’ll have plenty of capital available to pick up core assets at distressed levels. REITs and real estate private equity firms, on the other hand have capital they have to put to work and a board of directors and shareholders to answer to if they don’t. This structure often times leads to companies going further out on the risk curve or venturing into secondary or tertiary markets.
While there are a plethora of benefits, there are a few challenges with being lean.
There are times throughout the year, whether it be in the midst of multiple acquisitions or during quarterly reporting and investor distributions, where our resources are tied up. During these times we’re forced to prioritize our work and many things that are important are put on the back-burner. Additionally, with each employee bearing so much responsibility, it’s challenging for team members to completely disengage while on vacation or traveling.
While the lack of resources can cause many challenges, it forces us to take a critical focus on creating loyal investors and doing projects that serve them.
Joe Stampone is the VP of Investments for Atlas Real Estate Partners. He also authors a popular blog, A Student of the Real Estate Game, a community of real estate professionals driven by a passion to be on the cutting edge and grow their careers through collaborative learning.