The Cornerstone, Q1

THE CORNERSTONE
“Quality Living Is Our Passion”
Volume 17 | Issue 1
Spring 2016
THE SOUTH RISES AGAIN
Richmond, VA - It’s not only the capital of the Commonwealth
of Virginia, it is the home of PRG’s two newest acquisitions,
Ashton Creek and The Timbers. PRG has had a long history
owning and managing properties in Richmond. In fact,
we’ve owned the property next door to Ashton Creek for
over twenty years. From the literal and figurative side of the
fence, we’ve always known there was potential in Ashton
Creek. Its series of former owners, however, were never able
to unlock it. In fact, they did just the opposite. They left the
unit interiors in sad shape with décor harkening back to the
early 1990s. While the rehashing of ‘90s sitcoms (see “Fuller
House”) is all the rage, ugly oak cabinets with beige laminate
countertops are not! The equally dated clubhouse filled with
fake plants, wallpaper, and grandma’s dusty old couches were
also not up to snuff. Further, the old management company
didn’t prioritize residents making timely rent payments. All of
these qualities are good news for us as we’ve turned this exact
situation around time and time again using our proven system
of cost effective value-add improvements to both the physical
plant and to property management.
While not next door (about 10 minutes away), the Timbers
was a similarly attractive investment opportunity. Situated in
the affluent subsection of Bon Air, the Timbers’ neighborhood
features both excellent schools and a location very close to
downtown. The seller had renovated a handful of units, and
even with their lackluster choices of finishes, managed to get
$100 per unit increases in rent. With 200+ units remaining
to be renovated, the opportunity to add value could not
have been more clear. We quickly got started on our interior
renovations and are already seeing rental premiums for
our renovated apartments at or beyond our pro forma
expectations. Experience in the market place counts. Location
counts. Execution counts. In the case of Ashton Creek and The
Timbers, PRG has capitalized on all three in order to make
our newest pair of acquisitions homeruns for our residents,
employees, and investors alike.
Top Photo: Ashton Creek. Bottom Photo: The Timbers
EXECUTIVE TEAM
Steven A. Berger
Principal
Jon J. Goodman
Principal
Samuel C. Foster
Chief Executive Officer
PRG Property Managers and Regional Staff celebrate with the Philadelphia 76ers.
PRG LEADERSHIP CONFERENCE 2016
were separated into four groups and
attended four rotational workshops
taught by the PRG corporate staff and
regional directors focusing on: Finance
and Accounting, Renovations, Marketing
and Reputation, and Communication
Techniques. The groups had to integrate
content from each workshop, apply it to
the case study questions, and ultimately
present their solutions in front of PRG’s
executive team and fellow conference
attendees.
PRG Regional Directors
PRG hosted its annual leadership
conference last month at the Hilton
Philadelphia Penn’s Landing. Our property
managers and regional staff from eight
states attended the three day conference
to build their skills and network with fellow
coworkers, sponsors, and vendors. 2016
is the first year our conference has been
hosted in Philadelphia, the birthplace of
both America and PRG. The managers were
thrilled to visit the City of Brotherly Love,
and for many it was their first time traveling
to the fifth largest city in the United States.
While many were raving about the quality
and content of the conference, some
couldn’t help but proudly mention they
tried their first authentic Philly cheesesteak
“wiz wit,” and they certainly seemed to
enjoy our city’s staple food.
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This year’s conference followed a new
format that incorporated a property case
study and final presentation. Managers
Yet PRG’s conferences are not all work
and no play! We attended an NBA 76ers
game at the Wells Fargo Center in a
corporate box and had our faces featured
on the TV broadcast for displaying our lively
fan spirit. A group of our Florida employees
were even daring enough to cheer for the
Orlando Magic when they scored numerous
baskets against our historically abysmal
76ers. By the looks of our season record,
our fellow Magic fans were certainly not
helping the cause.
We finished up the conference with our
annual PRG awards dinner and celebration,
honoring 2015’s top performers. We
preselect two employees to be the award
hosts and they develop a creative and
highly comical presentation prior to the
show. The hotel patrons could surely hear
our roaring laughter emerging from the
conference ballroom. There are diverse
award categories highlighting both property
performance and individual employee’s
accomplishments.
Continued on page 3
Continued from page 2
Awards to note this year include:
•Property Manager of the Year –
Heather Powell
•Best 2015 NOI Variance –
The Palms at Altamonte Springs
CONTACT
•Most Improved Delinquency –
Church Lake Apartment Homes
2701 E. Luzerne Street
Philadelphia, PA 19137
We have since returned to daily operations
and are working to achieve recognition
for 2016 awards, but this year’s PRG
Leadership Conference is certainly one for
the record books!
prgrealestate.com
P. 215.744.1200
The staff at The Palms
PRG MAINTENANCE SUPERVISOR OF THE YEAR
Julio was nominated specifically for his
commitment to hard work while maintaining
a positive attitude in every situation. He has
been quite successful in assisting South
Square’s property manager to score above
the benchmark on quarterly inspections
while the property maintains best
variances to budget in the triangle region.
One of Julio’s greatest accomplishments
is overseeing large capital improvement
projects, including roof replacements on 19
buildings, pool plastering, drainage repairs,
and asphalt sealcoating.
Maintenance Supervisor Julio Ventura,
South Square Townhomes
Residents appreciate our office staff’s
smiling faces who assist them with entering
work orders and repair requests in a time of
need. But who is responsible for ensuring
the parts are ordered, approving invoices,
and performing repairs? It is customary for
our group of regional directors to nominate
a hardworking, enthusiastic employee
for the recognition of PRG Maintenance
Supervisor of the Year. The candidate must
exhibit a strong leadership ability, have
confidence to resolve any challenging task,
and ensure resident satisfaction is met to
the highest degree.
Congratulations to Julio Ventura from South
Square Townhomes for being selected as
the 2015 PRG Maintenance Supervisor of
the Year!
Julio has been employed with PRG since
July 1, 2003 — that’s over 12 years of
devotion to our communities! His most
challenging experience was working at
Treetop, a spacious 206-unit property,
built in the early 1970s. Julio’s favorite
property to supervise in the triangle region
is his current home base, South Square
Townhomes. He appreciates the property’s
grounds and values the sense of teamwork
practiced on site. His property manager,
Coretta Hendley, contributes to his growth
by assisting him with best practices in using
our Yardi software.
When Julio’s name was announced as
Maintenance Supervisor of the Year, his
immediate reaction was the look of surprise
and shock on his face, and he explained that
he felt happy and humbled to be recognized
for such an achievement. His goals for 2016
and beyond include learning more about
Yardi and PayScan in order to increase
his technological prowess and increase
efficiencies. Congrats again to Julio Ventura!
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EXECUTIVE TEAM
Steven A. Berger
Principal
Jon J. Goodman
Principal
Samuel C. Foster
Chief Executive Officer
Warren Buffett
ACQUISITIONS CORNER
WITH BRETT GOMES, PRG DIRECTOR OF ACQUISITIONS
In past editions, I’ve discussed our
acquisitions strategy, the state of the
apartment market, and our competitors’
follies. Hind sight is always 20/20 and it
seems to me that I may have put the cart
before the horse. While recent articles
have no doubt piqued your desire for real
estate investment knowledge, I have no
doubt that you have been asking a more
fundamental question: Why does PRG
choose to invest in value-add, garden-style,
suburban apartment communities with
150 units or more in secondary markets?
Before I answer, it would be prudent to
ask why real estate? It was once said to me
that every war in history was fought for
one of three things: women, religion, and
land. Real estate has seemingly been an
investment choice since the beginning of
time. It is a tangible asset, and because of
that investors can find a pride in ownership
not found from holding a stock certificate.
Additionally, real estate provides investors
with tax benefits and the ability to step off
the rollercoaster we call the S&P 500.
From its inception, PRG has invested in valueadd suburban apartment communities
with a simple theory: rental housing will
always be desired as long as people need
a roof over their heads. Because PRG is a
total return-driven company and follows a
conservative investment strategy we have
always been attracted to the value-add
space: proven, stabilized assets in need of
fresh capital or management improvement.
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Do you know the difference between
rigid frame, framed tube, and belt truss
construction? How about perforated shell
or deep-spandrel tubular systems? No? Me
neither. These terms all refer to building
systems related to high rises. While we could
undoubtedly learn about high rise building
systems, it is much easier, cheaper, and
less time consuming to become experts at
owning and managing wood-frame, gardenstyle communities.
Most of the nation’s garden-style housing
stock is found in a suburban setting. Land
is in greater abundance in the suburbs of
secondary markets, providing a larger garden
apartment per capita ratio. Such markets
also typically provide an investor with greater
purchasing power (read: bang for your buck),
taking our dollar further in a market like
Louisville rather than say, Chicago.
The stipulation that a PRG investment must
be larger than 150 units seems strange, but it
is for good reason. The number represents a
tipping point, where we can find economies
of scale. In his 2006 letter to investors,
the Oracle of Omaha, Warren Buffett,
eloquently addressed the need to ignore
smaller deals and seek out acquisitions with
greater potential. He tells a tale of a young
man and an old man who have lost track of
their wives at the supermarket and attempt
to seek them out together:
The older man asked his new companion
what his wife looked like. “She’s a gorgeous
blonde,” the fellow answered, “with a body
that would cause a bishop to go through
a stained glass window, and she’s wearing
tight white shorts. How about yours?” The
senior citizen wasted no words: “Forget her,
we’ll look for yours!”
Much like the wise senior citizen, PRG is
going to keep our focus on the money
makers (with or without white shorts).
CONTACT
2701 E. Luzerne Street
Philadelphia, PA 19137
P. 215.744.1200
prgrealestate.com
Left: Lakecrest Apartments (before). Right: Lakecrest Apartments (after).
PITCH PERFECT
Finding the perfect pitch is key not only
for a soprano or tenor but also for vintage
multifamily
garden
style
apartment
communities. Flat roofs and sometimes
even worse, flat roofs with mansards, can
give the property the appearance that it was
a former back drop to a Golden Girls set.
Nothing against Estelle Getty or Bea Arthur
but the Golden Girls is not the look PRG
is going for when it chooses to revitalize
its communities. So when we chose to
refinance and own our very successful
Lakecrest Apartments in Greenville, SC for
another ten years, we knew changing the
look of the property exteriors was going to
be paramount to another decade of success.
The flat roofs had to go.
While we are about 50% of the way there to
finding the perfect pitch, the initial results
are impressive. Rachel Schiller, our inhouse architect and project manager led
the way along with the onsite and regional
team spearheaded by Amy Banks, Dennale
DeFilippo, and Ray Judd. Because Lakecrest
has great road frontage in an excellent area
of Greenville, boasts newer kitchen interiors,
and a clubhouse about to undergo a massive
renovation it was a natural choice to make
sure the exterior of our asset matched the
interior. While the staff informs us they
won’t be entering any choral competitions
in the near future they can be assured, that
at least in the case of Lakecrest, the Pitch is
now indeed Perfect!
Left: Lakecrest Apartments (before). Right: Lakecrest Apartments (after).
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EXECUTIVE TEAM
Steven A. Berger
Principal
Jon J. Goodman
Principal
Samuel C. Foster
Chief Executive Officer
Ashley Van Diemen
Cary Pines Manager
Sandra Arriaga
Villages of Banyan Grove Manager
Top Photo: Cary Pines
Top Photo: Villages of Banyan Grove
THE PRG HONOR ROLL
RAVING FAN AWARD – Q3 2015
ASHLEY VAN DIEMEN
RAVING FAN AWARD – Q4 2015
SANDRA ARRIAGA
While we strive to renew all of our
residents, we understand that sometimes
our customers must relocate for various
reasons. Sometimes this relocation is to a
different state, which can amount to a lot of
time and headache for everyone involved.
Our 3rd Quarter Raving Fan winner, Cary
Pines Manager, Ashley Van Diemen was
able to assist one of our residents with
such a relocation. The resident submitted
the following via a handwritten note:
Residents aren’t the only ones who can
be raving fans; sometimes a manager can
assist someone who doesn’t even live (at
least not yet) on the property. Often times,
this creates the biggest “raving fan” of all.
Ms. Serber of Delray Beach, FL writes,
“Thank you for being so patient and
accommodating with us during our
transition back to Florida. It’s been a roller
coaster ride … Living here has been a
pleasure and I hope we get this lucky at our
next place of residence (doubtful). You guys
are the best!”
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Congratulations to Ashley and the Cary Pines
staff for achieving the Raving Fan Award!
“I was driving and heard a loud noise.
I immediately pulled into the first
development I saw, which was the Villages
of Banyan Grove. I had a flat tire and had
to call roadside service. After 3.5 hours
they did not come! Your employee Sandra
Arriaga was kind enough to take me to the
clubhouse and wait there and made me
(88 years old) feel comfortable and safe!
You are fortunate to have such a person
on your staff.”
We certainly are! Thank you Sandra for
being a great ambassador for PRG and
the Villages of Banyan Grove.
CONTACT
2701 E. Luzerne Street
Philadelphia, PA 19137
P. 215.744.1200
prgrealestate.com
The staff at The Palms and Villas
SHOW ME THE MONEY
3rd Quarter 2015
The Palms at Altamonte Springs takes
the #1 spot this quarter! The Altamonte
Springs Senior Property Manager Heather
Powell led her property to a 16.97% positive
variance with the help of her maintenance
supervisor, Omar Sosa.
Taking second place is Country Club
Apartments, a 100-unit property located in
historic Williamsburg, VA. Congratulations
to Property Manager Shanikka Parks and
Maintenance Supervisor James Wright for
exceeding budgeted NOI by 12.29%.
Rounding out the top three is Summerville
Station located in Summerville, SC.
Regional Director Dennale DeFilippo and
Maintenance Supervisor Bobby Lee Moore
guided their property to an 11.58% positive
variance. Great job!
4th Quarter 2015
Wrapping up 2015 with a bang, The Palms
at Altamonte Springs places first again! They
were able to improve their NOI variance
even further than last quarter, boasting a
27.23% positive variance. Congratulations
for improving budgeted net operating
income and achieving your second
consecutive award!
Congratulations to Property Manager Jerica
Shoemaker and Maintenance Supervisor
Christopher Blevins of Carolina Woods in
Winston-Salem, NC. This property improved
its NOI by 22.70% to take second place in
the fourth quarter.
Altamonte Villa in Altamonte Springs FL,
achieved the number three spot. The 180unit property was able to exceed budgeted
NOI by 17.44%. As sister property of
first place winner The Palms, a second
congratulations is extended to Heather
Powell and Omar Sosa for their great work.
MYSTERY SHOPPER’S
CHOICE AWARD
The “Mystery Shopper’s Choice Award”
is presented to the three top performers
each quarter and is achieved by providing
superior customer service to a prospect
by telephone, on-site interaction, and
effective follow-up.
Congratulations to the following individuals
who proved they not only talk the talk, but
also walk the walk!
3rd Quarter 2015
1. Crystal Whitten
Willow Ridge | 100%
Jan Mascola
Saddlebrook | 100%
2. Suzanne Maddie
Lake Johnson Mews | 99.5%
3. Amelia Mosai
Sawgrass | 99%
4th Quarter 2015
1. Stephanie Barlow
Linkhorn | 100%
2. Lindsey McDaniel
South16 | 99%
3. James DeCaussin
Chinoe Creek | 97.5%
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CAMPAIGN SEASON
Brett Gomes, PRG’s Director of Acquisitions, and I recently
attended the National Multifamily Housing Council’s
(NMHC) Annual Meeting in Orlando, FL. My nativeHawaiian associate and your humble millennial author
typically stand out in the NMHC crowd due to our refusal
to comply with the fashion rules of yesteryear, i.e. a sea of
baby boomers with blue blazers and grey slacks. Although
one’s choice of outerwear is important, our main purpose
for attending is to meet with as many of the key real estate
brokers, apartment owners, and bankers as is humanly
possible within a 72-hour period. They come from far and
wide, each peddling their respective wares.
EXECUTIVE TEAM
Steven A. Berger
Principal
Jon J. Goodman
Principal
Samuel C. Foster
Chief Executive Officer
Absent any “Trumpertantrums” or town hall meetings, the
NMHC event feels a bit like you’re in the middle of a political
campaign. In this case, however, PRG is running for “best
company to do business with.” In such a highly competitive
environment, brokers do have choices on who to market their properties to, and sellers have
choices with respect to whom they sell their properties. Twenty firms may be chasing the
next golden egg; in these cases, PRG is never going to be the highest bidder. So how does
PRG continue to purchase deals (at good prices mind you) in such a frenzied atmosphere?
It’s because we have a reputation amongst sellers and brokers for doing what we say we are
going to do. We close on time at the price we originally agreed to. We also try to make life
easy for the seller and the seller’s employees by conducting our due diligence in an efficient
and professional manner. In doing so, the real estate broker, who most likely brought us
the opportunity, is not “left in the lurch” by some crazy buyer who said they would pay a
high price to get awarded the deal but then had buyer’s remorse and tried to renegotiate
the terms of the contract. The seller is not thrown under the bus to look foolish to his or her
board of directors or investor base. Much like the behavior of some politicians in our actual
presidential campaign, poor conduct on the buy-sell trail can leave a sour taste in one’s mouth.
It tarnishes the reputation of the buyer, broker, and everyone involved (think of the scruples
of a certain American political dynasty a la Evita and Juan Peron). PRG prefers the Mr. Smith
Goes to Washington approach.
Sam Foster
Chief Executive Officer
So as Brett and I made our way up and down the halls of the NMHC meeting we held our
heads high. We knew that our pitch was a strong one because informing prospective
sellers about PRG’s long history of smooth and timely closings is, unlike pachydermic or
Trotsky-esque stump speeches, a story that is definitely worth listening to.
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