Managed Growth

August 24, 2010

While every business owner seeks to positively advance their company, there exists a fine line between growing and taxing an organization.

2010 has been an incredible year for Dover Realty Advisors – since last December, we have experienced a 50% growth in our group, including expansion through our recently added Cincinnati Regional Office. Our goal of growth into the multifamily markets of Ohio, Indiana and Kentucky has begun to be realized. Adding properties in Lexington and Louisville, Kentucky will be next on our horizon. Yet, despite the continued demand for our services, we are proceeding with caution, moving forward.

The key to success in this economic realm remains treading carefully; pausing for reflection and analysis even when things appear to be going “great guns” – in particular when it comes to people. For example, sometimes you need to take a look at utilizing contract employees and outsourcing particular functions. This approach serves to make sure your in-house staff does not become too stretched while keeping overhead in check. It also protects you should the need for right sizing come about.

Many companies are moving forward in this way with an eye in particular on how healthcare reform will affect operations beginning next January (2011). I’ve read the 2,000 page Act and am particularly concerned. The government says companies will be able to keep their health insurance plans but the Act says otherwise. Instead, with new dictates in place, many plans could go away and companies and their employees could find themselves faced with less desirable options – from both a benefits and cost standpoint.

The possible ramifications are not pleasant with resulting uncertainties sure to influence many companies to at least temporarily shelve thoughts of growth, even of the well-managed variety, for a more conservative wait and see approach.


Proforma merely a starting point in predicting a property’s potential

August 9, 2010

Have you heard the one about the real estate developer? He never met a proforma he didn’t like.

On the other hand, as an operator, I want to know, first and foremost, what something is going to cost me to operate. During my many years of developing and managing multi-family properties across the Midwest with Village Green Companies, I was known (affectionately?) as the “Budget Monster.” It was a title I relished borne of an approach that has served me (and my clients) well.

Every budget or proforma, first and foremost, has to be carefully developed and scrutinized. Dover Realty Advisors subscribes to a system of “sources and uses” which creates internal escrows; an inherent discipline for properly handling hard and soft project expenses – everything from legal to accounting to inspection work.

It is imperative that there is absolutely no guesswork where cash flow projections are concerned. If rents are too low and costs are off the return will not be there and what you thought would be a 10% return is suddenly 4%. You need to know where every dollar is coming from and where it is going.

Also key for analysis: What’s happening now in a particular area you are looking to develop. For example, are competing properties on the drawing board (a negative), or, are transportation/infrastructural improvements in the works (a positive).  How about with regard to the demographics of your potential customers? Are factors related to age and income lining up in your favor? Are these individuals there now? Will they stay? Are more coming? If you are going to have to wait 5 years for a particular neighborhood to transition in your favor, or, if it is poised for a downturn, more than likely that area is not ideal or even viable.

The proforma, then, should be a starting point for determining a property’s viability. From there, do your homework and then some.

Sometimes the best deal you ever did was the one you didn’t do.


The Era of the great Operator

April 12, 2010

As I mentioned previously, finding a great operator is essential to enjoying success, regardless of economic realities. Operating, managing and leading multi-family real estate investments for 30 years, I’ve come to know a few things about keeping a great operation going.

Other real estate professionals from around the country, also feeling the real estate pinch, ask me how I survive in the real estate business in Michigan; what my secret is. My response? Overcome the war by winning the daily battles. Put another way: sweat the small stuff.

We are in the era of the great operator. The person or persons who run your operation(s) is much more important to your business than ever. Tech upgrades no longer help you stand apart. High-speed Internet, unless it’s Google Fiber,, cable TV, flat-screens – they’re everywhere. The customer experience and interaction, set by the operator, is once again the rarest and most unique of commodities. You distinguish yourself today through service, service, service, not bells and whistles and smoke and mirrors.

Everything else is truly secondary. A great operator can make a mediocre asset perform in outstanding fashion. On the flip side, a mediocre operator can ruin a great asset. At the end of the day, the battle is no longer between properties and amenities, it’s about the whos, whats, whens and hows of the operator, and the best operator/operation always wins.

At Dover Realty Advisors, we survive by doing what great operators do – rolling up our sleeves every day, going to work wanting to be the best, never resting on yesterday’s successes, knowing how and when to react, and understanding that change is sometimes necessary. I also work hard to find the right people and instill these same values in them. More on that next time.


Are you a Driver or Passenger? A primer for effective real estate investment management

April 5, 2010

In the last several years, investment real estate in Michigan and the Midwest in general has suffered, which is not breaking news to anyone. But when I sit back and think about why, I feel it’s beyond the simple excuse of a “bad economy.” Rather, investment is suffering because of a lack of what I call “great operators.”

In economic downturns, great operators can produce significantly better investment returns then those of mediocre competitors.  Great operators are “drivers” of value while mediocre ones are “passengers;” they choose to sit idle and allow market conditions to be the determining factor for success or failure.

Ten years ago, it was easier to produce favorable investment returns as the strong market pulled everyone along including the “passenger” operator.   In today’s environment, the “passenger” attitude—where one accomplishes marginal results at best—won’t cut it, at least not for long. Those who are “drivers” continue to learn, improve and employ best practices, those practices built on a strategy of constantly maximizing investment value.

The current economic climate has emphasized the need for the great operator.  The key in an economic battle is to recognize great operators and provide them the platform to perform.

I’m reminded of Warren Buffett, the great investor and businessman, who stood by several tenets when entrusting companies with his money – invest in businesses you understand, never invest in the average company, and target the great operators, those who are on top. Because when the average drops, the great operator will fall slightly, but still be ahead of the curve.

Now how do you find a great operator? We’ll continue to discuss that in later posts. Meanwhile, thanks for reading, be sure to drop by again soon.