Recently, the multifamily industry experienced one of the largest horizontal mergers in its history when the Charleston, S.C. headquartered top apartment manager in 2014, Greystar, bought the runner up Dallas based apartment manager, Riverstone. The combination of these titans gives Greystar control of nearly 400,000 units, further increasing the margin by which it supersedes all competition in size. However, is bigger necessarily better? The merger sent ripples throughout the entire industry, raising the brows of competitors, some feeling crushed while others are viewing it as a blessing and an opportunity to better themselves. Ultimately, the questions we must ask are how does it really feel to be one of their residents? How will these ripples affect the lives and satisfaction of the many people residing in Greystar-managed properties? Will Greystar be able to successfully orchestrate the blend of the two apartment manager powerhouses?
Generally, motivation behind mergers and acquisitions stems from a desire to improve financial performance. Internally, the joining of the two companies aids in overcoming asymmetrical information and allows differing business acumen to be integrated into a single, moneymaking machine. Looking into economies of scale, Greystar will be able to reduce its fixed costs through the removal of duplicate operations, amounting in strengthened, or “stacked,” departments. Externally, Greystar now wields an increased market share and essentially has more power to set prices. Sounds too good to be true? Well, it very well might be. Merging companies of such mass in an industry that is fueled by resident satisfaction leaves quite a bit of room for error, specifically the neglect of residents. Just think back to the epic failure of the AOL and Time Warner marriage of 2000 to give you a general sense of the relative level of difficulty here.
One of the outstanding issues in this merger, from an internal operations perspective, is organizing the standardization of the Greystar brand culture and the Greystar experience across the new massive portfolio. Implementation of property management software would be ideal, however, its simplicity and user friendliness is vital, otherwise leading Greystar into deeper confusion. Throughout the process of developing their new operational intelligence, the difficulty of integrating Greystar and Riverstone poses opportunity to shine for smaller and local management companies.
Rick Graf, CEO of Dallas based apartment manager, Pinnacle, spoke out in a piece about rival reaction to the merger in a Multifamily Executive article. His statement peeked into their business strategy, “We have a different approach…We have an approach of strategically shrinking the size of our platform the last three or four years to enable us to focus on our clients and their goals and objectives” (Rivals See Opportunity in Greystar-Riverstone Marriage, 2014). Furthermore, MFE Staff reinforced Graf’s statement, commenting “… he thinks he can make a case that a smaller operator can be more responsive to customer needs.”
The customer-centric, multifamily industry cannot afford to operate under the management of a company who risks turning their property management teams into negligent “absentee slumlords” (Pyke, 2014). Organization is key and a software solution to highlight resident satisfaction as well as property health is a critical component of swiftly developing operational intelligence. Despite such a monumental merger amounting in the now seemingly untouchable Greystar, early adapters of innovative technology can pioneer new outlets of competitive advantages.
About the author
Anton Razanav is a Marketing specialist at ComVibe. ComVibe has effectively tamed real-time data collection and developed a solution for interactively engaging residents in the improvement and upkeep of their property while organizing and empowering maintenance crews and management with tools that promote professionalism and the maximization of staff potential. Their mobile, multiplatform system offers a simple and transparent user-friendly interface, actively connecting resident to maintenance workers while sustaining direct communication from start to finish of a particular task.
MFE Staff. (2014, June 5). Rivals See Opportunity in Greystar-Riverstone Marriage. Retrieved from http://www.multifamilyexecutive.com/mergers-and-acquisitions/rivals-see-opportunity-in-greystar-riverstone-marriage_o.aspx?dfpzone=general
Pyke, Alan. (2014, January 24). Wall Street’s Frightening New Plan To Become America’s Landlord. Retrieved from http://thinkprogress.org/economy/2014/01/24/3203471/wall-street-landlord/