Multifamily Unpacked, Season 1, Episode 5: Tim Argo, MAA — Portfolio diversity and a long-standing Sunbelt strategy fueled the country’s largest apartment owner’s growth
Having the winning strategy, before it’s everyone’s strategy
Maybe you’ve never heard of Mid-America Apartments, but we’d guess you’ve heard of MAA. They’re the largest REIT, and owner of apartments in the country with more than 99,676 units (and a Funnel customer).
In this episode, Tim Argo, Chief Strategy and Analysis Officer, shares stories from his 21-year career at MAA, including the REIT’s earlier days, and the importance of portfolio diversity by asset type and location within their long-standing sunbelt-focused strategy.
Read the interview below, listen in the player above, on Apple Podcasts or Spotify.
Tyler Christiansen, Funnel Leasing
Welcome to today’s episode of Multifamily Unpacked. In this episode, we sit down with Tim Argo, the chief strategy and analysis officer at a company called Mid-America Apartments. And while you may not know that name, there’s a good chance you’ve heard of MAA. MAA is the largest owner of apartments in America and has acquired brands like Post Properties and Colonial. In this episode, we talked about Tim’s 20-plus years of experience in the industry, and his journey from building a small regional player into the largest owner of apartments in the country. Hope you enjoy this episode as we dig into that history and what’s coming in the future of multifamily. All right, Tim, thank you for joining us on Multifamily Unpacked really looking forward to this conversation. So to get us started, tell us a little bit about yourself. How did you make your way into the world of multifamily?
Tim Argo, MAA
Well, so one, I’ll say it’s been a long time ago now. I’ve actually been in the multifamily space now since 2002. So I guess coming up on 21 years now, and had been here with MAA that whole time. So really just kind of got into the industry by chance. I’m a CPA or accountant by degree and by education, I guess. And so I worked, when I got out of college I worked in Big Four accounting or big, I guess, I might have been big six accounting back then. But work for Arthur Andersen coming out of school and about two and a half years or so into that is when the whole Enron thing happened. So I knew I wanted to do accounting at a school and kind of get some good experience and that sort of thing. But also knew that probably wasn’t what I wanted to do long term. So even though Arthur Andersen was going away and the offices were starting to close, I was kind of looking around for something else to do anyway. And just so happened, a couple of people I knew actually one, former Arthur Andersen person was working here at MAA, and somebody else I knew who was working here. And they had a job opening. And I knew nothing about apartments, knew nothing about real estate, knew nothing about MAA. It was just, you know, it was a job. And it was to actually come in and underwrite acquisitions, they were starting to get into a little bit of a growth mode. And so I think my accounting background which was similar to Al’s who was our CFO is one up hiring me. It was similar background and what he had and felt like that was, you know, a skill set that you can kind of go different ways with. So they gave me the opportunity. And here I am, 21 years later.
Tyler Christiansen, Funnel Leasing
That’s amazing and interesting parallels. I mean, I think a lot of us feel like the potential downturn we’re experiencing in the economy, folks, like myself, I started in the workforce on the tail end of the great financial crisis. And so this is the first one I’ve lived through with a slowdown in our industry. But obviously, you coming in in 2002, you mentioned there was, you know, a lot of trouble in the economy. And in our world in tech space, we talked about the.com bubble, but maybe just to give us some context as well, because everybody knows MAA today as the 100,000 unit, the largest public REIT, how large was MAA when you joined in 2002.
Tim Argo, MAA
In terms of number of units, I think we were about 22,000-23,000, something like that. Certainly much smaller than we are now, and we were much more I mean, we’ve always kind of had this Sunbelt Southeast focus, but much smaller, obviously then and much a little bit more geared to really what I would call more secondary and tertiary markets that we are now. But you know, honestly, have had sort of the same strategy. We have always been Sunbelt and felt like kind of that diversification in many different markets, and different market sizes was the right thing. And so we really just kind of grown from there, but much different back then.
Tyler Christiansen, Funnel Leasing
Yeah, that’s really interesting, and I apologize to Tim. But I like to go off-topic and you said several things that made my mind just start. I had a lot of questions for you. So obviously, you know, you oversee strategy for Mid-America. You mentioned you’ve had the same strategy. And I remember hearing that from your boss, Eric, that, you know, we used to be MAA was kind of the backwater company that, ‘Oh, you little guys in the Sunbelt.’
Tim Argo, MAA
Yeah.
Tyler Christiansen, Funnel Leasing
And now when I listened to the earnings calls for the other REITs they’re all asking, you know, the REITs that are on the coasts, in the West, and in the Northeast. ‘Hey, when are you going to get into the Sunbelt?’ Seems like your strategy has been the winning strategy. I mean, how has that changed? You know, especially, prior to your your latest role, you oversaw asset management. A lot of the questions on those earnings calls are directed at you. How do you think about that strategy? Now, what used to be kind of a minority strategy, seems the majority of folks are trying to deploy capital in the Sunbelt.
Tim Argo, MAA
Yeah, I mean, we’ve seen it change for sure. I mean, Al, and I joke about a conference, we went to way back, you know, it was probably ’04, ’05, and we’re almost getting laughed at, honestly, just because we were literally the only only one operating in the markets we were in. And like I said, we were much more kind of secondary and tertiary there, but still, you know, at a high level of a similar strategy in terms of being really the only one that was focused in this region of the country. And so there was just kind of a built-in bias a little bit that, you know, the coastal markets are where you had to be to, you know, to have value and to have growth and that everybody wants to live on the coasts, and nobody was really living in the southeast. So we’ve seen that shift over time, we’ve kind of been preaching the same thing. Eric’s been preaching that same strategy forever, that Sunbelt is a good place to be. And we’ve slowly seen it evolve. You know, we’ve had investors and people that have been with us all along, they kind of understood or appreciated that strategy all along. But we’ve seen, you know, some of that bias, if you will, that I’ve talked about become much less so, and honestly, I think these, a lot of the southeast markets have become a lot more dynamic as well. I mean, I think there was sort of thought that, you know, at five o’clock, all these cities in the south, you know, downtown, everywhere else, kind of roll up the sidewalk and close down, everybody shuts down and nothing happens. But you know, there’s a lot going on a lot of activities, you obviously got good, you know, moderate climates, pretty favorable in terms of affordability and quality of life and all that. So we have definitely seen it shift, we’re not having to justify the Sunbelt quite as much, and like said, we’re seeing a lot, a lot of peers and a lot of other institutional investors moving into the Sunbelt. But, you know, hopefully, with our 25-year track record in history and portfolio we have here, we still kind of have that leg up.
Tyler Christiansen, Funnel Leasing
This is fascinating to me. And it reminds me I’m currently reading a book about startups. It’s written by a gentleman named Peter Thiel, and he talks about how you have to believe in a strategy that to everyone else is ‘unconventional,’ they don’t see it, but it’s hiding in plain sight, or it’s a secret. And to your point, I admire the idea that you were going to these conferences, and everyone’s saying, ‘Oh, those are the Sunbelt, guys, we want to talk to the New York City guys.’ And now the tides have turned and to your point, like any good strategy, the key is having the strategy before it becomes no longer a secret, right? Because to your point now, you’re already in. I live in Tampa, I’m in the Sunbelt, last year, Tampa was the fastest-growing market with year-over-year rent increases. You know that better than I do. But your properties are both Well positioned in the suburbs, where a lot of folks are moving from you know, Ohio and New York, etc. to the suburbs where I live, but you also have properties downtown, and the cool neighborhoods, which to your point, you know, no longer are sleepy, right? Hyde Park in Tampa, you have two or three different communities. Rocky Point, these are bustling, young, vibrant neighborhoods. But that takes me to another question about MAA’s past, so folks who’ve been in the industry know the history, but a lot of folks may not. And the history of growth you referenced, being involved on the m&a side, obviously working in the finance department, and growing within the organization. So tell us about some of those big acquisitions. I know the names, I know, Post, Colonial, but tell everyone about that journey from 20,000 to 100,000 and what it’s like absorbing portfolios that are larger than what most people would ever manage.
Tim Argo, MAA
Right. No. Well, I mean, you know, the other part of the strategy, I mean, really, the main part of the strategy certainly being Sunbelt, Southeast, Southwest is and has been a key part of its strategy. But some of that was sort of organic in terms of, you know, the portfolio we found ourselves with, when we went public was focused in that. And so there was obviously sort of a built-in belief there. And then, you know, really the belief, certainly that that region, is what we should stay in. But a bigger, I would say as equal or bigger part of strategy, was really, which, when you think seems to be pretty obvious, when you think about just investing in general is diversification. And so, you know, we’ve always had the belief that be in a diversity of markets in terms of the size, so we’re in markets like Atlanta and Dallas and some smaller markets like Charleston and Savannah and others. But then beyond that, also be diversified within those markets. And so, you know, have assets in the suburbs, have assets in the downtown and more urban-style, have garden-style assets, high-rise mid-rise. And so I always had that belief that if we can continue to just kind of diversify within this region that we’re in, but that’s really the best of all worlds where you kind of try to have this long-term strategy where you’re, you maximizing your growth prospects, but also minimizing your volatility. Having that diversification have this full cycle, earnings growth rate, or these steady-growing earnings. And you know, being a public REIT, that’s really what it’s all about, the goal is, or we have to as a rule, payout, at least, you know, 90% of our income, and really 100% to avoid federal taxes. So having a steady growing cash flow is really what we’re being REITs is all about. But, you know, so what the acquisitions did for us is just really helped build out that strategy. I mean, the whole idea was, you know, we want to when we’re thinking about m&a, or acquisitions is something that will make us better and something that adds strength to what we already are. You know, we weren’t, we weren’t necessarily looking to get bigger just for the sake of getting bigger. But indeed, in the two big ones were unique. So Colonial back in 2013, I guess it was, yeah, they had a very similar footprint to ours, and a lot of the same markets, similar asset types. And, and were really complimentary in terms of getting us from that 25-30,000 range to, they were roughly about same size as us, that got us somewhere in the 60,000 unit range. And really, what that did was build out even further that diversification, and that scale. Really gave us the size to start taking advantage of that scale and use that, you know, whether we’re talking about buying things at a bulk level, or just having the buying power in a particular market, with vendors and all that sort of thing, but really, really build out the size when you start scaling the operation that we have. And then Post was, was a little bit different did the Post acquisition in 2016, I guess it was. That was one that really sort of fully built us out in terms of kind of how I’m thinking about this diversification. Again, they were in some similar markets, they were in a few that we weren’t in, but still certainly a Sunbelt southeast, focus. But they had a lot of more urban-style assets, very good locations. You know, we were prior to that we were diversified a little bit in terms of assets style, but we were very heavily suburban, very heavily garden-style, which brought us a lot more of the urban infill and both in terms of the types of assets but the submarkets they were in. So it really built that diversification in terms of asset type. And then it brought us something that we really had never done, you know, we had been growing outside of acquisitions, we’ve been growing kind of just by ones and twos buying assets, buying assets that were already built, or in lease-up. We had never really had any sort of development operation, at any level. And so they had a good development operation as well. That brought that capability to us. Particularly with the size, we got to at that point, you know, to just try to grow through ones and twos and recycle the portfolio that way is more difficult to kind of add another, another tool in the toolbox to be able to have that development arm. They had a great balance sheet as well. So that really moved our balance sheet towards where we are today where we’ve got, you know, one of the best balance sheets in the REIT universe and very low leverage and lots of opportunity and capacity to continue to take advantage of opportunities as they come.
Tyler Christiansen, Funnel Leasing
L:ove that. Yeah, and I’m gonna circle back on that when we talk about the future, we’re still kind of focused on the past. But to your point, obviously, I love this, this is a great insight, that some of the takeaways, you know, you have to have a strategy, one that is a little bit unique to you, and you have to stand out there. But I love this idea that, you know, as a REIT, you slowly but surely have continued to diversify. It’ll be interesting, where that again takes you in the future. So keeping in the past, help me understand, when you joined the industry back in 2002. What did it ook like from a technology perspective? What are some of the things that you recall that, today, are laughable compared to you know, where we are today?
Tim Argo, MAA
Yeah, I mean, pretty much everything probably, I would say, you know, certainly back then there was the use of technology was very limited. I mean, even you know, whether it’s from a prospect or resident perspective, or things we were doing internally, I mean, you know, if you were someone shopping for an apartment, the most likely thing you do is you’d go to the grocery store and they’d have the racks out front you know, with the Apartment Guide and you would, you would flip through that and kind of look at pictures and see things that may be within the neighborhood you’re looking for, or within the price range you’re looking for. Maybe you would go on the internet and go to a website and, you know, search apartments. But, you know, to the extent, companies had website. I mean, they had websites, but you weren’t, you weren’t gonna be able to lease an apartment and go through the whole process of doing that, you might, you might see a few pictures, but you probably weren’t gonna see floor plans, you weren’t gonna see pricing or anything like that. So you were going to drive to the property and say, ‘Hey, what, you know, what do you have in terms of apartments?’ They would look at their pricing sheet that may be from a week ago and say, Hey, we’ve got a one bedroom, it costs this and that price would be pretty standard, no matter if you wanted a three-month lease, six-month lease, 12-month lease, whatever it may be. Certainly much more manual in terms of that. Then, you know, thinking internally, in terms of how we operate it, you know, I would say, a big one was everybody paid their rents with checks. And so they would come in, and they would hand us a check. We would manually post them to the ledger, and then gather up the checks, drive down to the bank, and deposit in the bank. And that was sort of the rent posting process. You know, from an accounting standpoint, the closed process probably took us 12, 13, 14 days. So it’s, you know, kind of half the month is over, by the time you really close the books and figure out what, what your results were for the prior month. So certainly everything was much more manual for sure. Excellent, that’s helpful to understand. And given that you mentioned, you came into the industry kind of stumbled into it came in through the accounting angle. Tell me a little bit about advice you might give to a young professional today. I mean, obviously, to your point, the industry has changed quite radically. You know, and we obviously as an industry, those of us who love it, want to see new talent coming in. What’s what’s some advice you might think of, for a young Tim Argo that’s looking at this apartment industry? And what’s some advice you’d give to them? I mean, first of all, it would have been nice to know anything about apartments or REITs, or whatever. But I mean, one, I would just say, it’s probably less advice, more than just I do think it is a good industry to get into, and certainly would recommend it, you know, going forward. I think, particularly if you’re, you know, somebody’s interested in real estate, and you think of all the various real estate sectors, and how technology or the internet, or the way we shop, or the way we do things, has changed some of those other sectors. Think about COVID and the office sector. Think about Amazon, and everything else, from the retail sector. The good thing about apartments, you’re providing somebody’s home, and I can’t think of a way that technology can really take away the fact that people need a place to live and a roof over their head. You know, maybe that happens one of these days, but I think you’re in an asset class, and you’re in an industry that people gotta have and people will always have to have and so that, you know, it’s got some level of job security, if you will, in terms of the industry, it is. That would be the biggest thing I’d say, just that, you know, I think it is a good industry to get into, and to come into and can’t imagine it not being here, 10 years, 20 years, 30 years from now.
Tyler Christiansen, Funnel Leasing
That’s a great point. I, having lived through minor financial crises in this industry, have been able to see just how resilient of an industry it is. And to your point, coming in 2002, going through 2008, COVID, and whatever economy we happen to be in at the moment, I don’t know what it is yet. But it seems that to your point, people always need homes. And I think in some ways, that is why MAA, other REITs, and the apartment industry in general have gone from being seen as you know, an asset class to perhaps one of THE best asset classes. And so the positive side to your point is, you know, this is almost a recession-proof, broadly speaking, but a very resilient industry. But it changes a lot, right? And so you’ve been through different cycles. One of the things that I’ve noticed, in listening to earnings calls and attending conferences like NMHC annual. One of the biggest changes, obviously with interest rates rising, is how little m&a is happening. So we talked about that. Obviously, it’s been a big part of your growth strategy to date. But talk to us about the landscape of multifamily today. You know, what are the challenges in your boardroom? You guys are trying to figure out and, is it you know, something, entirely unique or does it remind you of other cycles that that you’ve lived through as a part of MAA.
Tim Argo, MAA
It’s a little bit unique, right now you’ve got, you know, typically what you talked about a moment ago, when you have interest rates rising and the threats of a moderating economy and that sort of thing. Typically, now we certainly don’t hope for that or look for that from an operating standpoint, it creates, obviously, more difficulty from an operations standpoint. But particularly for somebody like ourselves, and a strong balance sheet, a lot of capacity, and all that, it could or should create opportunities on the acquisition side. Some developers, or some owners, may not have the cost of capital we have, or may be impacted by rising interest rates, and having development loans that are coming due. They really need to take care of that. So the hope is that it creates opportunity from a growth standpoint for us, while it may, you know, be hurtful in terms of overall asset values, with rising cap rates, or our operating metrics, I think it does create some opportunity on the growth side and the ability to do acquisitions. I mean, if we go back to the great financial crisis, and go back to ’09, ’10, we rolled up, I think, 8-9000 units, those couple years after that, because it created those opportunities. I mean, we were buying assets that were 0% occupied, that, you know, failed condo conversions and that sort of thing. That really created some good growth for us going forward. But, right now, we haven’t seen it yet. We haven’t seen the opportunities really present themselves, yet. As you said, there’s really not much on the market for sale, you kind of got buyers and sellers kind of feeling each other out and really try to see where the market is. But I think, you know, there, you still have a lot of assets that put on some debt, you know, before the interest rates really started rising. So really the only thing you’re seeing in the market right now are some assets where maybe they have assumable debt that they put in place, you know, prior to interest rates rising where they can, you know, just with that interest rate spread, they can get good values from that. But beyond that, we’re not seeing a lot. But hopefully, those opportunities start to present themselves. At a macro level, just the industry in general, I mean, certainly there is a housing affordability problem in terms of you know, being enough housing that people, whether you’re talking about multifamily or single family, I think there is a broader macro long term concern there. And really, it’s just there’s, there’s gotta be ways to build this stuff for a little bit cheaper. I mean, when you think about all the costs that different regulatory authorities and government authorities kind of put in place to just get to where you’re, you’re digging dirt or getting shovel ready. And then just rising costs of materials and labor and everything else. The only types of deals really that work right now, whether you’re talking about apartments or single family is just high-end expensive stuff. And so, you know, that’s an issue that the industry will have to deal with over the years, and it really comes down to just being able to build, rent control is not the answer. It really comes down to being able to build more, more affordable housing.
Tyler Christiansen, Funnel Leasing
Yeah, no, that’s a great answer. And I think to your point, this certainly this. You mentioned kind of the condo conversions, and I didn’t ever live through that. But that always was an interesting concept to me. And it seems that that, kind of, reset that happened was the beginning of a new chapter of multifamily. A lot of growth happened after that. I love that you said, you know, when there are these tough markets create opportunities for strong businesses, we certainly are, we feel the same way in the tech industry. It’s definitely a recession in tech. And you know, there’s more talent available to us, there’s going to be more holes to fill in the market where companies otherwise would have potentially filled those. So make sense that, to your point, MAA with a strong balance sheet is well prepared for this. But one of the things just in the present that I wanted to kind of double click on there, as you talked about housing affordability. You know, I referenced obviously, when we talked about strategy, clearly the last couple of years, and to your point, even the regulatory environment has validated your strategy of being in the Sunbelt, where by in large, there’s less red tape. I mentioned obviously here in Tampa, fastest-growing rents in the country, within 10 minutes of our office, there are 1000s of apartment buildings going up and they lease up overnight. And the positive that I see in that as a, you know, an advocate for our industry that doesn’t want to see misguided rent control because having lived in New York and worked in Canada, you see that it doesn’t provide the results that everyone hopes it would. But I look and see some opportunity in that well, in these markets that had really unsustainable growth, you know, 25%, year-over-year, rent growth is not good for anyone, maybe short term on the earnings calls. But even you know, you all were kind of beforehand saying, ‘Hey, we don’t think this is sustainable.’ So looking at you mentioned obviously, you know, as you grow, there are some certain economies of scale, but just focusing on the present today, you know, as you said, the costs continue to grow, both for developing properties, but also managing those properties. How are you thinking about, you know, is keeping property staffed still a challenge in that market? Because, you know, if you’re seeing instead of 20%, rent, growth, 5% rent growth in certain markets, but all of those costs are continuing to rise for headcount. I would imagine that to date that’s still at your scale is a big challenge related to housing affordability, is it still cost a lot of money to run these properties? With the level of staff that you need for an operation? You’re size.
Tim Argo, MAA
Yeah, for sure. I mean, it remains difficult to retain and to hire staff, both on the office side and the maintenance side. I think the service and maintenance side has been particularly difficult. I would say, over the last, you know, 18 to 24 months really since kind of COVID kicked in. It’s been difficult, for sure, and it remains that way. Now, we’ve done some things from from a compensation standpoint, to try to help mitigate that. We have the luxury of being a larger company and operating in a, you know, with a lot of different properties, a lot of different markets. There’s certain, hopefully, perhaps career growth opportunities and benefits and things like that, that we can provide that, that hopefully gives us a little bit of a leg up. But it certainly remains a challenge. And, you know, brings in some of the need for some of this tech and some of the things that we can do to help, not replace, but help add some, some ability to do some of the things we need to do and help us operate through those times when it is more difficult to hire and retain talent.
Tyler Christiansen, Funnel Leasing
So that’s a great point. And I want to maybe tie together a couple of questions here, you know, related to the present day that you’re dealing with. So rapidly changing environment and the macroeconomy, the labor markets, the industry, the multifamily industry, in particular, but then tie that together with consumer expectations, consumer behavior, you mentioned, you know, office, people aren’t going back to offices, they’re working from their apartments, how do you manage this changing landscape while also being a publicly traded REIT who has the eyeballs of Wall Street on you? How do you think about that, perhaps differently than maybe somebody who, you know, as a private organization, and can kind of work on these ideas in a closet?
Tim Argo, MAA
Yeah, I mean, certainly being a public company, you have a lot more eyeballs on you, and a lot more transparency. I mean, we’re obviously reporting earnings every quarter and meeting continuously with investors and all that. So there’s definitely more eyeballs on you. And you’re doing everything sort of in a, in a glass house, as opposed to like, say, kind of doing things behind the scenes. It just makes you be more mindful of everything. I think, particularly with our size, you know, again, reporting earnings quarterly, you’re thinking about accounting regulations that are coming out, you’re thinking about things that the government’s considering that whether it’s surrounding ESG, or other things that could impact not only your business, but the way you report on things. You’re, you know, when you meet with investors, they kind of expect and assume that you’re in tune or in touch with kind of everything that’s going on, really around the world. I mean, everything, you know, if interest rates are rising, how does that impact your business good or bad? If there are tech layoffs over in this market or layoffs over here, how does that impact you from a associate and residents standpoint, rising prices or, you know, catastrophic events, you know, if there a maybe a wildfire in California, and we’re not in California, but when we renew our property insurance, the impact that those things had on our carriers impacts what we got to do to buy insurance. So you’re kind of thinking about everything, both macro and micro level. And I think, you know, talking about kind of consumer preferences and expectations that is constantly changing. And I do think, you know, with COVID, and more people working at home and just being in their apartment more, you know, more hours of today than they were before. I think that sort of raises service expectations and the service we provide our residents. So, you know, we certainly want to be careful or want to be in tune with, as we think about new technology and ways that we can automate things or trying to make things more efficient that we don’t lose that resident service, and don’t impair our ability to, you know, retain our residents and serve our residents, and also, obviously drive new prospects that want to live with us as well. So there’s, there’s a balance there that we have to consider. And then, I think, particularly with our diversification of markets and types of assets, you know, we have all kinds of different consumers, and they have different preferences. And so, for us, I mean, thinking about ways to stay flexible, and retain some optionality a little bit in the way we do things, and maybe how we operate in one market or one property may not, be exactly how we operate in another. You know, whether it’s from a staffing standpoint or kind of how we think about how we serve our residents, there’s not really a one size fits all solution there. So trying to be as flexible and retain some optionality in the way we think about it is a big part of what we consider as well.
Tyler Christiansen, Funnel Leasing
I, having worked alongside a lot of the folks at MAA, would say, your answer resonates with me, I have the two words I wrote down while you were speaking, that there’s a level of intentionality that I think at your size and as a public REIT, that I see in every meeting, and I see in every decision. But also to your point, you use the word optionality, I think the flexibility that, you know, ‘hey, we don’t know exactly what the future holds. And therefore, we don’t know what will work in every market, or what every consumer is going to want. So we need to be intentionally flexible,’ is I think I’ve seen, and I’m sure a large part of your success. So obviously, you’ve been very successful. What’s maybe a common myth today about you know, that, to your point, with the housing affordability crisis, a lot of arrows can be pointed at the big landlords. Right? And you’re the biggest public landlord there is. So what are maybe some misconceptions or misunderstandings about, you know, an organization like MAA and your size?
Tim Argo, MAA
I mean, I think I think that point, specifically, you know, I think probably don’t know, if it’s a myth or just not known is that the apartment industry is very, very fragmented, and much more so than a lot of the other real estate sectors. I mean, if you think about, you know, there’s kind of six large public multifamily REITs, in our industry, and together, we own probably 5 or 6%, of all the apartments in the country. So the other 95-94%, are owned by, you know, smaller owners, or some larger owners, some smaller owners, some mom and pop, some institutional owners and all that. So, it’s a very fragmented industry. So, you know, us even with 100,000 apartments, we own a minuscule amount of the apartments in the country. And then I think along with that, most, again, outside of the public REITs, most owners are not the managers are not the operators. So they, you know, they hire a separate third-party management company to run their assets. And so what comes with that is typically those guys, they’re much more of traders of assets. So they’re, you know, they’re buying an apartment community, and they’re holding it for four or five years, and then they’re selling it and try to make their money that way. So I think, as part of that, you don’t invest quite as much in the asset perhaps, or maybe in the systems that you use, or in the people that run your property, because there’s, there’s that separation between the owner and the operator. And with us, again, as a public REIT, our job is not to buy and sell and flip in and out of assets. Our job is to create a steady, growing, dividend or steady, growing, cash flow and earnings so that we can pay a dividend out to our shareholders. So you can’t do that by constantly flipping in and out that. When we buy a property, we plan to own it for the long term. I mean, I would say on average, we hold our assets 20 years or more typically, and sometimes much longer than that. As a result, you know, we’re investing in it, we’re keeping it up to a certain level of service and a certain curb appeal, if you will. We’re investing in the systems to run those assets as effectively and efficiently as we can to serve our residents and serve our associates. And we’re invested in the people as well. So I think that’s a big difference between, you know, what you see in some of the, the public apartment REIT owned apartments than what you might see in the other 90-95%.
Tyler Christiansen, Funnel Leasing
Yeah, that’s a great point. I mean, in some ways, you know, you can’t go and look up ‘third-party manager market cap’ today, right? You couldn’t go look up what your landlord is making, right, and how they’re operating. And to your point, one of the things why I have enjoyed the trends I’ve seen that’s interesting and particularly working with REITs is, when I first came into the industry, it was very transactional. What I sensed, and I’m all for the public, the private market, and buying and selling assets. But I think what I love about the REIT model is your incentives are to take great care of your residents, and your incentives are to take great care of the asset. And it’s not, I don’t mean to throw shade, but you know, a lot of times merchant builders get a bad rap because their incentives are to package it pretty and sell it off, leaseback expiration management be damned. They’re just really focused on getting that ROI. And I love where your ROI comes in, which is the FF O, you know, of managing that portfolio. And, just to segue on that, you know, so with that scale, and with that responsibility, what is it that keeps you up at night, you know, managing 100,000 apartments? Or more, what is it that wakes you up in the morning that you say, ‘Hey, I’m just so excited about this part of my job?’
Tim Argo, MAA
Yeah, I mean, as far as up at night, you know, it’s really probably just thinking about all the things that could go wrong. I mean, you think about specifically for us, with 100,000 apartments, that equates to probably 160,000 people or so living in our apartments, and that’s a fairly decent-sized city, when you think about it. Just the things that can happen on site are things that can go wrong, and that sort of thing, when you when you’re operating at that sort of scale. So, again, you know, just going back to my earlier point, just thinking about sort of the some of the broader macro things and what we’ve seen with rent growth, the last couple years, what that could mean, from a regulatory standpoint. Or, or things that could come, you know, just things that could impact our industry and our business, and just making sure we’re staying mindful about that. But, as far as, you know, excited, and what, you know, I think, a lot of this technology, you know, the multifamily industry is still well behind most industries in terms of the use and the embrace of technology. You know, most industries now really are technology companies, it’s just what is their end product? Or what do they sell? I mean, they’re all used to technology for everything to do. And I think departments have been probably a little bit behind in that. So I think just seeing how that can continue to evolve and how we can use that to better serve our residents and associates, and ultimately, our shareholders as well is exciting.
Tyler Christiansen, Funnel Leasing
Yeah, agreed. Well, and maybe to parlay that segue that into we talked about the past, you know, you joined 20 years ago, talked about the present and you know, all the opportunity that creates, let’s talk about the future, and specifically, you know, as it relates to technology, so your role as Chief Strategy Officer, you’re responsible for partnering with the technical department, but really overseeing asset management, strategy, and a lot of the ancillary revenue streams that come along with that. So when you look into the future, and you’re tasked with thinking about those 160,000 residents, and both take great care of them and also your responsibility to your shareholders, where are the opportunities in technology? Right? Maybe let’s start with the opportunities that exist, that maybe you all aren’t aren’t leveraging yet. And then we’ll, we’ll talk about, you know, what doesn’t exist yet? And then any ideas and perspectives you have there?
Tim Argo, MAA
Yeah, I mean, I think honestly, the biggest, you know, there’s, there’s a lot of different technology that we’re starting to put in place, and we’re testing and implementing, and kind of in various stages. I mean, I think the key is we just got to continue to make sure it all works well. And it all works as seamlessly as possible. There’s nothing worse than, you know, you roll out some kind of new technology or app or whatever that’s supposed to do this, and that, and it just doesn’t work. We do various levels of self-touring, where a person can, you know, schedule a tour online, and they can get an app and tour a unit and just use the app and get through the gates and all this stuff. But, you know, if they get on the property, and they’re walking down the hallway, and they lose cell service, the app no longer works, and you’re on a property you’ve never been before, you have no idea where you are, you’re lost, you don’t know where to get to. I mean, you’ve all of a sudden, taken what’s supposed to be a really great process and something that people want and being able to kind of do on their own and made it you know, the complete opposite of that. And the likelihood of that person ever renting with you, or wanting to come back, becomes minimal. So I think there’s obviously a ton of focus on the different, you know, applications and types of technology that we can use to, again, better serve residents, associates, shareholders, all of our various stakeholders. But making sure they all work together, like I said, is seamlessly and that they just work period. I mean, everything now is a smart device, everything’s got to be connected somehow, whether it’s cellular or WiFi, or whatever else. And you just keep, you know, loading on more and more of that stuff. You’ve got to have the, the infrastructure and the connectivity, and everything that goes along with that, or else, you’re just you’re shooting yourself in the foot, if it’s if you get there and you create a bad experience for what was supposed to be a really good experience.
Tyler Christiansen, Funnel Leasing
Yeah, a couple of weeks ago, I ran down to the local gas station to just buy a candy bar. And there was a little, you know, a self-service kiosk that was supposed to be scanning us all out, and it didn’t work. And none of us could check out. Had to find the gas station attendant and have them use the old-school technology. So yeah, sometimes while well-intended technology, if not deployed with proper, the strategy is great, but the execution is more important. And, you know, maybe coupling together what we’ve covered thus far, you know, when you think about how you referenced earlier that the challenges in the market are going to allow for the companies that are well positioned well capitalized, to take advantage grow, strengthen, over the next several years. What do we think the what does that mean, in the next five years for the industry? And how does that really you referenced investing in technology, you know, if organizations like Mid America are going to thrive and potentially grow over the next several years, what will that mean for our industry as a whole? Especially when you reference, we’re still kind of behind, but with this growth, and with the opportunity, and with more technology coming into the space? what do you think that looks like five years on from now?
Tim Argo, MAA
Yeah, I mean, I think, referencing what we were talking about a moment ago, and still how fragmented the industry is. I think it becomes less so. I think where we and others have the advantages, we do have the scale, the balance sheet, and the capacity to invest in these technologies. And continue to become more sophisticated, more efficient, and effective, and, you know, utilize these technologies that just make the experience better for residents and associates. So I think it would serve residents and everyone better to kind of have, you know, companies like ourselves and others that, you know, can start defragmenting the industry a little bit and take the tools we have and apply them to more of the assets in the market. We’re the biggest employer of smart home technology, we have over 80,000 of our units have smart home technology, where people can, you know, use automated door locks, lighting, thermostat, and that sort of thing. So there’s things like that, that I just think, you know, we’re definitely moving towards that environment with all the generations coming up and wanting to do things as efficiently as I can with as few clicks as possible, and just using their phone, not interacting with people as much and all that. So I think, you know, the companies that have the wherewithal and just have the capacity to invest in those technologies, will be at an advantage and not just an advantage to those companies to be able to grow and do well but make the experience better for residents and everybody else as well. I mean, I do think with what we saw with the Great Recession and housing and all that. I think there is somewhat of a permanent shift and a segment of the population that just, you know, haven’t outside of things that can happen with family or whatever, you know, there’s a segment that just apartment living is what they want to do and becomes more and more of a lifestyle and the ability to offer some of those amenities. And some of that some of those benefits are going to be key, I think.
Tyler Christiansen, Funnel Leasing
Yeah, that makes a ton of sense. And to your point, obviously, the industry is starting from a place of extreme fragmentation compared to other real estate verticals. But when we look at other real estate verticals, you know, short-term rentals with technology and consolidation. Companies like VRBO and Airbnb have led to better outcomes for both short-term vacation rental owners as well as travelers, right, the ability to have more mobility and the same thing in the hotel industry. You know, the Marriott program has brought together several different brands, and so long as there’s enough fragmentation to continue to fuel that competition, which, obviously in the apartment industry, there’s more than enough competition. And in fact, we’re all encouraging more we want more apartment units in the market. So I agree, I think that there’s a really exciting futures is that it companies that have the incentives to provide great customer experiences do so. Yeah. We’d like to finish up here in a rapid-fire, we call the Funnel Five out you. So first one here, what’s your favorite non-work app?
Tim Argo, MAA
Yeah, I wish I could let everybody know of some awesome app that changes your way of life that I use that nobody knows about. But I really don’t have that. So mine are just kind of the basics. I like anything sort of sports-related, whether it’s the PGA Tour app, or ESPN or kind of the various sports app. I’m really into that. And then the basics, you know, like Uber Eats I like DoorDash. So I can I can order food but not anything too off the beaten path to some of these basic, you know, creature comforts that I like to use.
Tyler Christiansen, Funnel Leasing
Love it. Yeah. DoorDash was on my list of favorite five as well. And, and hey, you know, speaking of sports, the Memphis Grizzlies are, you know, they’re on the up and up and up. And you see them in the competing for a title this year hopefully.
Tim Argo, MAA
Yeah, hopefully, we’ve had a few bumps in the road this season. But I think we’re kind of getting our team back and finding our rhythm. So it’s wide open Western Conference, for sure. So it’d be, you know, never had any kind of title come to Memphis. This is probably our get as good a chance as we have. And hopefully, we got a window here for the next few years.
Tyler Christiansen, Funnel Leasing
Yeah, very exciting. All right, favorite book or podcast? And you can tell us at the moment, or if there’s a book that you just, you know, that you really believe in? Either one.
Tim Argo, MAA
Yeah, so book I just recently finished, I would say recently read but actually recently listened to an audiobook called “The Upside of Stress” by Kelly McGonigal. And really, what it is, the whole kind of thesis behind it is that you know, everybody assumes everybody’s been trained to assume or think that stress is bad, and you got to, you got to reduce stress in any way possible. And there’s all these different things you can do to try to reduce stress. But her kind of thesis and theory and a lot of testing, a lot of things is that stress can be good. Or you can sort of train your body or train your mind a little bit to, you know, use that stress as a way not to always have you know, what she calls a threat response where you know, your heart beats and you get, you kind of get into this fight or flight mode, but more of a challenge-response where it makes you a little more aware and a little more clear-headed and things you can do there. And really use stress as a benefit as opposed to a detriment. So I reckon I highly recommend it. It’s very good.
Tyler Christiansen, Funnel Leasing
That could come in handy in my life, I know a thing or two about stress. I’d love to find the upside to it. Yeah. All right. Well, what ask the question about, you know, MAA has a charity by the way, and Funnel, we have a charity. Yours is a fantastic one, what I loved participating in on occasion, Open Arms. So maybe tell our listeners about open arms? But then also, maybe, maybe the answer is both. But then tell us you know, if you know, somebody gave you the opportunity tomorrow to retire, is there a passion or cause that you’re passionate about? A project that you would go and dedicate your time to? So tell us about open arms? And then you know, what would be your passion project?
Tim Argo, MAA
So Open Arms is a charity we’ve had in place really, since the beginning since we went public over 25 years ago. Basically what it is, is we provide free housing, free apartment housing for families who are having to travel to a market for medical care. And so you know, maybe they’re here in Memphis, where St. Jude has a base, it may be you know, if somebody has a child that has to go to St. Jude will provide a furnished apartment for them for their family, you know, completely free of charge. And it just it takes that burden off of them. That’s, that’s one thing you don’t think about when people have to travel for medical care is, you know, their, their family is with them. Where are they going to live? How they can afford it? So that’s something we’ve had in place, and have hundreds of units throughout our portfolio throughout all different markets that do that, and it’s been a huge source of pride for our people for sure. And, and been a great charity for us for a long time now.
Tyler Christiansen, Funnel Leasing
Love it. And is that would that be your choice is something you would work on? Or is there any other things philanthropy?
Tim Argo, MAA
I mean, certainly that one, it’s hard to hard to argue with the goals and what that one does. I mean, if I was gonna get outside of that, I think certainly I’m a dog lover. So thinking about, you know, whether it’s humane society or ASPCA, something like that. We’re just making sure dogs that have been mistreated or abandoned or things like that get proper homes get proper treatment, that’s always been a been a big thing for me as well.
Tyler Christiansen, Funnel Leasing
Oh, great answers. Those are phenomenal causes. All right. So do you have an opinion, this could be multifamily related tech related? Or just you know, in the world of Tim, that you think so strongly about you put it on a billboard. I know you were here in Tampa at a concert last weekend. So you know, you’re driving from the airport into Raymond James Stadium, big billboard there. Tim gets, you know, I give it to you free space. what do you put on it?
Tim Argo, MAA
I tried to think about this and try to think of opinions that I’m comfortable sharing publicly. One, I thought was completely off the beaten path. And the controversial hot-button topic is that I think condiments like ketchup, mustard, mayonnaise, all that sort of things are the worst. And I think that people just use them to cover up bad-tasting food. So “Condiments are The Worst” that’s my controversial opinion.
Tyler Christiansen, Funnel Leasing
That may be a winner, I would love that we’re gonna get
Tim Argo, MAA
It’s well known throughout the company as we’ve done conferences, or have lunches, and I’m always the one that’s like, ‘Can we can we get those sandwiches without condiments, please?’
Tyler Christiansen, Funnel Leasing
I like that, all right, that might be a winner for the billboard question. Last one, and this is, as you can tell, we this is not a Funnel commercial. But for you, when you see the phrase renter-centric I’ve got it here on my billboard. What does that mean to you? what does that mean to me to be renter-centric?
Tim Argo, MAA
So I think for renter-centric, you know, what we’ve thought about as this entire, what I call resident journey. So I would say renter-centric means helping the full prospect, to resident, to renewable resident journey, as efficient and as effective as possible for both the renter and the operator.
Tyler Christiansen, Funnel Leasing
I love that. And I couldn’t agree more. And that’s why Tim, it’s been a great partnership. We’ve loved working with them MAA super grateful, you are willing to join us today and share a little bit of your insight that hour flew by. So if anybody wants to keep, you hopefully, there are folks today that learn more about MAA than they knew previously, what’s the best way to follow along with them? I don’t know a lot of people are as nerdy as me reading the earnings calls every quarter, I read the transcript so they don’t have time to listen. But any other places that people can follow along with MAA?
Tim Argo, MAA
I mean, it’s, you know, obviously, as a public company, we’re pretty out there. So we, we have our website. And we always, you know, from a business perspective, always posting our latest investor presentations that we go out and talk to investors about you can see that that really gets into the businesses that we’re in, and then you know, various social media sites as well, but not hard to find www.maac.com and you can learn about anything you want.
Tyler Christiansen, Funnel Leasing
Awesome. Well, Tim, thank you for your time, greatly appreciate it. And I look forward to partnering with you on this journey.
Tim Argo, MAA
Yeah, thanks to you as well. I appreciate the time appreciate the opportunity.
Tyler Christiansen, Funnel Leasing
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