Tzadik Management’s Regional Vice President, Debbie Wheatley, who has thrived in the Houston Market for years is excited to get started. “More than anything I am just excited to bring the unique culture and engagement I have seen in my time with Tzadik,” said Wheatley. “We have been given a chance to make a difference in our community and Redefine how these communities operate moving forward”.
The 5-community portfolio is listed below:
- Crossings at Jackson Square – 8030 Airport, Houston, TX 77071
- Crossings at Bradford Place – 8300 W Airport, Houston, TX 77071
- Shadowtree – 9475 W Sam Houston Parkway, Houston, TX 77099
- Cresent City – 8501 Broadway, Houston, TX 77061
- Casa Royal – 9445 Concourse, Houston, TX 77036
While Tzadik Management’s recent investment strategy has brought them mostly toward the upper Midwest, Chief Executive Officer Adam Marcus Hendry believes Houston shares a lot of similar attributes that made the Midwest so appealing. “This deal helps us continue to establish our footprint in middle America, where we believe the steady population growth combined with their energy and oil supply should help mitigate the upcoming stagflation,” said Adam Marcus Hendry.
With property values continuing to climb at a rapid pace, Tzadik Management has begun looking into acquiring management companies to continue their growth. “Buying wholesale brings a lot of positives to the table. We believe we can close at close to 20 or 30 percent below market while also jumping the Death Valley curve” said Adam Marcus Hendry. Tzadik Management is also looking into commercial real estate acquisition, with many due diligence projects currently underway.
Tzadik Management is a growing, innovative, and driven real estate and property management company based in Miami, Florida. Since its formation in 2007, Tzadik has managed over $1 billion in apartment complexes and over 19,000 units in over 20 states. Through excellent management, a focus on company culture, and a tech-driven style of operating, Tzadik management has established a reputation for Building Lasting Relationships.
Chief Executive Officer Adam Marcus Hendry announces that Tzadik Management closed Wednesday on the acquisition of a 248-unit community in Sioux Falls, SD. The newest Tzadik acquisition, Taylors Place, is the 26th community-acquired in the past year in Sioux Falls alone. This is yet another example of Tzadik Management’s big push in the upper Midwest over the past several months, according to Adam Hendry.
At a price of just over $56K per door, Adam Marcus Hendry is excited they are still able to capitalize on these opportunities. “We have closely monitored purchase prices across all markets, and we are thrilled to still be able to get great value in the Upper Midwest” stated Adam Hendry. “It won’t be long before you won’t find anything under $70K a door because of the plummeting interest rates and money printing that will be hitting the markets”.
The management team in Sioux Falls is equally excited for the opportunity. “We have really built a strong culture of employee engagement here since we entered the market,” said Regional Vice President, Tessa Frank. “We are excited to continue building relationships in the Dakotas while driving our Net Promoter Score to over 60% which will, in turn, provide the best possible customer service to our residents”.
Tzadik is a growing, innovative, and driven real estate and property management company based in Miami, Florida. Since its formation in 2007, Tzadik has managed over $1 billion in apartment complexes and over 19,000 units in over 20 states. Through excellent management, a focus on company culture, and a tech-driven style of operating, Tzadik Management has established a reputation for Building Lasting Relationships.
At a time where class-A apartment buildings are popping up all over the US, Tzadik Management’s Adam Marcus Hendry urges potential investors to stay away. A closer look into the class-A market shows the bleaker side of all the recent development. “Recent market studies done in primary markets, including areas like Miami and Fort Lauderdale, are showing a tremendous amount of rental concessions, particularly in the newer buildings,” said Hendry. “It’s almost required now that you give away at minimum two month’s rent in addition to the waiving of most move-in costs.”
These rental concessions, used in attempts to quickly occupy apartment homes, allow for the property to lease their apartments at rents not ordinarily attainable in the given market. In some cases, apartments are giving up to 4 months’ rent-free for all new move-ins, effectively turning a $2,000/m apartment into less than $1500/m apartment.
Adam Marcus Hendry believes these concessions are necessary due to the surplus of availability in many primary markets like Miami and Fort Lauderdale. Despite overall population growth in those markets, the surge of development has far exceeded the demand, according to Hendry. “Property management companies are essentially revenue cuffed. It’s almost necessary if the building next door won’t make you pay for several months,” Hendry continued.
So why not just lower the rent instead of giving it away? “These burgeoning rental concessions are done to keep their market rents and NOI high. These “one-time” concessions are put below the line and seen as one-time instances when there is little evidence to suggest they are” said Adam Marcus Hendry. “The profitability of these apartments is now almost completely on life support, only surviving from the dropping interest rates that reduce debt service at the refinance. With all these new buildings popping up, what is stopping the renter from hopping to the next lease up?”.
The answer would be employee culture, engagement, and keeping “A” players on site for years, thus not having to have new faces in the office regularly, according to Adam Marcus Hendry, but he remains skeptical due to the increasing occurrence of renewal concessions. “Our research is showing some pretty substantial renewal concessions at many class-A sites,” said Hendry. “Renewal concessions aren’t new and are typically necessary depending on the situation, but if the renter was given the same or even double the concession at move-in, your NOI becomes a farce. The only defense we have seen that works is to spend the year developing relationships with the residents, so when the renewal comes up, they will stay for a much smaller concession even in the face of many months offered at nearby places.”
All these varying factors are a big reason for Tzadik Management’s recent push to the upper Midwest. “When looking for an opportunity, we closely examine not just population growth, but overall supply,” said Hendry. “Our recent acquisitions in the Midwest allow us to trust our forecasting and projections, mainly because there are less dangerous variables that currently plague the primary markets.”
In October 2019, Tzadik Management’s Adam Hendry sensed the looming economic uncertainty in December of 2018. From it, he made a prediction: “The Federal Reserve will lower interest rates over the next one to two years due to an upcoming recession,” said Hendry.
When rate cuts happen, it forces investors to pump capital into the economy instead of letting it erode away from zero interest rates on savings, that are in fact negative when taxes and inflation are taken into consideration. Thus, instead of losing money via savings it encourages people to speculate and make poor decisions. Hard to blame the drug addict (investor) when the rehab center (Federal Reserve) is the one supplying the drugs.
Now a year later Hendry’s forecast is accurate. The Federal Reserve has lowered interest rates, not once, but twice already. Adam Hendry believes it will not stop there. Hendry’s next prediction is that there will be another round of cuts before the end of 2019, bringing the total to three times for the entire year. He thinks the Federal Reserve will cut rates to 0% eventually in 2020 or 2021.
As for the next recession, Hendry says, “Everyone thinks they are preparing for another 2008, but most likely, the upcoming crash will be much different.” He also states, “We have to be prepared for a Melt-Up, not a Melt-Down.” The 2008 recession was an acceleration in the massive decline in values. All investment channels saw a drop. Like common stocks, corporate bonds, and real estate. Due to the nation’s risk of a total breakdown in industry and finance, the 2008 recession was a “Meltdown.” If Adam’s vision of the future is accurate, as the latter one was, then America’s future recessions will be a “Melt-up.”
A “Melt-up” is a sharp and unexpected rise in the price of an asset class, like real estate. However, while the price or rent in real estate may go up 1-2%, expenses like taxes, insurance, utilities, and materials could go up 5%+ annually. This Stagflation is going to find many people scratching their heads how they are upside down on their lifestyle while prices didn’t drop.
Due to a “Melt-Up” and potential Stagflation 1970s projection, the company repositioned itself strategically. Tzadik Management decided to head to the Upper Midwest. Why the Midwest? It has the most recession-proof cities in the United States. Adam Hendry said:
“We were looking geographically in the US where cities weathered 2008-2010 well, have booming population growth yet not too much multi-family construction, under 3% unemployment, attractive financing, and overall properties where instituting over company culture and DNA into the staff would give us a tactical advantage.” Additionally, Tzadik Management purchased an office building in downtown Sioux Falls where they now have over 30 employees working in that Regional office.
Adam Hendry currently owns and manages over eight thousand units. He has properties in Florida, Georgia, Texas, South Dakota, North Dakota, Nebraska, and is looking to expand opportunistically where the criteria are met. Hendry and his team of professionals are preparing for a Melt-Up by expanding to ensure that each Region of the company is at least 2.5x on the Labor Efficiency Ratio and over 50% Net Promoter Score respectively.
Tzadik Management is a thriving real estate and property management company. The Florida-based business began in 2007. Its CEO, Adam Hendry, and his team, value hard work and exceeding expectations. Hendry has fifteen years of progressive real estate and property management industry experience.
Learn more about Founder and CEO, Adam Hendry
Follow CEO of Tzadik Management, Adam Hendry on LinkedIn https://www.linkedin.com/in/adamhendry