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United Dominion Realty Trust Inc. (UDR) |
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CEOCFO
Interview Index |
This is a printer friendly page! United
Dominion has a thirty two-year history during which it has raised the dividend each of the
last twenty-eight years and has provided a total annualized return to our shareholders of
17% BIO: Mr. Toomey, 43, joined United Dominion Realty Trust,
Inc. (UDR) in February 2001 as President, CEO and Director. UDR is the fourth
largest apartment REIT, owning and operating middle market apartment communities
nationwide. United Dominion Realty Trust has a 32-year history during which it has raised the dividend each of the last 28 years. United Dominion is included in the S&P MidCap 400 Index. The Company currently owns 75,618 apartment homes and currently has 1,311 homes under development. United Dominion’s common stock is traded on the New York Stock Exchange under the symbol UDR. Prior to joining UDR, Mr. Toomey was with Apartment
Investment and Management Company (AIMCO) where he served as Chief Operating Officer for
two years and Chief Financial Officer for four years. During his tenure at AIMCO,
Mr. Toomey was instrumental in the growth of AIMCO from 34,000 apartment homes to 360,000.
He has also served as a Senior Vice President at Lincoln Property Company and as an
Audit Manager serving real estate clients at Arthur Andersen & Co. Mr. Toomey
received a BS in Business Administration/Finance in 1982 from Oregon State University. United Dominion (UDR-NYSE) founded in 1972 is the
fourth largest apartment REIT, owning and operating middle-market apartment communities
nationwide. United Dominion has a 32-year history during which it has raised the dividend
each of the last twenty-eight years. The Company currently owns 75,618 apartment homes and
is the developer of 1,311 homes currently under construction. With an objective to be a national company and one of
the largest apartment REITs, from 1996 through 1998, United Dominion acquired other REITs,
private portfolios and individual communities, growing its apartment portfolio from 34,000
to over 87,000 apartment homes by the end of 1998. Following this significant acquisition
period, the Company has spent the last three years building infrastructure to catch up
with the rapid growth, upgrading its portfolio and focusing on operation. The goals have
been to strengthen and better position the Company to sustain above-average net operating
income growth, steadily increase cash flow per apartment home, generate more predictable
earnings and strengthen the capital structure. United Dominion works hard to
create a distinctive living experience in all of their communities. They are dedicated to
providing comfortable homes with great attention to details. The company is proud of the
group of people who help to make you feel welcome when you visit a United Dominion
Community, and who make you feel at home every day thereafter. You can count on our people
to respond to your needs quickly and professionally and to work hard to make your home
worry-free. United Dominion is dedicated to earning your trust. It is their commitment to
you that they will act with integrity, treat you with respect and communicate with you
honestly. United Dominion never forget that you are the most important part of our
community. CEOCFOinterviews: Mr. Toomey, you have been with the company for about three years. What attracted you and how has United Dominion changed under your leadership? Mr. Toomey: “I was very familiar with the Company and it’s people. I understood why it was deficient and I knew what it was going to take to change it. It is a company with an enormous amount of heritage; it is 32 years as a public company and for 28 of those years it has increased dividends. I think a lot has changed with the company. First and foremost, the attitudes and the culture of the company have changed a great deal to a more assertive and aggressive sales and service organization. Secondly, the balance sheet has dramatically reversed course and thirdly, the value of the stock has improved significantly. Fourth, having bought and sold 25% of the company’s assets, we have upgraded the quality. Fifth, the Balance Sheet has come full circle and now represents strength.” CEOCFOinterviews: What kind of properties do you want? Mr. Toomey: “Our
investment philosophy is built on the foundation of supporting our dividend. I mentioned
earlier that it increased each of the last 28 straight years. We focus on the most stable
part of the rental market and that is the middle market apartment CEOCFOinterviews: How would someone know if they are in a United Dominion community? Mr. Toomey: “They would know by our associates; all of them reflect our attitudes and values. I think it is our people that sets us apart.” CEOCFOinterviews: What do you look for in your people and how can you keep track of the service they are delivering? Mr. Toomey: “There is a screening process on the front end of hiring associates that involves psychological testing and matching the skill set of the individual to the job. We do not hire where they do not match; you can have vibrant energetic people and you need them in sales roles. You can have people that are more introverted and you will not want them in sales but in your backroom support and service. It is all about screening and hiring the right people. The second thing is the ongoing training program and third is the ability to promote. We have a mantra that, we promote from within and that has served us well in growing a talented and deep team.” CEOCFOinterviews: Are there geographic areas where you would like to be? Mr. Toomey: “We pretty much have a foothold everywhere we want to be. Where we are looking to expand our holdings over the next five years in Florida, as well as continuing to expand our holdings in California, the Pacific Northwest, and the Rocky Mountain area. These areas are attractive because of the job growth, which is two times the national average as well as immigration..” CEOCFOinterviews: Do you do any construction? Mr. Toomey: “We do very little new construction. Our construction activities are generally Phase 2 orientation, which means we have an existing community and we are just adding more homes. That is safer because you already know the market, you have leasing momentum from the existing Phase I, and you generally have a good idea of the construction costs.” CEOCFOinterviews: Has apartment management changed over the last few years? Mr. Toomey: “It has
changed dramatically! The biggest change over the last five years is our residents are
much more Internet communicative than they have been in the past starting with for
apartments. In many of our markets today, 40% of our traffic is from people who have found
us via the Internet. It literally replaced the yellow pages, the newspapers, and results
in a more knowledgeable resident prospect with a higher propensity to sign a lease.” Mr. Toomey: “Turnover
has been a focus of all levels of management and associates Over the last three years that
I have been with the company associate turnover has gone from 68% to 38%; it CEOCFOinterviews: How often do you raise rents? Mr. Toomey: “We
operate about 48 markets and in those 48 markets, my estimation is that 85-90% of them are
now returning to where we can grow rents. Single family housing is still relatively
inexpensive but it is getting more expensive, and today the thirty year mortgages are over
6.5 CEOCFOinterviews: How do you deal with tenants who do not pay their rental fees? Mr. Toomey: “We have seen the three toughest years the industry has ever endured. Our actual bad debt has dropped and the main reason is because we found that the residents respond not to notices on the doors or knocks in the middle of the night – what they respond to is a discreet phone conversation early in the morning. In instances where we have found markets where we have had military or massive layoffs, we have worked out programs with individuals to work out paying their rent on a reduced level to help them get bridged to their next job. We have gotten more creative in that area and less confrontational towards these situations. It has worked to the point where our bad debt, since I have been with this company, may be at a fifteen year low of 3/10 of one percent.” CEOCFOinterviews: Is that a reflection of the change of culture, which we talked about earlier? Mr. Toomey: “It really has a lot of the roots in the culture and what we have asked our associates to do. We have freed them up by taking much of the paperwork off their hands and much of the mundane reporting. We have asked them to focus more on the residents and the next person that comes through the door.” CEOCFOinterviews: You have approximately 70,000 apartments. Do you offer services unrelated to their apartments? Mr. Toomey: “We have finally come full circle to realize is that our residents would rather have us focus on maintaining the community, staffing it with friendly helpful people, and quick service, instead of bundling up a bunch of things to confuse them. The truest and most enduring resident’s message back to us is always ‘just maintain my apartment community in great shape, and I will stay here. Give me good service. You do not have to give me everything, just good housing service’.” CEOCFOinterviews: How often do you need to refurbish and how big a problem is the maintenance of your properties? Mr. Toomey: “It is certainly an element, where if you do not continue to reinvest, it shows up rapidly in your occupancies and your resident turnover. We are currently reinvesting on an annual basis about $1,300.00 dollars per apartment home, or almost two months of rent out of twelve. So we are very aggressive in this area and see ourselves bettering the quality of our assets.” CEOCFOinterviews: What do you see for the future? Mr. Toomey: “I think the company looks to the future by our shareholders, who are predominantly retirees, and they are out there using our dividends to sustain their lives. They get a social security check and a dividend check from UDR. So the first thing we look forward to is the growth of the dividend. How we will accomplish that is much the same as we have done in the last three years; buying and selling communities, continuing to work with our workforce to enhance its service capabilities and grow rents, and looking to expand our company beyond its 78,000 apartment homes.” CEOCFOinterviews: How do you know when it is time to buy and sell? Mr. Toomey: “I would answer this question on two levels. First on an individual community basis, second on the M/A front. First on the individual community level, we have identified particular markets we want to grow our asset base in and others where we are comfortable with the asset base, but just want to trade up in quality over time. The process of making an investment or selling an asset is really a group effort and I rely upon my acquisition and sales group to read the particular market, and for operations to provide feedback about the potential for an acquisition and/or the lack of potential on a sale. So it’s really a team effort. I would also add we do not try to get that perfect timing. I think you could catch yourself. It is always a delicate balance and truly one of the things that a CEO has to weigh carefully and ask himself if his organization is ready for a bigger challenge. I think the way to know that is to be meeting with the middle and upper management and seeing if they are ready.” CEOCFOinterviews: Why should investors be interested in you and what should they know about United Dominion that might not be apparent when they look at the company? Mr. Toomey: “First, I think everyone should be looking at their individual investment, and realize that nearly one third of our economy is tied to real estate in the form of housing, rental, repairs, and construction activity. If you have no exposure to that segment, you certainly risk falling behind. Many people look at their homes as their exposure; that is too concentrated, you do not use your home as an investment, it is shelter Second, REITs are yielding a little over 6%, and that is a steady cash flow stream for investors. It has been written by many that the numbers of people that are moving in the retirement years are certainly going to be looking for more cash flow. I think real estate is a very secure, safe investment particularly apartments since one out of every three people in America live in some type of rental property. It does not go out of style and it is not replaced by technology; it is a safe way to invest. We operate in one segment that is probably the most predictable and safest of all real estate investments and that is apartments. We focus even further in the middle market, which is a segment of the business. Third, we are focused on operations as our value added. We are not a builder, which is fun and exciting but risky. We are focused on buying existing communities and running them better than the ones before; we believe that through our systems and our people that we can do that and we have a track record of doing that. Fourth, United Dominion is a company that has 32 years as a public company it has a long heritage, and 28 straight years of raising the dividend. It is a company that has a track record of stability and delivering on its promises. Fifth, management experience and depth we have been successful, and we have a simple, straightforward strategy that can be executed in both good times and bad. The good news is the business is getting better and stronger and we are very successful at what we do.” CEOCFOinterviews: What are the challenges that you face and how are you ready for them? Mr. Toomey: “I
think the main challenge for all people in the apartment business today is primarily the
increasing homeownership trend CEOCFOinterviews: In closing, tell us what are your functions during the day as CEO? Mr. Toomey: “The first thing I do everyday is try to ensure that the organization is moving forward. I try to make sure that people are not stuck looking in the rear view mirror, change their course of action whereby they are out there reaching for the next customer and thinking about tomorrow and where they are, where they need to be and how they want to be. The second thing is looking at the people side of the business and where I think we need to add talent and where some of our existing talent is struggling, and work through how to get the most out of the talent we have. I think there are many things that are always in your mind each day like strategy but you can get caught looking at the sky and miss the point that CEOs need tofocus on leveraging their time and energy on a day to day basis. Mostly it is about communication and keeping energy and focus high” disclaimers |
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