www.naahq.org N ot too long ago, Shamrock Gardens Apartments was not the best place to find yourself on a dark night, much less a safe place to call home. By the time the bank had foreclosed on its previous owners in early 2005, the 343-unit garden-style commu- nity in southwest Atlanta was rife with crime and suffering from neglected maintenance, graffiti-ridden signage and visible damage from multiple fires. Once one of Atlanta’s most desirable locations when it was built in 1964, Shamrock Gardens had lost its sense of community by the time Managing Partners Brent Sobol and Robert Holtack- ers of TORO Properties Group purchased the ailing property in October 2006. Just two years later, the results of the TORO team’s turnaround are a stark contrast from the original community it acquired. After a $1.5 million renovation and repositioning, Shamrock now boasts amenities including a community center, a renovated playground, upgraded land- scaping and onsite daycare. Since 2006, TORO has improved occupancy from 77 percent to 97 percent and has raised the value of the property from $7.5 million to $12 million in 2008—a return on invest- ment of more than 200 percent. The secret to TORO’s success at Sham- rock Gardens was not luck, but rather a combination of a proven turnaround process and a passion for improving peo- ple’s lives through re-building communi- ties. Sobol calls it “compassionate capitalism,” and his company’s business model of doing well by doing the right thing is drawing national attention. Sobol and Holtackers were recognized as Independent Rental Owners of the Year at NAA’s 2007 PARAGON Awards ceremony, and Shamrock Gardens Apartments received the 2008 PARAGON Award for Best Garden/Townhouse Community, Pre-1979, Over 150 Units. “I’d always seen the PARAGON Awards given to extraordinary companies that I admired,” Sobol said. “It was a tremen- dous honor to be in the ranks of some of December 2008 UNITS 45 By using their “turnaround template”—a three-phase process that sets a repositioning project’s course— Brent Sobol and Robert Holtackers of TORO Properties Group turn distressed properties into vibrant communities. BY JEANINE GAJEWSKI Compassionate Capitalists
Transcript
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Not too long ago, ShamrockGardens Apartments was notthe best place to find yourself
on a dark night, much less a safe place tocall home. By the time the bank hadforeclosed on its previous owners in early2005, the 343-unit garden-style commu-nity in southwest Atlanta was rife withcrime and suffering from neglectedmaintenance, graffiti-ridden signage andvisible damage from multiple fires.
Once one of Atlanta’s most desirablelocations when it was built in 1964,Shamrock Gardens had lost its sense ofcommunity by the time Managing Partners Brent Sobol and Robert Holtack-ers of TORO Properties Group purchased
the ailing property in October 2006.Just two years later, the results of the
TORO team’s turnaround are a starkcontrast from the original community itacquired. After a $1.5 million renovationand repositioning, Shamrock now boastsamenities including a community center,a renovated playground, upgraded land-scaping and onsite daycare. Since 2006,TORO has improved occupancy from 77percent to 97 percent and has raised thevalue of the property from $7.5 million to$12 million in 2008—a return on invest-ment of more than 200 percent.
The secret to TORO’s success at Sham-rock Gardens was not luck, but rather acombination of a proven turnaround
process and a passion for improving peo-ple’s lives through re-building communi-ties. Sobol calls it “compassionatecapitalism,” and his company’s businessmodel of doing well by doing the rightthing is drawing national attention.Sobol and Holtackers were recognized asIndependent Rental Owners of the Year atNAA’s 2007 PARAGON Awards ceremony,and Shamrock Gardens Apartmentsreceived the 2008 PARAGON Award forBest Garden/Townhouse Community,Pre-1979, Over 150 Units.
“I’d always seen the PARAGON Awardsgiven to extraordinary companies that Iadmired,” Sobol said. “It was a tremen-dous honor to be in the ranks of some of
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By using their “turnaround template”—a three-phase process that sets a repositioning project’s course—
Brent Sobol and Robert Holtackers of TORO Properties Group turn distressed properties into vibrant communities.
BY JEANINE GAJEWSKI
CompassionateCapitalists
the biggest and best companies in theindustry.”
Sobol and Holtackers see great oppor-tunity to repeat Shamrock Gardens’ suc-cess in a market flooded with distressedcommunities in the wake of the housingcrisis. They hope to become leaders byexample, paving the way for other devel-opers to emulate their business model—a business model that not only putsmoney in their pockets, but also prideback in their communities.
Getting StartedSobol and Holtackers spent years
sharpening the skills they would need asturnaround artists before they joinedforces in early 2006. For Sobol, real estatemanagement was in his blood.
“My grandmother flipped homes duringthe Great Depression so she could makemoney to feed my father and his six sib-lings,” Sobol said. “My father saw it as anoble profession and became a second-generation real estate entrepreneur.”
However, as a young man, Sobol didnot necessarily want to follow in hisfather’s footsteps until he got his first tasteof real estate as the student manager of hiscollege fraternity house Sigma Nu atWashington University in St. Louis in the1990s. “Talk about a tough resident baseto start with,” Sobol said. “Soon after, myfather told me, ‘You can pay for your col-lege if we buy a house, fix it and sell ittogether.’ So I did it and mad a nice prof-it—and I decided to do more of it.”
After graduation, a job with a sub-sidiary of Georgia Pacific took him toAtlanta. “The company was a dot-comwith a real estate theme,” Sobol said“Then Sept. 11 happened and three-fourths of the company was laid off in sixmonths. So I was jobless in Atlanta know-ing that I wanted to be in real estate.”
Sobol took a job with R. James Proper-ties Inc., starting on site in leasing andeventually working his way up to GeneralPartner with investments in several of thecompany’s properties. He decided to strikeout on his own and soon partnered withHoltackers, who already had a track recordof repositioning distressed homes as afranchise owner of HomeVestors, a compa-ny that advertises “We Buy Ugly Houses.”
Holtackers, a native of The Netherlands,moved to the United States to complete hisMBA at the University of Georgia. A trip toTaiwan as part of a construction projectprovided his first experience with develop-ment and real estate, and he found theexperience rewarding.
Holtackers founded two Internet com-panies in the late 1990s and beganinvesting in single-family homes with abusiness partner in 1998. “I was interest-ed in a better business model because thesingle-family home model was not scal-able,” Holtackers said. “So we startedfocusing on multifamily and sold theHomeVestors franchise in 2006.”
Creating CommunityIt was Holtackers who first spotted the
118-unit, 1960s brick apartment commu-nity in a newspaper ad. Towers Garden,located in Decatur, Ga., was a communityin much need of a transformation. “It hadoperational problems,” Holtackers said,“and fit our model for repositioning.”
As Holtackers began the due diligenceprocess, Sobol approached him with aninterest in partnering on the project. “Wegot together and compared notes anddecided to partner and buy Towers Gar-den,” Holtackers said.
They set a goal of completing a fulltransformation of the community withinsix months. Using only private funds, theTORO team took the severely neglected,crime-infested property with poor financialperformance to a fully occupied, well-keptaffordable housing community with areturn on investment of 300 percent.
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Shamrock Gardens, Atlanta
Before
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“My father told me,‘You can pay for yourcollege if we buy ahouse, fix it and sell it together.’ So I did it and made a niceprofit—and I decidedto do more of it.”Brent SobolManaging Partner, TORO Properties Group
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“[Sobol] did the lion’s share of therehab while I focused on the financing,”Holtackers said. “Within months, we’drepositioned Towers Garden.”
For TORO Properties, “repositioning”means more than a mere rehab. “We hadto get both the operations and the rehabright,” Sobol said. “By focusing on both ofthese, you achieve a vastly improved com-munity. We try to emphasize the humancomponent. Smiling children are a goodindication of how well we are doing.”
Sobol and Holtackers created a com-munity atmosphere at Towers Gardenthrough TORO-sponsored cookouts, par-ties and credit counseling and have part-nered with their local police, firedepartment and churches.
“In most C-class properties, you typi-cally have few physical amenities,”Holtackers said. “But when an ownerreally gets involved in the community,you can learn what is important to theresidents and incentivize them to careabout the community and foster a senseof community spirit. It’s good for theowner and it’s good for the residents.”
At Shamrock Gardens, the TORO teamhas invested $35,000 in a communitycenter where residents host parties, familyreunions, neighborhood watch meetings,a single moms’ club and seniors’ bingo.
“You have to concentrate on thehuman component of the business,”Sobol said. “It is easy to get caught up inthe spreadsheets and the financial analy-sis, but it is very much a people business.People want to rent from those they per-ceive as caring about them and the com-munity. It is as simple as returningphone calls promptly or having cookiesin the office so they feel welcome.”
Sobol sees each turnaround as a part-nership between four parties: residents,employees, service providers andinvestors. Building that sense of commu-nity goes a long way toward delivering onthe partnership with residents. With itsstaff members, TORO strives to instill asense of trust between employer and employee. The company also employslocal supplier partners and pays thempromptly for their services.
“And the fourth leg is the investors, whoexpect a return on investment,” Sobol said.
“They have told us that when we take on aproject, they like that we strive to changepeople’s lives for the better. We call it the‘double bottom line.’ There is the ROI, butthere is also the more intangible, lessquantifiable benefit to the four partners.”
The Going Gets ToughRepositioning a community is a
process fraught with unexpected road-blocks and challenges, and ShamrockGardens was no exception. Soon afteracquiring the property in the fall of 2006,the TORO team realized it had underesti-mated the level of crime that had perme-ated the community.
“One of the biggest challenges withrepositioning is factoring in crime andcriminal behavior,” Sobol said. “In a dis-tressed property, that’s a risk and there isno exact science for fixing it. But if youdon’t fix it, you can’t achieve the finan-cial returns.”
Next the team ran into trouble withtheir general contractor, who was notperforming as they had hoped. By thewinter of 2006, while Towers Garden wasperforming well, Shamrock was not turn-ing around as quickly.
“So we hunkered down,” Holtackerssaid. “[Sobol] took over community rela-tions—including dealing with thepolice—and I took charge of the renova-tions and the maintenance. For ninemonths, we spent most of our wakinghours to get it to the point where we need-ed it to be. We were both committed todoing whatever it took.”
“We were absolutely not going to allow
After
Shamrock Gardens, Atlanta
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“You can learn what is important tothe residents andincentivize them tocare about the community and fostera sense of communityspirit.”Robert HoltackersManaging Partner, TORO Properties Group
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it to fail,” Sobol said. “Too many devel-opers are willing to walk away when theyhit a speed bump. We felt a sense of com-mitment to our residents, employees,community and financial partner.”
By fall 2007, the team reaped the fruitof their labor with improvement on allfronts. They attribute their success notonly to their willingness to work hard anddedicate the man hours necessary to pulloff a turnaround, but also to a processthey call the “Turnaround Template”—a three-phase process that maps out thecourse of a repositioning project.
“Different stages of the process requiredifferent techniques,” Sobol said. “The firstphase is damage control and assessment.The second phase is the heavy lifting and
implementing the business plan. Thattakes the longest. The third is stabilization,where you look to improve the processes sowhen another buyer eventually takes over,it runs like a well-oiled machine.”
Today, Sobol and Holtackers haveimplemented the third phase of the processfor Shamrock Gardens and are in discus-sions with prospective buyers for the com-munity. Several community leaders andsome of the prospective buyers have urgedSobol and Holtackers to continue manag-ing the community after the ownershipchange. The TORO partners haveembraced this suggestion and they areworking out the details of this arrange-ment. They want to ensure the continuousimprovement of neighborhoods in south
Atlanta and keep Shamrock Gardens as ashining example of a transformed andvibrant community. They believe thatShamrock Gardens and Towers Gardenwill be among the first in a long series ofrepositioning projects for TORO Propertiesin the Atlanta area—and beyond—andare looking to share their expertise withother independent rental owners and thelocal government.
“Our extreme makeover of Shamrockhas attracted a lot of attention to ourbusiness model,” Sobol said. “Recently,the federal government passed a bill allo-cating $4 billion to help state and localgovernments reposition distressed hous-ing, including multifamily. We are work-ing with the local government to helpthem identify projects that would be ben-eficial to the neighborhoods.
“[Holtackers] and I both live inAtlanta and it is important to us that the city thrives,” he added. “We are proudof our city and believe we can make a difference.”
Shamrock Gardens residents participate in National Night Out at Shamrock Gardens (left), a nationwide crime/drug prevention event inpartnership with the local police department, and monthly children’s arts and crafts activities (right).
TORO Properties Scores An IRO Award Upset
This past June, TORO Properties trumped top national apartment firmsto earn a 2008 NAA PARAGON Award for best garden or townhouse
community—the company’s second PARAGON Award in as many years.In 2007, Sobol and Holtackers won a PARAGON as the top IndependentRental Owner (IRO)—100 units or fewer. The PARAGON ceremony audi-ence this past June took delight in the fact that Sobol and Holtackersscored an IRO upset, having won a category typically dominated bylarge-sized portfolio owners.
