FAMILY-OWNED REAL ESTATE FIRM'S BEST ASSET IS ITS NAME
By Natalie Kostelni, Staff Writer
Philadelphia Business Journal
December 14-20, 2007 issue
When Jennifer Eller heard Korman Residential Properties Inc. was considering buying the apartments where she worked as general manager, she did a dance.
"We got very excited," said Eller, who researched the company online and liked what she saw.
When the company toured her property, a 228-apartment complex a block from the University of Delaware in Newark called Christina Mill, she met her would-be future bosses in person: John Korman, CEO, and Jim Korman, president.
That the firm's two top executives personally toured the property and reviewed files meant a lot to her.
"I had another company come through, they came in, threw files on the floors," she recalled.
The Kormans were polite, respectful and even gave out some compliments, Eller said. That was last December. By February, Korman Residential closed on Christina Mill and two days later, new signs went up outside of the complex indicating its new name: Korman Residential at Christina Mill.
"That was fabulous," Eller said. The last owner of the property never changed the signs, an indication to Eller that the care wasn't there.
Eller's enthusiasm is a mark of the company's positive reputation among its 205 employees, which also extends to its tenants and investors. People in the real estate community say the Trevose-based company - which buys and owns 6,800 apartments primarily in Philadelphia but also throughout Pennsylvania, New Jersey, Delaware and Florida - has earned their respect.
"I've always been impressed with their commitment to their employees and customers," said Terry Brewer, who handles regional commercial real estate lending for Wilmington Trust and has worked with the firm since 2000. "They live and breathe it. It's sort of their brand. You know what you're getting with Korman housing and if you work with them. I found they treat their employees and customers the same way they treat their investors."
Korman Residential is one branch of the Korman family real estate dynasty. The seeds of the company were planted in 1919 with Hyman Korman, who built houses in Northeast Philadelphia. In the 1940s and 1950s, Hyman Korman Inc. expanded into commercial and more residential building. In the 1960s, the company built the Neshaminy Mall in Bucks County as well as office and apartment buildings in Center City, such as the Plaza Apartments along Benjamin Franklin Parkway, and throughout Philadelphia's suburbs. In the 1970s the company commenced its well-known extended-stay furnished apartment concept. In the 1980s, the company developed retail centers and transformed the Plaza Apartments into the Plaza Hotel.
In the early 1990s, the family debated going public but decided it could be more entrepreneurial by remaining private. In 1996, the family decided it could best serve the fourth generation by splitting Korman Corp.'s assets along family lines into three separate companies: Korman Residential, Korman Communities and Korman Commercial.
(con't page 36. KORMAN: WITH OCCUPANCY RATES IN THE 90S, KORMAN CREDITS TENANT LOYALTY PROGRAMS)
The three businesses are based in the area and run by different members of the family. For example, Korman Commercial Properties of Trevose recently completed a major capital program for the Neshaminy Interplex, a 12-building, million-square-foot office complex where its based. Korman Communities of Plymouth Meeting launched a new line of luxury extended-stay apartments branded as AKA, and has taken the concept to New York City and Washington, D.C., with plans to expand from there.
"They are three growth vehicles for the fourth generation to grow," said John Korman, whose father Berton E. Korman assumed control of Korman Residential.
A main asset for each company is the well-respected Korman moniker.
"The Korman name in this family is valued very much," said John Korman, 49, who joined the family business in 1980 after graduating from the University of Pennsylvania's Wharton School.
"No one dares to tarnish the family name," said John's younger brother Jim, who came to the company in 1988 after graduating from the University of Delaware. Their sister, Carolyn Korman Jacobs, worked at the company for 30 years and, though she's no longer involved in day-to-day operations, remains a partner.
The two brothers split their duties by their strengths. John Korman's strong suit is finance, so he became responsible for growth, acquisitions and investment partners' relations. Jim Korman, 42, focuses on apartment operations and service. The father remains chairman.
The company targets "value-add" plays. That means a property in need of some cosmetic work or that has occupancy or management issues. Korman also creates value by adding a certain number of furnished apartments to a property with a standard look from bedding to furniture.
"Dad always said : ‘Don't look at what a property is, but what I can be,'" Jim Korman said.
Korman's specialty is correcting management issues, which it does by stressing service.
"What sets us apart ... is intensely managing a property," Jim Korman said.
Korman strives to created tenant loyalty with 30-day trial periods on leases and guarantees that maintenance issues will be addressed within 24 hours. It throws resident appreciation lunches, ice cream socials and cookie swaps. Once a month it hands out a light breakfast of juice boxes and granola bars to tenants on their way to work. That's on top of new workout facilities, club rooms and business centers.
Occupancy rates at Korman residences are in the 90s, according to the company.
Going forward, Korman Residential, which declined to disclose its revenue, plans to double over the next two to three years, John Korman said. The company will continue to focus on apartments, which it generally holds for seven to 10 years, and will buy rather than build.
In the past six years, the company began to accumulate a presence on the Main Line. It now owns three apartment communities between Wayne and Wynnewood and is on the hunt for more.
It also looked at 25 properties in Delaware, finding three it liked enough to buy. One of the purchases was Chrsitina Mill, where Eller is a manager. Another is Brandywine Hundred, a 301-apartment community in Wilmington that Korman finally cinched up in June after three purchase attempts over eight years. It also owns what is now known as Korman Residential at Stratford in Wilmington.
For future investment, it is eyeing Nashville, Tenn., and Richmond, Va., because they have a lot of universities and medical centers.
The Kormans pride themselves on making prudent financial decisions.
"We don't like surprises," John Korman said. He has walked away from deals that didn't feel right, but once an offer is made, it will hold, he said. The company brags about closing a deal in 19 days.
"They have a fabulous reputation in the marketplace," said Glenn Gallagher, a Wachovia Corp. executive who has worked with the Kormans for the past 40 years.
Once Korman buys a property and begins making changes, vacancy issues are usually quickly resolved, said Gallagher.
"In a very short time, they are able to get them up to 90 percent occupancy," he said.
Now, nearly a year after the Christina Mill acquisition, Eller remains so excited about Korman's ownership that she bragged her new Chevrolet Equinox was in Korman blue, the color the company uses in its marketing and furnishings.
Eller isn't joking. "I think I'll put a sign on it that says ‘Korman' and drive around with it that way," she said.
COMPANY: Korman Residential Properties Inc.
NO. EMPLOYEES: 205
TYPE OF COMPANY: Owners and operators of multifamily properties in Pennsylvania, New Jersey, Delaware and Florida
FUNDING: As a private company, it funds acquisitions with investments from institutional and high-net-worth individuals
RECENT DEVELOPMENT: Bought three apartment complexes in Delaware
FUTURE PLANS: Stick to buying existing multifamily properties but expand geographically, such as to Nashville and Richmond, while building on its local footprint