There are two keys to effective decision-making — assembling the right team and establishing a vision for that team. Here’s how one investment firm works aligns everyone with company goals.
If I were to search for a term that best describes the structure of MZ Capital Partners, my Northbrook, Illinois-based private equity real estate investment firm, I would probably settle on “oligarchy,” since my son and I are the equity owners and have the ultimate say in whether we deploy our capital or not.
At the same time, I recognize that such a description might not be completely apt, as our team has never had to vote about whether or not to pursue any given deal in the multifamily space. Usually, it’s obvious. Usually, everyone in our organization is in accord, understanding what makes sense for us. No one has ever lobbied for a deal that is outside our wheelhouse.
That speaks to the first two keys to effective decision-making — assembling the right team and establishing a vision for that team. No, you don’t want yes-men, but you do want people who are all pulling in the same direction and have a clear idea of the organization’s objectives.
Communication is obviously critical to achieving that objective. Far from blocking out a set amount of time for daily or weekly meetings, we have reached a point where there is an almost constant dialogue among the people in our company, not to mention the lawyers, architects, and engineers we bring in from the outside to work on any given project. The result is that everyone has an innate feel for each other, as well as what we are looking to accomplish.
In addition, we delegate to managers and regional managers the day-to-day operation of the properties we own not only in Illinois but also Tennessee and Texas. They deal with issues like rent collection and maintenance; Such issues never fall under the purview of those in the corporate office.
Rather, we’re looking at things on a macro level — i.e., finding investment or development opportunities that are logical for us. We operate in a very challenging environment, one that has seen many firms like ours pursuing an almost constant stream of deals.
It’s a high-return business and considered a resilient and safe investment, so we’re constantly discussing strategies to guide the next project and the next deal, and then working on those. Most of them wind up not coming to fruition in various stages, but others do.
So, it comes back to focus and feel — making sure everyone on our team is on the same page, and is looking at things through the same set of eyes. That’s a result, again, of constantly brainstorming new ideas, and discussing different product types.
We have those discussions, usually well in advance of an opportunity — one, perhaps, that finds a piece of land coming our way. We know how that piece of land fits our current strategy and act accordingly.
The bottom line is that we have an intuitive feel for the markets that we’re interested in, and the types of projects that make sense. We know when there’s an opportunity that’s worth pursuing without discussing it very much.
We have to maneuver around dealing with the current owner and seller, the broker, and the municipality for zoning if it’s a new development. We’ve got that pretty well down. It’s more a matter of executing it — getting a property tied up and emerging as the winning bidder and then working through the municipal entitlements to build a project.
Most of our current efforts, for example, are focused on new ground-up development. We find that those at the moment are best for us to pursue, rather than purchasing an existing property.
Our approach also enables us to be agile, as was the case in 2013 when we began to shift out of student housing, where we had operated for some two decades, exclusively to the multifamily space. The transition, which took three years, was necessitated by an increase in the housing supply on the seven campuses where we were based. We were able to monetize our products, which were directly adjacent to those campuses, at very high pricing while investor interest was still high.
That strategy was something I developed and implemented. It really wasn’t discussed as a team. It wasn’t as if there had to be a group decision on every campus. We dealt with each campus and the managers separately, and the issues separately, with each of them.
But again, the vision had long been established. We knew the direction we wanted to go, and what we needed to do to reach our organizational objectives. That will always be the case with our firm. The vision will be clear, and it will be communicated, constantly and clearly, the result being that we will all be of a single accord.
Michael H. Zaransky is the founder and managing principal of MZ Capital Partners. Founded in 2005, MZ Capital Partners, based in Northbrook, Ill., deals in multifamily properties.