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Operating Procedures and Administration

Managing over-priced and over-leveraged properties required them to implement operating procedures and disciplines that would maximize cash flow. Jim and Steve focused on maximizing curb appeal, leasing apartments, and rent collection with a zero tolerance for delinquency. It was common for them to file 30 landlord/tenant eviction actions each month, which was quite substantial considering the number of apartments the Company owned. They had always stayed steadfast to their underwriting criteria and collection practices in order to prevent delinquency, and more importantly, maintain an apartment community that would be safe and comfortable for all residents. Their ideals were the foundations of BRC’s current Fundamentals, which guide all of the decisions made today.

In an effort to increase cash flow as rapidly as possible, all efforts were directed towards revenue related activities. Steve’s responsibilities were initially focused on the administration and the accounting side of the company while Jim’s focus was on leasing and collections. There was no need to focus on capital expenditures as there were none planned.

Day to day maintenance was more or less delegated to on-site personnel. The mentality was that it took far more effort to reduce a repair cost than to rent an apartment. They defined the company as a revenue-focused company which directed maximum efforts to generate revenue.

2008-2013 Company Expansion

In 2008, the corporate office was moved from Norris Hills to a commercial office building in Wayne, Pa. From 2008-2013, the Company expanded in Pa with acquisitions of The Commons at Mansfield in Mansfield, The Lofts, and The Residences at Ribbon Place in York, Highland Manor and 25 North Apartments in Pottstown, Walton Heights Apartments in Altoona, Norris Hills East in Norristown, Lakeview Apartments Williamsport, and Forest Manor Apartments in West Chester. These properties were purchased with substantially more cash than required in the past as the multi-family market had become highly competitive. From a cash flow standpoint, they shifted their focus to building significant capital improvement reserves to ensure that the capital needs of the communities would be met for the long term so that the assets would remain profitable and stable.

The Passing of Jim Berger and the Future of the Company

Sadly, in January 2001, Jim Berger passed away at the age of 55. This was a difficult time as Jim and Steve had worked so closely for many years, and Jim was very close to many of the Company’s employees. Steve was faced with a very difficult decision to either continue on with the business or sell the real estate. Fortunately, he decided to continue the business. In 2005, Steve’s son Dan Berger, 26, joined the Company. Dan had his JD and MBA degrees from Temple University in Philadelphia, Pa, and was at the point in his life that his focus shifted from practicing law towards a career in Real Estate. At the same time Steve’s daughter Cindy Nissen, 23, was wrapping up her Apartment Mystery Shopping business and wanted to focus on property management rather than the evaluation of property management personnel.

The focus of the Company’s efforts turned to maximize rental income, as well as cost control and marketing. As the locations of the properties now spanned over a hundred miles, the Company embarked on a management style that fostered delegation of responsibilities and authority. In 2006, they purchased Vairo Village Apartments in State College, Pa. This 410 apartment home community had significant operational challenges and required a much time and capital investment. Within one year though, the property that was previously sinking in losses became another profitable venture because of BRC’s style of management, and their willingness to adopt more sophisticated operating process. Until this time, with a few exceptions, the company’s offices were always situated in close proximity to the apartment communities, so that they could provide hands-on management.

All Property Managers previously reported directly to the corporate offices; however, with the planned growth of the company in terms of the number of apartments, properties, and the expansion of the operating territory, this became very challenging. They did not want to jeopardize the hands-on approach that proved so successful in the past. In addition, this structure made it difficult to grow as they had limited bandwidth. Shortly after the purchase of Vairo Village, BRC determined it was time to restructure the organization in order to allow for additional growth and to bring a new level of expertise to the organization. They moved to a regional structure by dividing the portfolio into three regions (West Chester, Montgomery/Lancaster County, and State College). This new structure would provide more bandwidth for growth, and allow additional training and expertise to our communities.

The Success of the 1980s

By 1980, several local banks and syndicators had witnessed the company’s success in challenging markets and offered the BRC the opportunity to purchase apartment communities that were in default or on the verge of default. These properties were located in suburban Philadelphia and offered a much greater upside than they had experienced in previous ventures. Despite being in better locations, many of the problems these properties faced were similar to that witnessed in prior acquisitions. As such, the same basic operating procedures continued to be used in order to achieve success.

By 1986 they purchased Highland Manor Apartments in Kenilworth, Pa; Goshen Manor, Goshen Terrace, and Audubon Manor Apartments in West Chester, Pa; Douglas Court in Stowe, Pa; Royersford Gardens in Royersford, Pa; and Perkiomen Place Apartments in Pennsburg, Pa.

They had also sold all properties located in the City of Philadelphia. After having acquired Goshen Terrace, which was now the largest property they owned, Steve and Jim realized that their personal efforts would be best utilized if they were to work out of the Goshen Terrace offices.

It also provided them with the opportunity to empower the corporate office team, which now comprised of five employees, to take on more responsibility. In 1989, they had the capital to purchase Toftrees Apartments, in State College, Pa. Toftrees, at 541 apartments, was the largest property they owned and represented the first significant cash investment the company had ever made. In addition, this was the first property outside the Greater Philadelphia area, and the first property acquisition that was already stabilized with few deferred maintenance or occupancy issues at the time of acquisition.

As such, they thought it was best to let almost all operations continue to be based out of State College. BRC still has a few team members with them today that worked at Toftrees when they purchased the community! Since acquiring Toftrees was so significant, the company slowed down its real estate acquisitions for the next several years. The next acquisition was in 1996 at which time they acquired Miller’s Crossing Apartments in Millersville, Pa. This acquisition was similar to those from the earlier years, in that it was a distressed asset, and was purchased with a substantial amount of debt.

The Early Years

In the early years, the apartment communities were in less than desirable neighborhoods. As such, a freshly painted and immaculately cleaned apartment was very marketable. Despite the efforts to provide well-maintained apartments to a community in need of quality housing, the housing activists of the 1970’s targeted BRC, and its competitors. This group coached tenants on techniques to avoid paying rent and tried, on several occasions, to organize rent strikes to paralyze the Company’s operations. Steve and Jim knew they offered a first class product and faced this group head on. Eventually, they prevailed; however, through this struggle, they realized that they had to start moving the operations into better locations and neighborhoods, where such issues were not as prevalent.

The challenge was finding the financial resources to acquire properties in more desirable neighborhoods. In 1975, they were struggling to make mortgage payments to an out of town financier and were told to deliver the mortgage payments in person to an office located in Norris Hills Apartments, one the of the financier’s properties in Norristown, Pa.

The financier recognized their diligence in making every effort to stay current in the mortgage obligations and appreciated how they dealt with the financial challenges of the property. Because of Steve and Jim’s diligence and sincere effort, the financier agreed to sell Norris Hills to them, financing the purchase with a negligible down payment. Norris Hills was burdened with deferred maintenance and occupancy issues at the time of acquisition.

He was the most distressed asset in the Company’s portfolio, but this didn’t stop Jim and Steve from successfully turning it around. By 1980 the company owned and managed slightly over 1,000 apartments in the Philadelphia suburbs. After reflecting on the company’s dealings over the past several years, Steve and Jim saw that if they had better knowledge and expertise to properly analyze and underwrite acquisitions, they would not have purchased some of their existing assets. They often struggled. However, learning from working out the obstacles of turning around a distressed property, they became better and better at managing them with efficiency, and integrity.