Operational Alpha in Multifamily: How Vertical Integration Drives Real Performance - Steven DeFrancis - Founder & CEO of Cortland

Prior to this point, people had lived in multifamily rental as a means to an end. So they were there for for a transitional period until they could move into a home, or they just couldn't afford to buy a home. In either case, It was really a commodity product and treated like a commodity purchase.

And so it was real no really no compelling reason to try to be really good at it because you really couldn't get rewarded economically for being good at it. Anyway, we felt that we were that was likely to shift. you know, due to a number of demographic trends going on in the country and just the, you know, Gen Y, Gen Z, the millennials just having a very different position towards owning a home in the suburbs with a picket fence.

They're much more urban you know, they're urbanizing much faster, they're delaying marriage, they're having kids later. You know, there're a number of things that would just lead to them wanting to rent longer or permanently. Welcome back to the distribution by Juniper Square, where I sit down with leaders across private markets. I'm your host, Brandon Sedloff.

Today's episode is with Steven DeFrancis, founder and CEO of Cortland, a vertically integrated multifamily investment manager with more than 75,000 units across 25 markets and approximately 20 billion in gross asset value. In our conversation, Steven walks through the evolution of Cortland from a small merchant builder developer to a scaled, operationally intensive investment manager, and why that pivot fundamentally changed the trajectory of the firm.

We discuss why he believes multifamily has shifted from a commodity product to a true consumer service business, how brand and trust directly translate into pricing power and retention, and why operational depth, not just capital allocation, is what ultimately drives performance across cycles. We spend time on the current investment environment, and Steven shares how supply, capital markets pressure, and owner fatigue are creating opportunities in 2026 and beyond.

Finally, we dig into technology and AI, not as buzzwords, but as embedded operational tools that are reshaping everything from leasing to screening to communication workflows. If you care about operational alpha, platform building, or where multifamily goes from here, this episode is definitely worth your time. Let's get into it. Steven, welcome to the show. Thank you, Brandon. Great to be here. As you know, I like to start all my conversations with a brief introduction. So for our listeners who

don't know you or your organization. Can you just take a moment to to introduce yourself and to introduce Cortland? Sure. I I'm Steven DeFrancis, the CEO and founder of Cortland. We are a multifamily investment manager focused on Development and acquisition and operations of multifamily assets across the country. We were founded in 2005.

Excellent. Well, we're gonna spend some time talking a little bit more about kind of the journey of Curt Cortland and, you know, your outlook on the multifamily market. But Before I do, I think, you know, your your story is an interesting one. And I always like to start by going way back with my guests. And so, you know, talk to me a little bit about, you know, your journey into the real estate.

business, you know, whether that's apartments or more broadly, did you grow up in a real estate family? Like how did this all get started? Sure. For starters, I was born in Atlanta, where I live today. I grew up one of five, I was the middle of five kids.

So there was a lot of action in our house as a kid. My parents actually grew up in the uh New York and moved here, you know, in the sixties before I was born. And You know like a lot of families in New York back in those days, a lot of uh, you know, second and third generation immigrants. A lot of those families were in

did whatever they did for their day job but also were in real estate on the side. And my family was no different. When I was growing up, my dad always had was always invested in some way in small properties, residential duplexes, a small commercial thing here or there. As were m most of the other m members of my family, whether they were in New York or in Atlanta, wherever they ended up, you know, it felt like everybody was sidelined in real estate to some degree.

So as I was growing up it was always a a thing that, you know we were very well very aware of. It was not institutional by any means, but just the idea of owning real estate and renting it out and whatnot was something that was always a part of our lives growing up. My father, round the time I was in middle school, he was an accountant by trade. He left his job and went to be in real estate full time.

Again, I was one of five kids, so I think it was great for him to be able to get some more uh freedom and time to deal with the madness of all of us while he was working. But he really enjoyed it and so he was in real estate and as a result it was something that I you know, was pretty familiar with as I was growing up. when you are sitting around the dinner table, if you all fit around a dinner table, but the proverbial dinner table

What did you think you were going to do? Was it a foregone conclusion that you were gonna follow in your father and family members' footsteps and get into the business? Or did you have other, you know, hopes, dreams, aspirations? Yeah. I had a another hope or dream. So Atlanta was a big office development city, especially back in the eighties. You may remember the book A Man in Full that Tom Wolfe wrote, which was about a c you know, sort of an amalgamation of all the big

office personalities in Atlanta in the seventies and eighties. And Atlanta was a town that shot way over its weight in property development, especially uh office and commercial. But anyway, growing up here I thought it was a really cool thing to do. I I always, you know, gravitated towards being in real estate. Ironically though, my dad owned, you know, a whole collection of rental homes and small properties and duplexes and

me and my brother and, you know, we would go down to work on these houses with you know, on the weekends or whatnot and we hated it. Hated doing it, hated going and doing it. It was like You know, we just hated doing it and so as we would sit around the dinner table, we would complain about having to do it. And certainly we would we when we would proclaim that we were that was we were something we were never gonna do as adults would be get into the real estate business the way my dad was.

Anyway, famous last words, thank God I went into residential real estate and didn't go into trying to be an office developer. So you grow up, you did you leave Atlanta? Where do you you know, did you go off to kind of traditional academics, you know, four year college, et cetera, or did you have a different journey?

Yeah, so I graduated high school in eighty nine, went to I went to the University of Georgia, so I went to Athens, didn't go very far from Atlanta. So I went to you know, went to Athens, went to college. And then while I was there, I started buying some rental properties here in Atlanta, but while I was in college.

They were really low quality, really low budget properties, all single family, one duplex and some single family stuff. In those days you could do that without any money and so it was a lot of uh you know, it was

soon after the eighty six tax change, in the midst of the real estate recession of the early nineties, you know, so most of the people who owned these properties were looking to get rid of them. And so I started buying, you know, small properties stuff while I was in college and that's kinda long you know, what kicked off my real estate career, if you will. you proclaimed, you know, uh what, uh uh five, seven, eight years earlier that you would never do this. So was it uh

Was it a necessity or an opportunity? Like what what what changed from, you know, the the the you know fifth grade version of yourself to the, you know, nineteen, twenty year old version of yourself? G yeah, it's a good question.

So first of all, while I was doing it in college, I never thought that I would do it af after college. Like it was just something to do because I could create some income and some money and I needed some spending money while I was at school and it was a good way to You know, back then you could buy these properties with almost no money down.

by just assuming the loans. Some of'em were fanny loans where you could just they were non escalating, non qualifying mortgages that as a eighteen year old knucklehead in college you could still qualify. most of the values of these properties had gone way, way down from where they were a few years earlier prior to the recession. So in most cases the loans were, you know, the the trick was to find one where the loan was not more than the value.

and then just assume the loan or or, you know, pay a little bit and assume the loan. In most cases the owners were just trying to get away from'em. And then I would, you know, get some buddies from Athens and we'd drive to Atlanta and paint'em or fix'em up, which, you know, they weren't very fixed when we were done'cause we had no idea what we were doing, but

You know, we'd clean'em up and then, you know, we'd rent or I'd put a rent for rent sign and rent'em and, you know, try to make a few dollars over the mortgage. But that was the beginning. Yeah. All right. Well I I I I like the beginning. So you graduate from school. What did you what comes next?

Yeah, so I still th wanted to go get a real job and work, you know, in the commercial, you know, in the office world. So I graduated from school, I moved to Atlanta, I started, you know, interviewing around And pretty s you know, it was r a really bad time to get a job in real estate because of the recession at the time. So w I was really just working, you know, on the houses that I had bought and doing some, you know, looking around for more and, you know, while I was looking for my real job.

And then not long after I got home from Athens, my father became ill with ALS. So I kind of put my job or my job search, if you will, on hold and, you know, focused on helping my family kind of get my dad's real estate holdings organized. Some renovated, some sold, you know, but to get all the various things that he was involved with organized in such a way

that my family, you know, di you know, could operate it without any real, you know, too much effort. I still had two little sisters at home and hi and one in middle school, one in high school, so, you know, they were still you know, my family was still in that phase where y you know, they needed some help to put it all together. So anyway I did that for a while.

And that was a couple two or three years. Um, actually it was probably two years, because he passed away a lot more quickly than we had anticipated that were expected. But then he passed and, you know, at that point I just decided, you know, I I gave up looking for a real job. And as I said, I've been continuing to, you know, work on the properties that I had bought. I had started doing some property management for some other folks who owned in town in Atlanta.

just to create some income for myself while I was doing this. And so not long after uh you know, around probably ninety six Ninety seven ish. one of my clients in my property management, my one man property management business. He and I had gotten to be friendly. His name was Robin Delmer and we had gotten to be good friends and so we decided to just throw all of our assets in together and start a company. I was getting to the point where I needed to hire some staff.

and I'd never had a job before. He was about ten years older than I am and so he'd had a real job so it made sense to partner up and have somebody who had some idea about how to you know, run an office involved. And anyway, so we started this little business and our you know, at the time we were again buying

small properties around into uptown Atlanta, renovating them, renting them, some selling them. And that's what we were focused on. And then we transitioned from that really after the Olympics came to Atlanta in ninety-six, that created a a big tailwind into a lot of these in town neighborhoods that had been a little bit forgotten before that. And so a lot of the properties that we had bought, you know, prior to that and and soon after, we then sold into that, you know, growth cycle.

And then we, you know, pivoted into doing affordable housing development, so section 42 development. using tax credits and tax exit bonds and C D B G funds and home for all these various programs, we pivoted from what we had been doing previously into, you know, developing multifamily through the affordable housing program. And what year kind of so you mentioned post ninety six, kind of w what what year what year was this? When I was kind of

So he and I did that from, you know, probably ninety-seven, ninety-eight until two thousand four. And in two thousand four, he and I decided to separate, largely because You know, there's a lot of doing section forty two development is a lot of It takes a long time for each project. So, you know, you're incubating a project for a while to get it approved and get it funded and whatnot, and then you're building it, then you're leasing it.

And then you have fifteen years of ownership thereafter. So uh you know, each project is twenty plus year life cycle. So we did that for probably six, seven years. Had a good run, but then he decided, you know, as I mentioned earlier, he was about ten years older than I was that he was ready to pivot into something else that didn't have quite as much term risk associated with So he and I kept our assets in a holding company and then I took over the operating business at the end of 04. And as

the first of oh five rebranded that company, which was called Capital Development Group. We I rebranded that into Cortland 1105. So that makes this our twentieth oh no, last year was our twentieth anniversary. Yeah, twenty f just kicking off the twenty first year. Amaz amazing. So when you were going, you know, post college when you kinda got into this in a as a job, if you will, or or a way to make money, maybe it wasn't quite a job yet.

was there any point in time, you know, w when did you know that this was it? Right. I mean, you mentioned you went back to Atlanta to try to find an office job, but when did you kind of flip from There's other aspirations to no, this is the thing that I'm just gonna be focused on for the you know, for the foreseeable future.

Well, as I got more and more into it, you know, I found that I enjoyed more and more parts of it and I enjoyed it like, you know, when I first started and I was buying homes and small buildings and, you know, whatnot and renovating them. I enjoyed that and, you know, it worked well and I, you know, enjoyed that part of it. Ironically, you know, until coming out of the GFC, we always had a very small firm because we used third party contractors and managers to do most of the stuff.

once we got into full scale multifamily. And so, you know, even post oh five when we were at, you know, I when I started Cortland, we pivoted from doing affordable housing into you know, just traditional merchant build market rate development. And even at that point, so from O five to oh nine, we were a very small business, you know, we probably peaked prior to the GFC at twenty ish people and then, you know, by two thousand nine we were, you know, down to eight or nine folks.

So one thing I, you know, had not experienced prior to, you know, our pivot coming out of the GFC was the was running a business and leading a a lot of people. So in the beginning I really enjoyed the real est you know, the development piece of the the business and, you know, the operations side. I've always had a a real bias for the operational side of the business. I think you just sort of get trained to think that way when you're doing s affordable housing because you're

building product for a clientele that's often families with children and whatnot. And so it's an intense use. And you're owning that property for, you know, Place and service date plus fifteen years. at least. And so, you know, you it you start to get a a feel and a mindset that's very much focused on long term ownership, long term preservation.

you know, the long term physical health and operational health of an asset, which is very different than the merchant build mindset, which is, you know, build it, fill it, sell it. So then, you know, I really enjoyed all of those parts of the business. And then after we pivoted the business coming out of the GFC and became much more of an operating business with lots and lots of people, you know, I Came to really enjoy that part of the business as well.

So, you know, your question is when was the like there was no point in time where there was like, oh, a light bulb went off or like this is my thing. I just started down a road. I knew I wanted to be in real estate really in college and coming out of college. There was no question about that. It was just as I got more and more into, you know, the residential part of the business.

in the operating side of the business, you know, and I I say that because, you know You're not in it, it's easy to confuse, you know, real estate development building buildings with operating a business and operating a an operating business, which are very t you know, two fairly distinct things. And I just found the more I got into the the whole ecosystem I enjoyed, you know, more and more parts of it, both development and the architecture and the design.

you know, and the the use case analysis, but then also the operating part and the human capital, you know, the the leadership part of the business. You know, we're all things that just you know, parts of it I enjoyed. So just to help our listeners frame up, so one one two zero zero five Cortland as we know it today got its official start. Over the last twenty ish years, multifamily has emerged as, you know, one of the most, if not the most attractive of the institutional sectors.

But if I'm putting on my thinking cap and going into the Wayback Machine in two thousand and five, I don't think that was the case, or at least you know, not the way that it's been over the last fifteen, twenty years. So maybe kind of t take us through kind of what was Residential real estate, what would you know, what did operations mean then? Kind of what was the state of the market?

when you started Cortland and sounds like you started it in Atlanta. Most of your projects were there. But maybe like take us through a little bit of the evolution of Cortland story. We started Cortland in oh five. You know, at some degree we were probably lucky that my partner and I had split up in O four and restarted in oh five because it probably kept us out of a lot of trouble. We would have been in in oh seven had it

Had we not had that restart? But so from 05, 6, 7, you know, we started a handful of projects. Last one we started in oh October of 07. Then, you know, as the market was starting to get soft and then led to 08, where the market really imploded, and 09, you know, we spent you know, f after oh seven until beginning of ten, we didn't do any other business like many other folks in our space. In two thousand nine though, you know, the

we spent a fair amount of time working on some research to try to determine where we thought the market was going coming out of the GFC. You know, and so think of it at the time, you know, everybody's talking double dip and it's, you know, you know, very, you know, dour news cycle and, you know, bad times in the economy. And so we decided to do this research and figure out, you know, where did we think the market was gonna go and the ri the multifamily market. And the takeaway from that was that

the very real near term, you know, negativity in the market. If you just focused on the data, there was some really encouraging and exciting there was likely to be some very be a a lot of growth in multifamily. And that was exciting and encouraging for us as a business trying to figure out what to do next. So without going through all the gory details, kind of the takeaway of all that research was

We felt that A, we needed to not be solely a development business. That was probably a pretty risky endeavor that we were lucky to be surviving and should never be back there again. But B was a realization that we were at the what seemed to be, and again there was no absolutes at this point, but the data was pretty clear that as you late oh nine was becoming ten, there was a bad economy, but a massive shortfall of supply. at that time, but then also a coming huge increase in demand.

So we were already under supplied and we had what was forecast to be a massive increase in demand. So obviously that was exciting. The other thing that we learned and all of that was a or another takeaway was that You know, that we we felt strongly it was the beginning of what was going to be an evolution or a transition in the space.

from multifamily being purely a commodity product where people moved until they, you know, for transitional reasons or afford a lack of affordability reasons, either they couldn't afford to buy a house or they were new to a town for some reason. Newly graduated, newly moved, you pick a thing. But by and large, prior to this point, people had lived in multifamily rental.

means to an end. So they were there for for a transitional period until they could move into a home, or they just couldn't afford to buy a home. In either case, it was really a commodity product and treated like a commodity purchase. And so there was real no really no compelling reason to try to be really good at it because you really couldn't get rewarded economically for being good at it. Anyway, we felt that we were that was likely to shift.

you know, due to a number of demographic trends going on in the country and just the, you know, Gen Y, Gen Z, the millennials just having a very different position towards owning a home in the suburbs with a picket fence. They're much more urban you know, they're urbanizing much faster. They're delaying marriage, they're having kids later. You know, there's a number of things that would just lead to them wanting to rent.

longer or permanently, and we felt that that was gonna cause a a really meaningful transition in the way the market behaved. So fast forward we decided to pivot from what was previously a small merchant build development business into a vertically integrated business where we were, you know, focused on insourcing all customer touch points. So the idea operationally was every time, you know, that every part of the business where you engage with a customer, a a r a resident in our case.

we wanted that to be done by a Cortland employee. And so that was operations, but it was a really a much broader suite of of services in the operations. And then also

you know, construction and, you know, other parts of the business that, you know, you would see in a vertically integrated platform. And so we set about, you know, really we launched coming out of twenty oh the the beginning of two thousand ten With that focus was to really pivot and rebuild the business into a, you know, large operational, vertically integrated business and investment manager versus what we had been before.

I was gonna ask you when you made the transition to investment management, but it sounds like it was two thousand ten. So well I I can answer that because what we did was we made a conscious decision to build all of the infrastructure For the other parts of the business? before we've transitioned into asset man investment management. So we raised our first LP funds. We really started raising GP funds.

in twenty twelve, but really our first traditional LP fund we raised in twenty eighteen. And we purposefully waited to go down that road and raise LP capital until we had devel built the entire suite of infrastructure needed to support that business. and proved through, you know, 300 some odd investments that we were deserving of the, you know, investors, you know, entrusting us with their capital.

You've been in this business for a long time now and what I'm kind of hearing there's a theme which is really around and I think it goes all the way back to your earliest days in interest in in in this sec sector and segment and industry, which is around operations. And, you know, it it it feels like you intentionally built

A really strong operational capability. And you just mentioned you did that before you transitioned to investment or asset management. What why was that so important for you? Because that's in contrast to firms that

you know, maybe are more allocator models where they raise money, they have a thesis on a sector, and they try to find the operator and, you know, kind of let somebody else handles the opera handle the operations. But for you, sounds like your core DNA is to be you know, in the mix on the operations, control the operations, and bring capital to it, not as a not as an afterthought. Right. There's a couple of things that drove that thinking. First of which is if you buy off on this idea that the

the resident is transitioning from the or the the business is transitioning from what it was previously. And why I say previously, I mean kind of the sixties, which was the beginning of traditional multifamily in the US until the GFC, you know, you really couldn't get paid for being there was no financial incentive to be better. or to you know, to be better than your peer set operationally because of the commodity nature of the business.

as we felt like that was transitioning, we felt that if we built a business that was better at the business we were executing, better at choosing, you know, understanding who our customer is, better at choosing locations where those customers want to be, better at determining what the product is that they want, better at executing it. Faster, cheaper. better quality and then better at operating it, you know, and, you know, having a you know, a best in class.

reputation with your customers that that would lead to outperformance for our investors. And so what we want to do before we were raising capital, which was, you know, that would be, you know, before we wanted to before we wanted to ask investors to entrust us with their capital, we wanted to prove

that we knew were very good at what we were doing, we knew what we were doing and that we we what we were doing was repeatable. And so You know for In the beginning, we were partnering with many different allocators, you know, all household names as you would know, you know, kind of from 2010 until 2018 when we started raising our own capital, our own LP funds.

You know, we were partnering with all the big names in the industry, or you know, all of whom you'd be familiar with, and investing at a project level or portfolio level.

So let's I want to come back to some of the operational elements and also this transition to L you know, from GP funds or deal by deal to to LP funds with institutional capital. But before I do, it might be helpful just to orient our listeners on kind of Courtland today. So, you know.

stats, figures, how do you describe the business in terms of the breadth, the depth, you know, any any kind of numbers that you wanna share that might help people understand the size? Cause I believe, you know, for the last You can tell me many years you've been among the top in the NMHC, top lists across the board from investment management to development, uh to operators and everything in between. So kinda where are we today? Yeah, so today we have

a little over seventy five thousand units in our portfolio. We operate in uh twenty five markets across sixteen states. We are we've got a we manage a portfolio or our own portfolio is About twenty billion dollars of G A V and about 10 billion of NAV. We invest out of two main vehicles. One is our open-ended core fund, Courtland called Courtland Growth and Income, which is an open-ended core and core plus.

fund and we have a series of closed end value add funds of which we are deploying our sixth fund today. And then we have, you know, host of other things which are acquisitions we've done or developments we've done or things that just don't meet the mandate of those two fund offerings. But we we're fairly simple business because we, you know, as I said, we have two main vehicles. One is a Core and Core Plus open-ended vehicle and one is a traditional value add closed-end vehicle.

Well, that's pretty substantial growth, especially, you know, over the timeline. What do you think? You know, when you made the transition to LP funds, you know, traditional funds in twenty eighteen, what do you think investors saw in you? What did, you know, what were you hearing from the market? Obviously you had the track record.

But how how was your story differentiated? And, you know, when you look back to what's led to your success thus far as an institutional investment manager, kind of any kind of key takeaways or lessons that you've learned about the journey that you've been on? Well, to your first question about what investors I think

found uh attractive about Corland. Again when we began to approach, you know, investors directly to raise our first funds, you know, we had built a very strong track record of performance and we had built a very strong platform you know, to uh operationally. So I think

You know, investors know when the world is going well, you know, a rising tide lifts all boats. But if you have a business which is really moving more into a consumer business and less of a commodity, that speaks to An industry where you're able to create more outsize performance and m better returns relative to your peers by being.

just b being better at the at your craft. And so I think You know, there was a respect by the investor community at the platform we had built and the capabilities we had built and the vast you know, capabilities of our platform to be able to take our to m you know, to go forward creating returns. And creating alpha at the same rate at which we had performed previously, you know, to 2018. And, you know, there was obviously a

many, many, many new entrants into multifamily generally between kind of twenty fifteen and twenty twenty two. You know, a lot of refugees out of other parts of the real estate's, you know, ecosystem. And rents were going up. I mean, hey, it was easy. Mm multifamilies easy. You just look at it, you know, everybody could do it. But I think investors really know how to tell the difference and know the difference between, you know, a guy that just left

you know, pick a developer and went out on his own'cause he found a wealthy guy who's gonna back him and he's gonna go buy three deals a year. I think investors, you know, know the difference between that and a real company who's built real infrastructure. And look, when rents are going up eight percent a year, it's hard to tell the difference between those two. In times like now when there's real pressure in the market and and fundamentals are soft.

You know, that's where having a deep bench and capability allows you to really outperform, you know, relative to your peers because you have this deep set of capabilities and and, you know, to go in the market and perform relative to your peers who just don't have the same you know capability set. And I also think that's going to play a lot of or bring a lot of value as we look at the opportunity set going forward in this market.

You know, we've done a handful of acquisitions over the last year that are, you know, I wouldn't say fully distressed, but are sort of impaired. Some are you know, where we've gotten, you know, structural seniority and a capital stack in return for bringing in our operating capability to put a get an asset back on track.

you know, some are very attractive acquisitions because you, you know, are able to bring the operating capability, the construction capacity, you know, all these things that you need to an asset that's been starved for capital or management for a while. I think that will play into you know, th this market will play into the hands of groups of like Cortland and others who are, you know, have this very deep operating capability.

as they begin to invest in twenty twenty six and twenty twenty seven,'cause, you know, we're gonna be at a great vintage.

valuation I mean pricing will be really good. You know, you'll be able to get great pricing relative to replacement costs. But I think you're gonna need, you know, it's gonna be hard to do if you're just sitting in an office in, you know, what um somewhere and you don't really have a team and bench strength or you're just trying to do it through a third party property local property manager or just

You know, having the internal capabilities I think is going to pay a lot of dividends as we find a very interesting investment market over the next couple of years.

So I wanna come back to this idea of the investment market and the opportunities that you see in a second, but I but going back to something that you just said, which is having kind of the operational depth. I if I think back to conversations over the last five to ten years where, you know, the the market was ripping, back to when the market was ripping. there was a debate, should we be vertically integrated and bring kind of end to end operations in house, knowing that that's expensive and

you know, it takes time to build the capabilities, it's harder to scale, or should we just, you know, be the the investor and allocate to operators and and be more passive? Clearly you've always been on the the side of operations in house, but I guess The way I wanna try to understand this is what like what's an example of something that your team would know or see?

because you understand operations, that somebody who's more passive or relying on a kind of arm's length or or kind of non arm's length third party to do the operating for them may miss. Right. Is that well Does that make sense? Yeah, it makes perfect sense. I'll say, you know, it starts with our data. So we have spent probably the last seven or eight years rebuilding our technology infrastructure, both around how do we, you know, make decisions around investments.

you know, how we make decisions around segmenting our consumer, our customers, who are they, where are they, but most importantly across all aspects of the operating part of the business. And Part of that, you know, one of the outputs of that is an enormous amount of operating data. from our own portfolio. And so having very deep insights, because now we own our own data, which historically you didn't do, you know, historically

even for us as a vertically integrated business, our data sat at, you know, either real page or Yardie. And, you know, while you had a single system, your data was sort of hard to get into. By re architecting how, you know we manage our assets from a technology infrastructure standpoint and then, you know, making sure that we control our data.

It's, you know, we have an enormous yeah, that's the first benefit of having, you know, be able to be able to create very real insights very quickly to drive things like when to you know, how to adjust pricing strategies, how to you know i it from an operation standpoint, it's super helpful, you know, from a uh maintenance and whatnot uh standpoint. But it really comes down to insights and data and how you use that to

Try to get ahead of a market that's getting soft by executing a sale. You know, what markets seem interesting to buy in a s a certain point. Most importantly, what markets seem disinteresting to buy in for various operating reasons. But then also and the true nuts and bolts operations of you know, how to, you know, just make your customers happy and therefore get them, you know, to

be willing to pay a little more, stay a little longer, et cetera. And so, you know, what our focus is we try to do is to be a very customer first company and it would create you know, uh a very high opinion, you know, g it gives us brand awareness in the marketplace with our consumers. So first we built a reputation of, you know, with the con our consumers We then branded ourselves around twenty sixteen, twenty seventeen.

which was, you know, a way to attach the reputation we had built to a brand, which then v makes it very easy for, you know, our consumers to find us and to, you know you know, find us when they're leasing or whatnot. And, you know, so we know that because of, you know, the customer reputation we have and the what our brand stands for and the value of that brand that we get

you know, outsized interest when people are shopping for their next apartment or the next apartment home. And we know, you know, that they stay longer. And, you know, we can see in the in the data that it we can get you know, two, three, four points more on revenue on a top line just because of our reputation in the marketplace and the brand's reputation.

Now, if it's a market where we're small and only have a few assets, that's gonna be on the lower end of that. If it's a market like Dallas where we have you know, forty assets, it's gonna be on the higher end of that, but you know, we can trace top line rate, you know, to the brand and the reputation the brand has in a marketplace.

So that's a a lot for your question of how does how does that operating capability create value, but I think it's you know, it leads to trust with the customer and that trust uh and reputation with the customer leads for, you know, creates brand equity and a premium brand, which then attracts new customers and old customers alike to stay with us longer and all that just drives

pricing, you know, top line. And as you know, you don't need to, you know, we're not trying to get a fifteen percent premium from our neighbor, but if we can use that reputation and branding in the marketplace to create a you know a 5% premium on the rate side and a, you know, 15% increase in average stay. And then also use our scale.

and our technology infrastructure to operate just a little more efficiently than our peers, you know, the combination of those things creates a real tailwind to investment performance. It's a topic that comes up a lot, which well, two topics that you mentioned that come up a lot. One is the importance of trust. and client centricity, whether you're an LP looking to evaluate GPs or a you know, GP working with end customers, in this case residences in your properties.

And I think that, you know, just understanding that And being focused on it matters a lot. And the other is this idea of brand. And, you know, as the market you mentioned, there's a lot of folks that have piled into your industry and you know, a a lot of investment managers across private markets are grappling with what is their brand, what is their identity, both, you know, as individual leaders inside of those companies, but also as a company and

I think you've done a, you know, a nice job not only building your brand, but articulating kind of why brand matters to you and it's not just a vanity kind of metric, but it actually impacts the bottom line as well, which which I think is really important. Yeah, I mean it and it you know, in some ways it forces us to be very intentional about everything we're doing. It's easy to ignore

One little thing or to look past a little thing when you don't have a brand, because there's really no accountability. You know, your customers. can't, you know, they may know what's going on at the property they live in, but they don't have any association to other properties in your portfolio.

nor do they know how to make that association. You know, if you're raising capital and from one investor, it doesn't necessarily transmit to another investor. But, you know, once you establish everything under one brand, and are clear with your both your internal organization and your external constituencies what that brand stands for. you then have a lot more accountability because when you make mistakes or you, you know, do things incorrectly,

you know, it gets attached to the brand. So there's risk to it, but I also think it creates an environment where people really rise up because they recognize that the things they're doing are meaningful and and have a big impact on the value and, you know, the value of a brand or what that brand stands for, the market.

So switching gears a little bit, you mentioned kind of the importance of having an operating business, especially right now. And we're recording this in the in the early early months of twenty twenty six and

You know, as you kind of look at the landscape as things have unfolded, you know, w multifamily kind of post GFC had an incredible run. And I think a lot of people know there was a kind of supply-demand imbalance, which

you can tell me, but seems to be burning off a little bit as we look forward. So How do you kinda size up the state of play right now and where do you think kind of the multifamily or the the living markets are gonna be kind of going over the next, call it, you know, twelve to seventy two months?

You know, so there's a number of things that excite us about where the market is and about where the market's going. You know, I would say this isn't a trend, but one thing it's very near term is just as I mentioned earlier You know, after really in twenty two when the m interest rate markets shifted and the cost of capital got considerably more expensive. The market has been under stress. It wasn't too noticeable in 22. It became more noticeable in 23. Frankly, in 20

you know, twenty late twenty two through twenty four, everybody kinda f stay alive to twenty five. And generally the industry felt like the supply would burn off. you know, in twenty four and at each point along the way in twenty two, three and four, if you looked at the forward looking yield curve, it you know, it ter it looked like rates were gonna go down much more quickly than they ended up doing. And so

There was a lot of reason to hold on and hang on. I think what has transpired since then is owners have realized that, you know, we built way more product than we even realized. a couple of years ago that was coming into the marketplace. Frankly, we've had pretty strong demand, you know, in the last few years. So we've frankly been lucky that we haven't had more softness in the markets.

But it feels like a lot of those owners and investors are getting weary and are getting tired of waiting on the market to turn. And so we're hearing from folks every day who are stepping up and calling us about helping them out of a problem deal or buying a note or buying a portfolio or doing so we're starting to get a lot more transaction

uh we're starting to hear a lot of a lot more transaction interest from counterparties who have been holding on waiting for a better environment that just doesn't seem to be coming. So We think we're at a really good time now because we're likely, you know, hopefully development will continue to stay on the sidelines for a while, which I think it will because It's gonna be another year, 18 months before we get really strong fundamentals, you know, operating fundamentals.

So despite the weakness in the operating fundamentals, we think there's gonna be a lot of opportunity to deploy capital over the next couple of years at really attractive at a really attractive basis. A lot of opportunity to buy assets at what, you know, are not great cap rates due to the near-term operating headwinds, but are great values relative to replacement cost. And You know, I don't think that those operating headwinds are gonna just

you know, reverse overnight. But, you know, as we get into twenty seven and start to get some positive growth operationally, you know, those assets will start to look really like really smart. investments when you get into late twenty seven and twenty eight. So in the very near term, I think there's a lot of opportunity on the buy side, which makes us very excited. More broadly, things that are really more trends that excite us.

You know, going back to one of the things I mentioned earlier is We believe strongly that this evolution of the renter going from a commodity or the product be going from a commodity business to really more of a consumer product or really now a consumer service, we think is a a real interesting and very exciting evolution of the business.

you know, the the average income of renters has gone up con considerably. I know there's a big affordability problem in the country, but despite that, we still also have had a huge increase in renters who are making a hundred and fifty, two hundred and fifty thousand dollars. There was a study that I can't recall the name of uh G Generational Kinetics a group did. In 2018, 13% of millennials said that they never planned to own a home. In 2022, that had gone to twenty-five percent of millennials.

uh you know, would had reported that they never planned to buy a home. And so you're just getting a much more pro renter population, even at all income bands. And so as you take a growing level of affordability amongst renters, and you couple that with a growing interest in, you know, a growing consumer interest, that creates an opportunity for those of us who are operators.

you know, to be rewarded for being better at it. So we think that's something exciting. I think that transition is driving a total change in how we operate because we're now going from having to be an investment business that sort of did operations but nobody was really focused on it twenty years ago, to now saying, okay, well, we can really outperform as an investor if we're better at operations.

And we can really be rewarded by being branded, by being good at what we're doing, having a great reputation. Um, and that's led operators that in the regulatory environment have led to operators having to spend a a lot of make a lot of investments into their in technology infrastructure.

investments in AI and technology all up and down the ecosystem. And so, you know, having made all those investments, we now see a a lot of enhancement in the operations from that, but we're also seeing across our industry, because of the need to make those investments, you're seeing a lot of consolidation, both in the

vertically integrated investment managers or previously generalist allocators making investments in or buying vertically integrated investment managers in various property classes, whether it's multifamily or industrial or others. You know, so that consolidation is real both at the investment manager side, but also in the property side. So whether that's

groups like ours who are vertically integrated or property management businesses. I mean, if you look at the list of the top fifty property managers that NMHC puts out, I I haven't seen it yet for this year, but my sense is, you know, if you go back Ten years ago there were very few managers that were, you know, You could probably hit the top fifty if you manage twenty thousand units.

I don't know what Greystar, I can't remember when they made their run, but you know, today they're probably gonna be close to a million units. You've got asset living in Houston, which is now close to half a million units. You've got, you know, number of companies that are

100,000 units and more, and that used to sort of be the top end of the list. So you've seen a lot of consolidation, partially because the business has become more institutional, but also a big driver of that is the need to be If you're better at the operating side of the business, you'll be rewarded with better operations. But to be better, you have to be bigger. You have to be more scaled. You have to be able to invest enormous sums in your technology stack.

and your consumer facing differentiators in a way that you just didn't have to do 20 years ago. Twenty years ago, you could call Yarty or call RealPage, sign up, and you could operate 5,000 units just like you own 55,000 units. And you didn't need to really do anything more than that. And frankly, if you did more than that, you weren't going to get paid for it anyway. So there's no real motivation to do it.

So y you've been on an incredible journey and it sounds like you're gearing up for another kind of great, great kind of cycle ahead, if you will. As you look back on the last twenty one years of building and leading Cortland. And of what surprises you, and that can be positive or negative, the most about kind of what's transpired thus far. You know, I gave up being surprised along around the time of the GFC.

So I'm not sure I would say what has surprised me. You know, the things that is most I think probably the thing that's most intriguing intriguing about today and where we're going is the impact of technology and AI on our business. You know, for many years all of us in the business really didn't think of technology, you know. Yarty and Real Page I think both are.

you know, who were the largest technology businesses in our space, I think if I'm not mistaken, they both started as in accounting technology. So really it was just the ledger we were working on and then all of a sudden they you know it's like, oh they do websites. What's a website? Oh, we need one of those.

You know, so but technology was not a real big part of our industry for a long time, and the As you've seen evolution in the regulatory environment over the last few years driving companies To be more, you know, to not share any of their data and any of their information, as well as this. uh transition to more of a consumer product where if you you know, where you can get rewarded by being better at your business.

And so you're creating there's a d dynamic to drive you to create new technology solutions which aid you in being better. All of those now have some amount of AI in them. Like there's not, you know, there's the idea that, you know We're gonna create an you know, or bring in an AI solution into the platform and that's gonna be our AI solution. It's really, you know, what we've done here is really tried to build a culture around innovation, whether that's technology or AI, and that's most of it.

It's really a culture of innovation and a of you know, making an a environment where people are encouraged to bring new ideas, whether you're in the you know, we have probably twenty people on our data science team, whether you're in that team where it s makes a lot of sense to have innovation, or whether you're a painter and you just realize, hey, if we do things a little bit differently,

Maybe you could help me understand how to do this better. And it's amazing how many great ideas have come from that. In fact, one one of the things we've created is an AI-driven communication system where If you call us, text us, email us, no matter how you get in contact with Cortland. that goes into our CRM system and it tags that number of the text, the uh you know, all the communications. And from that, it records all of our

Connectivity history. Well, that came from me getting phone calls from residents. who were upset about one thing or another and could never get somebody to call them back. So it's just, you know, we have you know, I could go through a whole host of things that we have built to be better at what we're doing using It's really a process automation and technology and there is AI in all of those solutions at varying degrees. Some are very heavy AI and

usage, some are small AI usage, depending on, you know, the the data model that they're dr that's driving them. But

You know, a lot of those ideas come from really niche places across the organization. Again, back to your point earlier about what is the value of having this platform. But the exciting thing is seeing how those ideas become solutions and those solutions become systems in the overall ecosystem that just make us better at what we're doing, whether that's knowing the investment team, knowing where to go, find the next opportunity.

or whether it's, you know, a customer service related thing, you know, making us better at I'll give you one example. We created a centralized team that does all of our applications and screening. Well, by formalizing that into a central team, we now are responding Seventy five percent faster with an answer to our our interested potential resident. That means that unit is taken off is sitting in a state off the market from

a quarter of the time it was previously. But most importantly is our instance of col of uh evictions has gone down by ninety percent. A lot of that is a just clean it it solved all of the fraud problem. You know, so just a number of the little thing automating the system and bringing in an AI driven technology tool.

to have now a single unit of individuals doing this for the whole organization versus one person in each location doing it, and now having the technology to do it better has created a really meaningful impact to the outcome.

I think those examples are incredible and one of the challenges I think a lot of your peers in the industry are facing and quite frankly are much further behind you, very far behind. where you are is just knowing where to get started. So, you know, you've built your moat. You've been doing this for so long. You talked about how twenty years ago you started building the foundation, the infrastructure that, you know, kind of got you to this advantage place that you're in today.

I guess, you know, maybe end on lessons learned or advice, but kind of what would what advice not that you want to help Yeah, I I I believe a rising tide lifts all boats. Maybe you do too. But for others who are listening and, you know, say, Gosh, you know, uh it it's I don't even know how to get started. Like how did Steven

you know, g g instantiate the importance of technology and foundational systems in Cortland. Any any kind of key learnings or advice that you might share with your peers that are listening as they begin on their journey? Well, you know, I would say, you know, one of the things that really helped us was we had been a

developer and owner for many years before we built a vertically integrated business. And so we were utilizing the services of third party property managers and third party, you know, vendors across the board. And so we, like almost everybody who's ever been in that position, were you know, in frustrated with great frequency at the performance of our management partners, once we pivoted to building our own property operations business and vertically integrated platform.

I'm not gonna say we just said, Okay, we're not gonna tolerate doing anything wrong, but what we did was set a culture that was, okay, if there are things that we're doing wrong as Cortland, as an industry, as a property, you name it. Let's not just accept it because that's what everybody else is doing. Let's dig in and, you know, put it on the list and let's start to sort of talk internally and see if there's ways to solve these things. You know.

Some of those were not technical at all. You know, why do we buy used golf carts and then put our customers facing backwards and drive them around over speed bumps at twenty miles an hour? as the first experience they have with us as a potential customer. And some of them are so no technology at all there. It was just like, oh, let's go buy a little, you know, electric vehicle where everybody gets the face forward.

You know, or some are and but a lot of them are super technical and especially today in the world of AI, you know, many solutions. whether it's our pricing model or down to the leasing, you know, situation or the communications module or, you know, number of things that are all very technical. But I'd say be involved in all parts you know, once you're involved in all parts of the business, you things just naturally would flow up as

things w that were peculiar, like why do we do this this way? This just doesn't seem to be the best way to do it. And and then we would just, you know, talk about trying to find ways to solve these things. And for me, you know, I'm not saying everybody should do this, but, you know

My cell phone number is on our website, which means every resident who gets, you know, annoyed enough can figure out how to find me, and a lot of them do. And I try to make a point to respond to every one of those communications. Less about

Wanting well, let me say. I definitely want to make sure every customer's happy. But The most important thing that comes out of those interactions is I learned so much about things we're doing operationally at a given location or a market or whatnot, where when it's being explained back to me how we handled something or somebody.

You know, you just want to like pull your hair out in frustration and be like, Oh, please tell me we didn't do that. But then from that you realize, oh, okay, there's a system thing we could fix here. You know, whether it's a communications challenge or a you know, you you pick what it is. You can think of it, there's a thousand little things that you do operationally that You know, we a lot of those we would have never learned or were going on through the frustration of our residents.

had we not had that feedback loop. But from that, thankfully, is a a a a good feedback loop to get the information and then put some of those issues forth into trying to figure out how to, you know, enhance them, improve them, make them better. Oh, I l I love those examples and I think it's super relevant in today's world going back to what you talked about before with trust and authenticity.

and operations. I talk a lot about operational alpha and it's clear that that's been an area focused for you long before anybody coined the phrase. Unfortunately, Stephen, we're out of time. You and I I always enjoy our conversations and we could go on, I'm sure, for hours, but thank you so much for joining me today. I know our listeners are gonna get a lot of value out of this conversation as I have. So appreciate the uh the conversation and look forward to the next one.

Well great, Brandon. Thank you so much for having me and enjoyed it and look forward to seeing you next time. Thanks for listening to the latest episode of the distribution by Juniper Square. If you liked today's podcast, please share it with a colleague or a friend. And don't forget to subscribe and rate the distribution on Apple Podcasts, Spotify, or wherever you listen to podcasts.

You can connect with me on LinkedIn by going to www.linkedin.com forward slash IN forward slash B saidloft. Or you can find me on Twitter at BSedloff. You can also find a video recording of this conversation on demand at junipersquare dot com forward slash the dash distribution. Until next time.