Synco Properties CEO Tim Hose went from founding his own real estate company early in his career to working his way up the ladder at the firm he’s been at for 32 years.
In his spare time he, like many in his profession, enjoys playing golf. But he said his passion for travel by far trumps his love for the greens.
Since moving to Mecklenburg County from Ohio more than 40 years ago to attend Davidson College, Hose has been to more than 30 countries, including France, Spain, Switzerland and Thailand, to name a few. His recommended country was South Africa, which he said was best experienced by traveling from the south to the north.
Hose doesn’t have any children, which he said gives him and his wife the freedom to see the world. He added that being CEO doesn’t hurt either.
In the past, Synco Properties owned properties throughout the Southeast, but now is focusing its business primarily on multifamily and solely in the Carolinas, where it owns 4,000 apartment units spread across 23 properties.
Currently, Synco’s focus is on Colony Apartments in SouthPark, which the company hopes to redevelop into a 27-acre mixed-use development that would include 1,100 residential units, a 300-room hotel and 250,000 square feet of office space along Colony Road between Sharon and Roxborough roads.
Hose said Charlotte’s commercial real estate market is finally stable again, but also that the demand for apartments has caused a drastic shift in local real estate firms’ focus.
Read on to find out how Hose helped keep Synco afloat through the Great Recession, and why he values a diverse portfolio of properties.
Q: I read that you majored in German. Has it come in handy during your career?
A: When I got to Davidson there was a language requirement, and I had studied a little French in high school, but wasn’t that fond of my instructor, so I decided to take German at Davidson. My father knew a teeny bit of it from being in World War II, and I decided my freshman year that I wanted to go abroad for a year – and that I was going to go junior year – to Germany. So it was somewhat of a path of least resistance to study German and then go abroad that year. I spent 10½ months (there), and you get pretty fluent in 10½ months if you work at it. But the German – to get to your point … we have done over the years some business with and made good friends (with people) who live in Zurich, Switzerland. And while they speak Swiss-German in Switzerland, they all know High-German, so I was able to use my German language background to help make that connection and bridge the connection. You know, most Swiss know a number of languages, including English, but some of the older people might not, and so we dealt with some older people and a few of them did not know English, so my knowing German made that nice for them.
Q: Are your German-speaking skills still sharp?
A: I’m not that up-to-date, but it comes back quickly. If you got to a point where you’re fluent…if I get back into it I can speak it pretty well. And I stay in touch with a couple of friends via email. And some of those Swiss folks who are investors of ours became friends of ours. One of them is even on our board of directors now.
Q: You were a founding partner at Spectrum Properties, right? What happened?
A: Jim Dulan and I – you know, he’s the chairman at Spectrum now – worked together at Spaulding and Slye Investments, and we were leasing guys. I started there in 1979. Jim had been there before me. They needed a guy and he came to me and said, “I know you want to be in the real estate world, would you like to join us?” So I did. And he and I worked as kind of partners in the leasing group there. Bill McGuire was forming a number of different businesses under his auspices, and he recruited Jim through an executive search firm, and Jim convinced Bill that the two of us should go together to be at Spectrum. I was there for about a year and a quarter or so, and I left there to come here, and have been here ever since.
Q: What made you decide to make the move?
A: We had some differences.
Q: It was as simple as that?
A: Well, it was not my idea to leave.
Q: What made you choose Synco Properties?
A: Synco was growing its office portfolio very rapidly, and they did not have an individual running a commercial leasing function. So it was fortunate that when I left Spectrum I had a job offer here, a job offer with Charter Properties, and a job offer with Paragon Properties, and I selected this one and came on board to run their commercial leasing operation. Shortly thereafter I just took over leasing and management, and then took over acquisitions and financing, and just kind of grew my responsibilities over time until being responsible for everything.
Q: Why did Synco shift its attention more towards multifamily after the Great Recession?
A: There are a couple of reasons for it, and they’re not directly related. First off, as an investment we like apartments because no one decision can hurt you. If you have 200 apartment units and one person moves out, big deal. That’s one-half of 1 percent. On the other hand, if you have an industrial building or an office building – which we used to own a bunch of office buildings, and that’s kind of where I cut my teeth was in the office building business. If you have…say a 100,000-square-foot office building, and you have a tenant that’s 30,000 square feet and that tenant moves you have a huge problem. You have to spend a lot of capital to up-fit the space. You have to spend a lot of money on leasing commissions to find the tenant and put them in place. You have no idea how long it’s going to be vacant and generating no revenue. So the predictability of the capital needs of an office building is much more uncertain than we think the unpredictability of an apartment investment is. And our apartment occupancies might fluctuate from a low of 85 percent and a high of 100 percent, and office occupancy can fluctuate to a low of – if it’s a single-tenant building – zero. But even if it’s a multitenant building it can drop down to 60 percent, 50 percent. And you’re really in a pickle in terms of capital needed. Office, industrial, even retail has that kind of characteristic, and apartments don’t have it. There’s no collectivization among residents like there is in ownership housing. We spent a little time developing for-sale attached housing, and those owners get together, and they’re frequently in a homeowners association meeting frustrated with something the developer did. In the apartment business there’s not that collectivization. Apartment residents are…they don’t know each other necessarily that well. You know, we’re leasing to 200 individual households – let’s say in a 200-unit property – (which is) more predictable in terms of occupancy, more predictable in terms of revenue as a result, more predictable in terms of the capital requirements for improvements, that kind of thing. So on a risk-reward basis – kind of the so-called risk-adjusted return basis – we preferred apartments. And then that led to us to saying, “OK, what are we good at doing in terms of property management and operations?” And we had a good strong track record in apartments since 1971, and felt like we could continue that, so we were playing to our strengths by focusing on multifamily for rent.
Q: Was there a lot of competition in the multifamily market coming out of the Great Recession?
A: Yeah. I think a lot more people saw some of what I just said about apartments. People that didn’t do apartments before started doing apartments. You know, a lot of the big players around town didn’t do multifamily (before); they started doing it. I mean, Childress Klein brought on a partner to do apartments. A lot of commercial-only firms started to do apartments when they saw there was a lot of opportunity in apartments. So yeah, there were a lot more people developing apartments, a lot more people acquiring apartments, because people felt like apartments were where the opportunities were – definitely a changed market place for that.
Q: Why did Synco decide to focus on less-luxurious apartments as opposed to high-end apartments?
A: That’s a very good question. We have a little phrase around here – that’s not anything genius – that says, “We will do an apartment investment that makes sense.” So you see in our portfolio older properties that rent for $550 to $700 a month, or $750 a month – depending on unit type – and newer properties that rent for more than that. If we are fortunate enough to obtain a rezoning and redevelop the Colony(site), those units will probably rent for $1,500 a month to $2,800 a month in first phase, and much higher than that in subsequent phases. You know, if you look at the population of America – so to speak – there are different income strata, many of which need to rent housing. And so there’s a strong market for people between $550 and $750, and there’s a very strong market for people between $1,500 and $3,500. So there are success stories across all age ranges and price ranges in the apartment world right now. And a household whose annual income is $30,000 … theoretically they can’t afford more than a $1,000 a month in rent, and really they can be even a little bit lower than that. There are households who have incomes of $20,000; they have to have a place to live. So there is a market for that $550 apartment. And one of the challenges in the world – as you know – is to provide housing for the folks who don’t have high incomes. But we have properties that appeal to lower-middle income, middle income, upper-middle income, upper income renters, and we’ll probably continue to have a diverse portfolio like that.
Q: What are the odds of more less-luxurious apartments being developed?
A: There’s certainly a lot of demand for that rent rate range, because if you study the income levels of the population in the United States there’s a lot of people that fall in the range that that’s all they can afford. The challenge is you can’t build a new apartment community and rent it for those rent rates. So you have to buy an existing community, perhaps rehabilitate it some, but you can’t build a new apartment property unless it’s some affordable-housing subsidy from the federal government or the state government or a combination of the two. You can’t do it. It’s just too expensive. You can’t build the units cheaply enough to rent for that rent rate. So it’s, in essence, impossible to build new apartments that will rent for $500 a month or $600 a month or $700 a month. You just can’t do it.
Q: What are the most common things you restore when you buy existing properties?
A: It kind of breaks down between interior and exterior, if you know what I mean. Frequently a roof will need work. We frequently put new windows in – that’s surprisingly affordable to do. And it’s shockingly affordable to do new windows, and makes a big difference. But roofs are frequent; windows are frequent; doors are frequent. If there are structural defects, like balconies or stairs or something like that, it gets frequently done. Landscaping enhancement can work a lot of advantage for curb appeal. And then amenities – if it doesn’t have a certain amenity, or let’s say it has an old swimming pool that likely needs to be completely redone – new equipment, new surfaces on the deck, new pool itself. It just depends on the condition of everything, but you have to just look at your location, your likely – what we call – resident profile, meaning who the renters are going to be. Sometimes we’ll add a nicely renovated or a new fitness center if there isn’t one, and what we call a coffee café, or a cyber café, where you can go sit down and get a free cup of coffee in the morning and relax, check your iPhone, check your iPad, prepare for your workday. Maybe you work nights, and you can go over there and just relax during the day. So it’s a litany of things, depending on what we see when we buy an asset. We’re looking at buying one in Wilmington right now, for example; it’s not very old at all. But the existing clubhouse needs work, the fitness center needs work, the pool and pool deck need work. We’re going to create an outdoor grilling and dining area; that needs to be done. So it just depends on what we inherit when we buy it. And on the unit interiors: floor covering, light fixtures frequently, plumbing fixtures frequently, counter-tops and kitchens and bathrooms, appliances. Those things frequently get redone to update the units.
Q: Where do you draw the line – in terms of age – for buying old properties?
A: It kind of breaks down in the business to – in my view – anything older than 1980 construction might mean there’s asbestos-containing materials in it. It could mean there’s lead-based paint in it. You know, issues like that. It could create some potential environmental risks. Generally speaking, if it’s 1980 or newer those things wouldn’t be possible. And so if you get older than 1980, we – as a company – tend to struggle to get comfortable. Some people at good firms around town – I think Scott Wilkerson and Phil Payne at Ginkgo are buying some assets that are 1970s vintage and are doing a fabulous job renovating them. But we tend to do early 1980s or newer. Older than that you bring in some issues that we just don’t want to deal with.
Q: Is there anything you miss about working with office space?
A: Yeah. I still work with it, just a teeny little bit, and I always loved negotiating leases and there was always a thrill to make a transaction, even if it was a small transaction, if it was one that was difficult to make. That was a lot of fun for me. I’m a salesman at heart, and I really loved putting a landlord and a tenant together and having them both end up saying, “Man, that’s a great transaction, and I love it.” I miss doing that some, but you can’t do everything every day; you have to kind of focus on what’s the most immediate, pressing and opportunistic situation. That’s what we do. But I kind of get the same psychic income – if you will – when we’re selling something. If we put a property on the market and get it sold at a price that makes sense for us and our investing partners, or if we’re buying something, you know, getting in the hunt to negotiate to buy an asset, get it financed, negotiate the debt on it, and get it closed. So what I used to do in the office world I now do in the apartment world, and the big trades are the purchases and sales and financings. And now we’re starting to do some ground-up development, and that has a huge psychic income because you have so much of a role to play. Can you get the site entitled? Can you get the project designed right? Can you get it built at your targeted cost level? Can you get it leased up consistent with your projections? So I don’t come to work and say, “I really miss something.” But I did enjoy – and still do, the little bit I’m involved in it – the commercial transactions.