Nearly 60 Emerging Leaders gathered in Newport Beach on August 3 to hear from industry veteran, Daryl Carter, Immediate Past Chairman of NMHC and CEO of Avanath Capital.
In a discussion moderated by Green Street’s Dave Bragg, Carter talked candidly about the lessons he’s learned from forming two companies over his career, both interestingly started during downturns.
His first business was Carter Primo, started during the 1991 recession. Given the economic conditions, Carter said he had 58 meetings and everyone said no. “I only got to yes on the 59th meeting."
His latest company, Avanath, was started in 2008, during the depths of the Great Recession. Carter shared that he closed on 20,000-unit acquisition on May 1, 2008 with a Citicorp bridge loan due April 30, 2009. He and his partners put up $40 million, with Carter responsible for half. Over the next six months, everything went south and it was all lost.
Steve Ross of Related counseled Carter and reminded him that during the 1991 recession Ross had a negative $3 billion net worth. He told him if he could it through 2008, he could be successful in the long run. He kept going, and there are a lot of working families better off for his perseverance.
In hindsight, Carter concluded the period was a "great launching pad.” But he added “I don't necessarily recommend it ."
Avanath’s focus is the affordable space, and when Carter starts talking about the business model, you can tell it’s also a personal passion. This Ebony article about him and his company is a great overview of what he’s trying to do.
“There are a lot of myths about affordable properties, perceptions that they suffer from drugs and crime,” he said. But remember, he noted, the median renter makes $35,000 and can only afford $1,000 per month.
“We want to create a business that can provide working families with a quality product in a safe environment so they too can pursue the American Dream," he said.
Too often you hear about people wanting to take a C (property) to an A. We want to change that model and keep things affordable. They do that by skipping some of the upgrades that other firms assume are “must haves.” Popcorn ceilings are a favorite example. He leaves them in, figuring most his residents are watching their TVs, not looking at their ceilings. They rather have a lower rent, than a fancier ceiling.
"You can't just invest in brick and mortar. You have to invest in community." It translates into lower turnover and higher occupancy. Carter said his average rent is $1,100. "Why do we do it? It's where demand is."
"There are many people in this country who are left behind,” he said. “As an industry, we have to take on these challenges and try to make a difference."
For would-be entrepreneurs, he told them to stay humble. “Self doubt is a good thing. It makes you scared and work harder."
"What everybody does in this room is not splitting atoms or rocket science,” Carter noted. “This business is about working hard and relationships." “I got mentors by working hard, building relationships and making my bosses look good.