MORE OF OUR CONTINUING CONVERSATION: HOW IS COVID-19 AFFECTING YOUR APARTMENT PROPERTIES?
We conclude our series of personal interviews with Mike Obloy of 3F Construction and Dave Pezzola of Icarus Investment Group. We hope that hearing the perspective of some of our clients and how they are managing their businesses and lives during the Covid-19 lockdown was of interest. As was the case in our last two posts, we will present to you in a question and answer format responses from select clients.
We say “conclude” our series because we are hopeful that with the conclusion of this month, we will all begin to make our way back to the office to get back to the business of helping our clients achieve their goals. We understand we will be facing a new normal. Interra is adapting to the new realities and we are ready to move forward with a sense of purpose as we re-dedicate ourselves to you, our loyal client base. Now onto the interviews.
Let’s start off on a personal level, how are you dealing with the adjustments to work environment? How has the nature of your job changed?
Obloy: Similar to most people, I have been working from home since the governor implemented the shelter-in-place order. Initially, the adjustment was challenging, but with each day/week things become more routine. The most significant change to my role at the company is that I am not visiting any of our construction projects or properties under management. This has forced me to think differently about how our team is managed, including how we communicate and how often. Overall, the change has been a positive experience.
Pezzola: I usually travel constantly, so that change has been dramatic. We have offices in Chicago, New York, and Puerto Rico. We have properties in our core business within Chicago, Detroit, and Indianapolis. We have investors all over the country. We are starting to get into the mobile home park business through strategic partners of ours. Parks of interest are all over the country from Charlotte to Seattle to Houston. Whether it is meeting with potential investors and lenders or looking for new opportunities, I am flying at least once every 5-10 days. I have not had one flight since the middle of March; this is the biggest personal change by far. The nature of my job has changed substantially from being primarily forward-looking and planning strategic growth/partnerships to focusing more on our operation locally.
How are you managing your employees to allow them safety and still provide excellent management and operation of your properties and/or business? Are there any specific solutions or actions that your team has employed that you are particularly proud of?
Pezzola: We are having our team work remotely 100% of the time when possible. However, from when we started, we were based in New York City buying properties in Chicago, so we are used to working remotely as we began by working entirely remote. We ordered reusable masks for all of our maintenance and field personnel. We are adhering to all social distancing protocol. I am very proud that our team has been able to continue to be effective and adaptable during this time.
Obloy: We have focused on maintaining constant communication with our team. This includes weekly calls with the entire company where we share updates relating to the financial strength of the company, active business that we are managing and new business. We generally open things up for the team to voice concerns regarding health and safety as well. It’s important to focus on these things with the team so everyone feels reassured that their employment is secure during these difficult times. Additionally, we implemented daily project team calls. Typically, we would only meet as a team on a weekly basis. However, it is more important than ever to make sure we are on our game as it relates to execution. I am personally impressed with our team’s ability to make the adjustments as quickly as they did. Everyone stepped up quickly so we could continue business as usual as much as possible.
Changing the way we work sometimes produces unintended consequences, good or bad. What change has surprised you the most in this environment?
Obloy: Our team has been incredibly resilient and responsive while working remotely. We were really concerned about how remote working would affect productivity, customer/tenant service and overall execution for the company. The entire team was able to quickly adapt to the changes and maintain status quo. We really did not miss a beat during the transition and we are proud of that as an organization.
The perceived threat of a slowdown also forced us to rethink how some of our work is performed on our projects. Protecting the jobs of our employees is a priority for us. As such, we decided to start self-performing work that we would normally subcontract. The transition has been smooth with a lot of credit owed to our field team leaders.
Pezzola: So far, nothing has been materially changed regarding workflow from not utilizing our offices as frequently. However, I have realized that I have been able to be more productive on projects requiring more focus because there are less interruptions at home versus the office.
Let’s talk more about actual operations. What are the stresses you are experiencing operating your properties and managing your tenants or business during this period?
Pezzola: This has been very tough on some of our commercial retail tenants that cannot possibly operate remotely – such as gyms – that have been forced to shut down by the government. There seems to be no “fair” outcome, which is very unfortunate. Even if one’s lender offers forbearance, those funds are still owed back quickly for the skipped month(s). For the commercial tenant, if the monthly payment is deferred that payment from our tenant will still be needed by us to pay our mortgage/property taxes/employees/etc. But even if the tenant gets to defer the rent, the commercial tenant will never get back the lost month or two of potential revenue. So all currently proposed solutions involve someone being permanently hurt from this, which is unfortunate and make for very difficult conversations.
Obloy: Maintaining a safe and quiet construction effort in our value-add projects during this time has been a challenge. Because we are performing renovations in buildings that are partially occupied, a great deal of thought needs to be put into developing and managing our schedules so that noisy or disruptive work is coordinated appropriately. This effort includes more coordination than usual with property management, leasing and ownership. In early March, we implemented safety protocols for COVID-19 at all our buildings. Social distancing, PPE requirements, hand washing stations, and strict limitations on tool sharing was introduced and continues to be enforced.
Considering the changes experienced during this period, which do think (or want) to continue after recovery? What positives are you finding in this time that you hope to continue after this passes?
Obloy: Working remotely has been the most positive surprise for us as a company. We will likely continue to offer our employees an option to work remotely for 1 or 2 days per week moving forward, even after this pandemic passes and things return to normal. While we never considered it in the past, and I am still a big advocate of a strong and collaborative office environment, this experience has changed our view of how productive we all can be when working outside of the office. The experience has brought our team closer together despite everyone being apart.
Pezzola: This is forcing us all to work more efficiently while remote, which is an important discipline. I think it is showing us that it is still possible to do certain things without travel. It would be nice to find a way to travel less than before and still continue to be as effective after the recovery.
Mike Obloy is a Principal and co-founding member of both 3F Construction and Monroe Residential Partners. He is responsible for the company’s acquisitions, development, and construction management activities. Mike brings 18 years of direct real estate experience and has led the acquisition, development, construction, management, and sales of over 1,000 residential units with an excess value of $325M.
David Pezzola is the founder and CEO of Icarus Investment Group. Icarus began purchasing and managing apartment building in Chicago in 2011, and has since grown to over 1,500 units. They also operate portfolios in Indianapolis and Detroit.