How To Triple Your Brand In One Deal
Since its founding in the ‘60s, LA-based Oakwood Worldwide has been a pioneer in the corporate and serviced apartments sector. Thanks to a $4B JV with Singapore firm Mapletree Group, Oakwood will triple its brand with more than 100 new properties globally over the next five years (and really get to know the SkyMall catalog). Some of them will be in Chicago.
Oakwood CFO Bill Foltz (left, with Oakwood founder, chairman, and CEO Howard Ruby at the deal signing) was the architect of the JV (with Goldman Sachs as financial advisor) and gave us the details. A year before meeting Mapletree, Oakwood was independently contacted by three other Asian firms that were attracted to its serviced apartment brand in Asia and were looking to JV (that's much more than a coincidence), he says. In Mapletree's first foray into the US, the JV will direct more than $2B for acquisitions of traditional apartment properties—50 buildings estimated—which Oakwood will fully furnish (below) and update with hotel-style amenities, says Bill. The JV will likely focus on “B properties in A locations, with 80 to 150 units” on the coasts and in major business centers like Chicago, Bill tells us.
The firm has been active in the Windy City for around 30 years, currently master leases a 331-unit Oakwood brand building at Lake and Wells, and would hope to pick up another few buildings in the area, Bill says. Along with seeing ample opportunity for expansion downtown, Oakwood has had a very robust business in the Chicago suburbs. Properties near major corporate campuses like McDonald's would be their sweet spot, he tells us. (We also like to work near a McDonald's, but for different reasons.) Oakwood also did a lot of business in Chicago when United Airlines merged with Continental, finding places to live in the urban core for all the uprooted execs. The serviced apartment concept (average stay is 75 days) is well established in Asia and Europe, he says, but here the sector is fairly wide open and Oakwood is one of few major players.
Its business lines include branded Oakwood properties the firm runs, as well as a supplementary service setting up and operating a chunk of corporate units (often leased through big clients' HR departments, like Microsoft or Accenture) within another company's apartment project (think AvalonBay, EQR, etc.). The business model works. Oakwood can charge more than what a traditional multifamily landlord does for the same space, increasing the property's profit potential. But it's not without risks. Serviced apartment vacancy could reach 15% versus a well-run apartment building's 5%, thanks to the velocity of the turnover. Bill says obsolete office buildings in urban cores could be potential conversion plays, and adds that the company will be hunting down land for ground-up development. Formerly the CFO of the LA Dodgers, Bill once hit a homer during a softball game at Wrigley Field. (Which means he is currently hitting better at Wrigley than Emilio Bonifacio.)