American Landmark CEO is a one-trick magician

American Landmark Apartments acquired $1.5 billion worth of multifamily rental properties in a relatively tight cluster of Southeast U.S. states last year.

To hear company CEO Joe Lubeck tell it, though, the Tampa-based company that owns more than 28,000 apartments valued in excess of $4 billion is just warming up.

If things go as planned, American Landmark will buy another $2 billion worth of apartments this year, too, with capital from a new $500 million acquisitions fund the company is raising money for now.

“I don’t see any decline coming,” Lubeck says. “There’s more equity chasing apartment deals than ever before. And that’s largely because multifamily rentals are among the most recession-proof investment assets out there, because people need a place to live.

“Yes, it’s a very competitive market today, but one advantage we have is that we’ve been through several cycles,” Lubeck adds. “A lot of our competition has not, and as a result, they aren’t as conservative as they should be at times.”

Lubeck has been around apartments the way the New England Patriots have been around Super Bowls in recent years.

He got his start in the multifamily rental business while in the fourth grade, helping his father, who managed a small complex. Before school, Lubeck would take out the trash, sweep floors, mop and clean elevators.

Years later, after earning a law degree in the 1980s, Lubeck ended up working for a company that owned apartments, where he found himself heavily ensconced in operations.

In 1996, Lubeck quit his day job and, with a lone investor, bought the 144-unit King’s Inn apartments in St. Petersburg.

Around the same time, Lubeck made a series of fortuitous decisions that would shape his professional life.

Perhaps most importantly, Lubeck decided to focus — both within a property niche and geographically.

Rather than chase deals all over the country, Lubeck drilled down on Southern Sunbelt states — Florida, Georgia, the Carolinas, Tennessee and Texas — that appeared poised for population and employment growth and where rents were below the national average.

“We felt very strongly that the South was the future of real estate,” he says. “Because it could be more profitable, the climate was better, it was busy friendly and tax friendly.”

And while many competitors became enamored with gleaming urban high-rises, Lubeck consciously went after mostly older properties that often required some tender loving care and were built for people who worked for a living.

“Value add” became Lubeck’s hallmark — even for new properties.

“Buying is always the beginning of the story,” he says. “It’s all about how we can add value, and sometimes that goes beyond physical improvements. We focused on doing one thing but doing it really well. My wife says I’m a magician who knows just one trick, but people keep on applauding for it, so we keep doing it.”

One deal led to another, and another, and before long, Lubeck and the team he’d assembled and credits for the company’s success — today American Landmark has 600 full-time staff, many of which have been with him for decades — had a portfolio of properties.

Along the way, he continually challenged himself and his team to act quickly, understand their markets better than anyone, help tenants remain in their portfolio of properties whenever possible. Lubeck also pledged never to fall in love with any of his properties.

In 2006, Israeli-based Electra America took note and began backing Lubeck, who went on to fold his portfolio into a publicly traded entity called Landmark Apartments Trust.

By the time Starwood Capital came calling with a $1.9 billion offer for the company, in 2015, Lubeck and his team had rolled 35,000 apartments into the trust and were generating internal rates of return around 25%.

“Everyone thought I would retire after the Starwood deal and I did,” Lubeck says. “That lasted about 15 seconds, and then I started up again because I enjoy what I do and I like coming to work. I have a great team in place and a great set of partners with Electra and others.”

In 2016, Lubeck regrouped with American Landmark and started a fund to buy apartment properties, fueled by a growing bandwidth of people who rented by choice for mobility, access to amenities or because they believe home ownership is a liability.

As his reputation grew, among both investors and apartment owners, Lubeck increasingly began seeing “off-market” deals that required often quick closings but could be picked up at a discount.

“Because of our track record, we now have unique access to deals and portfolios, sometimes deals that have fallen out of contract,” Lubeck says. “So there, our ability to act quickly helps us tremendously. Of the roughly $1 billion we’ve purchased so far this year, I’d say about $800 million of it has been off-market.”

American Landmark has honed its skills in operating properties over the years, too.

Tenants who need to break their leases and move to another city, for instance, can keep their security deposits and face no penalties if they rent anew in an American Landmark complex — potentially saving thousands of dollars.

For those who stay put, American Landmark renovates units with tenants in place, rather than abiding by the industry standard of waiting for renters to leave. The company has found that tenants whose units have been upgraded tend to stay longer as a result.

“Joe has a unique recipe,” says Joe Lytle, managing director of C3 Capital Partners of New York, which has invested in several American Landmark projects.

“He knows where the deals are so he can approach them directly, and he’s very innovative in regards to tenant relations,” Lytle adds. “He’s done a great job, in large part because he knows every facet of the business.”

In Florida, American Landmark now owns 24 apartment complexes.

Most recently, the company teamed with RSE Capital Partners to acquire the Westly Shores Apartments, in Tampa’s Westshore Business District, for $64 million.

There, American Landmark plans to invest about $1 million to make improvements to the 20-year-old, former PriceWaterhouseCoopers corporate campus, now a 360-unit apartment project.

Newmark Knight Frank, the commercial real estate brokerage that negotiated the sale and helped American Landmark obtain financing, notes it was 93% occupied at the time of sale.

Earlier this year, American Landmark and RSE Capital partnered on buying a 440-unit multifamily rental project in Jacksonville, and before that, on a portfolio of properties with nearly 2,000 units in a suburb of Nashville and the Dallas-Fort Worth area.

But even with all the purchasing, Lubeck has stuck to his principal and kept romance out of his deals. Last year, American Landmark sold $800 million worth of apartment properties.

“We have a return threshold that’s reviewed every quarter,” Lubeck says. “So when we hit ‘X’ return, we sell. That way, our horizon is lined up with our investors. Our goal is to grow and prune our assets continually.”

And while entering new markets has been tempting, at times, Lubeck has resisted the urge.

“We’re not looking to expand beyond where we are,” he says. “We have boots on the ground in every city we’re in, and we know every corner. That’s how we like it.”

Lubeck is aware that the current growth cycle for apartments has stretched on longer than almost anyone anticipated — “we’re in the 18th inning,” he says — but he’s not ready to stop buying or make an exodus.

“We do have to be very disciplined in buying,” he says. “But as long as there’s solid job and population growth, apartments should continue to see good returns.”

As for Lubeck, he’s also begun thinking about longer-term horizons.

“I’m hoping this company will have a life of its own, long after I’m gone,” he says, pausing.

“But who am I kidding? I hope to work another 20 years or so.”