As one of the largest third party property management firms in Canada, DMS Property Management continuously looks for opportunities to grow its business and expand into other markets. It has extended its reach beyond managing multi-residential properties to commercial properties, student residences, government land management and the self-storage industry.
DMS has been implementing integrative strategies, which involves buying competing and complementary businesses, as part of its overall growth plan. This approach has enabled the company to expand into new markets, increase its market share and remove competitive barriers to future growth. Over the past 10 years, DMS has purchased Tridel’s rental and commercial divisions, as well as Ivest Properties (a property management company based in London, Ont.).
DMS’s horizontal growth strategy has taken the next step with the agreement to purchase Fengate Residential Property Management (and its portfolio of 1,500 multi-residential units). Fengate has been in the real estate and property management business for more than 40 years, and has been a dominant player in the Hamilton-Niagara region of Ontario. The deal will have closed Nov. 7, and the next stage in DMS’ progression as a leading third party property manager in the province will have begun.
“For DMS, the addition of the Fengate business represents an increase of over 10 per cent in number of staff and units under management, as well as an opportunity to dominate a new geographic region,” says chief administrative officer, Paul Smith.
After several years of working for another property management firm, Smith and Rob Watt struck out on their own to found DMS in 1997. They partnered with Tridel, one of Canada’s foremost real estate developers, to pursue the market for third party property management services. Over the years, DMS grew organically, eventually providing its services to a broad range of building owners.
Several years later, DMS took over Tridel’s multi-residential property management and commercial management divisions, which served to solidify DMS as a third party property management company. It also expanded into managing government properties at the municipal, provincial and federal levels, developing expertise and success in bidding on government real estate management opportunities. DMS currently has a long-term contract with the Ontario government to manage provincially owned land.
Today, DMS is one of Canada’s leading real estate services organizations. It employs more than 300 staff in over 50 offices across Ontario. The company manages residential townhouse and apartment communities, retail plazas, industrial parks, commercial office buildings and land holdings. Its portfolio consists of more than 12,000 residential units and 5 million square feet of commercial space, as well as more than 80,000 acres of land.
“We have a mantra that we live by at DMS, ‘Growth is good’,” says chief administrative officer, Watt. “Our staff benefit from our growth as it facilitates career opportunities. Our clients benefit from our growth as we further achieve economies of scale and buying power. Corporately, we benefit from efficiency gains and a diversified and growing client base.”
Comprehensive service offerings
As a third party property management firm, DMS acts on behalf of owners in all areas related to the care and custody of their properties. The company is responsible for the physical maintenance and protection of its clients’ assets, which includes preventative maintenance, building and equipment repair, and cleaning. DMS maintains working relationships with a host of service providers such as maintenance people, mechanical and electrical repair personnel, cleaning staff and landscapers to maintain all of its managed properties – from small multi-residential buildings to large industrial and commercial properties.
“We have established a service infrastructure to maintain our managed properties,” says Smith. “As we possess a large portfolio, we can provide new and existing clients with the benefits and advantages of bulk buying. We purchase more than $100 million in services per year, so we have the ability to put out requests for proposals and contract services for optimum pricing.”
DMS provides clients with tenant management services. This includes undertaking leasing functions such as advertising vacancies, meeting with and screening prospective tenants, showing properties, managing lease agreements, and collecting first and last months’ rent. The company also delivers landlord services on behalf of its property owners. For multi-residential buildings, DMS will maintain tenants’ units and ensure work is performed properly. For its commercial properties, the company focuses on tending common areas since tenants are primarily responsible for maintaining their own units.
As part of its third party property management services, DMS engages in monthly measurement reporting, which includes producing management and operations reports and financial statements. These reports provide clients with a comprehensive outline of their properties’ performance. The company delivers updates to landlords at established checkpoints to illustrate how money is being spent on building maintenance and property upgrades.
DMS also uses operational reporting tools to track key performance statistics for each of the properties under its management. These proprietary tools, which have evolved over the years, have proven to be useful for developing accountability and promoting continuous improvement in its service offerings.
“With each new contract and client, we customize the performance measures to match that client’s goals,” says Watt. “The performance measures are shared among the individual property managers so that each staff member can see how their assigned property is doing comparatively.”
Corporate growth and culture
DMS is a growth-oriented organization that places substantial emphasis on the pursuit and acquisition of new clients. Its reputation in the industry enables it to attract new business through word of mouth promotion. It also meets potential clients at networking events and identifies property owners by tracking the purchase and sale of properties within its market. DMS gets to know more about owners and their properties through its involvement in the acquisition and/or disposition process. Attracting new clients and addressing their particular needs are key to DMS’ growth and success.
“We get a lot of inquiries from clients outside Ontario who need local expertise,” says Smith. “Property management is a very local business as you have to know the trades and the market to optimize a property’s performance and value. We’re able to leverage our knowledge of the Ontario market to add value to owners who are not familiar with the area.”
DMS has established a dynamic, growth-based organization, with a strong business development culture to support it. The company is not content to manage only its current clients since it consistently seeks out opportunities for new growth. Employees are ingrained with the directive to pay attention to clients’ needs. They are also required to dedicate a significant percentage of their time to business development activities, which includes identifying (and cultivating) new business. As such, DMS attracts people who have the personality and desire to work in a positive growth environment.
Both business and personal growth are integral components of the DMS corporate culture. The company believes in developing its employees and promoting from within. It will identify candidates for career development, help them to succeed and present them with opportunities for growth. In fact, the entire senior management team – there are 18 senior managers in addition to the two owners – started in junior positions and worked their way up the company ladder, eventually being promoted into their current roles.
Smith and Watt are regularly involved in the company’s daily operations and dynamics, which enables them to develop a better understanding of their employees. Participation, measurement, communication and feedback are built into the company’s operations. The owners personally meet with managers on a weekly basis and will talk with all employees to determine how they are doing. The company also evaluates employees on a peer to peer basis, and measures their performance against other employees’ achievements.
“We are proponents of healthy employer-employee relationships and we have a keen interest in how our employees are doing,” says Smith. “We believe in maintaining a positive culture for our employees through feedback, training, benefits and promotion as they are essential for maintaining our positive growth culture.”
DMS has helped its employees to achieve a number of industry and professional designations. Property managers and accounting staff are encouraged to pursue formal designations since they provide a standard that is recognized by the property management industry. The owners have found professional designations enable individual employees to differentiate themselves while providing DMS with increased credibility in the market.
DMS employs a complement of internal and external tools to train and develop its employees. Internal development opportunities include semi-annual property administration (PA) training, which is conducted off-site by the company’s internal team and supported by industry experts that deliver specific training in their respective fields. External training is facilitated and financially supported through DMS’ corporate benefits program and all employees have access to an annual training allowance.
“Standardization of training site staff is critical to our business,” says Watt. “The site staff are the face of the company for the tenants, and the procedures and tools we use can only be properly executed if the staff are adequately trained.”
Fengate Property Management
Fengate Property Management, founded by Louis Serafini Sr. in 1974, has been a dominant player in the Southwestern Ontario real estate and property management markets for several decades. The family-run organization built its portfolio of property management contracts primarily through its relationships with developers. Fengate provides comprehensive commercial and residential property management services throughout Southwestern Ontario (primarily the Hamilton-Niagara region) and in select U.S. markets.
Fengate’s residential portfolio includes townhomes, single-family homes and highrise apartments. The company built its success by meeting the specific and separate needs of residents and property owners. Residents benefit from living in high-quality environments that are clean, safe and affordable, while building owners receive a complement of cost-efficient property management services. Fengate also provides comprehensive third party property management services to commercial clients. Its portfolio includes street level retail, light industrial buildings, office properties and retail plazas.
As Fengate grew and its business evolved, it moved into other areas of real estate and asset management. In 2000, the company launched Fengate Capital Management, which specializes in developing and managing investments in the infrastructure and real estate sectors. Its first venture was Northgate Properties Inc., a real estate fund established on behalf of a group of high net worth investors. Fengate Capital currently manages several investment funds with more than $1 billion of aggregate capital.
Making the deal
In early 2009, Smith and Watt met Louis Serafini Jr., principal with Fengate Capital. Serafini Jr. was investigating business opportunities for his organization as part of the company’s plan to grow and transform the business. They discovered they had a lot in common since both companies were involved in third party property management of similar asset classes.
Over time, discussions turned to property management and Fengate’s plans to focus on the investment and asset management components of its business. Those conversations eventually evolved into negotiations for DMS to purchase Fengate’s property management division. Smith and Watt determined Fengate would provide an excellent opportunity to expand their business into a new market, while Serafini Jr. identified DMS as an ideal fit for Fengate’s employees and clients.
“Fengate’s roots are in the residential property management business and we are dedicated to our staff that have been part of that business,” says Serafini Jr. “We chose to sell to DMS because of their focus on people and the opportunities they can create for our team.”
The Fengate deal was a true team effort as several members of the DMS executive (in addition to Smith and Watt) were involved in ensuring the success of the deal. Nadine Jones, general manager of DMS’ residential division, led the transition of the operations department, while Catalina Chu, vice-president of finance and administration, worked on Yardi data migration and setting up systems.
“Over the past 12 months, we’ve been working on a structured process to take over client contracts and transition Fengate’s employees to DMS,” says Smith. “It’s very complex and involves a series of steps to get us to the Nov. 7 closing date. We will be working with Serafini Jr. and his team to ensure the transition is as smooth and stable as possible.”
Managing the transition process
As part of the transition plan, DMS is employing a rigorous process to define the tasks required to assimilate the two companies’ tactical duties and tasks. The company developed a transition template, which is arranged by functional area, to track the progress of assimilation. Functional areas include (but are not limited to) information technology, human resources, finance, administration and legal. Senior management has been using this tracking tool as part of a weekly conference call to measure progress and identify areas of concern.
DMS and Fengate are working together to make the transition as smooth as possible. Fengate’s ownership will remain involved in the process for some time after completion of the sale. The transition affects both employees and clients, and keeping both groups happy is necessary for DMS’ future success. Fengate has prospered in its market because it has built and established a high level of trust with both employees and clients, and maintaining that trust will take consistent effort going forward.
Fengate employs more than 30 people in their central Hamilton office. Many of the employees have been with the organization for years and have developed a level of comfort with the ownership and culture. The sale of the company involves changing ownership, processes, management, co-workers and systems. Change is a challenge and can be difficult to manage if not handled properly. DMS has worked diligently to ensure employees are satisfied with the transition process so that they remain on board and continue to provide clients with a consistent level of service.
As part of the Fengate transition, new employees were provided with an overview of DMS as part of their introduction to the company. This was followed by a series of face-to-face meetings and interviews. The company scheduled training sessions prior to closing the deal. Training was divided into two groups: live-in superintendents and management team staff. Training and integration were considered to be crucial first steps in helping new employees make the cultural change necessary during this type of transaction.
“At DMS, we have a rigorous approach and a structure that is supported by standard operating procedures that apply across our company,” says Watt. “These procedures and our approach to delivering superior service are something we feel passionate about. Only through ongoing communication and training can we ingrain this philosophy into all new staff.”
DMS’ purchase of Fengate is part of the company’s strategy to become best in class in its industry and to continue growing (and improving) the company. It also provides employees with new avenues for growth as well as the opportunity to work with an organization that is focused exclusively on providing third party property management services.
“Corporate growth means greater personal opportunities for employee growth and development,” says Smith. “We believe in promoting from within and our new employees will have the same opportunities to develop as our existing staff. We appreciate and reward experienced, knowledgeable and skilled people, and will give them every opportunity to grow with the organization.”
Clients have developed a high level of trust with Fengate. Many contracts and business relationships have been in place for years, and have remained with Fengate because they appreciate the quality service and attention to their needs. DMS ownership has been meeting with clients to walk them through the process that will be involved in the new business relationship and to ensure clients are comfortable with the level of service going forward. Having Fengate’s existing employees in place to provide consistent service will help make the transition more palatable.
The first few months following the official transition date will be crucial for DMS as it will have to prove to clients that it can be trusted to do the job. The senior management team takes a hands-on approach to transitioning its new clients. DMS’ senior managers and the two managing principals will meet with each client group and integrate themselves into the client’s meeting schedules to ensure they understand their goals and objectives.
“This face-to-face interaction is critical to establishing mutual trust and effecting a positive perspective on the acquisition of Fengate by DMS,” says Watt.
Growth of an untapped market
One of the key motivators for DMS’ acquisition of Fengate is the opportunity to grow the business in the Hamilton area. The region is relatively untapped since DMS has not had much exposure in the market. The purchase includes more than 1,500 multi-residential units in Hamilton and the surrounding area, which increases DMS’ portfolio by more than 10 per cent. Besides adding new properties and clients to its roster, the company can leverage the acquisition and new client relationships to pursue new opportunities in Hamilton and the surrounding area.
“This purchase will elevate our company as it is a quantum change in the size of our business,” says Smith. “While DMS is already a significant player in the third party property management industry, Fengate will help to take our company to the next level and solidify our position in the business.”
Expansion into a new area of the province will enable DMS to extend its reach and service offerings. It plans to build the business in the region by leveraging Fengate’s resources to promote its third party property management services to commercial and government clients. The Southwestern Ontario market offers a number of opportunities for growth in both areas, and DMS will be able to use its existing experience and new contacts to increase its client base.
“We hope to leverage the new Hamilton office to provide local support and service solutions to that market,” says Watt. “DMS is currently operating in Windsor, St. Thomas, Burlington, Hamilton and London, and the addition of the Fengate portfolio provides opportunities for growth in many of these markets.”
For the immediate future, DMS will work on the transition of its new employees and clients. Ensuring the integration of Fengate’s business proceeds as planned will take time and resources, and is necessary for the overall success of DMS’ plans for the region. Following these efforts, the company will work with clients and employees to expand its reach and grow the company throughout the Southwestern Ontario region.
“As per our growth strategy, DMS will continue to expand our operations in Hamilton and Southwestern Ontario, both organically and through acquisition, depending on available opportunities,” says Watt. “We are poised for growth in Hamilton, and are confident that, with the support of our head office team, we will continue to attract new clients and expand our organization.”
As DMS is a dominant player in the Ontario property management market, it will look to expand to other provinces and the U.S. in the next few years. Many of its Ontario-based clients also own property outside the province. The company has received a number of requests from existing clients, as well as potential clients from other provinces and the U.S., to provide property management services for properties outside Ontario.
“We are interested in moving outside Ontario at the right point in time,” says Smith. “DMS is studying the issue to determine if the benefits justify the cost and attention that will result from pursuing this mandate.”
David Gargaro is a freelance writer in Toronto.