Smart Application of the 1031 Exchange in Multifamily with Mark Hamilton

Mark Hamilton Prior to co-founding Hamilton Zanze in 2001, Mark Hamilton sponsored the acquisition, ownership, and development of nearly 40 properties in the Bay Area. Mark’s main focus has always been locating value-add properties in changing urban neighborhoods and then re-working them into higher-quality buildings with higher incomes, improved tenant profiles, and higher resale values.

His company, Hamilton Zanze (HZ), is a private, San Francisco-based real estate investment company that owns and operates multifamily apartment communities in 16 states around the country. Since its founding, Hamilton Zanze has acquired over $5.86 billion in multifamily assets, primarily in the Western, Southwestern, and Eastern U.S. The company recently made a 60-property acquisition in California, marking the first time entering its own home State.

Mark has considerable experience in partnership formations and operations, project planning and implementation, asset management and management oversight, landlord-tenant and rent-control issues, risk management, and zoning and building department matters. Before forming his own commercial brokerage and investment business in 1994, Mark worked in the San Francisco office of Marcus & Millichap, subsequently co-founding Property Resource Group (real estate brokerage) and Quantum Land Company (development).

He earned a B.A. with High Honors in English Literature from San Francisco State University and an M.A. in English and American Literature from Brandeis University, which he attended as a University Scholar and Fellow.

Mark:

If you show up for the work and you don’t try to kid yourself above the work, you’re probably going to be

Pierce:

So your partner coming in, and you said he brought in the institutional strategies, practices, yeah, practices, we’ll dive into that a little bit.

Mark:

So I would say really three things. He knew finance very, very well. He ran the West Coast lending office of GE Capital. At one point, he ran a lot of equity and debt at Northwestern Mutual, and his MBA from Wisconsin was in real estate and finance. So he knew finance a lot more than I did. I, you know, my personal bias, my appreciation of the subtlety of finance was, you know, called loan broker get the best rate, right? And then he certainly had a more refined view of debt, you know, and all the different debt products that you can get, whether it’s fixed or variable use swaps. How much leverage do you want? You’re gonna consider using mezzanine debt or not, which we don’t we never have, you know, you’re gonna go I owe for part of it, or, you know, how much amortization do you want, and he is an expert at that. The other thing I would say is that he brought more institutional practices in terms of asset management; my approach to asset management was always basically as follows. In the run-up to my acquaintance with Tony, as I said, I had a portfolio of probably three to 400 units, older buildings, primarily. In my work area was insurance claims and litigation, CAPEX contractors, maintenance and repair, dealing with permit matters with various cities where we were dealing with landlord-tenant matters, and, you know, it’s really much more of special projects or, or problem, children, emphasis, that’s kind of my part of the street. And Tony really brought in an emphasis on reports. And so before Tony came in, I would just, I met with my wife, once a month, who managed, she and her partner managed the apartment portfolio, just walk through a shared office space with them. So I just walked through the door and went over to her desk and did the rundown every week on what was going on with the properties. And I was always focused more on special projects and hotspots. I knew she was in charge of the accounting and was doing proper reports and dealing with all the accounts payable and receivable and all the rest of it. But when Tony came in, he brought a lot more expertise and emphasis on the reports, whether it’s a p&l, the balance sheet, rent rolls, you know, Mark, you know, adjustments to market rent, and whatnot. And so he brought, he brought that expertise up, but he also brought expertise in the form of knowing how to work with institutional partners. Historically, we’ve done probably 15 to 20% of our volume has been jayvees with institutional partners. And Tony, I mean, I’ve learned a lot from him in the last 21 years. And I certainly, can hold my own conversations with institutions 21 years ago; that wouldn’t have been so. And so you know, it’s just a really good fit. And you know, temperament was a fit, and, you know, the important things, like culture and ethics, were a fit.

And consequently, we’ve been able to draw many outstanding people into the firm. And last year, we promoted Kurt how Cooper, who joined us in 2003, promoted him to CEO, and he’s a partner. And then, we promoted six senior staff into partnership positions. And so I really just say that it’s, it’s so much of it has been about loving the work and, and getting to run with great people. And being honest about it, right being serious about the work and not not not kidding ourselves about things you just mean apartments is it’s a, it’s a daily grind. I mean, if you’re on-site at the apartments, it may be an hourly grind; there’s always going to be activated. But if you show up for the work, and you don’t try to kid yourself above the work, you’re probably going to be okay. I mean, some of it is about problem-solving. But you know, it’s worked out.

Pierce:

Absolutely. So, the institutional practices that came in were just creative in an in-depth knowledge of how to finance many of these deals.