Equipped with technology, residential manager grows

Real Estate Weekly, Sept 1, 1993 by Therese Fitzgerald

When the residential conversion business collapsed, Fred Rothschild and Adam Levin did not shut the doors of the management firm they founded in 1986 to act as agent for a single sponsor. They, instead, began the process of transforming the company into a third-party property management service with a state-of-the-art back office.

"As the conversion process died," said Rothschild, president of Regal Management & Systems, Inc. "we started taking on outside management and we continue to do so."

The firm, which changed its name from Kingswood to Regal at the beginning of the year, today manages more than 10,000 apartment units throughout New York City and 1.7 million square feet of commercial space in New York and Philadelphia.

Rothschild, with the help of programmers, began developing what he considers to be the most sophisticated, yet user-friendly, computer system back in 1986. And, with two programmers on staff, he said, it is constantly updated.

"We looked around for the software to do the conversions and it wasn't available," he said.

The system, he says, is based on cash management and, by using bar coding rather than data entry, it is labor "unintensive." For 10,000 units, the accounts receivable department is three people. Accounts payable is two. The system's other functions include inventory and preventative maintenance schedules.

The efficiency of Regal's system recently attracted the attention of Newmark Real Estate & Co. And what began as an idea for streamlining Newmark's back-office operation has blossomed into a venture that aligns Regal with one of the area's leading commercial services firm and takes Newmark into the residential arena.

"We were looking for a way to more effectively run our back office," said Jim Kuhn, head of Newmark's asset management division.

Recalled Rothschild: "We wanted to take on their back office for them. That was our original plan to take on their back office and save them money."

But as the two became further acquainted, they realized they each had a growth need the other could fill. Newmark offers the name recognition and the institutional clients. Regal was experienced in residential management services, which Newmark's clients are requiring more and more as they purchase or take back residential property or mixed portfolios. Thus, Newmark Residential Real Estate Management was born.

"Nobody wakes up and does residential management," said Kuhn. "They're two different animals."

Said Rothschild: "The property management itself on a residential side is a lot more intensive, a lot more social."

Large pools of real estate are being sold by the RTC and the FDIC and others. There will be a lot of different properties in these portfolios, said Kuhn, and residential will be the most attractive.

"[Residential] recovers the fastest," he said, "and can be securitized most easily."

Regal also brings to the venture the ability to do asset management, asset disposition, brokerage and sales, mortgage loan servicing and property appraisal reviews.

"I think we bring a lot of the same things in different fields," said Kuhn. Newmark and Regal's skills, Kuhn said, can offer a complete one-stop package for an institution or individual client. While Newmark currently handles a few million square feet for General Electric Credit Corp., Regal processes $23 million in mortgages for the same company.

"We could service it, analyze it, lease it and sell it," Rothschild said.

Kuhn said his ownership background -- he was partners with Bernard Mendik for 13 years -- and that of other Newmark leaders -- The Gurals and Barry Gosin -- help his company offer creative "entrepreneurial" solutions to institutional and individual investor client.

"I think you need to be able to come equipped with excellent marketing strategies," he said. "You need to position tough properties today."

At 305 Seventh Avenue, for example, Newmark advised the owner of a poorly-tenanted office building to condominimize and market to non-profits.

Rothschild said his firm has also solved many problems for cooperatives and condominiums that need to refinance mortgages.

Combined, says Kuhn, the two companies are the largest full-service management firm with 35 million square feet of commercial and residential space in their portfolios.

Education and Disclosure

Levin, a former consumer affairs commissioner for the State of New Jersey who received real estate know-how from his developer father, the late Philip J. Levin, is the "people person" of the operation, says Rothschild.

According to Levin, his consumer affairs experience prepared him to properly address tenant complaints.

"Obviously, the ability to deal with people is an important part," said Levin. This is a people business."

With the help of the computer system, he said, the firm stresses education and full disclosure to minimize unhappy tenants and board members.

"The problem I feel people have with managing agents is you don't know where you are," he said.

The Regal system, Levin said, does "time accounting." Reports are ongoing and can be issued at any time they are requested. A board member can even retrieve the information on his personal computer at 3:00 in the morning.