Peter Lohmann's Newsletter - Issue #78

Exclusive: Northpoint Sold to LP First Capital

Northpoint Asset Management (8,100 units under management) has been acquired by the Austin-based private equity firm LP First Capital (LPFC).

If you’re not familiar with Northpoint, headquartered in Salt Lake City, I’m not surprised. They deliberately keep a pretty low profile. But they’re actually massive, with 40 locations across 22 states.

Their long-time President, Adam Haleck, assumed the CEO role shortly prior to the sale. Adam told me “We're thrilled to partner with LP First Capital, Genesis Park, and Samson Capital Group, especially given our shared thesis around the SFR space and its tailwinds. We look forward to elevating performance outcomes for our clients and tenants to even higher levels, while advancing Northpoint's position and influence in the residential property management industry overall."

This is one the largest property management transactions that I can recall, and sets up LPFC nicely to build on Northpoint’s solid foundation. The company said of this:

I got the chance to sit down with LPFC’s founder & managing partner, and Crane member, Thomas Ince, last month in Austin (we had previously connected through Twitter). He shared with me his extensive experience building, operating, and investing in service business. It was refreshing to hear from him such an optimistic (yet realistic) view of our industry, as opposed to the condescending “we’ll fix your backwards industry with tech” attitude that seems to emanate from Silicon Valley like a foul wind blowing off a landfill.

Notwithstanding the fact that they’ll be competing with me locally here in Columbus (hey guys!), I’m excited for Adam, Thomas and the rest of the team. Congratulations to all!

This week’s issue is sponsored by:

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Peter’s 2024 Property Management Predictions

I couldn’t be more excited and optimistic for our industry as we kick off a new year. I took some time this week to reflect on the direction of the property management industry, and thought I would share some of my predictions.

Here are some of my expectations for our industry in the coming year:

1. AI becomes integrated into the software we use every day. AI is a feature, not a product. It should blend seamlessly into the workflows of property management, speeding tasks and eliminating tedious and mundane activities from property manager’s todo lists. Property Meld and AppFolio are leading the way here; I love what they’re doing.

2. RentVine experiences a breakout year for growth. I got the chance to meet RentVine’s founder & CEO, Dave Borden, for the first time at LeadSimple University in December. They recently snagged Randall Henderson away from PMI. RentVine is a bit of a darling among the NARPM crew, and is seen as “one of us”. I haven’t used the software myself, but if the raving Facebook group reviews are anything to go by, they got something right. I now view them as a heavy-hitting competitor to Buildium in the under-50-units category. Over 50 units, you have to introduce AppFolio to the mix, which brings me to:

3. AppFolio strengthens their lead. AppFolio is the clear property accounting software leader, with 7.8M total units as of Q3 2023. Their stock price just about doubled last year, driven in part by improved revenue-per-unit (yes, they use that metric too). Their new CEO, Shane Trigg, has extensive real-world real estate experience and is viewed favorably inside and outside the company (I expect nothing less from an OSU grad!) With the afore-mentioned AI integrations, a renewed commitment to improving customer service, and the successful Stack marketplace, it’s hard to see anything slowing them down.

4. Consolidation slows down and prices fall. 2023 was a red-hot year for M&A activity within property management, concluding a multi-year feeding frenzy for the big acquirers like Evernest, Pure, Poplar and Rhome. The pace had noticeably slowed even by the end of Q3, and several firms paused new acquisitions as they tackled churn and/or sought additional funding with mixed results. A reduction in demand will inevitably put downward pressure on prices, even if sellers may not be ready to admit that yet.

5. NARPM Has an Identity Crisis. The role of trade groups needs to evolve as the needs of their members change. It’s not clear to me that NARPM is ready to re-invent itself to the extent that will be required for it to remain the PM locus it has been for the last 20 years, despite a new mission & vision. Add to that lingering questions about their governance structure, and it could be a rocky year for our beloved association. Despite all that, I expect their two national conferences to be outstanding as usual, and plan to attend both.

6. Two More VC-Backed PM Companies Go Away. I track the largest VC-backed property management companies on a continuously-updated page on my website. As you can see if you check it out, several of them are out of the picture and I expect that to continue. Property management is just not set up to deliver the return multiples that VC requires. You can’t “solve” PM with tech.

7. Return of the Accidental Landlord. This is an obvious one, but it’s worth mentioning here regardless. Expect your phone to ring off the hook this year with homeowners wanting to move out and rent their house instead of selling it. It’s a great time to be an established property manager with a high organic google ranking & business score. For those who struggled to grow in the red-hot sales market of the last few years, it will be welcome relief.

8. Beginning of the End of Fee-Maxing. Two forces, one from without and one from within, will begin to erode profit margins in our industry. First, government regulations will continue to hammer away at allowable fees and programs from every direction. And second, leading PM firms will start to use their operational efficiency wedge to undercut competitors on price, rather than further increase profits. Why? Market forces will only “let” profits go so high (and they are now quite high) before competition floods the supply side with options & drives down price. Savvy operators will want to hold those competitive waters at bay.

9. Non-Integrated Point Solutions Fall Behind. If you provide a software or product solution to property management companies and you’re not banging down the doors of AppFolio, Buildium, and the other property accounting softwares to allow you to directly integrate, what are you doing? PM company owners do not want to manually set up zaps or handle double-entry of data to use your product, no matter how great it is. Integrate or be left behind.

10. PM Operations metrics are defined and benchmarked. ProfitCoach partnered with NARPM several years ago to define and benchmark the key financial metrics for 3rd party residential property managers. Now we need to do the same for operational metrics. This is long overdue and desperately needed. Who will lead this effort?

Industry News and Events

• Evernest is hosting a Property Manager Roundtable next Thursday. Their content is always great. Register & view previous webinars right here.

• LeadSimple is hiring for 14 open roles right now, including VP of Marketing, Senior Product Manager, Data Analyst, Content Marketing Manager, and more. Having worked closely with their team for over a year now, I can confirm that they are an amazing company to work for.

• PM company for sale in Massachusetts (650k gross rev, asking 450k)

• PM company for sale in Seattle (400+ doors, asking 1.9M)

• PM company for sale in San Diego (300 units, asking 1.3M)

Closing Thought

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That’s all for this week! Have a great weekend. -Peter

P.S. Looking to reach 4,900+ property management company owners?

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