BSR REIT's Dan Oberste Calls Multifamily Investment Market 'Dynamic'


BSR REIT's Dan Oberste Calls Multifamily Investment Market 'Dynamic'
Dan Oberste (Jason Burt)

Dan Oberste became CEO of BSR Real Estate Investment Trust of Little Rock on Jan. 1. Oberste, who joined the company in 2009, succeeded John Bailey, who had led the company since 1991 and is now executive vice chair of the board. Oberste retains his previous duties as president and chief investment officer. From 2007 to 2009, he worked for the Kutak Rock law firm. He is a 2019 Arkansas Business 40 Under 40 honoree..

Oberste graduated from the University of Arkansas at Fayetteville in 2004 with a bachelor’s degree in finance with a concentration in real estate investment. He received a Juris Doctor from the University of Arkansas School of Law in 2007.

Oberste leads a REIT that owns 31 garden-style, multifamily developments totaling 8,666 units in Arkansas, Oklahoma and Texas.

How would you characterize the current environment for investing in multifamily properties?

On the one hand, housing supply of all sorts is simply not keeping up with demand in certain markets across the country. As a result, rental rates are increasing along with cash flows and property values. This behavior is precisely why multifamily real estate remains a fertile inflation hedge. However, these factors are driving up multifamily values. 

Real estate requires a large up-front investment and constant management. This market will crush the speculator who over-leverages themselves to invest in a single project driven by the hopes of quickly trading their project for profit. Inversely, this environment will reward the disciplined steward of capital with a platform to expertly manage efficiencies, care for residents and adapt a property to future resident needs. 

I don't own a single multifamily property. I choose instead to buy stock in our company. The REIT model allows a multifamily investor to skip the expensive entry point, skip the difficult work and the management risks, and instead just benefit from the scaled revenue and value appreciation as a shareholder. Additionally, public REITs are more liquid; so, if you decide tomorrow that the time is bad to invest, you can sell your stock. 

BSR says it’s in some of the best markets. What qualities make a city or region a good market for multifamily housing as an investment?

There are many recipes. We love markets with diverse employment bases, long-term sustainable population growth, reasonably priced housing costs, attractive lifestyle qualities and well-financed good public school systems. Austin, Houston and Dallas all fit these criteria.

Are there other markets on the horizon?

Indeed, and we are thrilled our process identified these markets early. We have plenty of room to grow in them, and intend to increase our exposure. Concerning new markets, if we can identify opportunities that will increase the BSR shareholder return relative to growing in Texas, we will pursue those opportunities. We don't see any today but will act swiftly if we do.

What’s BRS’ strategy for property investments?

We invest in properties around five years old or newer and have more than 300 residences, situated in our core Texas markets and where we can scale with multiple properties. We particularly like the “big house” style of multifamily developments, which include elements like multiple floors, private-access garages and modern amenities.

Does BSR have investments in Arkansas?

We have two multifamily properties in Arkansas, but our main investment is in our headquarters and its people. Our team in Little Rock is industry leading and the architect of our growth. I don’t feel like BSR gets enough credit for our management platform as an owner-operator in the multifamily industry. What this team has been able to do from before our 2018 IPO through until now is nothing short of extraordinary. 

What made the Toronto Stock Exchange attractive?

At the time of our IPO, we were much smaller and owned properties in markets generally unfamiliar to the U.S. public REIT sector. The TSX provided us with a more effective ecosystem to grow our REIT. Its position as the third-largest exchange in North America with a market cap of more than $3 trillion provided us with more than enough comfort that our future liquidity and investment needs would be met.

What’s your best advice to young professionals seeking career success?

My friend, Dan Parfitt, is dying at the irony of this question. There is no singular path to take. With that said, absolutely own who you are, humble yourself not at the expense of your confidence or competence but your arrogance, develop an insane curiosity regarding your pursuits and constantly focus on self-awareness. On ownership: In the end, you’re going to deserve most everything you’ve got coming to you, so be deliberate in choosing what you want. On humility: Add “I don’t know” to your vocabulary and use the phrase generously. You can’t be good at everything; you are good at what you do a lot of. On your pursuits: Be a maniac about what and who you love. On self-awareness: Obsess on perspective. Also, don’t steal or lie, ever. You can spend a lifetime building bridges, then burn them quickly if you can’t be trusted. That is my advice — that, and wear comfortable shoes when you’re walking properties.

What attracted you to this business? What do you like about it?

Our product is a basic necessity. Everybody has to live somewhere, right? However, within the necessity model, complacency arises that can generate arbitrage. Maybe certain owners don’t invest enough into their properties, focus enough on resident satisfaction, or see technology as a means to advance rental rates, create an exceptional living experience, or promote sustainability while generating increasing investment returns. We do. BSR's deep management team, experience in the industry dating back to 1956, and innovative culture drive us to pursue excellence. It is a recipe that works and interests me immensely.

What leadership lessons are you learning as CEO? What surprised you about the job?

This job humbles you. It's entirely different than I expected. There is no instruction manual that prepares you to serve as CEO. No two CEOs will describe their primary job responsibilities the same way. This surprised me. I'm learning my job isn't to be the expert; it is the opportunity to listen to the experts critically analyze a problem, and then to support them in executing a decision. If one of those functions isn't working, my job is to adeptly address the failure. When the team works together, as is the case at BSR, boom! It makes you so grateful.

What's a mistake that you've made, and what did you learn from it? 

I could wallpaper our home with the mistakes I've made in the last week. Here's one: Recently, on vacation with Rachael and our boys, I couldn't sleep. I was dreading the impact of a nonexistent but potential bad business outcome. A total basket case the entire trip, I grumpily obsessed over the worst outcomes while probably frustrating my coworkers and family. At 4 a.m. on the drive home, Rachael calmly reminded me to extinguish dread from my vocabulary, to channel concern in order to create, and that helped me focus on working the problem. I had forgotten my favorite behaviors and was lucky enough to have a partner who could help me resolve them. Stress will make you do some weird things, and temporary amnesia happens. Extinguish dread, use any anxiety as a tool of creation and work the problem.