The Power of Vertical Integration: What Roers Companies is Doing Differently

What is “Vertical Integration”?

To be vertically integrated means that a company controls different stages of business along the supply chain internally, rather than relying on external partners and suppliers. When a company is vertically integrated, processes are brought in-house. Roers Companies is a vertically integrated company — we don’t just manage properties or build them. Our internal capabilities include development, construction, leasing, property management, and asset management. 

This vertical integration means that Roers Companies is able to achieve significant cost savings and efficiencies that companies with a single area of expertise cannot match. With a close watch on local markets, strong industry relationships, and a robust evaluation and approval protocol, our process refines and strengthens each opportunity offered to our investors for consideration. 

Development

84 Roers Cos. projects developed 

What our in-house department does: Identify sites, work through approvals, secure financing to begin construction, and consult with construction and design teams throughout the project.

HOW BEING VERTICALLY INTEGRATED HAS MADE A DIFFERENCE:

Being vertically integrated has allowed our development team to expedite new project origination on the front-end. We’re able to better understand construction costs and operating expenses based on past projects and instant access to experts in our general contracting and construction management groups as market trends shift. This integration allows our team to apply past knowledge of where we can gain efficiencies in cost, construction timelines, and long-term operations upon opening. With a holistic understanding of a wide variety of factors, the development team can better  identify sites where we can replicate past successes and improve upon previous projects. Additionally, having a strong track record of lease-up speed and operational optimization allows us to negotiate better financing terms. Plus, we can get the best construction pricing in the market, which helps to offset higher interest costs. All of this allows us to make faster decisions and keep our projects moving forward in a market where many other firms simply can’t. 

Construction

$550K+ average volume-discount savings per project 

What our in-house department does: Estimate, plan, and oversee construction projects that are delivered on time and on budget.

HOW BEING VERTICALLY INTEGRATED HAS MADE A DIFFERENCE: 

Our internal construction department, Roers General Contracting (RGC), has a vertical integration strategy directly linked to enhanced investor returns. We’ve already secured over $12 million in buyout savings on our projects, ensuring maximum value across every construction trade. This strategy, which involves a dedicated team for each project, is only viable because of our readiness to invest in staffing, which makes higher returns for our investors possible. Not only are we saving on project costs, but we can also consistently meet or exceed our timelines. This pace allows us to initiate leasing earlier than other management companies do, which brings in more leases prior to the project’s initial occupancy. More preleasing activity means accelerated income timelines, as a larger percentage of apartments welcome paying renters at the time the project opens its doors. Moreover, our transparent pricing model offers the entire development team clarity from the outset. Should any opportunity arise to enhance the project without compromising the budget, we can seize these savings. Our in-house structure also enables prompt communication, swiftly addressing any issues to minimize delays or additional costs, further solidifying our commitment to optimal investor benefits. Our costs to build are 10 – 15% less than industry average in the markets where our RGC group is active because of their focused approach to the project from the outset. They don’t have distractions from other clients that a third-party general contractor experiences. Rather than putting our energy into sales and pursuing future work, we are able to put our energy into ensuring that we are building at the best possible price for Roers Companies and our investors.

Vertical Integration in Action: Our Rosemount, Minnesota project saves $1.2 million in construction costs

With the buyout savings on this project, we were able to reduce the guaranteed maximum price (GMP) value by approximately $1.2 million after the project had been under construction for six months. This reduction to the GMP would not typically happen with a third-party general contractor as they would want to keep those funds available to them until the project was completed. Since we were able to make these reductions to the GMP, we were able to add back in value-engineering items that will enhance the project to help it operate and lease more efficiently in the future. This was only possible because we are vertically integrated and aligned on the ultimate goal of positioning our projects to provide the highest returns to our investors.

Leasing & Property Management

2x faster lease-up than national average 

What our in-house department does: Lease and operate properties to rapidly achieve and sustain high occupancy levels. 

HOW BEING VERTICALLY INTEGRATED HAS MADE A DIFFERENCE:

Based on what we’re seeing in today’s market, we currently operate our properties about $200 to $500 per unit per year less than our competitors. We place a heavy focus on our lease-ups and launch them six to eight months prior to receiving the certificate of occupancy. Doing so allows us to open our projects with an average of 30% more units preleased in comparison to competitors. Another advantage of being vertically integrated is the opportunity to dedicate lease-up specialists to each project. The attention our lease-up specialist has on each project helps sustain leasing momentum, builds rapport with the future residents, and helps creates a smoother transition at time of the property’s first move-ins. Having partnerships with developers, construction managers, marketers, and asset managers in-house enables us to better manage our budget — and take advantage of opportunities for rent increases, too. We budget our projects tightly and hold our team accountable to those budgets, analyzing revenue on a quarterly basis to uncover and implement any new opportunities that may be available. By managing the properties we build with Roers Companies employees, we have full transparency into operations and pivot quickly when we see an opportunity. Key performance indicators are monitored weekly to track performance and proactively address any challenges that emerge.

Asset Management

$390M capital transactions in 2022 

What our in-house department does: Drive project budgets and curate favorable refinance and sales events. 

HOW BEING VERTICALLY INTEGRATED HAS MADE A DIFFERENCE:

Because of our vertically integrated model, the asset management group knows what kind of debt structure we’re using on the front-end and can plan accordingly for when, how, and why we may or may not need to refinance each project. Additionally, our model allows us to plan ahead for projects we may want to sell after completing construction. Staying ahead of the process gives us ample time to work with brokers to position the project during the construction and lease-up process. Asset management sets performance targets and holds our team members accountable for meeting these targets. By applying constructive and strategic pressure to each project, the asset management group can drive higher levels of efficiency, productivity, and overall performance — ultimately benefiting the owners and stakeholders.

Vertical Integration in Action: Strong leasing and rents lead to $65.16 million sale price on Woodbury Apartments

Thanks to the close internal alignment between our marketing, leasing, property management, and asset management teams, our Beyond Apartments project in Woodbury, Minn. is one of the firm’s most successful to date. The team secured 133 leases during construction of the 255-unit community during the spring and summer of 2021 to open in September 2021 at 53% leased. With rent and parking price increase recommendations from asset management incorporated throughout the successful lease-up, the property secured an additional $375,000 in annual income. The combination of strong rent pricing and leasing velocity led the asset management team to secure a sale opportunity in March 2022, just six months after the first phase of the property opened its doors. Beyond Apartments sold for $65.16 million, bringing its investors an average return on equity of 98% and an average internal rate of return of 41.3%.

Information updated November 2023.

NO OFFER OF SECURITIES; DISCLOSURE OF INTERESTS: Under no circumstances should any material enclosed herein be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only by means of the confidential Private Placement Memorandum relating to the particular investment. Access to information about investments with projects undertaken by Roers Companies LLC, Roers Companies Project Holdings LLC, or any of their respective affiliates is limited to investors who either qualify as accredited investors within the meaning of the Securities Act of 1933, as amended.