FCP℠ is a company that has deliberately and routinely transformed itself, successfully navigating two decades of volatility in commercial real estate while honing a winning formula for growth. The key, according to Christopher LoSapio, Senior Vice President for Asset Management, is encouraging the constant flow of ideas. “Innovation comes from the most unlikely of places,” he said. “When you have a spark, you have to keep it alive.”
But FCP doesn’t simply encourage inspiration; it manages it within a carefully defined framework that champions environmental sustainability, affordable housing and community engagement. “Fundamentally, we are in the business of taking older properties and breathing new life into them,” LoSapio said. “We are always looking for new ideas that can help us do a better job at this, both for our investors and our tenants.”
Perfecting Its Business Model
Founded in 1999 by two alums of The Carlyle Group, FCP started modestly, acquiring a portfolio of real estate assets in the greater Washington D.C. region valued at $1.2 billion. In 2008, it gained access to capital and growth as a small fund manager, closing on a first fund of $240 million. Over the next few years, it accumulated properties at recession pricing, gradually expanding its footprint in the Mid-Atlantic, and launching a series of progressively larger funds.
Today, FCP is poised to break out of the East Coast and establish a presence in major real estate markets nationally. It focuses on value-added opportunities at across income spectrum. It depends on its portfolio of naturally-occurring affordable housing properties to generate cash flow and selects high-end projects for appreciation.
FCP purchases 1960s-, 1970s-, and 1980s-vintage garden-style apartment communities that are undercapitalized and undermanaged and repositions them in the marketplace, upgrading the properties quality and improving customer service. Its target is workforce housing that is affordable for people making between 40 and 60 percent of the area median income (AMI).
Additionally, FCP applies this cash flow to the adaptive reuse of often historic, central business district properties into mixed-use, office, or multifamily space. A prime example is the Art Deco 1616 Walnut Street in Philadelphia, just off Rittenhouse Square. Built by the Pew family (which later established the Pew Charitable Trusts), it is listed on the National Register of Historic Places. In 2013, FCP converted the building, then an office building, into luxury apartments. “By complementing the many period details with modern high-end finishes, we created a property that outperformed the market when we sold it in 2015,” LoSapio said. FCP has pursued this adaptive reuse strategy more recently in Charleston, Atlanta, and Raleigh.
Encouraging the Flow of Ideas
As LoSapio suggests, inspiration has played a large part in the company’s success, but that is not an accident. From the very start, FCP has systematically encouraged the exchange of ideas. In 1999, it was among the first companies to adopt an “open” office layout. That openness is not just physical, however, but permeates many of its processes and procedures. For instance, the entire staff is encouraged to attend investment committee meetings and participate in deliberations. “Openness starts at the top but infuses the entire organization,” LoSapio said. “We have found that the more perspectives we have on a decision, the better the outcome.”
Openness at FCP even goes as far as encompassing failure. “If you are going to have an entrepreneurial culture, you simply have to accept failure,” LoSapio said. “Naturally, some ideas fail, but we’ll never know which ones are worthwhile unless we allow people to try them out.”
Ideas that Encourage Energy Efficiency and Support Sustainability
FCP does a particularly good job of framing its search for new ideas with a question. For instance, when FCP purchases a property, one of the first things it asks itself is how can it reduce utility costs. Using ideas from outside consultants and employees, it now routinely installs low-flow shows and toilets, compact fluorescent bulbs, optimal insulation, and energy-efficient hot water heaters, windows, roofing systems and appliances.
But energy efficiency is not the sole motivation for these changes. Environmental sustainability is a key value for the company. “Because sustainability is not an add-on for us, but at the core of our business model, we can have it both ways,” LoSapio said. “Extending the viable life of properties is inherently sustainable.”
The company has been recognized for its efforts. The Global Real Estate Sustainability Benchmark, an organization that validates, scores and benchmarks environmental, social, and governance performance, has awarded FCP a Green Star ranking for leadership in sustainability.
Ideas that Reduce Tenant Turnover While Improving Their Quality of Life
The interplay of business and social goals is evident in another question that FCP poses. Asking how to increase resident loyalty at its workforce apartments and reduce turnover is the operational equivalent of asking what it could do to improve the quality of life for its residents.
Here again FCP found its answers in a series of ideas, each inspired by the previous one. The first was to award each FCP employee eight hours of paid volunteer time annually to work at the nonprofit organization of his or her choice. The enthusiasm that greeted this initiative led to the idea of the entire company coming together once a year and organizing a large charitable event at its communities—and the creation of an employee-led nonprofit, FCP Serves. Capitalizing on ideas from employees, FCP Serves has organized a series of activities, including an annual Empower for School Campaign. As part of this initiative, FCP donates more than 2,000 backpacks filled with school supplies to its residents’ children. In addition, FCP employees distribute toys during the holiday season and donate supplies to local schools.
“FCP Serves is an example of a small idea, gaining traction, and generating additional ideas as it gains momentum.” LoSapio said. Inspired by the example FCP employees are setting, the company’s vendors are stepping up. FCP is working with Capital One to provide credit counseling to community residents to prepare them to weather the holiday season successfully. “Many people don’t understand how to budget their money effectively,” LoSapio said. “We want to make sure that they have the funds at the end of the year to meet all their needs.”
Looking Ahead to the Next Great Idea
FCP’s success over the last two decades comes from its ability to encourage innovative thinking in areas that matter to its business—and it has been fortunate in being able to define this business so that its commercial and social missions are congruent.
It also takes a disciplined approach to vetting them. For instance, one reason that FCP implemented utility tracking software, which aggregates utility information from across its portfolio, is that it enables the company to determine if ideas for energy savings actually produce the expected results. “The secret to our success,” LoSapio said, “is our willingness to entertain new ideas without becoming enamored of them. We operationalize an idea, look at the data, and if it fails, we move on to the next one.”
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