The Cardinal Group of Companies has focused on growing its management platform, while creating a magic touch for troubled assets.
By: Randall Shearin, editor of Student Housing Business magazine
By starting small, taking steady and measured steps forward and challenging the status quo, Cardinal Group Companies has become known for its youthful, authentic and innovative approach to real estate, in particular its student housing communities.
The company, headquartered in Denver, is split into investment, management and construction companies. Cardinal Group owns a modest 3,000 beds in just three markets, after being net sellers the last couple of years, and manages almost 17,000 beds with a presence in 25 states. The construction company leads design and construction management for its investment portfolio and third-party contracts under management. In addition to its student housing portfolio, Cardinal Group has owned and managed nearly 10,000 conventional multifamily units across the country.
The company’s reputation is its trademark. It’s known for embodying a unique combination of being culture driven and innovative, while also conservative and careful about growth. The company has received awards multiple times for clever and sophisticated marketing campaigns and transformative turnarounds of distressed assets. The company has also been ranked by the Denver Business Journal as one of the best places to work in the city two years in a row.
But Cardinal wasn’t always a big business. Four friends fresh out of college — Del de Windt, Alex O’Brien, Eric Frank and Jason Luker — began their real estate journey together in 2004 by investing in single-family homes with capital garnered from friends, aunts, uncles and cousins. They didn’t just casually ask for a couple of bucks — they wrote lengthy private placement memorandums and investment prospectuses. “As Eric Frank used to say, we were hunting field mice with an elephant gun,” laughs de Windt, who today serves as chief executive officer of Cardinal Group.
The four invested their capital first in one home, then in a few homes, followed by small apartment complexes. That continued until 2009, when they decided it was time to turn their attention spans toward larger, institutional grade assets.
On the management side, Cardinal Group’s philosophy has always been to buck the status quo of “the way it’s always been.” After graduating from Stanford University, de Windt entered the real estate world working for a high-end hospitality developer in San Diego where he helped lead a small team of individuals in creating one of the most unique and impressive operating hotel companies in the country. O’Brien was a Captain in the United Stated Marine Corps, who then studied leadership and organizational behavior at the University of Chicago, where he earned his MBA.
The partners’ backgrounds led them to an interesting and innovative place — the way in which Cardinal Group Management structured its organization. The approach is simple and seemingly intuitive, yet bucked the status quo of the student housing industry at the time.
“The role of the regional manager hasn’t evolved in years,” said de Windt. “In all honesty, it’s broken. Regionals are spread too thin and they lack dedicated personnel who intimately know their deals, their markets, the assets’ strategic business plans and the owner’s expectations.”
At Cardinal, the strategy for regional managers is different. Resources and decision makers are close to the deals. Instead of investing in layer upon layer of executives, Cardinal invests at the operating level by building out four-person, dedicated operating teams led by a portfolio manager. The company limits the number of deals that team of four can oversee. This allows Cardinal Group’s portfolio managers — as it calls its regional managers — time to focus strategically on these assets and execute “on the things that actually drive NOI,” says de Windt.
Cardinal’s managers come together each year in Denver, Colorado, for an annual leadership summit.
“Remember the saying, ‘it’s not the strength of the wolf, it’s the strength of the pack’? Cardinal has a pack mentality to operating real estate and it works,” de Windt adds.
In 2010, Cardinal Group embarked on the project that would lead it into the spotlight and demonstrate its savvy for turning around highly distressed properties. That project came in the form of a distressed urban project in Atlanta, MetroPointe Lofts, that served Georgia Tech, Georgia State and several other universities. The five-year-old, 1,214-bed behemoth had incurred more than a bad reputation; it was viewed by students — and the Atlanta Police Department — as an unsafe place to live and even visit. Built in 2005 for over $100 million, MetroPointe was considered Class A at the time of development. After the lender foreclosed on the property, MetroPointe stood at 30 percent leased for the 2010-2011 school year. Cardinal Group came in with an equity partner to purchase MetroPointe for nickels on the dollar.
A $2.5 million renovation followed, which included upgrading amenities, and an unprecedented marketing strategy righted the course of the property’s visual appeal and safety. The name was changed to WestMar Student Lofts and the property was at a staggering 98 percent leased within a year of Cardinal Group’s control. The WestMar project received two 2011 Student Housing Business Innovator awards — for Best Turnaround and Best Leasing and Marketing Program. Today, the property is stabilized and continues to serve students.
“With WestMar, it was an all hands on deck exercise,” reflects de Windt. “We all forwent our summer and lived in the model unit. We literally spent every week there, managing the construction, building our systems and making sure those systems did what they needed to do. And we documented our procedures and policies ourselves as we were going along so that our operating company organically formed one experience at a time. We were trying to build the reputation of our business. The strategy of the heavy value-add, renovation, turnaround plays is one of Cardinal Group’s greatest strengths, and one that we quite frankly do better than anybody else.”
Cardinal Group has grown up in front the student housing industry. As the conventional multifamily sector takes more clues from the student housing sector, Cardinal Group has been called on to implement some strategies for owners of conventional properties to attract younger renters. Now the firm regularly partners with some of the most well known and respected developers around the country to help lead their Class A ground-up lease-ups.
“The conventional owners we partner with are seeing a ton of benefit from our student housing experience. We place an abnormally strong focus on leasing and marketing, it’s in our DNA with student housing and the conventional developers like that,” de Windt says.
Cardinal Group Investments has had success following its residents post-college into major markets and secondary cities that are attracting younger residents.
“You’re seeing this resurgence of downtown urban areas that are regentrifying, where 10 years ago, there were very few businesses downtown and not much investment,” says de Windt. “You’re seeing populations coming back to the urban core, even the Detroits and Clevelands of the world. I’m from Detroit so I’m allowed to say that. Public transportation is coming in and businesses are leaving the periphery and moving back into these urban environments. We looked at that and said, ‘there is a ton of stock here. A lot of it’s been poorly managed by mom-and-pop operators and with our creativity and our construction team we can make a difference here.”
By applying what it has gleaned in student housing, Cardinal has been able to breathe life into that older housing stock again at a strong price point. Applying that to conventional multifamily, Cardinal struck a chord with young renters. The result has become the company’s Mint Urban brand. The company launched Mint Urban properties in Denver, Portland and Austin.
Cardinal continues to grow its presence in student housing as well, mostly with its third-party management business.
Cardinal recently launched its newest venture, Agency Fifty3, a marketing agency focused exclusively on the multifamily sector. “Cardinal Group is always working hard to be on the forward edge of the industry, and I think Agency Fifty3 is the next strategic move for us that is going to keep us at the forefront of this industry,” de Windt says. “The team we have assembled, the digital landscape we are dominating, and the way that we’re approaching strategic multichannel marketing in this industry is truly second to none…and for the record, desperately needed in multifamily.”
— This article originally appeared in the September/October 2016 issue of Student Housing Business magazine.