Building a Family Model of Success
Last year, we had the pleasure of introducing Hathaway Development company, a family-owned-and-operated real estate development company headquartered in Atlanta, Georgia. This year, we checked back with this thriving business to see what has changed in 2019.
Founded by David Hathaway thirty-one years ago, the business has grown to have separate divisions, headed by David’s three children: Daniel, Nick, and, most recently, Anna Hathaway Browning. Its projects have been developed in markets across the Southern United States in areas such as Alabama, Florida, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and Texas.
David worked hard to develop, acquire, and build over twelve thousand multi-family units and accrued nearly $1 billion in assets during his time at the helm of the company. It was not always an easy road for this entrepreneurial family, though. In the 1990s, Hathaway concentrated on construction and development, but then, as the recession hit, business slowed somewhat, and the firm was forced to focus more on development.
Once the market started to rebound in 2005, his son, Daniel, took over the construction portion of the company, and according to Nick, carried the ball for the Hathaway Companies for a good three years while the group was emerging from the recession. Nick joined his father and brother in 2007 and dedicated his efforts to the development side of the business.
“As we re-emerged, it was David, myself, and Daniel – each with a third in the development company, and we refocused our attention on in-house deals only,” said Nick Hathaway, Partner and Director of Development.
Over the next twelve years, the three built the business with a small, core team and focused on cultivating relationships with local contractors and repeat partners. Under the Hathaway umbrella, there is the development company – Hathaway Development; the construction company – Hathaway Construction Services; a management company – Provence Real Estate; and a private equity fund – Lynx Capital. In total, around three hundred people work across all divisions.
The company attributes its success and longevity to the fact that its culture has always been a simple one. It does not bite off more than it can chew and over-delivers for every job it takes on.
“We’ve have had the good fortune to get through bad experiences and unforeseeable turns in the corner that we’ve had to back up and re-approach,” explained Nick. “One of the luxuries of having a family office is that there is an element of understanding that no one is doing anything other than trying to serve the greater good, keeping this company alive because we do all live under this one umbrella.”
Nowadays, David is starting to take a step back from the business, and trust that his children will take the company to even higher levels of success.
“We like to limit ourselves as far North as Virginia, and as far West as San Antonio, Texas, and we’ve been in Florida. Post-recession, in 2010, I was tasked to look for underserved markets that have an ability to have a property disposition that meets our yield requirements,” said Nick.
Since then, Nick’s role has been to continue to investigate these markets to see if they warrant a build. “I basically live the area for a couple of nights to see if the site is viable – traffic counts, what it looks like at night, what it looks like in the day, and from there, I start working with locals – anywhere from the Chamber of Commerce to Civil Engineers to Consultants – to see what else is going in the pipeline that might not be reflected in the Planning Department,” said Nick.
“I also look at what is for sale, what is successful and why, and try to create a backstory to justify why we would put $40 million on top of a $3 million pile of dirt, and why it would be worth the risk for the next three years to build and then lease-up.”
Nick’s role presents many challenges, because he needs to help his family overcome pre-conceived notions of markets that he is investigating as potential locations for a new build.
“On my side, being the only one who is looking at first blush, if no one else has seen it, and it’s just me describing it – getting through the verification process takes a little bit of showmanship, a little bit of finesse, a little bit of data reporting, and quite a bit of convincing,” he explained.
The company still tries to maintain a workload of around four major deals per year. Since the late fourth quater of 2018 through now, Hathaway has closed and broke ground on three new developments in different markets – Georgia, South Carolina and North Carolina.
Currently, the company has four projects under construction: The Exchange at Holly Springs – a 316-unit apartment community in Holly Springs, NC, where the buildings are currently being delivered, with the Clubhouse and first building resident ready in December. Then there is Highland Exchange – 276 units in North Charleston, SC – with an anticipated Clubhouse delivery January 2020; Station at Brighton (a partnership with Tynes Development) – a 304 unit community in Grovetown, GA , with anticipated Clubhouse delivery February 2020; and Exchange at Windsor Hill – 312 units in North Charleston, SC – with a scheduled delivery of the Clubhouse in April 2020.
The company is also in various stages of looking at new developments in Atlanta, Georgia; Winston Salem, North Carolina; Myrtle Beach, South Carolina; Raleigh, North Carolina; Charlotte, North Carolina; and Jacksonville, Florida. These projects all range from 300 to 340 units, some of which are a hybrid product that include a four-story rental building surrounded by three single-level units. The company spends a great deal of time with its interior designer and architects to ensure that the inside experience translates to the outside and the amenity areas, so there is a cohesive, compact package for tenants.
“I’ve tried to evolve our product type to where we’ve gone from a traditional three-story garden walk-up in only suburban markets, to being one or two stratas in closer to a larger market, and also offer a full interior-corridor, elevator, four-story product for multi-families,” said Nick. “Our real goal, which seems to be most effective for what we do, is using a hybrid product. We use two, four-story buildings to house about fifty to sixty percent of our unit count and surrounding amenity area, and three to four garden buildings surrounding it that match the aesthetic of the larger buildings.”
The business has also tried to be innovative in other areas. In addition to overseeing all of the third-party construction work as well as the in-house construction, over the last several months, Daniel Hathaway has been working on raising equity. He and his Co-Founder started Lynx Capital, and successfully raised their first Fund (Fund I) through Lynx Capital at just under $35 million. With the majority of Fund I capital allocated to pipeline projects, Lynx is actively working to organize Fund II.
The Fund will allow Hathaway Development to move forward on ground up development projects, and stabilized acquisitions with more speed and agility in addition to identifying quality products from third party developers that fit into the Fund’s risk and return profile. “It will essentially serve anywhere from sixty-five to eighty-five percent of an equity deal, and the intent for that is to lower the cost for some of the individuals involved and allow us to do more deals.”
Their sister, Anna Hathaway Browning, who joined her father and brothers in 2018 after getting her feet wet in commercial real estate law with a large firm in Atlanta, acts as a liaison between the Development Company and the Fund. “Anna works arm-in-arm with Daniel handling the legal aspects, reports and acts as a main point of contact for current and potential investors,” said Nick. “We really enjoy having the injection of youth in the office that she brings.”
Having three siblings all working together also adds another dynamic to the office. “We have a healthy understanding that we can argue and disagree at the office, but we try not to bring that home with us,” chuckled Nick. “You have a little bit of the family dynamic that bleeds into the business world, but I think we’ve been doing it long enough to understand we can absorb a lot of it and translate it back into something productive.”
Over the past year, Hathaway Development has encountered a few more challenges in the industry with regard to municipal regulations. “We have fought more and more with municipalities than we ever have,” said Nick. “From conditional reasons to a right-by-use site plan development to staff level approval. There are challenges in all of them. We are also seeing that the inspections are getting a lot more rigorous. A lot of people are adapting to development at a growth rate that they are not accustomed to and trying to backfill that the best they can, and some of their ways have been counterproductive.”
In general, construction costs and site selection are always an issue and getting more difficult. “The easy-picking ones are gone, and the ones that are great come with some sort of caveat that you never expected.”
Despite any challenges they may face, however – whether internal or external – it is clear that this family knows how to come together and weather the storms of their industry. There is no doubt that they are committed to building a legacy for the next generation of Hathaways to carry for years to come.