From left: Andy Wallace, Ron Kutas and Nate Kline are the founders of One Wall Partners, a real estate investment and management firm focused on workforce, transit-oriented housing in northern New Jersey and other major markets. — Courtesy: One Wall Partners
By Joshua Burd
Admittedly, Andy Wallace says there is “nothing fancy” about the name One Wall Partners. As he recalls, it simply came from the address of the riverfront property in Binghamton, New York, where the company launched its first project in 2012.
It’s only fitting. The real estate investment and management firm has quietly built a portfolio of transit-centric, workforce housing properties in northern New Jersey. Its holdings locally have grown to some 40 properties with more than 2,000 apartments, about half of which are in East Orange, and the company sees a continued opportunity to add to its fast-growing footprint in the state and in the region.
It’s not an easy business, Wallace said, but One Wall has executed its plan in recent years by finding areas where it can create value, self-managing its portfolio and staying committed to long-term ownership, which he feels is only fitting for the residents of its buildings.
“It’s very much a hands-on, in-the-trenches kind of work,” said Wallace, the CEO of the Newark-based firm and its roughly 90 employees. “The folks that live at our properties are the backbone of our workforce — a lot of folks live paycheck to paycheck — so we try to do the right thing and treat people in our properties like they should be treated.
“It’s a long-term approach, not the short-term approach.”
The model has served One Wall Partners well since its principals, which include Wallace, Ron Kutas and Nate Kline, met nearly a decade ago thanks to a mutual relationship, forming a trio that now has more than 57 years of combined experience. After successfully launching its project in Binghamton — a mixed-use, historic rehabilitation that created a new student housing complex — the firm crafted the business plan that drew it to northern New Jersey.
With a focus on market-rate, workforce housing within 10 minutes of a commuter train station to Manhattan, One Wall found its “proof of concept” in 2013 when it purchased 25 units at 207 South Harrison St. in East Orange. The city had an abundance of properties that fit the model, Wallace said, while allowing the company to plant a flag in an area “where we could scale within pretty close proximity.”
It would also allow the firm to capture the demographics it had in mind, along with a price per unit that made economic sense for One Wall’s platform. Not to mention that, coming out of the Great Recession, the seemingly conservative strategy provided some level of protection: In the event of another downturn, he said, renters living in luxury, Class A buildings would be drawn to the affordability of a place like East Orange.
“There was always a method to the madness,” said Wallace, who has more than 30 years of industry experience, most of which came as an executive in Colorado.
“We are very employee-centric and are very much here for the long haul to build a solid business and continue to build our portfolio,” he added. “We know we’re going to go through some periods where it’s going to be a little bit slower, but for the most part we’re a long-term hold and committed to what we’re doing right here locally.”
Investment firm acquires 16 apartment buildings for $63 million
One Wall and its investors have followed that blueprint in other cities, largely in eastern Essex County. In 2016, it purchased a 641-unit, seven-property portfolio in Newark and Irvington, seizing a chance to capture the upside in a deal whose sellers “had been trying to sell it for a while and couldn’t quite get the right buyer,” Kutas said.
“And we stepped in there, we bought it, we turned the thing around and were very successful with it,” said Kutas, the firm’s chief operating officer. “I think that kind of put us on the map locally as a group that can deliver on the promise and can actually close a transaction of significant size for this region.”
The firm through late last year had inked some $240 million in acquisitions. When it comes to finding or creating value in its portfolio, Wallace said “you’ve got to buy right to begin with.”
That’s followed by improvements at the property, such as upgraded fixtures and mechanical systems to create better utility and energy efficiency.
“You’re going to get your 3 to 5 percent on your rental income annually,” he said. “The tougher part is the savings piece and squeezing that, but it’s ultra-important. … It all goes into the formula.
“The other thing is trying to make sure that everybody in the buildings (is) happy and that we’re keeping them,” Wallace added. One Wall’s in-house property management and leasing team goes a long way toward achieving that goal.
The company has also grappled with an increasingly crowded market in East Orange, which is drawing more long-term owners and one-off investors, as are other surrounding locales with workforce housing. But One Wall Partners has continued to look beyond the city, while also taking on larger acquisitions as a result of its growth.
Wallace cited Park Square Apartments, a 159-unit complex in Rahway that the firm recently acquired from Roseland Residential Trust, as an example of how that strategy has evolved.
“It makes sense: It’s close and it’s of a scale where you can justify having dedicated on-site personnel,” Wallace said. “So everything is self-contained and you’ve got one team all working together there at that one property. It makes it a little bit easier to manage.”
One Wall Partners acquires 159-unit rental complex in Rahway
Kutas also pointed to the importance of entering a new market with a larger deal. The firm has been more willing to buy smaller buildings in cities in which it was already established, such as East Orange and Newark, but “when we’re going into a new market, I think we look for scale, where it makes sense to start a whole operation there.”
One Wall moved its headquarters to Newark from Manhattan in early 2016, due largely to its growth in and around Essex County. But the company also has expansion plans that go farther south, having recently acquired its first asset in Philadelphia. Built around the 1960s, the roughly 500-unit garden-style property was both undermanaged and in the mold of the company’s other assets — workforce housing that is close to transit and close to an employment center.
The city also provides the value and the scale that is increasingly tough to find in Essex County, and it fits the company’s long-term plan to expand its reach throughout the Northeast corridor.
“We’ve identified the markets we want to be in and Philadelphia was the next in line,” Kutas said. “And this acquisition just made it finally make sense for us to enter.”
In North Jersey, Philadelphia and everywhere else, Wallace said the firm will look to get involved at the community level. For instance, One Wall recently became the East Orange YMCA’s signature partner for youth development, making a major financial commitment for three years to fund sports programs and an after-school science, technology, engineering and math initiative, among other benefits.
“A lot of times when a new player comes into a market like this, because of what’s happened over the years, I think that you automatically get tagged as a carpetbagger,” he said. “That’s not what we are. When we come in, we’re very purposeful for what we’re doing — and we want to get involved and we’re here for the long haul.”
