by Mike Fickes

Over the past six years, Frank C. McDowell, president and chief executive officer of San Francisco-based BRE Properties, Inc., has overseen the final stages of the company’s transformation from an old-line REIT with industrial, retail, office and multi-family assets into an aggressive operation focused solely on high-end, multi-family properties in eight western states. Under McDowell, BRE has grown from 5,200 apartment units to more than 23,000; total market capitalization has increased from $500 million to $2.4 billion; total return to shareholders has surpassed 100 percent.

McDowell’s success in the multi-family world arises from a zeal for customer service. To hear him talk, you might think BRE’s tenants form an extended family.

Portfolio: What does customer service mean in the multi- family business? Honoring a lease, sure. But what else?

McDowell: Many multi-family owners do believe that residents will sign a lease, move in, and move out relatively quickly. If that’s what you think, then all that’s required is to honor the lease. We believe residents have a choice. A year from signing the lease, they can choose to move or stay. We want them to stay.

Portfolio: Are you saying customer service can sell lease renewals?

McDowell: We own high-quality properties, which are by no means low-price alternatives. Our customers choose to pay for a high-quality home, and we don’t accept the premise that they are likely to leave in a year. We believe we’re in a customer- service/customer-satisfaction business.

Portfolio: How does a multi-family REIT develop a customer-service agenda?

McDowell: Customer service means delivering valuable services to tenants. Some are amenities included in the rent. Some are available for additional fees. The key is to measure the services that drive customer satisfaction.

Portfolio: And how do you measure that?

McDowell: For the last 18 months, we’ve used J.D. Power and Associates to survey our customers and report on customer satisfaction. We have a lot of data now, and we’ve learned a lot about what drives our customers’ decisions.

Portfolio: What does this data tell you?

McDowell: The numbers are confidential. But these studies improve our ability to attract residents and to lower our turnover rate.

Portfolio: Do these studies challenge conventional assumptions about attracting and retaining tenants?

McDowell: Yes. Conventional assumptions about why people rent apartments do not show up in these surveys. Rent, for example, is not a first or second consideration among our customers. It’s more like eighth or ninth. The top of the list includes feelings, like a sense of well-being within the community.

People use a different set of issues in choosing whether or not to renew. The biggest issue here involves maintenance. There is a striking difference in the retention rate between residents who say they have never had a problem and those who say they’ve had one or two problems.

Portfolio: How does your turnover rate compare to the industry average, which is in the 70 percent range?

McDowell: We tend generally to be in the low to mid 60 percent range. At the moment, we’re a little higher because of a spike in the numbers in the Bay Area seen by all multi-family owners.

Portfolio: Do you live in an apartment?

McDowell: No. But about 20 percent of our customers rent by choice, not necessity. They have chosen not to own a home but to rent with us. That percentage will grow dramatically as people my age, 53, get older. I think that the next 10 to 15 years will become the best demand-driven time period that the multi-family industry has seen in a generation.

Portfolio: Then perhaps you’ll soon begin to think about living in an apartment?

McDowell: Maybe, but not yet.

Portfolio: How do you spend your time outside of work?

McDowell: I believe strongly in education, in our industry and beyond our industry, and I sit on boards for two educational institutions. One is the Fisher Center for Real Estate and Urban Economics Policy, at the University of California. The other is an independent entity called Centerprise. This is an unusual non-profit organization focused on education and training for the next generation of management in real estate operating companies. Real estate has always been transaction driven and Centerprise has focused on developing managers for real estate operations.

Portfolio: But what do you do for fun?

McDowell: I’m a baseball fan. I root for our two Bay Area teams, the Giants and the A’s. Some people would say I’m a golfer. Many would argue the point. But I do enjoy playing golf.

Portfolio: Golf is a gambler’s game, isn’t it?

McDowell: Gambling is a fun way to keep the game interesting. But I don’t do a lot of it. We might bet on a screwball game that someone in the foursome makes up and no one really understands.

Portfolio: Other hobbies?

McDowell: I enjoy sampling different wines, from California as well as other places in the U.S. and around the world.

Portfolio: Excluding the U.S., what countries make the best wine?

McDowell: My favorite international wines come from Italy, Argentina and Australia.

Portfolio: Greg Norman, the professional golfer from Australia, recently introduced a wine. Have you tried it?

McDowell: (Chuckling). I’m not real interested in celebrity wines.

Portfolio: Where do you go when you need a vacation from the multi-family world?

McDowell: My wife Jean and I—we’ve been married for 30 years—enjoy the Big Sur coast of California. We have a weekend home there, where we spend a lot of weekends.