Peter Lohmann's Podcast
00:39:17 · Peter Lohmann, Dan French
[00:39:17] S0: Yeah. [00:39:18] S1: For rent. So that's our thesis that we are gonna try to put it into that machine. Now when it gets bigger, TBD. And Peter, that's why that's why it's a little... That that's why a lot of people don't. They don't wanna do multiple channels like like we're gonna do. But that's what's gonna separate us from the pack, I think, is that we're gonna take these on because we know how to do it. It's in it's in my DNA to bring them to the company. And also this guy, Steven Wright, who's our chief innovation officer, two decades in multifamily, then we're gonna keep, I think, pushing in some of this multifamily expertise and push out different paths to grow. But other firms are doing the same thing. I think they have the same... The... Some of the same mentality. Now who can execute best is the is the key question. [00:40:02] S0: Totally. Well, I appreciate you being candid about about your unit count dropping a little bit in in... Over the course of 2025. And I know that for a lot of people listening, they're kinda thinking like, okay. It's not just me. Because a lot of people have have experienced that, and and we barely were... We're up over 24... 25, but barely. We net added 29 doors. [00:40:24] S1: Big deal. Yeah. Congrats.
00:40:24 · Dan French, Peter Lohmann
[00:40:24] S1: Big deal. Yeah. Congrats. [00:40:25] S0: So, yeah, we added whatever that is, 5% or something or 10%, but it was tough. I mean, it was, you know, it was scratch and claw your way. It just just get a couple dozen doors added net. Now, of course, gross, we added hundreds of doors because we're churning out. I'm curious about... So you mentioned, you you know, you're private equity backed. I know some of guys at LP First Capital, great company, really like what they're doing. Are you guys in acquisition mode right now? Like, if if... Just if there's anyone listening, you know, are you one of the people they should be chatting with if they're thinking about selling their management company? [00:41:02] S1: Yes. Northpoint that is. Maybe. Absolutely. Yeah. Yeah. Northpoint. Yeah. Yeah. We we would love to talk to you. Yes. We're in we're in big town buy mode. We have a deal that should close in thirty to forty five days. It's it's in the Midwest, not Columbus. It's it's There's no one left [00:41:16] S0: to buy over here. They all got bought by some of the big players except for us. Mhmm.
00:41:16 · Peter Lohmann, Dan French
[00:41:16] S0: to buy over here. They all got bought by some of the big players except for us. Mhmm. [00:41:21] S1: No. It's it's really exciting. So that that's over a thousand doors, that that portfolio. So it's all about... To me, it's it's about how well do you integrate And how well do you do you... The the churn that's been massive in in the industry, especially SFR, like multi hasn't been as exposed. And I have a lot of friends in the property equity space, and that they've told me personally, that's why they couldn't, they couldn't wrap their mind around investing in SFR roll up, you know, property management roll up idea, because of what they call the melting iceberg. When you buy a company, and then it's like, dude, all your, your owners get spooked, everything changes, then they get they get scared, and then they go to the next competitor. And as we know with with our PMA is very easy to leave and go to the next owner. Yeah. So the group that can solve that melting iceberg problem is gonna have massive mass... They're they're gonna become the gray star of our space. They're gonna be the top on the leaderboard, and they're gonna access that power law distribution I've written about. They'll be far and away number one. That's where Northpoint is aiming to be, and we will be.
00:42:25 · Peter Lohmann
[00:42:25] S0: I've been thinking a lot about this melting iceberg problem recently, and I'd love to get your take on some of my recent thoughts on it. So first thing is when you buy a property management company, you need to understand that in normal times, the average property management company is churning 20% per year every year, normally. So what do you think is gonna happen when you buy a property management company? Think churn is gonna go up or down? It's gonna go up. So even if you even if you somehow perfectly executed the acquisition and nothing changed from the perspective of the owner, 20% of the owners you bought, let's say you closed on January first of this year, by December thirty first of this year, 20% of those owners, gone. Gone. You you made a few months of management fees off those owners. And the next year, another 20%. Next year, another 20%. So that's the melting iceberg. And I think buyers need to know this, and they need to factor it into their acquisition. And, also, you should, by the way, not assume that the churn won't change. You should assume it would go up Because when... Just like you articulated, when a when a property management company... When a property owner learns that their property management company that they use has been sold, they're going to take that opportunity to think about, you know, maybe I should just sell. Been thinking about selling anyway. Let me just sell it. Or they're gonna shop around or they'd be like, you know what? Times are tough. I'm gonna... How hard can this be? I'll just manage it myself. So that's a huge challenge for for these roll up groups is this churn issue. And just informally speaking to a bunch of them, it's been brutal. I mean, I talked to a guy the other day who came in and eventually worked his way up to COO at one of these larger groups several years ago, and that company was... It was experiencing double digit churn per month at that company. That's how bad it can get. So... Alright. So a couple other thoughts. I don't think that's anything new, but, you know, in the in the SaaS world, they don't use... They don't look at what they would call logo churn, which is what we look at. That's client churn. They look at NRR, net revenue retention, I think is what it is. And that's like, what percent of your revenue did you retain every year?
00:44:42 · Peter Lohmann, Dan French
And if you're thinking, like, how could those things be different? Well, what they do in SaaS is over time, they roll out new products and new features and they charge for them. So the revenue... What we would call the revenue per unit or actually it's revenue per client goes up every year as they roll out new products, new features, raise prices, they add ACH fees or whatever it is. So even if they lose a certain percentage of their customers every year, the existing customers pay more. And so that net revenue retention could be could be zero or could be slightly increasing even as logo churn exists and and is... You know, could be significant. So what property managers, we have this problem of we only have one product to sell, which is property management. And unless we find a way to upsell our owners on other products and services and features, our our net revenue retention is always going to be negative. So that's another piece of this I've been thinking a lot about, and we talk about that melting iceberg and and sort of the private equity guys who look at this. That's what they're accustomed to seeing. And if we can find a way to separate out unit churn from revenue churn, we're going to unlock a core part of, like, the financialization and institutionalization of our industry. [00:45:59] S1: Deep thoughts, man. I like it. [00:46:01] S0: No charge for that, by the way. [00:46:03] S1: Yeah. Thank you. Thank you. Yeah. Can I? I'll I'll respond to a few of them if that's cool. [00:46:07] S0: Yeah. Absolutely. Please do.
00:46:07 · Peter Lohmann, Dan French
[00:46:07] S0: Yeah. Absolutely. Please do. [00:46:09] S1: Yeah. First of all, I I think that there's many styles of of m and a. Right? And and when I first started, you know, conceiving of the of the idea of, well, how would you do an m and a platform roll up? Well, at first, was thinking, you know, just from straight up in the lab, you know, like the the lab experimental, how would I bake this up if I was just strategizing? I would just change the nameplate day one, you know, change all the systems and everything out, race, race, race, call it, you know, Northpoint. Now you're Northpoint, like, one. Right? Takeover day. But actually having [00:46:41] S0: There's groups who do that, by the way. [00:46:43] S1: I know. I know. Yeah. And we're gonna... Well, that's why I'm differentiating us. We... We're not doing that. And the reason is because I think that the data is is is proof positive that it sounds good in the lab, but in in actual, the field, the execution where where the guts... Blood and guts happens, which is all business, don't do it, man. Do not do that because it freaks out owners. [00:47:04] S0: And the employees too, by the way.