Like many great businesses, Associa comes from humble beginnings. John Carona founded the company in 1979 after taking out a loan against his wife’s Datsun. In the years following, the company has expanded beyond its Dallas Texas roots to provide association management services around the country. Today it is the global leader in association management serving over 5 million residents through 190 branch offices in the United States, Canada, and Mexico.
Associa has always been different, which is part of the reason it has been so successful. It was one of the first companies in the industry to utilize technology to improve efficiency and increase the level of service provided to residents. It has employed a robust, yet disciplined, acquisition strategy to increase scale and expand its core mission. And, notably, the company has consistently looked outside the industry for fresh talent to bolster its leadership team and provide new perspectives on how to grow the business.
Patrick Brensinger joined Associa in 2012 after roles at both PwC and Alvarez & Marsal. Initially serving as both Chief Operating and Financial Officer, Patrick has played a pivotal role in Associa’s success over the last 6 years. He currently serves as President and Board Member, focusing his time on strategic prioritization and organizational alignment.
We spoke with Patrick to learn more about his leadership and operating philosophy and walked away with a profound appreciation for his remarkable mindset and management skill.
RJ: Thank you so much for taking the time for this conversation with us, Patrick. We’re excited to speak with you. We’ve had the benefit of learning a bit more about your background as well Associa’s history. However, for those in our audience who are not as familiar with the business, perhaps we could kick off with some background on the company as well as yourself?
Sounds great, RJ. I appreciate your time.
Associa has been around since 1979. It focuses on the residential management space and offers lots of integrated services around that core offering. We’ve completed 150 acquisitions over the last 20 years and are currently managing around 12,000 communities covering 5 million residents. We have approximately 10,000 employees across 190 branch offices in the United States, Canada, and Mexico, and control about $5 billion in purchasing for the communities that we serve. It’s been fun to see the growth.
With regards to my story, I worked at PwC for a number of years in different capacities. I also worked at a company called Alvarez & Marsal. I liked Alvarez & Marsal’s operational heritage and hands-on approach, which exposed me to a lot of different industries. I eventually came across Associa. I got to know the Carona family and began to understand both the fragmentation in the residential management industry, as well as where the company was in its life cycle. It had been an amalgamation of acquisitions in many ways, and I had the opportunity to step in and start putting in place some enterprise-wide concepts, controls, and initiatives that would allow the business to operate in a way where they were “better together than apart.”
I became involved with Associa while at Alvarez & Marsal about a decade ago. Roughly seven years ago, I joined the company and went client-side as the Chief Financial Officer. I did that for a couple of years, and three years ago, I had the opportunity to take a broader view on the business and serve as President and Chief Operating Officer.
It’s interesting, because if you ever geared your career toward being a CFO, it’s a pretty big risk, a calculated risk, to take a broader role and move into operations. In all candor, I found that it actually opened up a lot for me as far as learning with humility and understanding everything that had to happen upstream to get to the financial results we expected.
I have spent the last three years working on a lot of enterprise-wide initiatives to take the company’s performance to the next level. I also work on the key elements of what we need to focus on as a business. Earlier this year, I had the opportunity to hire a fantastic Chief Operating Officer from a hospitality background to focus on our field operations, which has allowed me to concentrate as president more on where we’re going forward as a company.
RJ: Great. One of the interesting things about the company is the market that you are focused on. When thinking about the various types of communities across the U.S. and globally, there is a distinct need for what Associa does. I can only imagine that there are strong tailwinds behind how society and residential living are shifting. Maybe we could hone in on the services that you provide to the various communities and properties Associa serves.
I’ll frame the market first and then discuss how Associa fits into what that market needs. The market is fairly large; there are ~350,000 associations out there in the U.S. market alone. It’s interesting that, in a broader sense, that’s only 20 percent of the homes in the United States. To your point, we are seeing a significant amount of growth in what we call “deed restricted living,” communities where associations are a very present part of the living experience. About 50% of the homes coming out of the ground are being built in deed restricted living areas.
The growth is due to the trends we’re seeing with what folks are looking for in a living experience – they want a more amenitized experience. We’re seeing this with hospitality lines that are adding residences; we’re seeing this in mixed-use communities where more retail and restaurants are added alongside actual residences themselves because people want these things closer to where they live. In the past, individuals sought out these amenities through more of a private club experience. Now we’re seeing much larger communities that subsidize everything from workout facilities to some that even have their own airports. Golf courses are also very common. These are all things that reflect what someone would want in a community close to where they live. Deed restricted living works well because you’re able to help subsidize those assets, those different pieces of the community, by living in an association. We also see lifestyle show up a lot in different generations, where folks want more of a sense of community. They want what we would call “lifestyle directors” or “lifestyle divisions” that are creating more of a living experience in those communities.
Associa fits into this story by providing what we call our core residential management services. If you think about the commercial side, you have Jones Lang LaSalle and Colliers and others who provide these services. However, we’re the largest in the world on the residential side. We provide core management services, including community manager support, that includes the ability to help run different meetings, whether it’s the annual general members’ meeting or the ongoing board meetings. We also help with the financials. As you can imagine, you don’t want to be that board member – that volunteer board member, by the way – who has to go out and collect assessments from their neighbors and cut checks from the association account to vendors. We perform both governance and financial control functions.
We also have different arms that help with everything from more mundane or regular proactive and reactive maintenance tasks, all the way to more emergency event-driven work and restoration services. We have teams that provide insurance brokerage. That team specifically works only with associations, so they bring a deep level of expertise in working on behalf of associations and their boards.
We also do other things that help create a sense of community. Everything from technology, to websites, to other forms of communication that help boards enhance living for residents.
RJ: The history of the company is quite unique. From what I understand, the company was built over time beginning in the late seventies. You also mentioned all the different lines of businesses you’re in. It would be interesting to hear more about how the business has evolved over time, including how it’s different today than it was then. It would also be interesting to hear more about how the company pursues acquisitions. Does it start with identifying certain lines of business that you want to enter, or is it more organic in the way you uncover opportunities?
Associa was founded in 1979 by John Carona. John is someone who has worked throughout his life to support his family. He started at a very young age mowing yards. After graduating college, he started working with apartments. He realized in multi-family that if you do a good enough job, you basically get fired because the investor in that property is going to sell it off while it’s performing well. You could very easily work yourself out of a job.
He received a call from a developer here in the Dallas-Fort Worth market who said, “Hey, I’m going to be converting some of these multi-family apartments into condos. Do you know anything about managing those?” John says his dad always told him, “Figure it out.” So, he said, “Well, sure, I’ll learn,” and he got into it.
He took out a loan against his wife’s B210 Datsun and started Associa as a management company working in the residential space. Most of the initial work was focused on condo units that were converted from apartments. We see cycles of heavy builds of multi-family apartments and sometimes they convert to condos, depending upon the demands of the market. That created an opportunity for John in the late seventies. That’s also what happened more broadly in the U.S. around that time. Associa focused mainly in the North Texas market for the early part of our 40-year history.
It came to a point where John was involved with a group of about a dozen different management companies that were trying to share best practices. He realized they weren’t going to openly share enough unless they had common ownership. They weren’t going to do that unless someone took the first step. He was willing to take the calculated risk and decided to put himself out there and start acquiring. He acquired a majority of those initial dozen management companies over time, which became the basis of Associa
John continues to be involved in the business and enjoys the acquisition activities. In fact, there are meetings today about recent acquisitions that we’re really excited about. The business has grown over the last 20 years through heavy acquisition, with over 150 completed.
To your question on what we look for, it is a great question. We have high concentration in the markets that have the highest number of suburban areas. We find those in places like Virginia, Florida, Texas, California, and Hawaii. We’ve also found great opportunities in markets like Oklahoma and in other areas that don’t have high concentrations of suburban areas, but they offer opportunity because we can bring value to those markets through the broader suite of services we provide. That’s been an excellent experience for us. As we look forward, we are focused on growing our core business of associations we’ve acquired over time, as well as our integrated services that include everything from restoration, maintenance, insurance, and other offerings.
Inorganic growth is certainly a big part of our story, and will continue to be a big part of our story going forward. The way we handle acquisitions has matured over time. As we began to build out our capital structure and bring in new partners, we also wanted to improve our ability to effectively execute on acquisitions. We began to look at the acquisition strategy from what we call a “soup to nuts” perspective. In other words, everything from the very beginning of how we look for and source opportunities.
We have a lot of the most senior and tenured veterans in the industry. They are very well connected and bring us into a lot of opportunities. Candidly, one of the benefits of Associa is its longstanding track record of paying a fair price to the seller and always standing behind our notes related to the way we do our deals. That really helps us in the marketplace as we go out and approach people to say, “Hey, we’re very interested in having your company join our family.”
I say that very intentionally because we realize, for a lot of these sellers that are first-generation owners of their business, that it is really important to them that they achieve a purchase price that they feel properly reflects the value they have created over a number of years. That’s how they can create generational or familial wealth. But they also care about their legacy. They want to make sure that their second family – the folks that have been with them through all these years building their business – are in a good place and are with a company that matches their culture. Meanwhile, because we have a very strong sense of purpose and family at Associa, many of these first-generation sellers identify us as a place to leave their legacy and continue on in their next chapter.
We’re not a traditional firm that uses brokers; it’s our deep relationships and 40-year history that allow us, in a very fragmented market, to identify acquisition opportunities. That has worked very, very well for us; we have a very healthy pipeline of associations throughout the U.S., Canada, and Mexico that we’re very interested in. We go through a due diligence process that is well-structured and allows us to identify on the front end of a discussion some key criteria. We basically have a form that we go through to better understand the key attributes of the opportunity. Once we get through a certain level of due diligence, our CFO and several members of our finance and accounting teams that are dedicated to this part of our growth model will engage to gain a deeper understanding of the business through additional conversations.
We do maintain a level of discretion for purposes of not disrupting the business while we’re conducting our due diligence, depending on the size of the deal. Many of our larger deals, through our credit agreement, rightfully require that we have a third party financial due diligence firm come out and conduct a review. We’ll typically engage with this if we get to a letter of intent stage and we’re all comfortable with the basic terms we would want to pursue going forward. We have a basic understanding and framing of what that would look like and then we go through the process of acquisition.
Our industry is the services industry. We’re not asset heavy, so we value off of a multiple of EBITDA. Based on that, we’re always looking for how an acquisition would fit into our national network and our platform, as well as what other things we can bring to the table that the company is not currently doing. Our scale allows us to bring certain integrated services that an independent management company, who may be doing a good job in the core offering, would not have the resources to offer. That allows us to get a couple of turns off the acquisition multiple to a level representative of what we’re actually realizing. And lastly, I think you all understand the ability to think about valuation for the overall organization with those acquisitions integrated. We look at all those things and make sure everything makes sense.
For the past several years, we’ve also built out a project management office (PMO) that focuses on running our integration playbook. Having done 150 of these, we have a pretty good idea of how to assess where an acquisition may be in terms of technology, leadership, and succession planning, all the way through to what integrated services they currently have or are going to need to offer in the future. Depending on where they baseline compared to where we want them to be, we develop an integration plan that allows us to transition them along over a period of time. This helps us realize additional value from bringing them into our family.
We have seen a lot of different models where companies that are heavily acquisitive look at their core field operations’ regions and think through what you do with an acquisition once closed. You can have your project management team do the blocking and tackling on executing the project plan, but how does it fit within the broader operations team? Our COO and I both believe that Associa is better served to have dedicated regional field operators who work with newly acquired businesses and their teams. We also go through and make sure they learn the secret to our decoder ring. Like any good company, we have our fair share of three-letter acronyms for everything. Newly acquired businesses need to learn how to interact and engage with our teams, the rhythms that we expect, and the operating model that we want to deploy to make sure they’re successful. That could be a year to 18 months, to 24 months of dedicated field operators working with newly acquired businesses to ensure they’re learning how to be successful here at Associa before they would “graduate” into their much larger geographic region. We understand the amount of effort a new acquisition takes; it bell curves on the front end. We make sure we spend the additional time to help them through things with dedicated resources.
I know a lot of companies struggle with questions of, “Do I just let it fall under the larger region once I acquire it?” and “Will I receive the value that I anticipated by doing that or do I need to have dedicated resources?” We truly believe it’s better to have a dedicated team helping them along on the first part of their journey with us.
RJ: It certainly seems like the company is moving at a fast pace in terms of the growth it’s pursuing. There are a lot of moving pieces, given the number of lines of businesses that you have and the number of acquisitions you’re folding into the organization. Your background at PwC and then Alvarez & Marsal is a fantastic one. I presume there was a bit of a transition moving into an operational role? We would love to hear a little bit more about how you’ve been able to find success in your current position. At least from an outsider’s perspective, it seems like a lot to manage and a lot to take on.
Great question. The pace is material; I will confirm that. As far as background and how that parlays into the current scope of responsibility – I’m a big believer in connectedness and that things happen for a reason.
I attended Texas A&M University. While there, I founded a men’s organization. Over the weekend, we had the chance to celebrate 20 years of impacting over 600 lives. While I was at the university, some things happened that have interplayed with what we’re doing here at Associa. There was a big tradition at Texas A&M where every year we would build a large bonfire. In 1999, there was an accident where the bonfire collapsed and unfortunately 12 students were killed and a number more were injured. The importance of that event was that it began to form for me an understanding of being part of something bigger than yourself. It also helped instill the importance of connecting with people, especially during very stressful times.
When 9/11 happened, it opened the door for other student leaders and me to help raise over a quarter of a million dollars for the families of firefighters and policemen. We went back to New York City about a month after 9/11 and were able to give those funds and spend time with those folks.
That led into PwC, where I became involved with the broader forensic practice. I thought, “If you get involved where the fire is, you’re going to learn a heck of a lot.” I certainly did learn a lot in that role. I was able to join the 9/11 Victim Compensation Fund. I spent the early part of my career actually working with firefighter families from 9/11, over 90 of them. I really respected what those folks did, because they ran in when the world ran out. It became very clear to me that if you’re going to leave a legacy, let it be one where you go to where things are difficult, and you make a difference in the lives of others through the things that you can do to help them.
At Alvarez & Marsal, that was even further reinforced by being part of a very operational, roll-up-your-sleeves, get involved type mentality. That has stayed with me; the core values and the things that have shaped me. Also, the ability to come in and take an almost engineering like approach to breaking down big issues into smaller solvable pieces.
How that all rounds out into Associa: I was able to come in and make some level of impact in the CFO suite. I’ll use the analogy of our pillars here at Associa, we have four of them. They start with employee engagement and client retention. Clients that are retained, they promote; when they promote, you grow; when you grow, you make your financial numbers, your profitability. My area of responsibility and scope for the first couple of years here was focused on the caboose of the train. It was the back end of this, which is, if everything upstream happened well, then you achieved your financial results. We went through a period where we were experiencing a little bit of softness. In the earlier years I began to see that there were some things upstream that if we were able to impact and influence, there was significant upside to be unlocked.
A lot of the things that we applied aren’t things that are only relevant to our environment. They’re larger concepts that we brought in from different backgrounds and tried to apply in new ways. We are big believers in things like “Good to Great” and the idea of building up flywheel momentum that leads you to the point of a breakthrough. We’ve just started to see that breakthrough moment over the last year and a half and what that’s done to elevate the company’s performance across our core pillars. We began to come in and say there are things that we can do differently to unlock the potential in the organization and become more than an amalgamation of acquisitions, but to get to a point where we can operate at an enterprise level and be very effective.
We started down this path and it consists of a very clear formula in our minds. The thing we always asked was: first who, then what. It was apparent early on that if we didn’t have leaders who believe in our core values of servant leadership – the way in which we wanted to lead going forward and serve our clients and employees – this wasn’t going to go anywhere far. You needed to have the right people on the bus in the right spots. We spent a significant amount of time three years ago refining not only the operational regions, but also the individuals in those leadership seats.
We pulled a number of very talented leaders into the organization. If you look at the broader macroeconomic picture, we understood that retail industry was under significant attack and pressure from organizations like Amazon. We felt there was an opportunity to pull really talented people from major organizations in the retail space, like Staples and other companies. We began to bring some of those folks in. They had the right core. They didn’t know our industry, but they led with the financial and business acumen that we wanted to elevate in our organization.
At the same time, we began to invest heavily in leadership development. We created what we call our “Up Leadership Program.” We’re in our third year of that now. We began to look for high potentials in the organization and start to invest in them across the pinwheel of competencies that we look for to ensure we had bench strength of leaders that could operate with the rhythm that we expected. Once we began to understand the build out on the leadership level, we started to discuss, “What do we focus on when we have the right leaders on the bus in the right spots?” That came down to what we call our operating rhythm. We focused a lot on the idea that our pillars matter.
There’s a great HBR article out there on the service-profit chain. It was written several years back, but it’s a reaffirmation of the pillars for employee engagement in a service company. We believe that employees that are engaged are 87 percent more likely to stay and they’re 30 percent more productive. When they’re engaged, they create 70 percent of the clients’ experiences – seventy percent. If I have the right leader above an employee who is helping to engage them, that employee is then engaging the client in ways that are meaningful. And they are creating a better service experience for that customer. We saw significant improvements with an engaged employee population, which led to better service to our current clients. Our clients began to refer us and promote us. Since that has happened, it’s created tailwinds in the area of client growth. That client growth has helped us reach new levels of financial performance.
We’ve always felt the rhythm of this idea, what we call plan, execute, measure, and reward. I see a lot of organizations that have the best intentions. There are probably a million things we could all focus on, but once you understand the vital few, having that rhythm focus on the right things is absolutely critical to the organization. You have to plan well, both multi-year and for each year. We began three years ago to create what we call “SOAP.” Not what you take a shower with, we’re actually talking about, “Strategy On A Page.” What we do is define the three to five things that matter to our organization. This ensures commonality among the organization, alignment around what matters and what advances us toward our multiyear goals. Every one of our branches uses a management plan.
We use the “OKR” method which is objectives and key results. It is a very results-driven approach to being thoughtful about, “What do I need to do at the branch level that will help us advance toward our goals for the year, that will help us advance to our multiyear goals, and will be simple and clear enough that we’re all aligned.” We believe that when our employees are focused on the same things, we can accomplish a significant amount together. However, we have to make sure we’re on the same page about what matters.
You get execution and you measure it. We use a number of different dashboarding tools that ingest a lot of data and information. I worry a lot about data blindness, or the idea that you can overwhelm with data, so we try to keep it very simple. We measure things around our pillars to show us that we’re improving. Then we create both short-term incentive (STI) and long-term incentive (LTI) programs that incent performance around those pillars. Thus, the organization sees alignment around our pillars through the operating rhythm.
We create feedback loops with our employees and clients. We have employee advisory boards and client advisory boards. We’re hands-on executives. I like to get out in the field and actually go to board meetings. I do ride-alongs with our maintenance techs and I spend time in skip-levels with our employees and our clients. I feel we need to serve them well and when we serve them well, a lot of good things happen for the organization.
I look at the results we’ve achieved over the last couple of years and I think it’s been the biggest validation of this approach. We have seen our employee turnover drop by 25 percent since 2015. The last two years we’ve earned “Great Place to Work” from our employees. I’m most proud of the second one because they doubled the number of employees surveyed from 2,000 to 4,000, and in one year, our score increased 10 percent, which is significant.
In our second pillar, we dropped our client losses by 33 percent over that same period. And in our third pillar around client growth, we’ve sold over a thousand accounts in the prior year, which is a 43 percent increase from 2015. All that has resulted in an increase in profitability – we’ve doubled our EBITDA in the last several years. It’s been a really good journey this year to see those things come together.
RJ: These are all fantastic insights. The command of the operating principles that you have is tremendous. You’ve been generous with your time. We very much appreciate you speaking with us. We know how busy you are. Thank you again and congrats on all the success to date.
Thank you. I appreciate your time.
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