TUSTIN, CA-Mar West Real Estate founders Craig Stevens and April Buchner have built a substantial and growing business by specializing in a niche within the commercial real estate world that is little-known to many within the industry but is integral to the operation of literally tens of millions of square feet of commercial space. Mar West manages commercial property owners’ associations and operates as a property manager for those associations. The Tustin-based company and its Northern California affiliate Kocal work with 100 developers and manage 225 business parks with approximately 4,000 buildings/units/owners and 50 million square feet of space. To hear Stevens tell it, that’s a pretty good start. He and Buchner have set a goal of tripling the size of the company, and hence have brought in longtime industry veteran John Strockis as president to help shepherd that growth. Strockis calls his new position one of the best opportunities of his lifetime. Stevens, who is irrepressible on the topic of CPOAs (commercial property owners’ associations), talked with GlobeSt.com recently about the importance of good management for CPOAs, the pitfalls of poor CPOA management and Mar West’s ambitious growth plans.

GlobeSt.com: What is the difference between what Mar West does and what a traditional third-party property management company does?

Stevens: Our business sits squarely between something that most people are familiar with―residential homeowners’ associations―and commercial property management companies. What we do, which many people in the commercial real estate industry should be familiar with but are not, is a combination of the two. About 90% of our business is forming commercial property owners' associations with the original developers and their attorneys, bringing them to life and managing them in perpetuity. The other 10% is property management. It's a specialty niche that fits between those two industries, and requires an understanding of California association law as well as an understanding of property management. The reason there is a demand for our services is that HOA management companies don't know the commercial side of the business and commercial property management companies don't know association law. We have made it our business to know California association law cold.

GlobeSt.com: Why is it that most of us involved in commercial real estate never hear about commercial property owners’ associations?

Stevens: Even the most sophisticated developers and investors often don’t understand that they have created a commercial property owners’ association with their development, which potentially poses a lot of problems for them. It could be that three members of the developer's team are members of the association board and don’t even know it because nobody told them. We help the developers hold an election to establish a board from the members of the property owners’ association.

GlobeSt.com: What are some of those potential problems and pitfalls related to CPOAs, both for developers and for property owners who are members of the associations?

Stevens: For developers, typically, the members of the developer's team are members of the initial association board and do not know it because no one told them. Yet, as members of the board, they face huge potential legal and financial liabilities. For property owners, there is a distinct possibility that, 30 days after closing escrow, they can receive a special assessment from the CPOA for something like the cost of repairing a roof, and yet the property owners who receive the assessments didn’t even know there was an association and that it had the power to levy assessments on them. We have seen all sorts of interesting issues crop up in these associations/parks, from associations that were never formed properly, to unfunded/underfunded budgets and reserves, to residential firms running them like HOA’s, to “busted” parks where the lender owns large chunks of the space, to developers who have no idea how to run the mini-government that an association is, to condo conversion problems, to sales transactions being scuttled due to lack of information or disclosure about the underlying association status.

GlobeSt.com: Who makes up the bulk of your customer base?

Stevens: The main product we deal with is planned unit developments, or PUDs. A PUD might involve a group of owners, each of whom owns the building and the dirt under a property of say, 5,000 square feet, but the parking lot, landscaping and the fountain and other areas are owned in common. In the beginning, in the go-go days of construction, we followed developers who were building brand-new business parks, and that's what we've done for the past seven and a half years. The reason that we have brought John (Strockis) on is that we're going to phase two, which is going after all of the old parks that are out there, the tens of thousands of them that are in Arizona, California and Nevada, which are poorly managed or mismanaged.

GlobeSt.com: Where do you see the most opportunities for growth for Mar West in that next phase?

Stevens: There are tens of thousands of older, existing property owners associations that are not being run very well because the association managers don't have commercial experience. That's part of our growth strategy. Another part of it is to help the lenders of the world who are having problems. That's not our core business. Our core business is running these associations for many, many years. We will help the banks during this problem period, but in a few years the lenders will go away when the economy improves, and then we will go back to working with developers on new parks.

GlobeSt.com: And where will that growth be geographically?

Stevens: Arizona, California and Nevada, but we've already been asked to go to Denver, Salt Lake and Seattle. So, when we round this all out, our goal in the next five to seven years at the latest is to be a Western United States company and to triple in size.