James Donnelly, Founder & Chairman, Castle Group
In an interview with Invest:, James Donnelly, founder and chairman of property management company Castle Group, talked about the company’s record achievements over the past year, including managing over 200,000 units in Florida, despite facing challenges from recent legislation and economic fluctuations.
What have been some recent milestones and achievements for Castle Group?
We now manage over 200,000 units in the state, marking a record year for us. From the company’s perspective, it has done extremely well, but we have some concerns about our properties as there have been some headwinds this year after a nice 10-year run of tailwinds. There has also been some legislation out of Tallahassee this year that has significantly affected the condo and Home Owner Association (HOA) world. Additionally, with rent finally stabilizing after having increased for so long, concessions are increasing, which is good for renters but challenging for developers.
What impact have storms in Florida had on your business?
Storms are a fact of life in Florida, and they are an increasing concern. We have seen an unbelievable influx of people coming into the state — approximately 1,000 a day. That translates to 300 housing units needed daily, each requiring a property manager. The wealthy are also moving here in stunning numbers due to the lack of income tax. We attract people because of the favorable business environment, no income tax, and the weather. However, there are concerns about whether these benefits will be offset by the impact of storms and this could affect our positive migration numbers.
The implications of the storms are creating an interesting trend in construction quality and mitigation, as well as affecting insurance rates. Insurance used to be stable, but now, especially in condos and multifamily developments, rent is becoming a burden as insurance costs double. On the flip side, there is a whole industry focused on restoration and rebuilding with resilience in mind. Our business has been fortunate — of our 500 communities, only 70 were impacted. We specialize in higher-end, resilient, properties, but many management companies lost entire accounts because buildings became uninhabitable.
What are some strategies to recruit, retain, and train property managers?
A few years ago, Castle Group created the first property management program in Florida in partnership with Nova Southeastern University (NSU). I often use the analogy of a sports team: good teams have a pipeline of talent, but our industry does not have that pipeline. So, we created this program at NSU, which I endowed this year, and it is now called the James Donnelly Property Management and Real Estate Program. It’s now a bachelor’s degree in property management, one of only 10 in the country, and it’s poised to be the best one. I’ve asked competitors to help with the program since we’re all in Florida, and they have been very supportive, as it benefits the industry and elevates the sourcing of talent.
How are you leveraging technology in your business?
AI and machine learning are having a significant impact in the field. For property managers, there is a lot of data related to each property, whether it involves the physical plant or the administrative needs of residents or owners. In the past, if you needed a specific document, finding it was labor-intensive. Now, with AI, you can find data instantly.
Additionally, reporting can be done faster with AI, which is a huge labor saver, though a human still needs to review it. Another major advancement, especially for residents and customers, is self-help tools that allow users to ask questions through a chat function. While AI isn’t 100% accurate, it’s a game changer, especially for smaller requests. AI use cases are transformative, particularly given how expensive labor is.
What is your outlook for the industry over the next few years?
Castle Group is fortunate to be here in Florida, with a great new CEO in Jordan Goldman, and his leadership team paving the way. I am proud that we have been able to transition from the founders to the new team so smoothly, which makes the future bright. A couple of important factors are the passing of legislation in response to the Surfside condo collapse a few years ago, requiring every condominium over a certain age to undergo a study and make necessary repairs to prevent future incidents.
Historically, what would happen is that the condo’s board of directors, wanting to get reelected, did not want to increase maintenance fees, so they would defer necessary maintenance. That can’t happen anymore. This dramatically increases the monthly cost of living in a condo, and when you add the increase in insurance costs and the high inflationary period, many people find themselves unable to afford to live there and may have to move. It is sad, but unfortunately, that is the reality; although it is highly disruptive, it is better for them to move than for the building to collapse.
Because of this, the owners of many smaller, older condos are realizing it’s not worth maintaining the property, so they’re being bought out and the condo building is being redeveloped. This is a win-win, as owners are receiving more than they would from the market because the developer knows how much they can make. This trend of terminated condos being redeveloped will likely continue, as it solves many problems — new assets are created, and owners who would have lost their homes anyway receive more money than expected.
Housing affordability is also a huge issue. This year, the county has passed a master plan for affordable housing – the only one in Florida’s 67 counties. For the county to do this is a big deal, and the Live Local Act and its implications are significant. We are unique in that we are landlocked with very little land available for development.
We also have a half-penny sales tax that we promoted heavily, generating $500 million annually to fund transportation. That is interrelated with affordable housing, as it and transit are closely linked.
