Along with sourdough bread starters and fire pits for outdoor happy hours, dog adoption was one of the hottest trends of the pandemic.
Former hedge fund executive Steve Bardack saw a business opportunity in the 69 million U.S. households that own a dog.
Bardack, whose family has owned and operated apartment properties for five decades, is builing an apartment company, Dallas-based Fidus Pet Concierge Communities, by catering solely to pet owners
After finally allowing dogs in apartments, the multifamily industry has mainly worked to attract their owners with “incremental” features, like dog parks and pet washing stations, according to Bardack, the founder and principal at Fidus. With the backing of Dallas-based real estate investor Cypress Equity Investments, he wants to go a step further — by taking a holistic approach to building a portfolio that caters to canines.
At his communities, Bardack is introducing features like doggie doors in units, a private yard for every ground-floor apartment, in-unit cameras to monitor pups, text alerts to residents when Fido is barking and an intercom that allows renters to communicate with a distressed animal. Properties also have services that residents can book on an app, including doggy daycare, grooming and pet walking.
Fidus’s dog parks go even further with stadium seating, shade and lights. “We encourage people to hang out, and we have a whole bunch of programs, like’yappy’ hours, movie nights, morning dog walks and training classes from the local animal services,” Bardack said.
Here, Bardack talks with Multifamily Dive about the drivers behind dog ownership, the best properties to retrofit for dogs and the durability of pet demand.
This interview has been edited for brevity and clarity.
MULTIFAMILY DIVE: What’s driving the increase in dog ownership in this country?
STEVE BARDACK: This is driven by demographic factors. Millennials are having kids later in life. And so a lot of people are using dogs as kid proxies. So that's your major segment driving this.
But, we have a second segment that's also seeing significant growth, which is people that are getting divorced in their 50s or so. They're moving out and they want companionship. There is this robust market dynamic that has created increased dog ownership.
How many properties are you operating?
We have two that were acquired in 2021 right now. I bought the first one with my own capital. And we tested a bunch of vendors and optimized the operations. Then we proved out the business model. We bought a second one in late 2021.
The markets have been pretty cool most of this year. We're not seeing a lot of transaction activity, and there's still a pretty big disconnect between buyers and sellers. And so in this period, we're working with a number of interested joint venture partners and preparing to rapidly expand when the markets do thaw.
What types of properties work best for your model?
We focus on garden-style apartments. We plan to buy communities that are 300 to 600 units, and then we will do a best-in-class, value-add renovation.
We have very different types of yards. Instead of just putting in plain fences, we rip out all the grass and then bring in barriers and put in edging with drainage and animal-safe mulch.
How does your focus on retrofitting properties to be dog-friendly change your underwriting on deals?
We have a few extra features in our business model that ultimately do generate higher margins. And because of that, we do have the ability to be a little bit more flexible in terms of how we look at a deal.
When we're looking at a deal, we're making the assumption that in the first 24 months, we're going to turn over the entire resident base. And so we have to be able to underwrite deals with that in mind. So as we're upgrading the units and we're turning over the resident base in the first 24 months, that's where we have to focus on cash flow and debt covenants.
Are you concerned that if the rental market softens there might not be enough demand for your product?
We're never going to be all things to all people But in DFW, there are over 1 million apartment units. Roughly half of those are high B or A minus. So you’ve got half-a-million units and 30% of those have dogs already. So, 150,000 units already have built-in dog owners.
Plus, we have a significant segment of people who have always wanted to have a dog, and they could never do it without the types of features and amenities and services we offer. The addressable market is so large.
Are you a dog owner? How many?
My girlfriend and I have two rescue dogs. One is an older Golden Retriever/Rottweiler mix, and is approximately 10-years old. The second is a two-year-old Australian Shepherd mix that has a deformed paw. My girlfriend is a veterinarian and she adopted the pup because no one wanted her. She is a feisty one.
Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.