Brad Korman of Korman Communities: 5 Questions

Over the course of five generations spanning 110 years, the Korman family of Philadelphia has helped shape the evolution of residential living.

The firm grew from a local family business into a real estate powerhouse, with a total of 40 properties across the U.S. and in London. 

Originally known as Hyman Korman Inc. in the late 1800s and early 1900s, the firm later became the Korman Company, and now, under co-CEOs Brad and Larry Korman — the company is known as Korman Communities. The current name is one that Brad Korman said gets to the heart of what the business is all about. 

Commercial Observer caught up with Brad Korman in early June to learn more about the family business and the market where the firm first got a foot into the business.

This interview has been edited for length and clarity.

Commercial Observer: What made you want to join the family business?

Brad Korman: I wasn’t always sure this was for me, and yet I’d spend Saturdays going to different properties with my dad. My dad always loved going to the properties on Saturdays, because he could put on dungarees, he didn’t have to wear a suit, and he could look around. My brothers and I would go with him and I would just watch him, and he was so happy. He loved it. It wasn’t work to him, it was fun. He just loved it and I would just think, “Wow, he’s having the best time.”

But, I still thought I wanted to be an attorney. I went to school, and I realized attorneys didn’t get to go to court every day. It was a whole different experience, and I came out and I started working for the family company. 

How did you attack that first foray into the family business?

I went back to school. I went to business school because I wanted to understand what investment bankers do. We’re doing these deals and we’re reliant on just family capital. We were a family business, so you owned the management company, you owned 100 percent of the properties. 

But we were only in Philadelphia, because my father, when he grew the company, said, “I want to be home for dinner every night.” But I found at the time that there were only so many opportunities that were going to be available if you were using family capital and just staying in the tri-state area: Pennsylvania, Delaware and New Jersey.

If we wanted to do more, I wanted to understand what that meant. So I went back to business school, spent some time understanding it, and then came back and said, “We have this plan that we want to grow our business, but we want to grow outside the region, which means the check size for the deals we were going to do in New York, Washington and Los Angeles is bigger than what we were doing in Philadelphia.”

So we started making relationships with institutional capital, and that was really the big change for us 25 years ago. We took what our father did in the basics and really grew from there.

What are the challenges and opportunities that exist in the Philadelphia residential development market?

The challenge for a long time was that it wasn’t considered an institutional market, meaning there were not a lot of transactions, which led to not a lot of new building activity, and really rents were kind of straight. It was one of those markets where people said never too high, never too low, which is great when there’s a bust market. It’s not as great when there’s a boom market. Rents stabilized, and there just wasn’t a lot of new traction. 

But, what’s happened over the last eight years is that institutions have found Philadelphia to be a really solid investment vehicle because you’re in between New York and Washington, our political capital, our financial capital. Philadelphia is a great city, the sixth-largest city, and has a great food scene, great sports teams, you can get to the mountains or get to the beach, there’s a lot of great access. It just didn’t have a lot of corporate growth.

But what happened eight years ago was there was a 10-year tax abatement, which was going to expire in 2021. So where our market was always doing 2,000 new units a year, maybe 3,000 new units a year, all of a sudden you had 24,000 new units earmarked. So it exploded, and new neighborhoods like Northern Liberties and Fishtown became very interesting and attractive, and we had a huge slug of investment.

Did all of that new investment come at a cost?

Everybody seemed to have read the same report, that Philadelphia is having this growth and we should invest here. There was too much going on. We had oversupply for the first time, and all of a sudden a market that was very steady had two months’ free rent. Trying in 2023 and 2024 to absorb 24,000 new units was hard. 

Now, what’s happened is that supply has kind of worked its way through. You’re now coming back away from any concessions. Strong locations like Rittenhouse Square, Washington Square and University City didn’t get a lot of new supply. So certain areas stayed strong, and now people have found that this is a very livable city. It’s a great place to live and it’s manageable. Rents have gone up but are still well below what you would see in other markets. 

In what other markets is Korman Communities developing?

We’ve been very busy with new developments in the last two years.

We completed a lease-up in Santa Clara, Calif. That lease-up was done in four and a half months. We finished a lease-up in Paradise Valley, Ariz., next to Scottsdale. We already had two properties in Phoenix that went through the roof. We broke ground a couple months ago in Denver. We are finishing construction in White Plains, N.Y. And we broke ground last month in Montgomery County, Pa., at Horsham. 

These projects are doing great and we’re excited about them. 

We have properties in Austin and Dallas. We have properties in Tampa that we love, and we’re looking to do more there. We have properties in West Palm Beach, Florida, Boston, New York and New Jersey. We’re looking to grow in each of those markets, and looking at potential opportunities in Nashville, San Francisco and Seattle. 

Amanda Schiavo can be reached at aschiavo@commercialobserver.com.