HOUSTON Selecting the Right Strategy Houston is where it really starts to get interesting. Neither in the dire shape like Atlanta nor robust like San Diego, Houston leaves plenty of room for different operating strategies. The list of top performers is diverse and expands beyond the big national companies to include some regional firms.
Equity Residential is producing the largest performance premium generated by any company in the markets examined. Their properties generate revenue more than 8 percent over the norm for direct competitors in Houston. In a few cases, an occupancy advantage registers, but for the most part the revenue premium stems from maximizing rent production.
Similarly, above-average rents play the biggest role in a revenue premium of around 6 percent for United Dominion Realty Trust. A mix of occupancy premiums at some projects and rent premiums at others leads to overall revenue advantages just under 8 percent for Alliance Residential and near 4 percent for Orion Real Estate Services.
Camden The Price Is Right Another top performer in Houston is Camden. Success at Camden’s suburban developments is allowing the company’s Houston portfolio to generate overall revenues more than 4 percent over the performances seen for age-comparable projects in the same neighborhoods. In contrast, no revenue premiums occur among the firm’s class A projects in Houston’s urban core, where large numbers of new units were added to the market and have resulted in intensely competitive leasing conditions.
The right pricing is a key component of Camden’s operating strategy. While the company is still in the early stages of implementing an automated pricing model across its portfolio, an early pilot program revealed key guidelines that are being followed at multiple locations. “We’re avoiding any across-the-board concessions or move-in specials so that discounts are limited just to the units in weaker demand segments,” says Dawn Gaudet, Camden’s district manager for Houston. “Also, we pay close attention to lease expiration dates and try to schedule them at times we know will be periods of heavier renter traffic.”
Helping Camden quantify its performance, the company has introduced a program called the 20/40/5 Plan. The program aims at generating monthly renter traffic that equals 20 percent of a property’s total unit count and converting 40 percent of those prospects into residents in order to achieve a 5 percent vacancy rate. “While this doesn’t necessarily change the way we operate, just putting numbers to the plan keeps everyone focused on the same goal,” Gaudet reports. “Plus, situations that require action are revealed.”
Walden Seasoned Staff Among other top performers in Houston, Walden maintains slightly above-average rent production and slightly above-average occupancy for nearly every one of its 28 Houston area projects studied, attaining the most consistent positioning seen from one property to another among all the portfolios examined. The company’s total revenue premium over key competitors climbs to just above 7 percent.
Where the firm employs an aggressive revenue pricing plan, Steve Lamberti, Walden’s executive vice president, attributes some of this revenue advantage to property characteristics – the firm recently invested significant capital on both exterior and interior improvements for projects that are now about 20 years old. Furthermore, almost all of Walden’s communities benefit from locations along major thoroughfares, Lamberti says.
Walden’s biggest asset in Houston is the seasoned staff that the company has in place, according to Lamberti. “It is a tenured management group as well as an experienced team of on-site personnel,” he says. “There’s a cohesiveness and rhythm that develops when you’re lucky enough to have people who have worked together for a long time. It makes the decision process easier.”
An established routine for Walden’s staff in Houston has not prevented the company from adding innovations to the way the firm does business. The evolution of business practices includes an increasing emphasis on the market’s rapidly growing Hispanic renter audience. Targeting the needs of this group, Walden now is developing after-school tutoring programs at select communities, and the company is advertising in local Spanish-language publications.