Property Management
Maximize on-site opportunities for capturing residents and rebuilding revenues. Sometimes it takes a season or two to adjust to new field conditions. While a recovering marketplace brings opportunities for the multifamily industry, it also brings a whole new set of property management challenges–from revamping current leasing strategies to rethinking marketing techniques.
“One of the biggest challenges in property management that I see in 2006 is reprogramming our staff to deal with improving markets,” says Bill Donges, president and CEO of Atlanta-based Lane Co. “You have to work really hard to make sure your leasing people and your service people are dealing properly with the improvements in the marketplace.”
To prepare for the year ahead, multifamily firms are retraining employees on how to lease apartments in an environment where residents are willing and financially able to pay more in rent each month for added amenities and services. “There will be opportunities [in 2006] to capture enhancements to your revenue, but if you aren’t marketing your property properly, you are not going to be able to take full advantage,” says Mark Fogelman, president of Memphis, Tenn.-based Fogelman Management Group.
So Fogelman is teaching his staff how to capture a higher rent level by selling based on location and amenities, instead of on price alone. But simply retraining your staff will not be enough, Fogelman adds. His company plans to implement a commission structure to encourage employees to sell higher rents.
Companies also are teaching leasing agents how to be more proactive in initiating sales, which is especially important as apartments continue to compete with condos and low interest rates in 2006. So next year, expect to see more leasing agents approach potential prospects, instead of the other way around. To drive traffic to its doors, Village Green Cos., a Farmington Hills, Mich.-based company, encourages its sales team to meet with local employers and retailers on a weekly basis. The company is taking more of a hotel salesperson approach, says George Quay, the company’s president and COO. “If you are a salesperson in a hotel, your primary responsibility is finding accounts that need hotel rooms,” he says. “We have taken that to the apartment industry.”
But the biggest marketing push in 2006 will be Internet advertising. After all, the Internet is now the No. one source of traffic for the majority of multifamily firms. And a strong 2006 will allow companies to invest more in their Internet capabilities, such as offering online leasing. “Customer interaction over the Internet will be the big focus going into ’06,” says Tom Toomey, president and CEO of United Dominion Realty Trust, an apartment REIT based in Richmond, Va. “You have to be able to complete all phases of your business cycle [online], from attracting them, to leasing to them, servicing them through work orders, collecting their monthly rent, to ultimately the move-out.”
Expect to see more companies add manpower to help run their Internet advertising efforts, as companies are quickly realizing that Internet marketing isn’t as easy as it may seem. One of the biggest challenges: responding to prospects’ email in a timely fashion. Lane Co. recently hired two employees whose sole responsibility is to answer inquires sent by email. “Our goal is to be almost instantaneous in responding to an inquiry,” says Donges.
–R.Z.A.
Insurance
Brace for even bigger insurance hits. The financial impact of Hurricane Katrina, one of the deadliest storms to strike the United States, will be hit hard well into 2006. The storm, which hit the Gulf Coast in August, caused more than $100 billion worth of damage, with an estimated $14 billion to $35 billion of insured property affected. For many multifamily owners, these devastating losses translate into higher insurance premiums for 2006.
Apartment owners with properties located in areas with exposure to hurricanes, flood, and earthquakes, such as the Gulf Coast, can expect to see insurance premiums skyrocket by as much as 30 percent, says Eric Schake, executive vice president at insurance broker Willis Group, based in New York. “It will be even more significant or severe if they actually have a loss,” Schake says. “We have seen some substantial increases already.” There is some good news: Insurance rates are only expected to increase minimally for properties that are not located in storm-prone areas, Schake adds.
As the insurance industry faces strong pressures to pay back the astronomic losses in the Gulf Coast, insurance providers will likely become more selective in terms of which companies they are willing to underwrite. “It’s the double whammy,” says Dirk Wakeham, president of LeasingDesk Insurance Services, an insurance provider based in Irvine, Calif. “The losses take capacity out of the system. … You couple that with the fact that companies now don’t want to be there anymore, [and] it could get a little dicey.”
But property owners shouldn’t feel helpless. There are steps they can take to mitigate high prices. An important step: Be prepared. Insurance companies want to deal with owners who have clear systems and procedures in place in the event of a natural catastrophe, advises Schake.
Mid-America Apartment Communities, a Memphis, Tenn.-based REIT, takes this advice to heart. The company retains a proactive approach to risk management and loss control throughout its entire portfolio. “All that we can do to continue to minimize the event of losses for whatever reason, the better off we will be when it comes time to renew our insurance,” says Eric Bolton, chairman and CEO of Mid-America. The company stresses the importance of educating residents on safety issues, such as banning grills on balconies and demonstrating the proper use of fireplaces. Plus, whenever damage does occur, the company is quick to address the problem and minimize any further loss.
Mid-America is also taking a second look at its acquisition strategy in light of Hurricane Katrina’s devastating effects. “We are spending a lot more time being very thoughtful about where we buy properties,” says Bolton. “We fortunately don’t have anything on the waterfront or on the coast, and I would probably be somewhat reluctant to buy something directly on the water at this point.” With insurance premiums rising, there’s no need to tempt fate.
–R.Z.A.