The multifamily industry survived the worst of the credit crunch, but executives must now cope with an even bigger hurdle: a sagging economy.
"Experienced and well-organized multifamily companies are still getting financing," says Stephen Blank, senior fellow for capital markets at the Urban Land Institute. "But the prospects of a recession will prompt lenders to be more demanding about leasing, management, and market need on new projects."
David Cardwell, vice president of capital markets and technology at the Washington, D.C.-based National Multi Housing Council, agrees that the industry has not been overly burdened by the credit squeeze, but he points to other looming concerns. These include: declining property values (a plus for those looking to acquire), rising energy costs, and steeper property taxes as local governments target commercial and multifamily to offset declining assessments on single-family homes.
As companies confront these challenges, Cardwell stresses a continued need to monitor costs and improve operations, and he sees plenty of evidence that companies are prepared to do just that. "From talks we've had with CIOs and operations executives," he says, "it appears that the industry intends to hold firm or even expand investments in technology in 2008."
Indeed, operations managers point to a raft of activities to streamline operations -- from outsourcing key services to expanding Web-based platforms and implementing new energy programs.
"We are in the throes of identifying ways that we can streamline our processes and increase service levels to customers," says Kristy Simonette, vice president of business services for Houston-based Camden Property Trust. "It's all about leveraging technology to improve our efficiency."
STRATEGY No. 1: Go Outside
Rightsizing an organization often starts with outsourcing operations, be it funneling leasing traffic through a call center or finding new recruits through an outside vendor.
For Denver-based AIMCO, decisions on outsourcing are constantly being evaluated, regardless of economic conditions. "On outsourcing, our philosophy is that if we don't have sufficient scale to justify a function or service internally, we'll look for an outside partner," explains Jeff Adler, chief property operations officer.
AIMCO now outsources a numberof key services, including move-in services for new residents through WhiteFence, a Houston-based home services vendor; utility payments through ista North America, which also provides the data for rebilling residents; and online recruiting for on-site personnel via an Argentina vendor. AIMCO has also established a partnership with the Disney Institute for developing training programs for staff .
"Outsourcing is very fluid and never a done deal," Adler adds. For example, AIMCO once outsourced its legal work, but brought that function in house three years ago as legal hours mounted."In the process, we cut that cost in half," Adler says.
Call centers are one of the most popular functions to outsource. AvalonBay Properties in Alexandria, Va., is relying on this third-party service to tighten operations at its 180 properties. It deployed an outside call center system in 2007, contracting with Level 1, a Greenville, S.C.-based fi rm used by such industry giants as BRE Properties and Post Properties. As evidence of the 24/7 value of such services, Avalo Bay data shows that more than 20 percent of applicant guest cards are completed before or after regular business hours.
Earlier this year, Houston- based Camden Property Trust completed pilot programs with two call centers. Among the findings: Calls coming in to call centers lasted two and a half times as long as those answered by onsite staff , and lengthier calls typically lead to a greater percentage of leases, Camden says.
"While local leasing managers are busy tending to residents on site, an unanswered call can amount to $12,000 in lost rent over the course of a year," Simonette explains. She expects the company to move forward this year with a call center solution across the company's 180 properties.
Crucial to Camden's call center implementation was its earlier adoption of the OneSite property management software from Carrollton, Texas-based RealPage. Call center personnel have real-time access to unit pricing and availability, and they can then create online guest cards for prospects and set up leasing appointments with Camden's property management staff.
Camden's outsourcing efforts don't stop with call centers. The firm recently contracted with Land's End to outfit its property staff via an online customized catalog. The program is saving the company 20 percent versus handling business attire from the corporate offices. Another money-saver slated for 2008: consolidation of solid waste removal from communities under a single national vendor.
Among its most important outsourcing moves, San Francisco-based BRE has transferred maintenance of its corporate IT network to CenterBeam, a San Jose- based IT company. That deal included a 24/7 CenterBeam call center that supports some 500 BRE computer users. With CenterBeam handling routine computer chores, BRE's internal IT staff can now concentrate on optimizing key internal business applications.
Other multifamily developers are on the receiving end of outsourcing. Through its Strategic Initiatives program, Mercy Housing, one of the nation's largest nonprofit developers, is doing increasing consulting work for organizations that lack affordable housing savvy. Last year, for example, Denver-based Mercy advised Anawim Housing, a nonprofit affordable housing organization in Des Moines, in rehabilitating a former public-housing property.
"Helping nonprofits who lack the expertise in the many dimensions of affordable housing could be one of the big growth opportunities for Mercy," notes COO Dick Banks.
STRATEGY NO. 2: Think High-Tech
Companies also are tapping into technology to streamline processes and improve efficiencies. Among the more popular venues: resident portals, centralized Webbased purchasing systems, workforce management software, and yield management programs.
"In the multifamily industry ... over the that were once used only by large-cap companies are now available for small and mid-cap companies," says Ed Lange, COO of BRE.
Still, the large firms continue to be leaders in technology adoption. Last year, AvalonBay joined the growing list of companies to implement centralized, Web based purchasing systems. The firm uses software from San Francisco-based Ops Technology to streamline the purchasing process by saving local properties the time and expense of handling invoices. In addition, the software gives companies more data for negotiating better contracts with vendors, as well as an effective means for tracking spending patterns at properties.
"Vendors also benefit from this system because you no longer have invoices sitting around on property managers' desks," notes Mona Stahling, vice president of national operations for AvalonBay.
AvalonBay is also rolling out a new resident portal, Avalon Access, hosted by WhiteFence. Besides providing its 150 communities with the usual move-in services for new residents, WhiteFence facilitates online rent payment and maintenance requests.
Among other new strategies, AvalonBay has implemented workforce management software from Kronos in Chelmsford, Mass., to automate time-keeping, as well as bonus submissions and approvals. And the firm recently launched an online learning management platform for employees, offered by CornerStone Institute in Brattleboro, Vt. AvalonBay is also exploring adopting an automated lease package, to save time at local offices by generating the dozen or so documents needed to close leases.
To better manage its portfolio in California, Seattle, Phoenix, and Denver, BRE is also adding more technology to its operational mix, freeing up local managers to focus more time on pricing, customer service, leasing, and maintenance. Over the last three years, Lange says, adoption of new technology has helped the firm eliminate 160 hours per month in administrative and business chores at an average property. Strategies have included steps as small as automating late payment notices to major investments in call centers, Web-based property management, and centralized purchasing through OpsTechnology.
Many other firms, including Post Properties, Mid-America Communities, and Home Properties, are finding that the tough economic climate is a good time to put Lease Rent Optimizer (LRO) software to work. "In soft markets, leasing managers tend to be too quick to offer deals, such as a month's free rent," explains Tom Wilkes, property management president for Atlanta-based Post. "LRO takes the emotion out of pricing by giving you concrete data on rental rates and availability, market wide, as well as information on past trends."
STRATEGY No.3: Manage Energy
For other multifamily firms, the current "tone-up" environment means employing new strategies to cope with soaring utility costs.
Rochester, N.Y.-based Home Properties recently completed a "utility cost recovery" program, involving some 22,000 units, in an effort to transfer payment of water, sewer, and gas bills to residents. On most properties, the company was able to avoid installation of expensive new metering equipment. Instead, it relied on a ratio utility billing system where Home Properties rebills residents based on the square footage of the unit and number of occupants. Savings to the company: $16.6 million in 2007 and an anticipated $20 million in 2008.
Moreover, impact on renewals has been minimal, says Scott Doyle, senior vice president of property management. He attributes this to a strong communications campaign and the company's demonstrated investment in low-flow toilets and shower heads, as well as thermostats that cap temperature at 72 degrees.
Memphis, Tenn.-based Mid-America Communities, whose properties are located in many Southeast areas hard-hit by last year's drought, is ramping up its green initiatives. In Florida, the company has launched a pilot program to reduce turf square footage in favor of plants and ground cover that need less water. It is also installing ETWater's smart automatically adjust watering based on Doppler radar reports. BRE piloted similar technology from HydroPoint Data Systems at two Phoenix properties last year, saving $47,000 in less than three months. Now BRE is rolling out the technology across its portfolio.
"We're past the tipping point on environmental concerns," notes Thomas Grimes, senior vice president and director of property management for Mid-America."Not only do customers want to see us demonstrate a smaller energy footprint, but we're saving our company money as utilities get more expensive."
And saving money is the name of the game.
Larry Maloney is a freelance writer based in Ashland, Mass.
SIDEBAR: IN THE TOOL BELT
Vendors ramp up offerings to help multifamily firms maximize every dollar.
Vendor: CenterBeam (www.centerbeam.com)
Headquarters: San Jose, Calif.
Key Product or Service: Provides outsourced IT services to small and medium-sized businesses, allowing firms to focus internal IT on specialized applications. New Feature: Microsoft Dynamics, a customer relationship management (CRM) software package, will be offered through CenterBeam in 2008.
Vendor: Odyssey OneSource (www.odysseyonesource. com/v2/)
Key Product or Service: Personnel services, including counseling on hiring and fi ring practices and training for on-site staff. Also provides liability insurance, worker's compensation coverage, and the handling of payroll and tax reporting.
New Feature: White paper shows the value of outsourcing non-core HR functions, allowing firms more time for innovative core business activities.
Vendor: OpsTechnology (www.opsxchange.com/ index.html)
Headquarters: San Francisco
Key Product or Service: Software platform streamlines the purchasing process by saving local properties the time and expense of handling invoices.
New Feature: Online request-for-quote and supplierbidding system for renovation projects to be launched this year.
Vendor: RealPage (www.realpage.com/ onesite)
Headquarters: Carrollton, Texas
Key Product or Service: CrossFire Sales and Marketing, a leasing and resident contact software that captures leads, provides information on pricing and unit availability, and serves as a portal for residents to pay bills and request services.
New Feature: A "campaigns" communications tool, which property managers can use for sending automated e-mail campaigns to residents approaching their renewal dates, as well as surveys to new residents.
Vendor: RentGrow (www.rentgrow.com/rgd/index.html)
Headquarters: Waltham, Mass.
Key Product or Service: Resident screening, including credit and criminal background checks, plus additional screening for evictions, sex offenders, and terrorism suspects.
New Feature: A new tool verifi es an applicant's address history.
Vendor: Yardi (www.yardi.com)
Headquarters: Santa Barbara, Calif.
Key Product or Service: Yardi Voyager Residential, a fully integratedrevenue management tool set that lets property owners and manager maximize rents, standardize pricing models, and conduct and analyze competitive market surveys.
New Feature: Open architecture design that allows users to create their own scoring parameters, such as renewal probability, days vacant, comparabler ent analysis, and more.