As rents continue to fluctuate from quarter to quarter, property managers are working hard to keep NOI at its maximum level. At the MFE Conference last week in Las Vegas, a panel of management experts, moderated by Mark Fogelman, president of Memphis-based Fogelman Management Group, offered creative strategies to control costs, find new profit areas, and monitor capital expenses in order to boost NOI.
Fortunately, after a tough couple of years, rents and occupancies are trending upward. “We’ve tried to keep occupancies at 93 percent to 95 percent through concessions,” said panelist Terry Danner, president of Dallas-based Riverstone Residential Group, which manages more than 160,000 units nationally. “Over the past year, our occupancy has gone up 1.3 percent, and we’ve seen a reduction in concessions in all markets except for Las Vegas. Now we’ve seen expenses start to creep up.”
Danner, along with fellow panelists Joy Anzalone, COO of Cleveland-based Burton Carol Management; Paul Diamond, vice president of operations at Irvine, Calif.-based The Bascom Group; and Steve Lamberti, president of Dallas-based Milestone Management Group; said the key to combating increasing expenses is to take advantage of every revenue opportunity possible.
“Every dollar you spend needs to be maximized,” said Anzalone, who reported that her firm, which is focused on B properties, managed to maintain a 2 percent vacancy rate in Detroit. Strategies the firm uses to boost revenue include getting vendor discounts by promising to pay for services upfront and timing lease renewals so they don’t occur in difficult renewal months such as November, December, and January.
Firms also are focused on boosting ancillary services to increase NOI. Burton Carol Management rents its buildings’ roofs to cell tower companies for upwards of $100,000. Through a strict enforcement of resident fees for breaking a lease, The Bascom Group has been able to get an extra $250,000 in revenue. And Lamberti reported that Milestone Management Group has made a significant amount of money through mineral rights, where they are paid for oil and gas leases at certain properties.
The discussion inevitably turned toward technology, and whether technology has yet let to a decrease in on-site expenses. “We thought we’d be able to cut staff because of technology, but that has not been true,” Danner said. “It takes man power to run it and a lot of processes are more simple to do manually.”
That said, the panelists agreed that technology certainly has it perks. For example, revenue management systems have been an effective way to manage lease expirations and ultimately boost rents. Likewise, the shift from print to online advertising is saving firms big bucks. In 2010, Fogelman Management completely eliminated print advertising, saving $500,000 this year and an expectant savings of a whopping $800,000 next year.