Outside Influences

Ah, nothing tastes quite like a piping hot, perfectly seasoned Mc Donald's french fry. But who knew such a greasy indulgence could lead to a business plan that would ultimately save a multifamily firm millions of dollars? That's exactly what happened when Ira Locks of Atlantic Housing Partners paid a visit to the Golden Arches.

Locks had read a book detailing McDonald's rise to fame, setting the standard of quality, service, and cleanliness for the fast food industry. He approached a store manager at his local restaurant, seeking ideas for running Atlantic Housing's construction division more efficiently. The manager pointed to the restaurant's prized possession: the french fry machine. Locks saw a series of instructional pictures on the machine, showing how to create the perfect batch of greasy—but not too greasy—fries. Then the light bulb lit up.

“We borrowed the [restaurant's] concept for the way we install our windows,” says Locks, the company's development manager. “We have 40 pictures of how we install our windows. Instead of relying on the typical architectural drawings, which the workforce has a hard time understanding, we went to a pictorial way of telling people how to install things.”

The plan helped Atlantic Housing's workers succeed. The Winter Park, Fla.-based developer has six communities within five miles of the Florida coast, and none of these buildings has had leaky windows despite being hit by multiple hurricanes.

This story just goes to show that you never know where you'll find your next inspiration. You could be at a diner, a boutique hotel, or even a car rental shop when you spot a savvy business strategy in play. In today's marketplace, it's simply not enough to keep your eye on your multifamily competitors, says Steve Hallsey, president and CEO of AMLI Management Co., a subsidiary of Chicago-based AMLI Residential. And if you do, you and your company will miss out. “I think we've gotten very stagnated,” Hallsey says. “We just kept looking at each other, trying to see what Post or Archstone would do, and we never went outside. Then, finally, we all decided there are some great ideas going on out there.”

Of course, extracting new ideas from another industry takes a good bit of creativity and ingenuity. But the extra effort can certainly pay off, says Jim Gilmore, co-founder of Strategic Horizons, a thinking studio dedicated to helping companies conceive and design new ways of adding value to their economic offerings and co-author of The Experience Economy. “If you look at related stimuli, you are likely to get some new perspectives and new ideas, but they are not likely to be truly new,” Gilmore says. “If you go to unrelated stimuli, it's less likely you are going to find some new insight—but if you do, it's more likely to be truly new.”

And multifamily firms are discovering just that. Some of the industry's newest approaches are borrowed ideas, like revenue management systems adopted from airlines and hotels and the switch to commission-based leasing, which is popular in many sales industries. So if you haven't done so yet, it's time to take the plunge and explore the ideas and innovations happening beyond the walls of your properties. Here are a handful of lessons you can learn from five outside industries, be it your local fast food chain or your favorite TV show.

Customers like consistency and quality.

As Locks discovered, one should never underestimate the power of fast food. Fast food often gets a bad rap (and perhaps deservedly so) for its unhealthy offerings, but the multibillion-dollar industry is obviously doing something right. People love chains such as McDonald's and Wendy's because they can always count on great-tasting burgers and fries. “The multifamily industry needs to get the same quality control and consistency of product,” Locks says.

His company's step-by-step pictorials for window installation (modeled after McDonald's french fry machine instructions) are helping to do just that, and all workers, including those who don't speak English, can easily follow the directions. Due to the success of the revamped window installation process, Atlantic Housing Partners now offers similar instruction sheets for other key building components.

Locks, surprisingly, isn't the only multifamily executive to gain inspiration from fast food. Bill Fanning, Southern California division president of Chicago-based Silverstone Communities, can't stop talking about his favorite West Coast burger joint, In-N-Out Burger. “I have been going there for 15 years, and every time I go I am amazed that the quality never changes,” he says. “The people you meet are always professional; I've never had a bad experience. We strive for the same level of quality, customer service, and professionalism.” He attributes much of that quality control to the restaurant's simple menu—a technique his company replicates for the design of its condo units. To make its buying process as easy and flawless as possible, Silverstone offers a standard high-end finish package without customization options.

A trip to the mall offers lessons on marketing and sales.

If you're looking for a cool, high-energy environment, the Apple Store is the place to be. The executive team of AMLI Residential took a field trip to the forward-thinking store in hopes of creating a similar atmosphere at its rental communities. His team met with Apple employees and walked away with several key ideas that the company is now implementing at new properties—namely, how to create a more interactive leasing space. “You don't see anyone behind a desk,” Hallsey says. “We have the leasing agents stand up and be more interactive with the customer.” In the leasing office, prospects can sit at a coffee bar, enjoy a cup of java, and with the help of an agent fill out an online lease or arrange virtual furniture in their prospective unit. AMLI is extending this lively environment to the clubhouse, too. These areas, traditionally outfitted with heavy furniture and dark colors to create a home-like feel, now feature lots of big screen TVs with constant visual entertainment and plenty of big, airy spaces.

The retail industry offers more than just lessons on good looks. To price its units, Village Green Cos. replicates the retail model for merchandise pricing. “If you go into Abercrombie and Fitch, the sweaters that haven't sold are going to be at the front of the store and deeply discounted,” says George Quay, president and COO of the Farmington Hills, Mich.-based company. “The ones that are selling like hotcakes are going to be a little further back, and the price point is going to be pretty high. We look at our apartment communities the same way.”

Village Green prices its units based on a variety of factors such as location, floor plan, and view. An apartment with a fireplace and great view of a park, for instance, will have a higher price tag because of the demand for the unit.

Scot Sellers, chairman and CEO of Archstone-Smith Trust, draws inspiration from another retail tactic: the hiring of quality, part-time employees. “The staffing model in the apartment business is, frankly, pretty old and not terribly thoughtful,” says the executive. “The industry historically uses almost no part-time people, and I believe that's a mistake.” But it's a mistake he plans to correct in the near future. He looks to the popular storage and organization chain The Container Store for motivation. “The store has done a fabulous job of hiring part-time people who are engaged and represent the brand well.”

Show your residents how hospitable your on-site staff can be.

With its many similarities to multifamily operations, the hotel industry is an obvious place to glean fresh ideas—particularly on ways to improve customer service by taking a close look at high-end hotel chains like Four Seasons and The Ritz-Carlton. AvalonBay Communities, an Alexandria, Va.-based REIT, has borrowed a key operational strategy from The Ritz. Similar to the hotel chain, AvalonBay holds weekly meetings at all of its communities where on-site employees can discuss everything from customer service to maintenance issues. (The Ritz holds its meetings after every shift.)

Dig a little deeper into the hospitality world and you'll discover more than a model for customer service. Borrowing from the timeshare concept, Strategic Horizons' Gilmore suggests offering condo residents fractional ownership in a shared ultra high-end home theater room or spectacular kitchen. Sure, someone can put a plasma screen and DVD player in a condo unit, but with a timeshare everyone pitches in, making top-of-the-line equipment financially feasible, explains Gilmore. Plus, residents don't always have the space for such deluxe amenities.

The hotel industry also offers innovative training models. Quay, who worked for hotels before switching to multifamily, participated in Hyatt's signature training program and introduced a similar program at Village Green Cos. Hyatt recruits graduating college students for a two-year training course in which they are exposed to all facets of the business. “They develop a great in-house bench of talent and are never in a crisis position for mid- to top-level management, which I thought was very impressive,” Quay says. “Coming to the real estate business, it seemed like a crisis every time a property manager or a leasing consultant left.”

Not any more. Village Green hires recent college grads who, then, participate in a six- to 12-month training program, where they get a taste of leasing, property management, risk management, maintenance, and more. “They are well-trained and flexible so as we have growth opportunities, we have a bench of people we can promote,” says Quay.

Who would have thought a ZIP code could say so much?

Move over, “Beverly Hills, 90210.” There's a new hot ZIP code: Atlantic Station, 30363. Atlanta's trendy live/work/play community was awarded its own unique ZIP, and the project's developer intends to make these five digits as memorable as the old stomping ground of Brandon and Brenda Walsh. Atlantic Station's marketing campaign casts the development as an address that's unparalleled in the city. The numbers 30363 are splashed across the Web site and other marketing materials with hip images of people and places.

“The idea of creating our own ZIP code was about identifying a truly authentic address that is such a dynamic, unique, and fun place to live that you could really picture the next hot hour-long show on Fox being ‘Atlantic Station 30363,' like ‘Beverly Hills, 90210,'” says Brian Leary, vice president of design and development for Atlantic Station.

PERFECT PARTNERS

Leary doesn't just turn to pop culture for marketing techniques; he uses the entertainment industry as a barometer of success for his projects. For the past fifty years, the American Dream was defined as owning a suburban house with a two-car garage and white picket fence—as shown on a variety of television shows like “Happy Days” and “Family Ties,” he says. Now more people are flocking to a place in the city, thanks to the popularity of shows like “Seinfeld,” “Friends,” and “Sex in the City.” Case in point: Atlantic Station is filling up fast, with nearly 2,000 units occupied. (It's expected to house nearly 10,000 people over the next 10 years.)

Take a scientific approach to your business.

Lane Co. has two employees with black belts—but don't expect them to break out with Jackie Chan moves anytime soon. They hold black belts in Six Sigma, a data-driven approach typically used in the manufacturing industry for eliminating defects in a process. ( The concept became widely recognized with Jack Welch's implementation at General Electric, demonstrating that such a process could work outside the production line.) Taking a cue from Six Sigma, multifamily firms are looking closely at process control systems.

Lane Co. is already seeing big results. The Atlanta-based company mapped out its process for delivering monthly financials to its properties' owners. “I spent a lot of time in [the] property accounting [department] and learned how they produce the financial statement,” says Elizabeth Pickworth, Lane's director of project management who was Six Sigma-trained at Georgia Tech. “I put together a huge process map of what that looked like.” The mapping process, which includes both human and computer analysis, revealed several inefficiencies and redundancies in the company's current procedure, allowing Lane to reduce the time it takes to deliver the reports to owners from 20 days to eight or nine days.

Berkshire Property Advisors, the operating arm of Boston-based The Berkshire Group, turned to the Six Sigma concept to maximize its return on investment through value-add real estate. “To create the value and exit appropriately and systematically, you've got to create an organization that is much like an assembly line,” says Frank Apeseche, CEO of The Berkshire Group.

Berkshire's “assembly line” includes all the key people involved in the rehab process, from the acquisition team to property manager, who look at a potential acquisition together to determine if it's a solid choice. This model derives from the Japanese variation on the car assembly line, where workers would walk down the line together, explains Apeseche. “We are trying to break down isolated silos and put together integrated teams to think about assets.”

Having trouble finding ways to breathe new life into your communities or operational strategies? These forward-thinking stores just might spark a few ideas.