There are a lot of things apartment owners can’t control—the unemployment situation, governmental policies, and the health of their debt and equity partners. But apartment executives aren't necessarily concerned with that. Instead, they are looking internally to see how they could better manage costs at their own firms.
Most apartment owners are looking to cut costs by keeping their residents in units, which eliminates expenditures on turning units. That’s a priority at Memphis-based Mid-America Apartment Communities. “Our main focus is resident turnover,” says Eric Bolton, chairman and CEO of the REIT. “We went into the year with a renewed focus on managing existing residents.”
In fact, sometimes keeping residents happy means not cutting costs in other areas. For instance, Edward Wolff, chief administrative officer at Seattle-based Pinnacle, an American Management Services Co., wants to keep his residents happy, but he also wants to keep costs at a minimum. It’s a thin line. If he cuts staff too much, it could have a detrimental on residents. “It’s more expensive to lose the resident and go through turnover [than cut staff],” he says.
But some residents do move on. Bolton wants to make sure not too many are moving out at once in his communities. “We’re pushing lease expirations so you can avoid having large numbers of units turned back to your staff at once,” he said.
Wolff is also pushing for more efficiency from his systems. He’s done the Yardi Functional Analysis to make sure he’s managing consistently across his portfolio and taking advantages of the system’s capabilities.
In addition, all owners seem to be eyeing costs that can be cut but also have a minimal effect on residents. Owners and managers are finding a wide array of common-sense cuts to make that can boost their bottom line.
Paolo Pedrazzoli, president of Malibu, Calif.-based Sirius Property Management, is making a number of small, yet effective, cost-cutting moves. He’s replaced bottled water on-site with filtered water, monitors his inventories, makes sure he’s using the correct trash bins and has the correct number of pickups scheduled, partially renovates (for instance, replacing carpet in one room versus a whole apartment), puts motion sensors in to control lighting and energy usage, and teaches staff to keep power off and limit HVAC usage in common areas and empty units.
Meanwhile, Bolton is cutting Mid-America’s print marketing budget, incorporating an irrigation system that watches the weather forecast and determines whether to run or not, and is looking at staffing levels. “We’ll evaluate that into next year."
Another hot-button issue among the owners was renter’s insurance. Requiring renter’s insurance can help lower a property’s premiums, but a number of owners didn’t have across-the-board policies. Again, it’s a thin line. Requiring insurance can turn off prospects and residents and potentially increase turnover costs. “We’re going to continue to push it,” said Bolton, who acknowledged the only market he could make it mandatory in was Texas.
Apartment owners may be able to make a more effective cost-savings case with their local governments, where both Wolff and Bolton have had success. “We routinely challenge appraisals, and we have a lot of wins,” Bolton said.