To say the folks at Greenbelt, Md.-based Bozzuto Management were busy in the first quarter would be an understatement. The company added about 3,200 new units to its management portfolio in the quarter.
About 20 percent of those additions were expected, with the opening of three new properties in the Washington, D.C., area. But Julie Smith, president of Bozzuto Management Co, says the other 80 percent of the additions were through property takeovers with the company either replacing existing management or its clients buying new properties.
Smith took some time to talk with Multifamily Executive senior editor Les Shaver about these additions and what she’s seeing in her East Coast markets so far this year.
MFE: Are you seeing a lot of management replacements now that the market has improved? What's driving this?
SMITH: They’re looking at this period we’re in right now as an opportunity to regain some asset value. The most effective way of doing this is through increasing rents and occupancies. In most of our markets, the occupancies have been stable for the past year. It’s really growing rents. They’re also looking for a pretty aggressive approach to marketing, which would include electronic marketing programs, strong social media platforms, and good energy and sustainability programs.
MFE: How long do you think this strong rental run will last?
SMITH: I think the run could be good. It will be impacted by supply and where it is. Our ability to raise rents will be based on our residents’ ability to pay more. If there’s no wage growth in the market, at some point we will peak. No one really knows when that will be. Wage pressure will continue to be a challenge.
The other thing that could really impact the run is just consumer sentiment towards home ownership versus renting. Appreciation aside, we’re almost to the point where it’s cheaper to own than rent. Flexibility and mobility, particularly as it relates to employment, is weighing heavily on people’s minds. Just basic confidence in job security is also going to play a big role in how long this run lasts.
MFE: With possible federal government budget cutting in the Washington, D.C., region, you can’t really control what happens here as an apartment owner. What can you control?
SMITH: You're right. We don’t know what’s going to happen. You have to pay very close attention to trends and nuances within the communities. Are you seeing a lot of move-outs from people buying homes? Where are they buying? Are you getting friction on renewal programs? Who is moving into the communities? What is the demographic makeup of people who are renting? What are they renting?
There’s a silver lining of people who are planning to rent for much longer than they thought. If they’re going to be a renter, they’re going to live in a larger apartment or find a nicer apartment. They want granite or stainless steel or to move into a new building. Empty nesters are saying, “Wow, I would have rented sooner if I knew how great it was.”
MFE: What growth do you expect for the rest of the year?
SMITH: We have some properties that will be opening up towards the end of the summer and at the end of the year. Growth is not our primary goal. We’re excited when our clients get active. We appreciate the opportunity to continue to extend those relationships. If that means a little more growth than we had planned on, that’s great. Manageable growth is healthy in an organization and creates new opportunities and is exciting and keeps us sharp.
MFE: What are the challenges that arise from having 10 percent growth in the first quarter?
SMITH: We had planned to hire more people. So that was already in our business plan. Fortunately, the properties we added were spread through our geographic footprint. It didn’t put a strain in any particular region. We have been adding marketing people and adding resources to our social media staff and folks to our operations. We knew we would hire those folks anyway. The biggest growth on our team has been in marketing and general operations.