Two years ago, Steve Heimler, founder and CEO of Stratus Real Estate in Woodland Hills, Calif., was facing a five-headed monster. To meet the demands of various clients since its inception in 1989, the third-party manager had adopted a myriad of technology. By 2005, it was running five separate property and asset management systems. Areas such as training and support for on-site staff were growing increasingly complex to manage. Worse, Heimler worried whether the firm could maintain consistent practices—and results—across its 23,000-unit portfolio with so many different technologies in use.
“We were on five different systems, and you know what? That doesn't work. That part I'm sure of,” says Heimler, who recently merged his company with CAS Riverstone. To head off the problem, he decided to cut bait and go with a single solution. In March, Stratus completed its rollout of Santa Barbara, Calif.-based Yardi Systems' Voyager property management software across its portfolio.
Yet, while Heimler says he chose Yardi because it was the best system for his firm, he also says the decision to go with a single platform at Stratus—and risk alienating clients using alternate solutions—was much more fundamental than just choosing the right technology. “For me, going with a single software platform as opposed to always doing what the client requests was about profitability,” Heimler says. “The reality is that as a fee manager, if we do everything the same, we make money. If we don't, it cuts into our profit. And I think that's what a lot of smaller shops might not understand, that by trying to be flexible for the client, they're actually cutting into their own profits.”
PROFITABILITY OR FLEXIBILITY? For fee managers across the multifamily industry, Heimler's quandary is a familiar one. In addition to Yardi, Cleveland-based MRI Residential and Carrollton, Texas-based Real Page offer full suites of property and asset management software, while countless other companies proffer “point” solutions for everything from managing Internet leads to electronic rent collection. While technology is becoming more plentiful, getting those systems to talk to one another isn't always easy. The National Multi Housing Council's MITS initiative, which is developing a data standard within the multifamily industry, is attempting to address the issue. Progress is being made on converting data more easily when a company decides to scrap one system for another, but using different systems together on an ongoing basis is still a big challenge.
With increasingly competitive margins in fee management, the decision often comes down to the cold calculus of profitability. “Margins have gotten so tight that you have to be very efficient in terms of streamlining your processes and core systems. From our perspective, it's critical,” says Art Dramby, director of systems strategy at the San Diego-based ConAm Group of Cos., which has approximately 52,000 units under management. “If I'm doing it 18 different ways, my costs to manage and support all that is going to be enormous.”
Yet, return-conscious investors often don't see the situation from that perspective, creating yet another challenge for fee managers trying to satisfy everyone across their portfolio. “Clients usually aren't sympathetic to the fact that you don't know how to use their software as efficiently as your core system,” Heimler says. “It creates a bump in the road early on in your relationship with the client.”
Given these hurdles, many fee managers say they're faced with a single question today when pursuing clients who want to operate on different technology than their own: Is it worth it? “You've really got to look at the value of that account,” says John Rosenberg, a retired partner at Dayton, Ohio-based fee manager Miller-Valentine Group, who now teaches property management at the University of Cincinnati. “If the management opportunity isn't that lucrative, I'd say you have to pass.”
MIDDLE GROUND Others say there are alternatives to turning business away, though, while limiting the multi-platform headaches that you'll face by continuing to offer flexibility to your clients. At ConAm, for instance, Dramby says his firm has developed internal teams who specialize in various systems. When a client wants to operate on a system other than MRI (ConAm's core software), Dramby can deploy a special group of employees trained on that system to those properties. “Companies in the fee management business today have to have more skill sets, and disciplines, to handle and support other systems,” Dramby says. “At the end of the day it's the owner's decision as to whether he wants to stay with Yardi, or RealPage, or go to MRI.”
For smaller fee managers who may not have the resources to create and deploy platform-specific teams, multifamily tech experts say you can ask clients to meet you in the middle by using your preferred technology, but producing reports in the client's preferred format. “You need to ask your clients not to force you into an area you're not good at,” says Rosenberg.