Orion Haus, a multifamily management company that creates short-term rental-friendly buildings, has added 10 buildings and 1,588 units to its U.S. portfolio in and around Atlanta; Austin, Texas; Houston; Memphis, Tennessee; and Orlando, Florida.
According to Orion Haus, its model capitalizes on the massive growth and demand for flexible housing solutions by renters and alternative hospitality options for travelers.
The deal will potentially help to solve the recent supply issues pointed out last week by Airbnb during its Q1 earnings call, when it said it was lacking in the number of hosts it would need to manage the imminent crunch of travelers coming out of the pandemic.
“Subletting, what Orion Haus calls ‘home-sharing,’ drives significant value for landlords as they continue to seek creative ways to boost net operating income (NOI),” says Scott Liebman, chief financial officer at Orion Haus. “The formula is simple: Orion Haus drives demand, increases rent, increases occupancy, lowers turnover, and increases NOI.”
Multifamily Owners Earn 10% NOI
According to Orion Haus, its properties create 10% higher NOI through a combination of increased traditional long-term lease income with high hotel revenues. Orion Haus manages the multifamily communities, integrates its technology and operations to provide hotel-style services to residents and guests, and sells additional convenience items such as boutique shampoos, lotions, and candles.
This transaction gives Orion Haus the opportunity to serve its resident wait list of over 15,000 renters, who are ready to sign 12-month leases at its home-sharing communities, says the firm.
Home-Sharing vs. Master Lease
Orion Haus now sits just below Sonder in portfolio size for short-term rental inventory. Sonder was valued at $1.3 billion in June 2020 and is planning to go public via SPAC at a $2.5 billion valuation.
Orion Haus has a materially different business model than Sonder. “Orion Haus is not a master-lease apartment-hotel company,” Liebman says. “Orion Haus is an entire-building system that enables home-sharing for all residents, allowing residents to create personal income and building owners to see double digit increases in NOI.”
Its business model inspires resident retention based on them experiencing the high level of revenue they earn from their sublets. For example, should a resident’s 12-month lease expire in June, once they see the potential advance rental bookings they could prosper from July through September, they are more inclined to renew that lease—another boon to the owner.
“When a renter sees that they have $7,000 in bookings in the months following their lease renewal—they renew,” Liebman says. “The national average for turnover is 52%, but Orion Haus anticipates only 35% churn. This reduction in turnover combined with a reduction in vacancy, rent concessions, and marketing costs saves our building owners as much as 62% each year.”
The 10 new communities that will be managed by Orion Haus as part of the overall transaction are located throughout the Southeast and Midwest. Florida’s Fort Lauderdale and Tampa Bay/Clearwater; Charleston, South Carolina; Charlotte, North Carolina; Dallas; and New Orleans are among the markets that comprise Orion Haus’ prospective location list for 2021 and 2022—of which Orion Haus has over 8,000 signed and verified pre-lease agreements.
The Orion Haus Experience
Residents can post their available units as they wish—overnight, weekend, or extended stay, and with the support of their on-site concierge team.
Orion Haus technology supports residents’ home-sharing efforts by publishing listings, providing photography and messaging automations as well as digital lock access to guests, and alerting the Orion Haus housekeeping team when a guest checks out.
Orion Haus also staffs the properties, delivering home-sharing support to residents and guests, a role Alysha Vogler plays as a concierge director.
“We’re there to support the residents and their guests,” Vogler says. “We help them to learn the most effective ways to post their home-shares. And when the guests arrive, we’re there to welcome them, offer them a beverage, help them with their luggage, and get them settled comfortably.”
Vogler says she has a friendly solution to most any rebuttal a resident might make if they are resistant to the home-sharing concept.
“If they tell us that they are worried the guests are going to damage their fine china in the apartment, we send them a link to a simple locked container to keep those valuables away from guests,” Vogler says. “If they say they’re uncomfortable about guests sleeping on their furniture, we explain the cleaning processes, and show them their revenue potential.”
Per-night home-sharing lodging prices vary based on seasonality and supply and demand, but in her apartment community in Nashville, studio and one-bedroom apartments are priced from $500 to $800 per night on average; and three-bedrooms in April went for $999 to $1,200 per night, Vogler says.
Flexibility in Home-Sharing
Residents who choose to home-share have options. They can sublet their full apartment when they are away or make available just a room or two in their larger apartment homes. Orion Haus says others choose not to home-share.
Orion Haus plans for rapid growth in its portfolio and brand. The branded namesake is used for its luxury communities, but the Orion Haus operating system can work for any class of apartment buildings, and even smaller beachfront multifamily communities.
“We are looking for immediate deal flow in the Southeast,” Liebman says. “We could easily fill 25 empty buildings this year.”
