Cleanliness is not a capital item

My friend Mike Brewer, with whom I worked on two deals in St. Louis, recently wrote a post about "Opening the store" after reading a bad shopping report. The short version is that the secret shopper found several dead bugs in a unit, leading to additional questions.

This is why managers must walk the grounds every day. Photo courtesy of Walter Lim

This is why managers must walk the grounds every day. Photo courtesy of Walter Lim

This called to mind an incident earlier in my career, when I met the VP of Operations for a site inspection. I arrived at the property and found her pulling weeds and leaving a strongly felt voicemail with the landscaper.

All properties, regardless of how bare their landscaping or how lengthy their amenity list, must be walked daily for trash and damage. Leasing routes should be walked beforehand and all model units should be inspected throughout the day. I've run across model units where the sewer backed up, I've found portions of downspouts hidden inelegantly under buildings, I've encountered shopping carts in hallways. Failing to police the grounds and ensure cleanliness never fails to send an unwelcome message to residents and prospects.

Cleanliness is not a capital item.

It's not about the money

In one of the first posts, I described my opposition to concessions. Concessions should be avoided where possible for several reasons:

  • They reinforce price sensitivity and commodity behavior
  • When allocated over a lease term, they harm renewal increases
  • They're unmemorable and cannot be used for additional marketing
  • Concessions are about money and talking about money makes people uncomfortable

In property after property we used other tactics to attract and retain residents, stand out from competing communities, and forge a stronger bond with residents.

We secured the services of Indianapolis' Pike YMCA to provide summer camps, tutoring, afterschool activities, and other services for residents. Summer camps were provided free of charge for all children, leaving them happy and exhausted at the end of every day. While competing properties were offering 1-2 months of concessions, the total cost of the camps and other move in items amounted to half a month of rent.

Just as importantly as savings, securing this resource improved retention, reduced delinquency, and provided a shared topic of conversation for residents, prospective residents, and the site team. The money a resident "saves" from a concession is immediately spent for household necessitites. By contrast, summer camp, classes, and other benefits become bonding points that reinforce a positive image of the property.

Avoiding concessions means conversations about experiences.

Additional Thoughts on Knowing Everybody

In an earlier post, "Know Everybody", I wrote about the importance of managers engaging their residents, site team, and contractors. The same benefits that accrue to site managers accrue to asset managers as well.

One of the best aspects of asset managing a national portfolio was the ability to succeed in different markets, to work with different management teams, and to develop stabilization and repositioning strategies. I learned how to schedule capital projects in relation to leasing seasons (more of a thing in the Midwest than in Florida), tailor advertising and outreach to different market segments, and receive the wisdom of experienced operators in their core markets.

At MMA, we brought together our 3rd party property management firms for a two-day summit. We discussed the common challenges of running affordable properties, attracting residents, competing against properties with better amenities or more convenient locations. Most importantly, however, we exchanged ideas -- both successful and those in need of further refinement. Throughout my career, I've placed great value on learning from others and using their knowledge to refine my own ideas. Asking questions, sharing prior experiences, and then continuing the discussion long after the site visit is over are key to successful management.

A throwaway idea in Arkansas turned into a modest program in Kansas City, which then became a blockbuster in Indianapolis. I worked with managers at three firms and three properties to test, revise, and adjust, and then roll out initiatives that reduced my time to stabilize and attract the most desired residents across my portfolio. Those ideas have propagated in the legacy portfolio but also at management companies across the country. They don't have to be original, just better executed than your competitive set.

Know Everybody

This post is part of a series on managers

When I worked in New York, I was tasked with negotiating a buyout of some residents in a loft building. For those whose lives continue peacefully despite not knowing about the Loft Law, it regulates the treatment of residents and improvements to buildings that do not have residential certificates of occupancy.

I'm not sure why I was chosen, but I began by learning the names and tenancy of the residents, looking at the improvements they had made to the building to make it habitable, and discussing their future plans. Some wanted to stay in New York, others dreamed of moving to be closer to children, water, something else entirely. It wasn't completely succesful, I had a few doors slammed in my face, but speaking with the residents helped us understand their viewpoints, and we were able to buyout about 75% of the residents.

I remembered that experience two or three years later when, now as an asset manager, I began my first site visit. Located in Reston, this 200-unit community had a steady resident base, long term site team, and a tucked-away location that relied on word of mouth.

As the manager and I walked the property, I noticed that he greeted everyone by name. The women who sang in choir, the fathers who had returned from deployment, the kids walking home from school. He knew who was late on rent, who was expecting a contractor to stop by, and who needed to see him about a lease renewal. I could throw out a unit number and he would know who lived there and for how long.

The point of this is that if your manager does not engage with residents, they cannot tell you who lives there, what they do, or what they'll do at renewal. It makes managers less knowledgeable, their recommendations less informed, and your investments less effective.

The absence of engagement leads to the presence of surprises.