Plan Your Work and then Work Your Plan

Plan the Marketing… Then Work the Plan
Feature, Features, In Focus, Property Management, Property Management
Published Nov 30, 2011

By Diana Mosher, Editor-in-Chief

As the year winds down, marketing plans are being finalized for 2012. It’s time to do some serious thinking about what worked in 2011 and what should get carried forward to 2012. A lot of good marketing ideas get rolled over from one year to the next, but when new ideas come up will the team have the resources and funds to execute them? A proponent of “planning the work and working the plan,” multifamily marketing consultant Kate Good recently shared a number of tips during a webcast “Essential Elements of a Successful Marketing Plan” produced by Multifamily Insiders and sponsored by VaultWare.

In addition to her role as a speaker and trainer, Good also serves as a marketing director and she’s currently working on several properties including a lease-up in Birmingham, Alabama. “Let me tell you, it’s so great to see new construction happen again. I love the sound of a job site. The great thing about a lease-up,” says Good, ” is you really get to start fresh with your marketing and your brand. I like that. Typically you have a bit more money in the marketing budget because you have so many apartments to lease in a short amount of time. So we can investigate some deeper investments in our marketing message.”

But Good also enjoys older properties that come to her with a different challenge. Maybe they’ve noticed a change in their demographics. Or perhaps they don’t have the position they once had, and they want to work on regaining market share… but, they don’t have a lot of money for marketing this year, so they’re looking for low cost/no cost ideas.

Good has plenty of marketing ideas for little or no money. “But those ideas don’t just get implemented without a plan,” she notes. “First there must be a foundation for the entire program; all those ideas that we plug in are great, but first we have to put forth the plan. What is it you want to accomplish and how will you execute it?”

“I truly believe in planning your work and then working your plan,” says Good. “When you plan your work, it makes it much easier to communicate to the entire team what’s going to be the focus and what will be important in the coming year. It’s so important to have that bird’s eye view of the entire year.”

Good points out that marketing is really just the process of observing and gathering information. One of her favorite strategies is “clustering,” a technique she picked up from her former colleague Stephen Covey (author of The 7 Habits of Highly Effective People) while working at Day-Timers. “Stephen Covey is a brilliant mind. One of the things he taught me was that all along—up until the point when you write your plan—you should be collecting. Grab a file folder and write on it ‘my great marketing ideas.’ And every time you run across an idea in a magazine, or see an idea while you’re driving down the street of something you want to do, toss the information in the file. My own folder has things I’ve drawn on napkins and notes I’ve scribbled on scraps of paper.

“Then, when you sit down to write the marketing plan, take each item and start researching and writing and figuring out where it will fit in. This will help get you the energy and momentum which I think is so helpful,” says Good.

The challenge Good hears so many times when working with property managers across the country is that they don’t even know if the marketing plan is worth the effort to write because what are the chances they’ll get the money to execute the plan. She notes that the resources requested have to be directly related to the business goals of the apartment company. “Whenever I can justify that in my marketing plan, it’s not hard for me to ask for the dollars that I’m going to need. It becomes very worthwhile.”

Good adds, “Never go to an owner and say I want to try this and it’s going to cost $35,000 dollars. Instead, say ‘I need 12 leases and here’s how I’m going to do it.’ Your entire marketing plan should support that business goal. I’m not saying you can write a $4 million dollar marketing plan, and expect that you can get approval. You have to value engineer that marketing plan. But the end result of your marketing should always be about profit to the property and how to help the business thrive.”

Making Concessions

By Christopher Hosford, Contributing Editor, MultiHousing News

Economists are now proclaiming that the recession may be over, just as rental occupancies and rates in some markets are beginning to rise cautiously. Better days may be just around the corner for the apartment industry. And yet, concessions and incentives remain the order of the day. Be it one or two months of free rent or heavy-duty giveaways such as flat-screen TVs or cruises, concessions and incentives are baked into the leasing equation. They’re the unavoidable fact of leasing in an up, down or sideways market, the albatross that seem to be hung around the necks of leasing agents everywhere.

“What’s interesting to me is, renters understand the lingo now so much more than they ever [did],” says Lesa LaRocca, president of Tempe, Ariz.-based Trilliam Residential Communities. “Now, they shoot right to the bottom line with, ‘What’s your net rent?’”

LaRocca says it’s still common to see banners outside apartment communities with such come-ons as, “Three months free rent, $99 move-in.”

“That’s the lowest I ever saw, a $99 move-in, until I later saw a $29 move-in,” she says. “It was actually funny. I mean, how much lower can you go?”

LaRocca says the syndrome is partly fed by pricing transparency; with the Internet, every community’s rates and advertised concessions are available for all to see, and with the economic downturn, all renters are cost-conscious. But with the slight upturn in the economy, and better community performances in certain areas, LaRocca is seeing a shift in how the game is played.

“Once you get down to a manageable inventory, you’re able to play it a little differently,” she says. “Now, instead of making blanket concessions across the board, you might apply one free month to just one floor plan with only a couple of apartments to rent, and reserve two months free rent for the rest of the floor plans.”

Nevertheless, LaRocca notes, the blanket approach remains common, in particular in those areas still suffering. In some sectors, such as Arizona, whose renter base has been decimated by harsh immigration laws, some communities aren’t even requiring security deposits.

A double whammy

Even in healthier geographic areas, the double whammy of concessions and incentives continue to play a vital role. The trick may be in knowing how to package them.

“The best thing to do is look at the goals of the community’s owner, the current market and competitive conditions, and see what you can do,” says Kate Good, a marketing solutions strategist and professional speaker for the apartment community. Good indicates that for communities that are truly suffering—with, say, 70 percent occupancy—straight concessions could prove ruinous.

Instead, she suggests, communities might consider an intriguing variation. “For one community, I just did a coupon book worth about $1,000 or one month’s rent,” Good says. “The individual coupons were worth $30, and the tenant could decide how many coupons to use per month.”

Good says the coupon idea addressed residents’ sense of fear. “Some people want that first month free, and that’s great; they can cash in all the coupons at once,” she says. “But we give them the flexibility. Being in control eliminates fear. The coupon book gives them control.”

Good says once the program became popular, her client started to pull back its value a little, to $600. “People still like it,” she adds.

Sale or sail?

Besides rent concessions, other incentives remain popular in encouraging new leases and increasing resident retention. One of the more popular is free cruises.

“The perception [is that] cruises are much more expensive than they really are,” says Doug Dinnsen, account executive at AIM Cruises. He notes that five day/four night sailings are typically “valued” at $1,798—what many might call the “suggested retail price.” But because of volume pricing and the inevitable vacancies that occur on any ship, apartment communities can purchase cruise certificates from vendors such as AIM for as little as $140.

Dinnsen says his packages offer an 18-month window for the resident to take advantage of a free cruise, so the renter doesn’t have to book his vacation right away.

“It’s not magic, but it is a compelling offer, and at least it’s helpful, depending on the marketplace,” Dinnsen adds.

Another company offering cruise packages to the apartment industry is Cruise4Two. Shawn Sarnecki, the company’s director of marketing, says that with the right demographic, and at the right time, the free cruise offer can be effective.

“I just had a struggling student housing property in Alabama run ads offering free cruises for the first 50 prospects that toured the property,” Sarnecki says. “After the 50 cruises were given away, they then offered the same promotion if the prospect signed a lease. As a result of the incentive, they leased 166 beds in February.”

Sarnecki doesn’t advise his apartment community customers to eliminate concessions in favor of cruises, but rather to offer both in tandem.

But are these evil twins absolutely necessary to the leasing process? If concessions and incentives must be part of the plan, which they usually are, here are some issues to keep in mind:

■ Amortized concessions. Communities should consider whether or not to amortize concessions over 12 months, which—instead of providing the one or two months of free rent up-front as intended—essentially reduces each month’s rent by the total concession, divided by 12. The upside may be an incentive for the resident to stay for the entire lease, rather than jumping ship after the short concession period. There are also downsides.

“The result with this amortized concession is net rent, ” says LaRocca. “When you take the entire amount and divide it by 12, the discount is taken every single month, and when you do this, the renter is so used to paying the lower rate that he’ll resist going back to market rates.”

One way to avoid this is when renewal time rolls around, indicate to the renter that the unit will return to market rates, but offer another month free, to help ensure the renewal and get the community out of the cyclical amortization situation.

■ Incentive choices. When offering, or blending in with concessions, some form of incentive, consider what form it might take. While the free cruise is popular, other options may be more attractive, such as upgrading countertops, or giving away flat-screen TVs, iPods and iPads.

“We had this fun scratch-off game where the renter could win a cruise, TV or Flip video camera, along with discounted rent,” notes Good. She adds that, because of sweepstakes rules, the offers could not be linked to an actual “purchase” (that is, a signed lease).

“Yes, there was a little bit of risk,” Good says. “But there was only one case—we gave away a Wii video game system—where the person didn’t rent. All the other items were used as closing tools.”

■ Leasing vs. Retention. An incentive often is most effective when renewal time comes along. The reason: When a renter is moving in, his main concern is about a change in his life, whether it’s a new job, marriage or school term. Taking a vacation isn’t top-of-mind at that time.

“But for resident retention, the renter is now stabilized and more likely to take that cruise right away,” says Dinnsen. Year-round displays about such a renewal incentive, posted in community rooms and leasing offices, can get people thinking long-term about renewing, he adds.

■ Staff training. Perhaps the biggest, albeit hidden, aspect of the concession/incentive game is making sure the leasing staff knows what it’s doing.

“Leasing professionals in our industry often are transient, and they’ve been educated to lease using concessions,” notes Tami Siewruk, head of consultancy at Multifamilypro. “Those people need to be retrained to offer concessions only under the right circumstances. That can be a difficult process.”

Metro DC Remains a Top-Tier Apartment Market Performer

by Greg Willett

The greater Washington, DC area was one of the few spots across the country where the apartment market made it through the 2008-2009 time period without taking much of a hit. Revenue loss, taking into account shifts in both occupancy and effective rents, was limited to about 1 percent in the nation's capital, compared to an average decline of nearly 8 percent for the U.S. as a whole. Given that performance during the downturn, it's no surprise that DC is among the metros leading the charge now that momentum has returned for the country's overall apartment sector.

What really stands out looking at apartment market results in the Washington, DC area as of mid-2010 is the return of considerable pricing power. Measuring change on a same-store basis, effective rents jumped 3.1 percent during 2nd quarter, taking growth during the first half of the year to 3.9 percent. Prices are up meaningfully across every neighborhood in the region, with especially strong lifts registering in both the North and South Arlington County submarkets, plus the city of Alexandria.

Greater DC's apartment occupancy rate as of June stood at 95.3 percent, up 1.2 percentage points so far this year. That climb reflects that the market posted demand for more than 9,000 units during 2010's initial half, compared to completions totaling a little more than 3,500 units.

An important factor to consider when evaluating the outlook for the Washington, DC apartment market is that this is one of the few spots across the country where new development deals still pencil out on a fairly broad basis. Thus, some new starts continue. Ongoing construction at 2010's mid-point totaled about 5,200 units. DC soon should rank as the nation's most active building market, since recent leaders Dallas/Fort Worth and Houston are poised to drop down the list.

That flow of additional product in Washington, DC, while certainly not notably aggressive in the big picture, does point to a somewhat competitive leasing environment at the top of the market. Thus, while occupancy and rent growth should prove quite healthy, greater Washington might not realize the total revenue increases that are on the way in locales like San Jose, Denver, Austin and Raleigh — spots that have been beaten down but now are well positioned for pronounced recoveries.

Apartment Rentals Surge in U.S. on Foreclosures, Jobs

July 27 (Bloomberg) -- U.S. apartment landlords are seeing a surge in rentals as mounting foreclosures reduce homeownership and an improving job market for young adults encourages them to find their own places to live.

The number of occupied apartments increased by 215,000 in the 64 largest U.S. markets in the first half, according to MPF Research. That’s almost double the units added in all of 2009 and the most since the firm began tracking the data in 1992. The vacancy rate declined to 6.6 percent last month from 8.2 percent in December.

“Demand is pretty stunningly strong in the first half,” Greg Willett, a vice president at the Carrollton, Texas-based apartment-industry research firm, said in an interview.

Investors are betting the expanding ranks of renters will lead to earnings increases next year of about 5 percent to 10 percent or more for apartment real estate investment trusts such as Equity Residential and AvalonBay Communities Inc. UBS AG this month raised its rating on AvalonBay, Essex Property Trust Inc. and Post Properties Inc. to “neutral” from “sell.”

The change signifies a “less bearish” view on apartments, while acknowledging that “headwinds will remain,” according to the July 7 report by New York-based analysts Dustin Pizzo, Ross T. Nussbaum and Derek Bower.

“The apartment REITs have priced in the most growth within the broader REIT group and as such are most vulnerable if the economy slows and job growth does not begin to come through in a meaningful way,” they wrote.

The Bloomberg REIT Apartment Index has gained 28 percent this year, double the 14 percent advance in the broader Bloomberg REIT Index. The Standard & Poor’s Supercomposite Homebuilding Index has fallen 3.1 percent.

Job Growth

The economy’s recovery from the worst recession since the 1930s has revived hiring enough to stimulate demand for apartments. The growth hasn’t been enough to prevent more home foreclosures, which lift rental demand, or to lead to a sustained rebound in homebuying.

New jobs are the biggest driver of apartment occupancy. Employers began hiring again in January, adding an average of 147,000 jobs a month through June, according to the Labor Department. Employment for people 20 to 29 years old -- a key group for landlords -- rose in May and June on a year-over-year basis for the first time since the end of 2007.

While payroll growth has been modest compared with pre- recession levels, it may be enough to have persuaded some families sharing housing with relatives to get their own places, according to Mark Zandi, chief economist of Moody’s Analytics Inc. in West Chester, Pennsylvania.

Bunking With Brother

“Given how hard it is for families to live together for very long, they moved out as soon as they got a job or even thought they could find one,” he said in an e-mail.

Mike Odenthal moved to the New York area in January from San Diego in search of a communications job, sleeping on his younger brother’s couch in the Heights neighborhood of Jersey City, New Jersey. He moved out four months later after the condominium went up for sale, eager to live on his own and not wanting the sight of his possessions in the living room to discourage potential buyers.

“I was tired of depending on my family for housing,” said Odenthal, 27, who also stayed with his parents in Jersey City. “I can’t imagine doing that forever, and all retiring to Florida together.”

Odenthal found a roommate and moved July 1 to Manhattan’s Upper East Side, paying $700 a month for his share of the rent. The next morning he got an offer to work at a New York public relations firm.

Foreclosures Persist

Finances for homeowners didn’t improve fast enough to prevent more than 1.65 million foreclosure filings in the first half, an increase of 8 percent from the same period in 2009, RealtyTrac Inc., a data company in Irvine, California, said July 15. A record 269,962 U.S. homes were seized from delinquent owners in the second quarter as lenders set a pace to claim more than 1 million properties by the end of 2010.

The U.S. homeownership rate fell to 66.9 percent in the second quarter, the lowest since 1999, the U.S. Census Bureau said today. The rate peaked at 69.2 percent in the fourth quarter of 2004.

“As homeownership continues to decline, people need to live somewhere,” said Henry Cisneros, who was President Bill Clinton’s housing secretary from 1993 to 1997 and is executive chairman of CityView, a real estate investment firm in Los Angeles that focuses on urban projects including apartments.

Sales Decline

The rate of new-home sales last month was the second-lowest on record, behind May, following the expiration of a government tax credit for homebuyers, the Commerce Department reported yesterday. Sales of previously owned homes fell 5.1 percent in June, the National Association of Realtors said last week.

“The rental market will be robust for the next few years,” Cisneros said.

Effective rents, or what tenants pay after concessions or breaks from landlords, increased 1.4 percent in the biggest markets in the first half, according to MPF Research. Rents may rise 4 percent to 6 percent in both 2011 and 2012, compared with a gain of about 2 percent this year, Willett said.

AvalonBay, which took a nine-month hiatus from construction in 2009, said in April it had seven communities under development and would increase rents for tenants renewing in the second quarter. It raised its forecast last month for second- quarter and 2010 earnings based on “improved operating trends.”

The Arlington, Virginia-based company’s funds from operations, a widely used measure of earnings, will rise 8 percent in 2011, according to the medial estimate of 20 analysts surveyed by Bloomberg.

Equity Residential

Equity Residential, based in Chicago, has pushed rents up by “high single digits” in all of its markets since January, Chief Executive Officer David Neithercut said in a June 11 interview. Funds from operations in 2011 also will rise 8 percent, according to a survey of 22 analysts.

Landlords won’t be able to raise rents too aggressively because unemployment remains high at 9.5 percent and declines in home prices have made it no more expensive to buy than rent in about half of larger markets around the nation, Willett said.

Buy Versus Rent

In Atlanta, the median home price has fallen 37 percent to $110,100 from the peak in the third quarter of 2006, according to the National Association of Realtors. Assuming a 10 percent down payment and a 30-year mortgage at 5 percent, the monthly principal and interest cost is $532. That compares with average monthly rents of $774 in the city, Willett said.

Riverstone Residential Group of Dallas, which manages 175,000 units in 30 markets around the country, reduced average concessions to about a half-month’s rent from about two months a year ago, CEO Walt Smith said. Vacancies have fallen below 5.9 percent in buildings that aren’t newly constructed, from 8.25 percent last year. Smith said he expects significant rent growth by 2012 as supply tightens with so few new units being built.

“Landlords are cautiously testing the strength of the submarket their property is in to see if the market will withstand small rent increases,” Smith said. “In most markets, they’ve been successful.”

--With assistance from Oshrat Carmiel in New York. Editors: Larry Edelman, Kara Wetzel

To contact the reporter on this story: Prashant Gopal in New York at Pgopal2@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

Targeted Marketing Boosts Leasing

Multi Housing News called a few weeks ago for my comments on the current state of marketing. The article was published in the most recent copy of their magazine. I am pleased to see I am in good company with comments and expertise shared by Lori Snider of Creativity For Rent and Steve Lefkovitz with Joshua Tree Internet Media.

Enjoy the read: http://tinyurl.com/cnv5r8