Experts Offer Advice on Property Repositioning
Owners of older Class B or C properties don’t need to spend a lot of
money to attract tenants willing to pay higher rents. They can reposition
their properties at a reasonable cost and realize a good return by following
a few simple guidelines.
Speakers at housing conference panel titled “Competitive Repositioning
Strategies” provided some essential pointers on the repositioning of
assets from an owner’s perspective.
Andrew M. Chaban, HCCP and CEO of Princeton Properties Management in
Lowell, Mass., moderated the panel. The participants included Carol
Levey, CEO of Levey Enterprises Inc./I.T. Partners, San Diego; technology
expert Larry Kessler, CEO of the InteliCable Group, Mt. Pleasant, S.C.;
and landscape architect David Hawk, president of Hawk Design, Inc.,
in Boston.
Tips to follow
The panel members recommended that owners bear the following things
in mind when repositioning their properties:
- Make market-driven decisions. When rehabilitating a property, owners
should be doing cost-benefit analyses at every step of the process
to make the best use of their rehab dollars. In the words of Chaban,
“Never lose sight of market data … pull yourself away from your own
taste.”
- Spend on infrastructure first. The funding for rehabilitation is
a one-time opportunity, so owners need to prioritize. The money should
go toward addressing “issues of functional obsolescence” before anything
is spent on cosmetic alterations to a property.
- Do your market research. Owners can’t know what their residents
want until they’ve done market research. The first step is to define
a current resident profile and a target profile, to determine what
kind of tenants owners wish to attract. Surveys and focus groups need
to be conducted with both existing residents and target demographics
to ask what they’d like in their apartments.
- Define a brand identity. Marketing campaigns need to be thought
out from the beginning in order to attract the target profile. Before
doing anything else, owners should settle on the components of their
brand identity plan – what kind of public relations and advertising
they want to do, and what kind of logo, colors and design they want.
- Set up a relocation plan. A certain percentage of tenants won’t
want to stay in a repositioned property because of affordability or
lifestyle issues. Owners need to have a relocation plan in place in
order to protect their reputations. This may involve working with
nearby competing properties and/or relocator services.
- Don’t set leasing teams up to fail. Many times owners will need
to bring in de-leasing and leasing teams to help with the relocation
of tenants. These teams need to be informed and educated about the
owner’s expectations from the start. They need to know how to present
the message to tenants, what to say to the press, and so on. Without
this kind of training, the leasing teams are being set up to fail.
- Talk to your construction crew. The on-site management and marketing
team should meet once or twice a week with the construction crew.
Owners need to bear in mind that construction work will be occurring
around existing residents, who will want to know when the crews will
stop working each night and how long the project will take. Frequent
communication between the on-site managers and the construction crew
is essential, so that marketing and construction don’t make different
promises about when things will be ready.
- Know how much your apartments are worth. Owners need to know the
rental dollar value of each feature in their apartments. How much
is it worth to have washer/dryer hookups or DSL in each unit? As part
of this, owners should study competing properties in the area, specifically
within a five-mile radius.
- Assume that each apartment will be used for a home office. If owners
are going to spend any money on rehabilitation, they are going to
have to put in more outlets in each unit for computers, phones, fax
machines and cable and satellite television. Residents are becoming
accustomed to having all of these things, and owners need to be aware
that they are basic demands.
- Don’t make assumptions based on demographics. Contrary to popular
belief, families of lower income spend just as much if not more time
on the Internet than high-income tenants. Studies also show that low-end
demographics also spend more money on cable services (like HBO and
Showtime) and pay-per-view. Owners of B properties should make sure
the units in these buildings are fully upgraded and technologically
capable.
- Create a message with your landscaping. Landscaping can put the
architecture of a property in a pleasant setting. It can be used to
frame and enhance the most desirable parts of a property, or it can
be used to draw attention away from the less attractive aspects. Owners
should think about the impression prospective tenants get on the way
to the leasing office; leasing offices shouldn’t be located out back
near the dumpster. All signs on the property should be clearly visible
and legible.
- Trumpet your accomplishments. Owners should make full use of the
public relations value of rehabilitating existing property. Once a
former eyesore has been renovated, owners should hold a grand reopening,
make sure the mayor is invited for the ribbon cutting. The positive
publicity will prove helpful in the future, especially if the owner
intends to build new property anywhere in the area.
Report details growth in apartment ehab
The National Multi Housing Council provides an exceptionally detailed
look at rehabilitation and renovation of apartments in a report titled
Capital Improvements to Apartments: Projections for States and Metro
Areas. The report predicts an upswing in the rehabbing of older apartments
in the coming decade.
The following observations were among the report’s key findings: Approximately
one of every three apartments is upgraded each year, and seven of every
10 apartments are improved in each five-year period. An estimated 5
million apartments are likely to be upgraded each year from 2000 to
2010.
Properties that are more than 20 years old are much more likely to
be rehabbed than newer properties.
Rehab activity will be concentrated: Half of those apartment upgrades,
as measured by the total number or aggregate spending on improvements,
will occur in California, New York, Texas, Florida, Illinois and Ohio.
Forty-eight percent of the total number of apartment upgrades will
take place in the nation’s 25 largest metropolitan areas.
Kitchen and bathroom renovations are the most common apartment upgrades,
followed by heating and plumbing system improvements.
Apartment owners spend an average of $1,262 per upgrade, far less than
the $10,000 per unit generally associated with a full interior reconstruction.
The NMHC report is available online at http://www.nmhc.org/Content/ServeContent.cfm?IssueID=86&ContentItemID=177
or by calling (202) 974-2354.
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