Introduction.................................................................................................................
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113 116
105
147
163
89
50
80
110
140
170
2005 2006 2007 2008 2009 2010
There are a few key factors contributing to the
pos...
62.5%
64.5%
66.5%
68.5%
70.5%
1990 1995 2000 2005 2010
single family residential foreclosures. High
foreclosures have domi...
1997 to 2005 - homeownership increased
1.8 percentage points from 65.7% to a peak
of 69.2%
After 9/11, the U.S. Federal Re...
1,500,861
1,487,696
570,503
> 30 Days Past Due
90 Days +
60 Days
30 Days
816,302
474,713
332,703
REO Default Auction
The c...
2,000
3,500
5,000
6,500
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
2,500
3,000
3,500
4,000
4,500
1970 1975 198...
534
667
877
1,283
323
1990 1995 2000 2005 2010
12%
63%
25%
Echo Boomers
Own
Rent
Relatives
An even greater indication of t...
All indicators point to continued demand for
rental units nationwide. At this point, the
apartment sector continues to lea...
50
100
150
200
250
300
350
400
Jan 1991 Jan 1994 Jan 1997 Jan 2000 Jan 2003 Jan 2006 Jan 2009
The demand for apartments an...
It is obvious to see that what happens next will
be a boom in apartment construction.
However, the real question is not, "...
Leasing offices should be designed to provide a
visual connection from the lifestyle oriented
marketing materials to the a...
to take a successful and well tested hotel based
service model and apply it to the condominium
market. The concept turned ...
The last few years of economic hardship have devastated most sectors in real estate. The hardest hit of
all sectors has be...
Apartment White Paper - What Happens After Next
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Apartment White Paper - What Happens After Next

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Apartment White Paper - What Happens After Next

  1. 1. Introduction.......................................................................................................................... 1 Is the Optimism Justified?...................................................................................................... 2 Credit Crisis and Shadow Inventory.................................................................................................2 Impact of Echo Boomer Generation................................................................................................6 Positive Perception of Renting.........................................................................................................6 What Happens Next?............................................................................................................. 8 Data Summary....................................................................................................................... 9 What Happens After Next?.................................................................................................. 10 Leasing Experience...........................................................................................................................10 Service Delivery ................................................................................................................................11 Conclusion........................................................................................................................... 13
  2. 2. nnn ttthhheee mmmuuullltttiiifffaaammmiiilllyyy aaapppaaarrrtttmmmeeennnttt iiinnnddduuussstttrrryyy,,, eeevvveeerrryyyooonnneee kkknnnooowwwsss wwwhhhaaattt iiisss gggoooiiinnnggg tttooo hhhaaappppppeeennn nnneeexxxttt --- aaa dddeeevvveeelllooopppmmmeeennnttt bbboooooommm... TTThhheee rrreeeaaalll qqquuueeessstttiiiooonnn iiisss,,, """WWWhhhaaattt HHHaaappppppeeennnsss AAAfffttteeerrr NNNeeexxxttt???""" Demand for apartments generally is driven by several factors including job growth, the relationship of cost-to own versus cost-to-rent, age demographics, household formation, household income, overall economic well-being, consumer confidence expectations and governmental policies. Currently, several of these factors are converging to create unprecedented demand for apartments although job growth continues to be sluggish. While the housing crisis has been a drag on the overall economic recovery, it has been the catalyst for a boom in apartment development. History shows us that when demand is forecasted in a sector of real estate, prices rise and cap rates decline, capital becomes readily available followed by growth in development. The apartment industry is experiencing strong demand and new projects are being planned and delivered. The short-term view is optimistic as a result of demand for rentals from defaulted homeowners, increased acceptance of renting and positive demographic characteristics associated with the Echo Boomer generation. With all of the optimism present in the apartment industry, it may be easy to overlook the fundamentals of building a long-term, profitable business model. It is likely that in the next three years, the development boom in apartments will require the need to create a sustainable sales and service delivery model to compete head-to-head with other apartment communities. Will today's developers and management companies be on the forefront of implementing a sales and service delivery model that provides a platform to acquire and retain tenants in a competitive market? The chart below reflects the likely phases associated with the apartment industry with the final phase and path to revenue and profit maximization being the implementation of a superior sales and service delivery model to compete in a potentially overbuilt market. III PPPHHHAAASSSEEE IIIIII::: DDDeeemmmaaannnddd PPPHHHAAASSSEEE III::: HHHooouuusssiiinnnggg CCCrrriiisssiiisss ||| DDDeeemmmooogggrrraaappphhhiiiccc SSShhhiiifffttt ||| PPPsssyyyccchhhooolllooogggiiicccaaalll CCChhhaaannngggeee PPPHHHAAASSSEEE IIIIIIIII::: CCCaaapppiiitttaaalll AAAvvvaaaiiilllaaabbbiiillliiitttyyy PPPHHHAAASSSEEE IIIVVV::: DDDeeevvveeelllooopppmmmeeennnttt BBBoooooommm PPPHHHAAASSSEEE VVV::: CCCooommmpppeeetttiiitttiiiooonnn
  3. 3. 113 116 105 147 163 89 50 80 110 140 170 2005 2006 2007 2008 2009 2010 There are a few key factors contributing to the positive outlook for the apartment industry. The primary impacts include the demand generated from the following three sources which are discussed further in the pages that follow: Credit Crisis and "Shadow Inventory" Impact of the Echo Boomer Generation Positive Perception of Renting The credit crisis effectively shut down credit markets for all sources of real estate funding in 2008. While the tightness in lending standards within the residential sector are well documented, the same was true for the multifamily sector. With a one to two year construction cycle for an apartment community, the lack of funding beginning in 2007 through 2009 dramatically reduced the delivery of new units in 2010. The chart below depicts new Unfurnished Apartment Units per year since 2005. The average number of new units delivered during that time was 122,000 per year with a peak in 2009 of 163,000. The credit freeze resulted in the completion of only 89,000 units in 2010 or a drop of 45%. As the delivery of new units has declined from the lack of available capital, the demand generated from the collapse of the housing market correspondingly began to increase. Beginning in 2009, the demand for apartment living began to improve primarily related to the following factors: Single family residential "Shadow Inventory" Demographic shift related to the Echo Boomer generation Positive perception of renting Historically, rental demand has increased or decreased for a variety of reasons. However, at no time has there been an impact on the scale of the housing crisis that has and will continue to funnel former homeowners into the rental market. The sheer number of people entering the rental market that were once homeowners is staggering. With depressed levels of existing and new home sales, there has been limited ability for distressed homeowners to sell their home and preserve their credit. Consumers with unsatisfactory credit ratings are proving to be a captive market for the apartment industry considering they will be unable to leave the rental market and re- enter the homeownership world for an extended period of time. The impact of lower home sales demand and high unemployment leads to a steady flow of
  4. 4. 62.5% 64.5% 66.5% 68.5% 70.5% 1990 1995 2000 2005 2010 single family residential foreclosures. High foreclosures have dominated headlines and the ongoing impact of "Shadow Inventory" has been addressed as well. However, in order to get a full understanding of the scope of the "Shadow Inventory" and the potential impact on the rental market, it is important to look at the change in the Homeownership rate and the number of distressed homeowners. There is not one single factor that caused the credit crisis and it could be argued that the history of the credit crisis goes back several decades. The goal of several presidents was to increase the homeownership rate in the US to fulfill the American Dream of homeownership. The emphasis on increasing homeownership led to modified, new and creative funding vehicles ultimately increasing the homeownership rate to the highest level on record. However, the credit crisis quickly reversed the trend (as reflected in the chart above) thereby significantly increasing the demand for rental inventory through the current economic downturn. In order to gain a historical perspective on homeownership, the following bullets reflect the change in the homeownership rate for various periods of time along with some factors that contributed to the changes: 1900 to 1940 - homeownership in the US ranged from 43.6% to 46.5% 1940 to 1950 - homeownership increased 11.4 percentage points to 55% primarily due to the return of World War II soldiers encouraged by the GI Bill 1950 to 1975 - homeownership rate increased 9.5 percentage points from 55% to 64.5% 1968 - Government National Mortgage Association (“Ginnie Mae”) was created to provide assistance to Fannie Mae. As part of President Johnson’s Great Society reform, much of Fannie Mae became a privately owned, government-sponsored enterprise (“GSE”) with authority to issue mortgage-backed securities and ensure that funds were available to institutions lending money to home buyers 1970 - Congress authorized Fannie Mae to purchase conventional mortgages and created Freddie Mac 1975 to 1997 - homeownership increased slightly from 64.5% to 65.7% 1977 - the Community Reinvestment Act (“CRA”) was signed and encouraged lenders to issue mortgages to unqualified (low-income) borrowers 1989 - the Financial Institutions Reform Recovery and Enforcement Act (“FIRREA”) was signed and mandating the public to release data regarding banks’ adherence to CRA 1991 to 1993 - the number of single- family home starts jumped 22.6% 1997 - Bear Stearns & Co. launched the first publicly available securitization of CRA loans (guaranteed by Freddie Mac)
  5. 5. 1997 to 2005 - homeownership increased 1.8 percentage points from 65.7% to a peak of 69.2% After 9/11, the U.S. Federal Reserve began cutting interest rates to encourage borrowing and mortgage rates dropped to their lowest level in 40 years The injection of subprime mortgages (loans generally to those with poor credit) into pools of asset-backed public securities and the introduction of teaser rates on adjustable-rate mortgages created a homebuilding and home-buying frenzy 2005 to present - homeownership rate dropped from 69.2% to 66.5% March 2007 - the value of subprime mortgages was estimated to be $1.3 trillion 2004 to 2006 - the share of subprime mortgages relative to total originations ranged from 18% to 21%, versus less than 10% between 2001 to 2003 4Q 2008 - the Federal Reserve and the US government pumped hundreds of billions of dollars into the financial system to prevent wholesale financial panic. Freddie and Fannie, which owned or guaranteed nearly all of the $10 trillion in the U.S. mortgage market, were placed in conservatorship. To put the recent homeownership rate decline in perspective, with every 1.0 percentage point drop in the homeownership rate, 750,000 households leave the home ownership market. Since the peak in homeownership in 2005, that means over two million households are no longer homeowners fueling the drop in apartment vacancy rates nationwide. A drop in the homeownership rate, such as one that has happened in the last few years hasn't happened since the Great Depression and creates a source of tenants that the apartment industry has never experienced. The drop in the homeownership rate is expected to continue with some economists predicting the rate could drop below 60% (5 million more homeowners). The amount of "Shadow Inventory" in the US is staggering and will provide a steady stream of renters over the next few years. Again, this has never been a primary source of business for the rental industry. Since it is a new source of tenants, it may be difficult to predict exactly how many of these former homeowners will rent apartments, but it is safe to say the number is significant. Given the significance of the "Shadow Inventory," the charts on the next page are provided breaking down "Shadow Inventory" into the following three areas : In Foreclosure and Bank Owned Inventory Delinquent Loans Underwater Home Loans While "Shadow Inventory" will continue to drive the dynamics of the single family market, it will also impact the market for rentals. A portion of all homeowners in a distressed situation will likely feed the demand for apartment rentals for the foreseeable future. As a side note, sales of foreclosed or distressed homes represent a third of all single family home sales nationwide. In some markets, buyers are only looking at homes that are either short sales or foreclosures. The price for bank owned or foreclosed homes has been a little more than 30% below non-distressed sales prices. The charts on the next page support a significant number of distressed homes in the pipeline. As mentioned, the apartment industry has never had as many former homeowners entering the rental market. As a result, developers and property managers will need to plan for this type of renter.
  6. 6. 1,500,861 1,487,696 570,503 > 30 Days Past Due 90 Days + 60 Days 30 Days 816,302 474,713 332,703 REO Default Auction The charts to the right highlight the "Shadow Inventory" with the first chart reflecting the number of homes currently In Foreclosure and Bank Owned. There are about 1.6 million homes in this category and if they haven't already started, a large percentage of these people will begin renting. The next component of "Shadow Inventory" is Delinquent Loans or loans that are more than 30 days past due. There are an additional 3.6 million homes in this category as the second chart to the right indicates. Combining the first two categories mentioned, leads to a total of more than five million homeowners representing over 12% of all outstanding mortgages in the country in a distressed situation. A large portion of these homeowners will sadly lose their homes and become rental candidates over the course of time. A final segment adding to the decline in homeownership is the number of homes where the loan is considered underwater. It is estimated that 27% of US homes with loans are considered significantly underwater or 12 million more homes. Significantly underwater homes are loans where the loan-to-value exceeds 125%. Owners of these homes may choose to walk away from their house even if they can pay the mortgage since they do not believe the asset will appreciate. Together, the foreclosed, bank owned, delinquent home loans and underwater loans represent a significant stream of demand for the apartment industry. LLLoooaaannn BBBaaalllaaannnccceee === 111222555%%% HHHooommmeee VVVaaallluuueee === 111000000%%% TToottaall:: 11..66 mmiilllliioonn TToottaall:: 33..66 mmiilllliioonn TToottaall:: 1122 mmiilllliioonn
  7. 7. 2,000 3,500 5,000 6,500 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2,500 3,000 3,500 4,000 4,500 1970 1975 1980 1985 1990 1995 2000 2005 2008 The demographic profile of the US has been undergoing a transformation in the last 50 years, and the apartment industry has benefited. As the latest data from the Census Bureau indicates, the US population has hit 308.7 million, an almost 10% increase from 281.4 million in 2000. The biggest trend that preoccupies most apartment companies today is the entry of the Echo Boomers into the rental market. This is the generation born between 1980 and 1995 and they number 80 million. The number of Echo Boomers currently exceeds the number of Baby Boomers (77 million). The “best estimate” is that there are about 15 million Echo Boomers that will enter the prime renter age of 18 to 34 this decade. The housing crisis has contributed to a shift from the view that homeownership is mandatory in the US to a preference towards renting. The financial impacts of the credit crisis have expanded to a psychological perception favoring apartment rentals. Primarily due to the credit crisis, sales of existing homes have fallen dramatically. Sales of existing homes fell nearly 30% since the peak in 2005 to about 4.3 million units in 2010 and a third of those sales were distressed properties. This drop in home sales is despite record low interest rates which, as mentioned, effectively stimulated housing demand after 9/11. It is likely the demand for housing will continue to be sluggish unless the employment picture improves. However, with tight loan underwriting standards, it is not likely the growth in homes sales will return to levels experienced in the period of 2001 to 2006. EEEccchhhooo BBBoooooommmeeerrrsss
  8. 8. 534 667 877 1,283 323 1990 1995 2000 2005 2010 12% 63% 25% Echo Boomers Own Rent Relatives An even greater indication of the negative consumer perception towards housing is the demand for new homes. New home sales have dropped from a peak of 1.3 million in 2005 to only 323,000 in 2010 and 2011 is on pace with 2010 or slightly lower. Current levels of new home sales are the lowest ever recorded (since 1963). This is especially alarming considering the growth in population in the last 50 years. The chart to the right shows the reverse "hockey stick" trend in new home sales since 1990. The average new home sales per year from 1990 to 1999 was 700,000 which increased to 1 million on average from 2000 to 2007. Some economists do not see new home sales reaching the 1990's level for ten to 15 years. Echo Boomers have watched their parents get burned by the housing crisis and, for the time being, are not interested in jumping into long- term commitments associated with home ownership. The Echo Boomer generation tends to prefer urban versus suburban living, wants to be in 24/7 cities, is used to “college like” living quarters and does not have enough savings or income to buy a home - all of which supports a preference towards renting. The Echo Boomer chart above shows the housing choices for the Echo Boomer generation. The majority - 63% - of the Echo Boomers prefer to rent. With 80 million Echo Boomers, the potential renters is significant and their lifestyles are different from previous generations. They will expect their residential landlords to provide them with the lifestyle they desire which includes: Communal and collaborative areas promoting social gathering Green development Simple and functional design Technologically plugged in Located in an urban core Close to transit center and/or work Near universities Enhanced services providing assistance with daily errands and chores
  9. 9. All indicators point to continued demand for rental units nationwide. At this point, the apartment sector continues to lead a generally soft economic recovery. The forecast growth in multifamily apartments is primarily the result of the current credit/housing crisis and the sluggish recovery in the housing market. Combining the "Shadow Inventory" market with general demographic changes from the impact of the Echo Boomer generation and the enhanced perception of renting, it is likely the demand for apartments will be strong. The following two charts reflect perceptions about the apartment industry from surveys conducted by the National Multi Housing Council in July of 2011. The first chart supports optimism with a sentiment towards ongoing market tightness and strong institutional sales volume. A reading in excess of 50 indicates a positive outlook while a reading below 50 reflects a pessimistic outlook. Demand for rentals turned around in 2009 and optimism grew. The increase in consumer demand lagged the rebound for apartment sales as institutions recognized the forthcoming demand for apartments and began purchasing properties (also spurred on by distressed sales). All of the demand factors previously mentioned have impacted the apartment industry causing increased sales, new construction and declining cap rates. As expected, demand for rentals has increased, institutional sales of apartments have grown and capital is available for apartments. The chart on the next page shows the increase in available debt and equity for apartments. Consistent with the previous chart, a reading above 50 indicates optimism and a reading below 50 indicates pessimism. Note the dip in the chart in October of 2008 when the reading for both Equity and Debt was at a level of 4. Equity financing appears to be more stable, while debt financing has improved. However, debt is less consistent than equity which is likely due to the more stringent underwriting requirements. This data shows that investors are responding favorably to the positive changes experienced in apartment fundamentals and are once again acquiring apartment properties for higher prices than what was experienced during the downturn. 0 25 50 75 100 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Market Tightness Sales Volume Index
  10. 10. 50 100 150 200 250 300 350 400 Jan 1991 Jan 1994 Jan 1997 Jan 2000 Jan 2003 Jan 2006 Jan 2009 The demand for apartments and the availability of capital has led to an increase in multifamily construction after experiencing a period of a virtual standstill when the credit crisis began. The chart to the right shows the drop in Multifamily Housing Starts during the credit crisis, but also reflects the beginning of a sharp increase in early 2010 as investors and developers were looking at the projected trends in rental demand. For the next three years, the apartment industry will experience significant expansion with new projects planned and developed moving the industry from one with excess demand to a much more competitive landscape. To this point, the focus has been on providing data supporting strong demand in the apartment industry and attracting capital leading to a rebound in new apartment development. Due to the convergence of strong demand from what historically has never happened with the credit crisis ("Shadow Inventory"), increase in the population of apartment aged consumers (Echo Boomers) and a psychological shift away from home ownership to rentals, there is well deserved optimism in the apartment industry. What will happen next is the combination of demand and available capital will lead to an expansion of multifamily construction as developers attempt to be the first one in position to capitalize on the market. The question then becomes,' what happens after next?' 0 25 50 75 100 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Equity Finanancing Index Debt Financing Index
  11. 11. It is obvious to see that what happens next will be a boom in apartment construction. However, the real question is not, "What happens next?" but "What happens after next?" It will be important for developers and property management companies to have some foresight to recognize the amount of competitive product that will be delivered and to have a plan in place to compete head-to-head for a prospective tenant that will have choices. Even if a developer is successful with being the first to complete a new community, when the first renewal cycle comes, they will be faced with the need to differentiate their product and services from the new product that is delivered across the street or in the same general neighborhood. According to the Sales Executive Council, the two most important factors in renewing a lease are the initial Leasing Experience and ongoing Service Delivery. Given that soft assets and human interaction play such a large role in the long-term profitability of an apartment community, why do some developers pull back on creating a service based culture that begins at hello and continues through every interaction throughout the term of the lease? In a tight rental market, prospective renters seem to walk through the door and sign a leasing application at the end of the initial tour. The physical product does most of the selling and the leasing agent's role is simply to tour the prospective tenant around the property. On the other hand, in a competitive market, the amount of effort and planning necessary to complete the initial lease-up of a building and fill vacancies becomes much more focused. Given the importance of the initial leasing process in the overall success of a property both at lease-up and at renewal, a thoughtfully designed sales/leasing process will provide the greatest opportunity for success. The sales platform needed to succeed requires a systematic and collaborative approach to prospective and existing tenants. It is important to understand that in today's world, word of mouth is the currency of choice. Everything a company does is open for review. It will be important for the leasing team to speak the same language that today's renters are speaking in order to ensure positive reviews. Today's renters are saying things like this: "I am not a target; be real with me, be honest with me, don't manipulate me." "Friendship is earned not bought, I will like you if you like me, I will follow you if you give me a reason; friendship is good so give me the reason." In order to compete for tenants, prospective tenants will do business with people they know, like and trust. To establish a lifestyle and trust based platform, all marketing materials should be designed to accentuate the lifestyle that the prospective tenants are pursuing. The following traditional and digital marketing and sales channels should be leveraged to implement a message of connectivity and service: Broker Programs Print Advertisement Signage Digital Media Social Media Search Engine Optimization Website Behavior Tracking Lead Nurturing Lead Scoring
  12. 12. Leasing offices should be designed to provide a visual connection from the lifestyle oriented marketing materials to the apartment community and reflect the lifestyle that tenants will have while living in the community. Once the prospective tenants enter the leasing office, they should get a sense of place and quickly realize they have entered a comfortable and trusting environment much like a setting they would meet friends and family. To compliment the marketing and visual experience in the leasing office, the leasing agent will need to execute on a structured sales process designed to do the following: Reduce tension Establish trust Identify tenant's lifestyle and living expectations Present product offering Sign a lease application (if there is a fit) The marketing and sales process should be planned and delivered with a level of professionalism that creates trust and leads to a commitment (application) from prospective tenants where there is a fit. In order to achieve this level of professionalism, it will be necessary to attract, hire, train and retain talented professionals having the ability to interact and relate to prospective tenants. The value of the leasing agent is sometimes overlooked when planning a new apartment community or developing a proforma for the property. However, the leasing team has as much impact on the revenue and NOI of a project as the type of appliances chosen or the floor plan of a unit. If a professionally executed structured sales presentation is implemented, the economic value of the project in terms of higher rents, enhanced retention and reduced costs will likely pay off tenfold. Many new rental communities in urban settings have construction and development costs in excess of $25 million. When looking at the total investment of both capital and time, many developers stop short of creating a world-class, service oriented culture since most of the emphasis is placed on design and construction. The physical building and location play a key role in attracting new prospective tenants; however, the most important aspect of tenant retention is how they are treated from the day they move in until renewal time comes. It has been said that you should do more after the sale than you did to get the sale. While services will vary from community to community, the spirit of service should not change. As was mentioned in the Leasing Experience section, the service delivery model should be structure and implemented by a group of professionals who are passionate about their work. A service mentality starts during the recruiting process and becomes part of the organization's culture. If done correctly, prospective tenants and existing tenants will be more likely to join and renew at higher rates. The higher rates and enhanced efficiency will more than cover the cost of hiring and training a professional team. Additionally, satisfied tenants will share their positive experiences with others through their social networks generating more leads and tenants at minimal cost. In the late 1990s and early 2000s, there was an influx of branded hotels taking a leadership role in the luxury condominium market. Well respected names like The Ritz-Carlton, Four Seasons, Rosewood and others entered the condominium market. The simple concept was
  13. 13. to take a successful and well tested hotel based service model and apply it to the condominium market. The concept turned out to be very successful and resulted in premium prices for the developers and enhanced absorption. While the concept of branded apartments may not be the answer for the rental industry, the service component of the branded condominium model has strong application in the apartment industry. The Echo Boomer generation is interested in maximizing their social time and does not embrace tasks such as shopping, cooking, running errands and other chores. Similarly, former homeowners that are entering the rental market as a result of the credit crisis have grown up having services and while they may be unable to purchase a full-service condominium, they have not lost their appreciation for service and quality. At the top of the market, these services may include items such as: 24 hour security Valet parking Periodic housekeeping Personal concierge services Grocery shopping Restaurant food pick-up General errand support Pet services Preferred vendor lists Yoga studios (if not offered onsite) Spa facilities Restaurants Wine shops Car wash Pet stores Coffee shops The list of services needs to be tailored to the specific community and should be modified to maximize benefits for each respective market. While the list of services is important, the success is based solely on the ability to execute the service model with professionalism and consistency. Similar to the Leasing Experience model, the company's ability to attract, hire, train and retain professionals that thrive in a service environment plays a substantial role in the outcome. If properly implemented, the service delivery model will become the foundation of the culture within the community and rental rates will be maximized and tenant retention will be enhanced ultimately improving top line revenue and NOI. In summary, the primary point of this White Paper is not to state the obvious that the rental industry is at the beginning of an expansion cycle, but to illustrate that the winners of this cycle and the next cycle will win because of the sales and service delivery model developed today to support their properties in the future. Said another way, it is not what happens next that matters, it is what happens after next.
  14. 14. The last few years of economic hardship have devastated most sectors in real estate. The hardest hit of all sectors has been single family residential. After an initial decline in the apartment industry following the beginning of the credit crisis, investors began to see some positive indicators in the apartment industry seemingly benefiting from the downturn in housing. As the forecast turned positive for the apartment industry, occupancy rates improved and development capital followed. The apartment industry is currently in an expansion phase with several new projects in the pipeline throughout the US. As a result, it is likely this phase of expansion will be replaced with a competitive market with developers and property managers competing head-to-head for the Echo Boomer market and the former homeowners entering the rental market. In order to be successful in a competitive market, it will be necessary to implement a sales and service delivery model that tenants will value. Consequently, any project that is being considered, planned or in the construction process should have a business model in place in order to compete within the apartment industry. Once the model is set, effective implementation will be required beginning with attracting professional talent who passionately embrace the sales and service culture. The professional team will need to work in a structured environment supported by high standards and regular training. If a comprehensive sales and service model is effectively planned and implemented, rental revenue will be maximized, costs will be reduced and the project will compete favorably in a competitive market. References Housing Bust Worst Since Great Depression, NPR, October 6, 2011 Quarterly Survey of Apartment Market Conditions, National Multi Housing Council, July, 2011 US Census Bureau 2011 National Apartment Report, Marcus & Millichap Real Estate Services Future of Apartment Living, CEL & Associates, Inc., June of 2009

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