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Greystar grows to more than 660,000 units under management.
Greystar Real Estate Partners has acquired the property management business of Alliance Residential Company, which is the fourth largest apartment manager in the country.
Alliance’s portfolio, which includes 500 multifamily properties and nearly 130,000 primarily Class A units across 21 states. Over the past 20 years, Alliance has become the number one multifamily developer and the fourth largest management company in the United States, according to The National Multifamily Housing Council (NMHC).
The combined portfolio will increase Greystar’s U.S. footprint by approximately 25 percent and significantly complement the firm’s current presence in key western markets, such as the San Francisco Bay Area, Los Angeles, Phoenix, Denver and Las Vegas, in addition to the Northeast and Pacific Northwest.
Through this transaction, Greystar will grow to nearly 19,000 team members overseeing a portfolio of more than 2,400 communities and 660,000 apartment units across 42 U.S. states and 13 countries.
Adding new portfolios to its platform is nothing The company has built its platform through a series of noteworthy acquisitions over the past 12 years, including JPI Management Services (2008), Riverstone Residential Group (2014), Monogram Residential Trust (2017) and student housing firm EdR (2018). The Riverstone deal established Greystar
“We only consider acquisitions of companies that are culturally compatible and fit our long-term strategic objectives. In Alliance, we’ve found both. Alliance is held in the highest regard in our industry, operates in some of the best markets across the country, and has some of the most talented people in rental housing,” said Bob Faith, Founder, Chairman and CEO of Greystar said in a press release. “Even during severe economic downturns, we believe in the resilience of rental housing and we are committed to continuing to grow our company.”
Alliance, the leading developer of multifamily units in the U.S. for the last two years, will streamline its focus on development, construction and acquisition across the multifamily, workforce and senior housing segments. As part of the deal, Greystar will provide management services to Alliance’s multifamily acquisition and development businesses going forward.
“We are thrilled to launch this long-term strategic relationship with Greystar, combining best-in-class residential managers, complementary portfolios and unrivaled expertise to create the leading property management company in the multifamily industry,” said Alliance Residential Chairman and CEO Bruce Ward said in a press release. “Greystar’s global reach, corporate culture and seasoned leadership team made this milestone a clear next step for Alliance, our residents, investors and associates alike.”
How buildings will be constructed in the future remains a big question.
Some experts predict that there won’t be dramatic changes in new student apartment building designs in the immediate future since it takes a minimum of three years for a building to be designed and completed, says architect John Kirk, AIA, with Cooper Robertson. “The challenge is to grow without building new buildings and repurpose some of what they have in the next year or two.”
How these buildings will be constructed in the future remains a big question because of challenges both pre-COVID-19—such as the escalating costs of land, construction and labor—and post-pandemic—such as unknown enrollment numbers. To be better prepared for a return of this virus or another one, many think what will be needed is flexible housing with walls that can be changed easily and affordably.
“We need to build in flexibility to convert two studios to a one-bedroom, for example,” says architect Jason Boyer, AIA, with Studio Ma. At the same time, many developers and architects don’t want to lose the momentum they’ve initiated to improve air quality and add more natural light and recycled materials, which make life healthier and better under any circumstances, Boyer says.
Everybody seems to agree with the assessment of Kevin White of Virtus Real Estate Capital: “It’s a very complicated jigsaw puzzle.”
The lasting impacts of COVID-19 on residents, owners and operators.
When the first stay-at-home orders went into effect in the United States just as peak leasing season was kicking off this spring, apartment pros across the country worried that without the ability to physically show prospective residents available apartments in a one-on-one setting, leasing velocity would be severely impacted.
But a funny thing happened on the way to potential disaster during leasing season 2020: Prospective residents kept leasing apartments anyway through virtual leasing.
“When things started shutting down, the fear was, we’re not going to be able to rent apartments,” says Diane Batayeh, CEO of Southfield, Mich.-based third-party management company Village Green, which operates 41,000 apartment homes. “But last week was a record-breaking week for us, and our year-over-year numbers have been exceeding 2019. The pivot to virtual sales is something I believe will stick in the apartment industry.”
Yet the changes probably won’t stop there. For one thing, a desire for less density—i.e., fewer people around—could reverse the design trends of smaller apartments and larger amenity spaces, bringing back a flight to garden-style apartments in the suburbs, away from dense urban cores. Also, resident screening criteria and security deposits may ratchet up, as companies strive to pad out their cash flows and reserves to weather future outbreaks of the current virus or maybe an even more dangerous one. Other changes likely to stick around long after COVID-19 has faded range from pandemic insurance policy riders to residents’ do-it-yourself maintenance.
Virtual and Self-Tours: Here to Stay
On the tech front, the compulsory social distancing and virtual interaction that COVID-19 brought only propelled the long-developing trend of technological innovation and acceptance in the apartment industry. “Everything’s going digital,” says Carla Powell, Vice President at St. Louis-based 2B Residential, which manages more than 4,400 apartment homes. “COVID really accelerated that.”
One example: self-guided tours of apartments, where prospective residents are allowed to tour an apartment without a leasing agent. Although self-tours may be convenient for both customers and staff, they eliminate the one-on-one rapport-building that can help close a lease.
But at 2B Residential, Powell says leasing agents have been using apps like Google Hangouts and FaceTime to give prospective residents live, virtual tours as staff walk the apartments. They’ve now flipped the script, letting prospective residents physically visit the apartment alone, while the leasing agent tags along virtually via smartphone to field any questions, says Powell. This allows potential residents [for variation] to physically see a space—something many still want—while letting agents build customer relationships while social distancing.
As with Batayeh’s experience at Village Green using virtual tours to create year-over-year gains in her leasing numbers, 2B Residential’s strategy has paid off in residents signing leases without having to physically interact with staff.
Tech Rollouts: There’s No Going Back
The increased digitization of the apartment industry goes way beyond the sales office. The digital footprint at Chicago-based Draper and Kramer, a venerable, 125-year-old real estate company with 8,000 apartments, grew organically as the company did, which meant different websites for different apartment communities and varied systems for staff. But when executives suddenly had to start working out of their home basements, the digitalization initiatives that the company had in the wings soon took center stage.
“We basically took what was a several-year plan of updating and centralizing all of our online tools and websites, to serve both our prospects and leasing agents, and super-accelerated it,” says Jim Love, Vice President and Marketing and Brand. “I’ve never been so busy in my entire career, as I have been hunkered down here in my basement trying to keep up with the latest news from Dr. Fauci, and all of our efforts to bring our entire team onto one centralized platform.”
Of course, the energy Draper and Kramer and other real estate companies are putting into such centralized digital efforts won’t go away when COVID-19 does. “The adoption of technology is a one-way street,” says Brian Zrimsek, Industry Principal at Cleveland-based multifamily housing solutions provider MRI Software and former IT Vice President at the Irvine, Calif.-based Irvine Co. “You don’t start using it and then drop it later. I think we’ve all learned we can leverage technology more than we thought we could.”
Beyond virtual leasing, maintenance and preventative repairs will likely see lasting impacts as well. When COVID-19 first hit, to maintain social-distancing standards between residents and staff apartment managers were forced to prioritize service requests to respond only to emergencies such as leaks and stopped drains but not to less pressing problems. The result has been to empower residents to handle minor maintenance issues themselves.
At Village Green, Batayeh’s team has produced more than 25 do-it-yourself videos on its YouTube channel featuring instructions on everything from resetting a tripped GFCI outlet to replacing a refrigerator water filter, stopping a running toilet and even realigning a door.
“That probably reduced the buildup of work orders by about 15 percent,” says Batayeh. “If they needed a light bulb or a particular screw, we would tell them to reach out, and we would leave it by their front door.”
Even More Demand for Package-Handling Solutions
Package-handling solutions, which were already making big inroads into apartment communities where staff were inundated with deliveries, will almost certainly gain more traction. That’s because when the pandemic struck, many communities stopped handling packages altogether, right at a time when people were spending more time at home and deliveries were increasing. According to MRI, package handling dropped 70 percent across the million-plus units it tracks.
“Owners will need to address this issue by setting up package lockers and rooms that residents can access without staff assistance,” says Zrimsek. “You could also see retrofitting package delivery options into units themselves.”
In fact, Village Green is currently working with its developer clients that have apartment communities being built right now to ensure that the issue is addressed before plans are too far along. The company is providing input on how package rooms can be set up to ensure residents will be able to access packages on their own, Batayeh says.
Hand Sanitizer Galore
COVID-19 will leave other lasting impacts, including more rigorous—and visible—cleaning regimens by staff, to both protect residents and give them peace of mind.
“We’ve enhanced all of our cleaning protocols, and continue to modify our management of common areas and amenity spaces,” says Dana Caudell, President, Property Management, at the Wellington, Fla.-based Bainbridge Cos., which operates 20,000 apartments. “We want our residents to have a vibrant experience living at a Bainbridge community while continuing to exercise caution.”
The hand-sanitizing stations that operators scrambled to procure and deploy at the start of the outbreak will also remain at Village Green communities. “Sanitation stations are going to be everywhere,” Batayeh says.
Other changes at apartment communities will include increased spacing of common-area amenities, such as co-working area desks and exercise equipment in gyms. Signage will announce reduced capacity of anywhere from 25 to 75 percent. And many communities are already using electronic booking and reservation systems, as well as access control, to enforce the lower numbers in amenity areas.
2B Residential is limiting the number of people permitted in amenity spaces and has launched online reservations for the fitness center, says Vice President Jeff Hebrank. “Rethinking access control to amenities by removing 24/7 access might be in the future as well.”
Other permanent changes at apartment communities will be the materials chosen for finishes. Brass, bronze and copper are top choices for handles because of their natural antimicrobial properties, along with touchless solutions for doors and elevator buttons, and hard surface finishes that are easy to clean.
Changing Lease Language
Leases will likely also be redone to emphasize operators’ ability to shut down amenities for health and safety—an area that got some resident pushback during the pandemic. Language will specifically address the ramifications of a pandemic.
“Everyone needs to be prepared to answer, what’s your pandemic readiness plan?” says Ryan Shear, Managing Partner at Miami-based development firm PMG. “It used to be an afterthought, but now it’s a top priority, including for leases. Every contract you have with residents, lenders, contractors and insurers needs to be evaluated for pandemic impacts.”
More Understanding Apartment Operators
At the same time, operators may very well offer more flexible leasing terms, and be more understanding when residents need to break a lease.
“We’ve always tried to have a reasonable policy for breaking a lease, because people lose jobs, people get divorced, pandemics happen,” says 2B Residential Associate Vice President Mark Milford. Because of COVID-19, he adds, 2B believes more companies will adopt policies that let residents break their leases because they’ll need that assurance now.
In addition, Michael Lamantia, a CPA in the New York office of global accounting firm Mazars who works with a number of multifamily housing clients, says the goodwill that flexibility has engendered will also benefit owners in resident loyalty. “One of our clients provided $50,000 in rent relief to their residents in a 12-unit building,” he says. “Landlords are working with their tenants to try to get through this. I think you’ll see that goodwill pays dividends in residents wanting to stay at the property, because they know that owner cares about their well-being.”
At the same time, Lamantia foresees larger security deposits and stricter screening criteria for potential residents to help operators offset any future cash crunches, should there be another outbreak.
Lasting Alterations to Design
There may well be fundamental changes in building and community design. For example, the mantra of multifamily housing design in recent years of “sleep in the apartment, but live in the building” could resonate less with virus-wary residents.
“We normally see a lot of interest in dense apartment complexes with smaller units and lots of common-area amenities,” says 2B’s Powell. “But now we could see residents wanting less amenities and bigger, more-spread-out units with less shared common space.”
Indeed, operators have even been pondering whether the trend of dense, downtown urban living, perhaps the signature hallmark of the last apartment construction cycle, has finally played itself out. “I’m expecting a higher demand for suburban properties, as opposed to the urban ones,” says Batayeh. “What we’re seeing is that communal spaces and high density are making people uncomfortable. That is going to create an impact on demand.”
For some operators, it already has. Los Angeles-based multifamily housing investor and developer Cityview, which has generated more than $4 billion in urban investment across more than 100 projects, had routinely seen its studios generate the most demand at its apartment communities. Now “our studios have been much more challenging to rent and to lease up during the pandemic,” says CEO Sean Burton. “But our one- and two-bedrooms have been flying off the shelves to the point where we don’t have availability in those units anymore. Clearly people are spending a lot more time at home, and they want the extra space.”
An End to City Living? Not so fast!
Burton admits that product preference has changed among his prospective residents, but doesn’t put as much weight on the flight-to-the-suburbs scenario as many other apartment pros do. “I’ve heard some people say over the last few weeks that the city is dead and everybody’s going to move to the suburbs to be completely remote and apart from other people,” he says. “But that feels like an overreaction to me. We are fundamentally social animals.”
Burton points to predictions after the 9/11 attacks of New York’s demise, along with cities in general, based on the premise that people wouldn’t feel safe living in a target zone. But then came a major urbanization push in the apartment market, where residents preferred living downtown in areas with high walk scores rather than in the suburbs, where they would have to drive to amenities.
Instead of relocating to the suburbs, consumer preference may come down to design of buildings themselves, Burton says. “We think the mid-rise concept, where you can take the stairs and don’t have to get in an elevator with someone for 20 floors, may be a good middle ground. You can still be located in an urban area, but it’s a different proposition to live in a four-story building.”
High-rise living will be a harder sell in a post-COVID-19 world, Burton adds. “That kind of urban, high-rise lifestyle seems like it will be hardest hit. I think that will be the biggest change.”
Others see a return to spread-out construction types and designs that naturally limit the amount of interaction residents have with each other, and staff. “I think there’s going to be a big shift back towards vintage, garden-style apartments, because there’s more open space,” says Ari Rastegar, Founder and CEO of Austin, Texas-based developer Rastegar Property Co “There’s less interaction between tenants. You have more outdoor access, which allows more air circulation and less interior space. I think that’s going to be something that [will] be highly attractive.”
Higher Finance Hurdles
On the finance, deal and business side, operators are seeing more stringent requirements.
“At the beginning of the year, you would have to put 25 to 40 percent equity into a deal,” says Burton. “Now that’s closer to 40 to 50 percent.”
Underwriting numbers have shifted, too, says Village Green’s Beteyah. “The underwriting criteria on the operating side are more conservative. We were in an environment where you may have been able to project 3 to 4 percent rent increases. Now, it’s more like a 2 percent increase.”
Also, operators will likely want to build up larger war chests in case things go sideways again.
“I’ve always been a believer of cash reserves, where you can comfortably have two years of working capital to stave off any downturn,” Batayeh says. “Some people might say one year of reserves is good and healthy, and that might be true to survive. But I’m talking about thriving and taking advantage of opportunities that present themselves. More is better than less.”
At Bainbridge, Chief Operating Officer Kevin Keane says keeping a close eye on finances going forward is simply good business, both internally and with residents. “While managing the crisis at hand, you have to the long-term investment in mind,” he says. “Running regular cash flow analysis and developing criteria for alternative payment plans helps maintain goodwill with our residents. That’s key for our retention and referral strategy.”
With all the considerations related to the impacts of the COVID-19 pandemic on the rental housing industry, it may be difficult to focus on just one particular area. In fact, that fire alarm feeling of trying to address all the daily adjustments and challenges likely lingers.
It is a constant struggle to keep up with growing resident expectations, especially as they are amplified by our present circumstances. Residents will remember their experience at your apartment community during this time. Will that memory will be positive, negative or indifferent?
There are many opportunities for apartment operators to enhance their resident experiences during this trying time. In fact, many of these opportunities are focused less on costs and more on attention to detail. The time taken to plan experiences for residents will equate to positive resident reviews, increased renewals and the opportunity for higher rental rates.
1. Personalize experiences
Residents are yearning for communication and an easy way to make an impact is by merely personalizing communications where possible. Avoid assuming that all residents are keeping up with the news or that they are fully engaged with events happening in the community. Take time to connect to ask how they are doing and then update them on recent changes by setting expectations. This can be about amenity hours, occupancy guidelines, lease renewals and everything in between. Make the connection as interactive as possible.
2. It is all about the details
As office and amenity spaces re-open, find ways to bring a smile to your residents' faces. Branded masks that feature your community name or funny expressions are a start. Incorporate fun into necessary signage to include bright colors and quirky sayings. Think about what people are missing most and try to find ways to deliver it. Small examples include drive-by birthday celebrations, graduation acknowledgments, inspiration-chalked sidewalks and teddy bear hunts. No idea is to small to create a large impact on the lives of residents. Continue to find ways to engage others.
3. Offer digital experiences
Make it easy for residents to digitally reach you. Develop a presence for online community events, virtual leasing, online payments, submitting service requests and communication platforms for neighbors to connect. Timely customer responses are also critical. When developing or reshaping the digital customer journey, making the experience as low-touch and seamless as possible is crucial. One highly effective strategy for meeting customer demands and creating a sense of loyalty is to meet customers where they are.
4. Go the extra mile
This is more important than ever. How you choose to respond to resident concerns and provide acceptable solutions will separate you from your competitors. Overcome challenges such as package delivery; deliver packages to residents’ doors so they do not have to leave their home. Offer multiple ways to contact onsite team members and then quickly respond. Your physical office may not be open, but your virtual office should be and your ability to quickly respond will make a significant difference in staying connected with your residents.
If unable to complete service requests, provide instructional videos to assist residents with minor fixes. Set up a request line for residents that need assistance during this time. If your office is unable to help, you can provide resources such as grocery delivery, food bank, local financial assistance, dog-walkers and other services that may be needed like creating a pantry with canned goods on-hand for those who may need it.
5. Leverage technology
Embrace new forms of technology that will assist in reallocating employee time, allowing for greater focus on priorities such as resident retention. Utilize automation and self-service channels for lower priority items. Program fobs or create platforms to reserve amenity spaces and assist with enforcing occupancy guidelines. Self-guided tours and on-demand virtual tours to include online mechanisms for prospects to reserve an apartment, submit an application and easily pay fees.
How you choose to respond and the time you allocate toward enhancing the resident experience during social distancing will significantly influence your residents’ attitudes and the community as a whole.
The industry’s second-quarter dip could lead to increased deal activity by year-end.
For Dan Wurtzel, the lives of his residents were literally hanging in the balance. As President of FirstService Residential New York, which manages some 20,000 rental apartments and 50,000 co-op and condo units throughout New York City, Wurtzel was responsible for coordinating the firm’s front-line response to COVID-19, right at the epicenter of the pandemic’s outbreak in the United States.
Part of the challenge was the speed with which the virus spread throughout New York, the most densely populated metropolitan area in the country. At first, “it took a while for people to take [it] seriously,” Wurtzel says. “Then, when we started to see the numbers go through the roof in terms of confirmed cases, ICU patients and the number of people dying, it became real. We had to adapt very quickly.”
At FirstService communities, that meant closing common-area amenities, transitioning office staff to working remotely, and ensuring that other personnel were still available onsite to continue to meet residents’ needs.
With past experiences ranging from 9/11 and Superstorm Sandy to blizzards and blackouts, FirstService was able to leverage its investments in technology, from its property management systems to its resident portals, to stay on track. Having that technology helped staff rapidly transition to working offsite.
“Our technology has become more robust over the years, and it really allowed us to basically stay in business, without being in the office,” Wurtzel says. “Running Zoom calls with our co-op boards or using web-based accounting systems means all those tools are accessible to anyone who has a computer and Internet connection.” It has also helped the company reach out to residents and keep them updated on the latest developments, while maintaining social distancing.
FirstService’s early actions at the epicenter of the novel coronavirus outbreak are emblematic of the quick, often disruptive, but necessary, steps apartment firms all over the country have taken. As infections swept over the U.S. this spring, apartment operators scrambled to serve 40 million residents who were suddenly home 24 hours a day, seven days a week, with little information about what lay ahead and no clear end in sight.
Even now, operators continue to grapple with the ongoing impacts of COVID-19, which are sure to last well into the third and fourth quarters of this year, if not longer.
Communication Is Crucial
Key to it all for apartment operators has been maintaining open, clear communications with residents to help them through the crisis, including information on Centers for Disease Control and Prevention (CDC) guidelines, social distancing and personal hygiene.
“The number-one tool we have with our residents is communication,” says Wurtzel.
On Monday, February 3, Miami-based Vie Management, an operator of 5,843 beds across nine student housing properties, sent out a staff memo about the potential threat of a virus that had originated in China. The memo hit inboxes the day after the Kansas City Chiefs defeated the San Francisco 49ers in Super Bowl LIV, when terms like “COVID-19” and “social distancing” were still unfamiliar to most Americans.
“We take the health and safety of our team members and their families seriously,” read the message from Ari Rosenblum, Vie Co-founder and CEO. “We are closely monitoring the coronavirus situation.”
The memo highlighted the declaration of a public health emergency by U.S. Health and Human Services Secretary Alex Azar three days earlier. It emphasized the potential of asymptomatic transmission of the virus in the U.S. It also advised Vie employees to wash their hands frequently, to avoid touching their faces and, above all, to stay home from work if they were feeling ill.
In addition, the memo identified the five domestic airports where arrivals from Wuhan, China, the first flashpoint for the virus, were being rerouted for health screenings, and asked employees to refrain from traveling “until further notice.” In closing, it promised to provide staff with updates as they became available.
Vie’s memo, which was full of commonsense tips to fight the spread of the novel coronavirus that have now been drilled into our collective conscience, came a full five weeks before New York state established a containment zone on March 10, and nearly seven weeks before California Gov. Gavin Newsom issued the country’s first state-wide shelter-in-place order on March 19.
Vie’s early response allowed the company to stock up on much-needed personal protective equipment (PPE) for its staff, from hand sanitizer to face masks to gloves, long before nationwide shortages for those items emerged.
“We saw what was going on in China, and we very quickly realized that we needed to get out ahead of what we saw coming,” Rosenblum now says.
The company followed up the staff memo with a letter to its residents on March 3, when many people were still downplaying the threat of the virus in the U.S. “A lot of [residents] thought we were a little wacky at that time,” says Rosenblum. “But we kept talking about it right up through March, at which point they started thinking we were a little bit less wacky.”
During this highly fluid time period, information and guidance changed daily, if not hourly. “It was not the time for being indecisive or not communicating,” says Kurt M. Westfield, CEO of Tampa, Fla.-based WC Equity Group, an operator of 400 apartment homes.
Dana Caudell, President of Property Management for the Wellington, Fla.-based Bainbridge Cos., which operates 20,000 apartments, agrees. “The biggest, most crucial part of this has just been the constant communication with the residents, as well as the employees,” she says. “We wanted to empower them to protect themselves.”
For apartment managers, keeping the information flowing seemed the best—perhaps only—way to help allay the burgeoning fear for residents stuck at home and watching the alarming news of the dangerous, highly contagious virus.
“Everyone is scared right now,” Tony Subraj, Vice President at New York-based Zara Realty Holding Corp., which manages 4,000 apartment homes, said at the beginning of April. “Everyone is on pins and needles, and we’re trying to ease and calm their fears by talking to our tenants and telling them the steps they can take to help and protect themselves. We’re also just here to listen, and be a supporting ear if they need it.”
Shutting Things Down
Beyond increasing their communication, many operators also immediately shut down common-area amenities, especially places like pools and gyms, where residents could come in close contact with one another, and where the virus could reside on surfaces.
“We are strictly following the CDC-recommended guidelines and shelter-in-place protocol, and have therefore closed all shared amenities until further notice,” wrote Gina Fortune-Harmon, Vice President of Market Rate, at the 23,000-apartment, Chicago-based Habitat Co., in an email to residents in mid-April. “This includes fitness centers, resident lounges, demonstration kitchens, rooftop decks, and business centers.”
For many apartment operators, the scramble to take those steps, while isolating staff from one another and from residents, quickly became an all-consuming task.
“It was 15-hour days, trying to get our policies and procedures in place,” says Caudell. That included isolating employees in leasing offices, where they interacted with residents by phone or electronically. “But then the next day, something else would happen or something would change, and you’d have to revisit everything all over again.”
Addressing Rent Refunds for Unavailable Amenities
Not surprisingly, shutting down common-area amenities was also one of the first areas of friction between operators and antsy residents now stuck at home. Industry message boards quickly filled up with onsite staff postings about residents asking for discounts on their rent because their amenities were no longer available.
At Bainbridge, Caudell says her residents for the most part understood the reason behind amenity closures: Public safety and stopping the spread of the virus. But she adds that a good lease should spell out that amenity use isn’t included in the rent to begin with.
“When we first [closed amenities], internally we were worried that we were taking something away,” says Caudell. “But our leases are pretty clear that you’re not paying rent for amenity use. That’s not what rent is for. So we just tried to go back to the safety aspect, and why we didn't want anyone gathering in any common area or amenity space during this pandemic.”
Some apartment operators have suggested emphasizing amenity use as “complimentary” for residents in future leases, but for operators who charge amenity fees in addition to rent, the path ahead isn’t as clear—one more surprise challenge for apartment operations sparked by COVID-19.
Keeping Up with Repairs
On the maintenance front, by the spring, apartment community staff were suddenly restricted to only doing emergency repairs inside apartments, as well as carrying out hour-by-hour, full-building cleanings, including wiping down elevator buttons and stairway railings.
“There’s been a shift to sanitizing the buildings multiple times a day, seven days a week,” says Zara’s Subraj. “We just keep doing that, over and over, to keep our guys employed. We haven’t had to lay anyone off.”
For routine maintenance items, such as filter or battery changes, operators began asking residents to perform those tasks themselves. “We typically do smoke detectors and filters for them,” Caudell says. “But now, we’re just leaving batteries and air filters outside their doors and communicating that to them.”
At Vie, Rosenblum leveraged video conferencing to encourage his YouTube-generation student residents to learn do-it-yourself skills. “We’re using Skype or Zoom or Houseparty or whatever the chosen app is,” he says. “They can talk with a maintenance teammate who can show them, if it’s an issue like a light bulb, for example, what they can do to fix it themselves.”
Habitat is logging noncritical maintenance requests for future service, while prioritizing the safety of staff and residents regarding jobs that just can’t wait. “For team members who are going into residents’ homes, we’re being as careful as possible for both the sake of maintenance staff and those occupying the unit being serviced,” Habitat’s Fortune-Harmon says.
When immediate, in-apartment repairs are needed for HVAC or plumbing issues, many operators have followed the same protocol: Communicating with residents beforehand to ask them to wipe down the area where work will be done, and to keep away from workers while they’re in the apartment by going to another room, if possible. Firms have also outfitted workers with PPE—when they could get it.
“We’ve equipped all of our guys with sanitizer, and they also have masks and gloves and shoe coverings,” Subraj says. “They’re sanitizing and wiping things down before they go into the apartment, and sanitizing when they come out, too.”
One frequent best practice for operators is to have maintenance staff make sure that residents see them put on a new pair of gloves, and then see them dispose of those gloves immediately upon leaving the apartment to give them peace of mind that PPE isn’t being reused.
Meanwhile, the blocking and tackling of property management couldn’t simply grind to a halt just because everything else did. The pandemic may have hit smack at the height of apartment operators’ busiest time of the year, yet turnover was still happening. Leases were expiring, and new ones were getting signed.
“People are still moving,” says FirstService’s Wurtzel. “We had 18 move-ins in March, some of them even toward the end of the month.”
To support those new leases, the industry turned, almost overnight, to virtual-tour technologies that had already been on the upswing in multifamily. “Before the COVID-19 pandemic, only 5 percent of our leasing traffic was sight unseen or done by virtual tour,” says Aaron Galvin, President of multifamily broker Luxury Living Chicago Realty. “With the current crisis, owners are keeping rents flat and new lease velocity is at 50 percent of projections.”
But in terms of business, the news is not all bad. For instance, on the deal-making side, operators say many in-process transactions have been waylaid. On the other hand, that halt in activity should lead to pent-up demand and then sales opportunity toward the end of the year.
“Our acquisitions and dispositions have been basically put on hold with the capital markets,” Caudell says. “But I have a really good feeling about the end of third quarter and the fourth quarter, especially for those funds who have to outlay cash by year’s end. We may see a plethora of properties going on the market and a lot of fast sales and acquisitions. That’s something I'm keeping an eye out for.”
Indeed, depending on the timing of a deal, COVID-19’s impacts could lead to forced sales down the road.
“If you were looking to buy a project that’s in lease-up, or someone just finished building it, lease-up or construction financing has kind of dried up,” says Brad Dillman, Chief Economist at Atlanta-based Cortland, which runs 60,000 apartment homes. “So some of these builders are in a tough spot. They’re going to have a lot of work to do to get their current situation extended.”
Given the current environment, and the uncertainty of when the country will get back to “normal”—whatever that may look like—apartment firms in the second quarter were also just starting to get a handle on how things might shake out later this year, while reaching out to investors and lenders now for possible alternative plans later.
“Our finance team has been extremely busy,” Caudell says. “There’s a lot of cash flow analysis that we've been working through, trying to determine what type of cash reserves we have on hand. If we get six months down the road, and we only have 80 percent of our rents coming in, what does that look like? It’s still a very fluid situation right now.”
On balance, operators say their finance partners have been willing to talk about alternative payment plans, deferments and forbearances, as long as owners are transparent about their situations.
For Vie’s Rosenblum, who had the foresight to start planning for the fallout from the current crisis at the beginning of February, that means planning for the realities of the second half of 2020 now. “We’ve had some preliminary phone calls and e-mails with lenders to just let them know, hey, we’re still here, and here’s what we’re doing,” Rosenblum says. “We’ve found extremely responsive partners on the other end of the phone or email, because we’re all trying to beat this thing together.”
While that esprit de corps has been palpable in the apartment industry among residents, operators and financiers who got past the initial hurdles of the pandemic of 2020, others caution that we may not be out of the woods yet. “I think what a lot of people are overlooking now, or only talking about from a high level, is a second flare-up of the virus later this year,” says Dillman. “I don't think people are thinking about what that means for the labor economy, or what that means for how the government will respond to it. That, to me, is a much bigger issue.”
For apartment operators and residents, it was just one more unknown in a new reality, at least temporarily, for the industry—and for the country.
The fifth-largest apartment owner in the nation announced the launch of an initiative created to support local hospitals and food banks.
Morgan Properties, the fifth-largest apartment owner in the nation, announced the launch of Morgan Cares, an initiative created to support local hospitals and food banks as they combat the COVID-19 pandemic.
Throughout the 15 states where Morgan Properties' operates, the company will donate a percentage of each resident's May and June rent to their choice of a local hospital or food bank. Morgan Properties is expected to contribute more than $500,000 in funding to give back to these local organizations that need it most.
"As a family business whose culture is deeply rooted in helping others, we are incredibly passionate about giving back to communities in which we serve" said Jonathan Morgan, President of Morgan Properties. "We are in the midst of a global health crisis and the only way to get through it is to come together and help those in need."
In addition to Morgan Cares, Morgan Properties recently launched Hometown Heroes, a social media series recognizing employees, residents, suppliers and local emergency personnel who are going above and beyond to help others during the pandemic. Throughout the month of May, Morgan Properties will recognize four individuals each week by sharing their stories on its social media channels.
Employees throughout the Peabody Companies donated items for the homeless program.
The Peabody Companies completed a winter clothing drive throughout its organization to benefit the Boston Health Care for the Homeless Program (BHCHP).
Employees throughout the Peabody Companies donated gloves, hats and undergarments to BHCHP, while the company itself matched the donations given by their employees by purchasing 20 warm and waterproof winter coats for men and women to accompany their team’s donation.
BHCHP was established in 1985 with a mission of providing or assuring access to the highest quality health care for all homeless individuals and families in the greater Boston area.
“The BHCHP is a fantastic organization, and we are proud to support them, especially as their work coincides in part with our own,” said Melissa Fish-Crane, principal and COO of the Peabody Companies. “We look forward to continuing to work with them in the future.”
The Peabody Companies plans to further its relationship with BHCHP throughout the year by exploring various volunteer and service opportunities that the company’s associates can participate in, both individually and organized through the company.
“We were blown away by the phenomenal donations from the Peabody Companies,” said Tevin Montgomery, corporate relations manager for the BHCHP. “They have all made a tremendous impact by devoting time toward helping our patients, and our community in general.”
On May 15, the U.S. House of Representatives passed H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which establishes a $100 billion emergency rental assistance program. Per the bill, funds would be disbursed to state and local government grantees and delivered in consultation with continuum of care providers, through the U.S.Department of Housing and Urban Development’s (HUD) Emergency Solutions Grants (ESG) program. While we appreciate the House’s tireless work to provide relief to the millions of renters and housing providers affected by COVID-19, we continue to have reservations about the current proposal as it makes its way to the Senate for consideration. ESG should not be the primary delivery mechanism for a rental assistance program of this magnitude.
Irrespective of the proposal in the HEROES Act, the National Apartment Association (NAA) has emphasized in ongoing discussions with lawmakers that Congress must create an emergency rental assistance program in its next COVID-19 relief package. We have urged them to utilize multiple federal programs through HUD and take advantage of the implementation infrastructure of these existing rental assistance platforms to get funding out quickly and efficiently to those most in need. We also suggested that Congress look to lessons learned from past disaster relief efforts, where housing agencies worked with residents and owners to ensure rent payments go directly to the property.
As background, the HEROES Act proposal restricts eligibility for renters based on their income at the time of application. The bill also provides the HUD Secretary with discretion to waive current requirements as needed due to the ongoing COVID-19 emergency. Funding would be provided to cover current and past due rental amounts, including utility payments, late fees and deposits, and made available for a maximum of three years.
While there are many positives to the rental assistance proposal in the HEROES Act, our concerns center around the limitations of the program’s delivery system. The mission of grant recipients under ESG is geared towards homeless shelters and assisting homeless populations. There is no question that additional funding is needed to support the programs and at-risk populations normally supported by ESG, however, the program lacks the capacity to disburse $100 billion in funding quickly and efficiently to the myriad renter households that may need assistance due to the crisis. Using ESG’s formula approach with its multi-layered process would be overwhelmed and likely result in delays. Also, the bill’s requirement that grantees consult with continuum of care providers adds another layer of process that would interfere with timely allocation of the funding amidst the crisis.
Additionally, the HEROES Act establishes an income limitation for renter populations served by the emergency rental assistance proposal. At most, the bill provides for assistance to households up to 120 percent of area median income (AMI) but not before grantees sufficiently serve the needs of renters at lower income levels. This restriction would exclude many middle-income renters from eligibility. Meanwhile, renters across the income spectrum who are experiencing job loss, furlough or a reduction of income due to COVID-19, and live in a variety of asset classes, may require temporary, short-term rental assistance to make ends meet.
Establishing an emergency rental assistance program is a top priority for NAA. The apartment industry expects a significant number of residents will be financially affected by COVID-19, inhibiting their ability to pay their rent even with the assistance provided in the CARES Act. Housing providers rely on rental income to pay employee wages, mortgage payments, taxes, insurance and, importantly, to maintain continuity of essential services for apartment communities as many renters must shelter in place.
In fact, according to NAA’s Breakdown of $1 of Rent, all but 9 cents of each rent dollar passes through rental housing owners to pay property-level financial obligations, including 14 cents to property taxes, which in turn support the community through financing for schools, teachers, emergency services and other important local needs. As the crisis continues and renters’ savings are depleted, the ongoing challenges that interfere with renters’ ability to pay their rent could have cascading effects not only on the rental housing system, but state and local governments and the broader economy.
As the Senate takes up the issue of rental assistance in the next phase of federal relief, we recommend the following.
Utilize existing housing programs through HUD to maximize the capacity to provide relief during the emergency.
- ESGs to ensure that homeless persons receive rental assistance and related services and provide emergency housing as well as help families or individuals that are facing homelessness ($20 billion).
- The Section 8 Housing Choice Voucher program, which can utilize the 2,200 state and local agencies that currently administer and distribute funding for 2 million families to establish and fund short term emergency vouchers ($20 billion).
- The HOME program to address emergency housing needs including a streamlined funding formula to states with at risk properties developed under the HOME and/or the Low-Income Housing Tax Credit programs ($27.5 billion).
Employ existing programs through the U.S. Department of Agriculture to ensure rural communities receive equal consideration for funding.
- The Rental Assistance program under the Section 521 program to provide sufficient project based rental assistance to prevent displacement. Funding for supplemental rental assistance for the Rural Rental Assistance was not included in the CARES Act ($2 billion).
- The Rural Housing voucher program, which would provide short-term vouchers for rural families through the existing distribution platform ($500 million).
Renters and housing providers would be better served by an emergency rental assistance program allocated through existing platforms under the HUD secretary and the secretary of agriculture. This multi-faceted approach allows for sufficient capacity and flexibility to ensure that rental assistance reaches urban, suburban and rural areas quickly and efficiently. Similar to provisions in the CARES and HEROES Acts, existing programs could be modified to waive many of the current statutory and regulatory requirements and adjust for the temporary nature of the assistance, urgency and the realities of working in a shelter in place environment.
NAA continues to work with members of both chambers to ensure policymakers understand both the severe affects HEROES Act proposals would have on the apartment industry and its residents and what is needed to maintain stability in the rental housing system. Rental housing operators urgently need relief in the next federal package. The viability of the rental housing industry is at stake.
To learn more about NAA’s policy asks, please visit the Phase 4 Resources for Industry Advocates page. If you have any questions, or would like to learn more about rental assistance, please contact Jodie Applewhite, Manager, Public Policy.
Oddo Development has associates focused on virtual leasing and completing tasks on their to-do lists.
When COVID-19 forced the closure of the nation’s economy, executives at Oddo Development had no idea what was going to happen with leasing.
In one respect, however, they were pleasantly surprised.
“I think the people who are looking right now are seriously looking,” says Jeannette Cox, Executive Vice President of Oddo Development Company. “If they’re calling you and wanting a virtual tour, we’ve seen that they are definitely in the mode to move, and they’re doing it fairly quickly.”
Right now, Oddo is limiting virtual tours to prospective residents who need to move within 60 days. If they’re moving later than that, the company’s associates will take the prospect’s name and call them back when it’s closer to their move-in time.
“We’re doing that to respect the [shelter-in-place] order and to not overburden the limited staff that we have onsite,” Cox says. “We’ve seen a high number of virtual visits. We had a very high number of leases for the month of March, which was very surprising for us.”
When it comes time for new resident move-in, Oddo asks several questions prior to move-in day. If the resident indicates they have been sick, the company will put a lockbox on that door and email instructions have them do a virtual walkthrough.
While Oddo’s number of new leases was better than expected, cancellations were coming in from people who signed their lease but hadn’t moved in yet. “We have seen an increase in the number of cancellations,” Cox says. “That’s been due to a job loss or the uncertainty due to COVID-19.”
As of mid-April, Oddo’s rent payments have held. Fewer than 5 percent of the company’s residents reached out because they would have difficulty paying their rent.
“We’re being very flexible and accommodating toward any resident who has been affected by COVID-19,” Cox says. “Whether it’s job or illness, we’re working out a payment plan with them because home is necessary.”
As shelter-in-place orders stretch into May, Cox anticipates more calls asking for relief. The company has been encouraging residents to communicate and set up payment plans if they’re in trouble.
“As a management company, one of our biggest goals, in the beginning, was just trying to communicate as clearly as possible,” Cox says. “This is something that can affect anyone and everyone.”
As it has worked with residents, Oddo has also revamped its onsite and corporate operations to minimize the number of people in its offices. Most members of the corporate office are at home, other than the few who are coming in to check mail and do payroll.
“We’ve set everybody up at home and set up weekly calls so that we continue to communicate and at least have some face-to-face time, even if it’s through the computer,” Cox says.
Oddo also has reduced the number of onsite staffers in the office each day. “We’re doing an A-B schedule so that we distribute the workload fairly and evenly,” Cox says.
Like many companies, Oddo’s maintenance crews are only doing repairs in an emergency. “We’re putting anything that isn’t emergency on hold until the shelter-in-place [order] is lifted,” Cox says. “So, with that, we don’t need our full maintenance teams there.”
With in-apartment visits limited, Oddo is giving its maintenance teams work that is either outside or not requiring face-to-face interaction with residents. “We’re just trying to be flexible and work on those different projects,” Cox says.
At each community, Oddo’s teams have made a list of projects that they’ve wanted to complete but have been on the backburner. “We’ve made that list and then prioritized it and started assigning those to different people,” Cox says. “We’re rebuilding websites. So our marketing team can work on that and social media efforts”
Onsite teams are also performing ongoing audits. “We’re making sure that we go through those files and assign those to different people,” Cox says. “It’s a great time to catch up.”
Oddo’s associates are enjoying having enough time, with no interruptions, to complete these tasks. “The clubhouses are all closed,” Cox says. “They don’t have anybody just popping in and looking for a home right now.”
A recent study conducted by Gallup, “Gallup Panel Normalcy,” asked Americans to consider their willingness to return to normal once government restrictions related to the COVID-19 pandemic are formally lifted.
The results show about one in five (22 percent) say they would resume their normal daily activities "immediately." Seven out of 10 would "wait to see what happens with the spread of the virus before resuming" and 9 percent would continue to limit their social contact "indefinitely." This translates to more than half of the U.S. workforce lacking the confidence to return to their workplaces.
The biggest challenge for leadership will be recognizing and overcoming psychological and emotional stability among their workforce as employees begin to return to their workplaces. Companies need to be proactive, strategic and thoughtful with their intentions to create cultures of certainty, confidence and safety amid the chaos and fear.
The question remains: How do you show up for your employees each day? Offering a solid support system while leading with empathy will be key components in answering this question.
Offering clear communication is the first step to achieving employee confidence. Educating your workforce is a critical part of your responsibility. Allowing employees to know what to expect and when to expect it will limit unnecessary anxiety. When possible, give proper notice before asking employees to return to the workplace. This will assist employees with making adequate arrangements for situations such as childcare.
Maintaining a safe workplace is also of utmost importance. The need exists to determine the levels of safety that will be incorporated, such as employee temperature checks and standard health screenings. Decide what personal protective equipment (PPE) will be provided and ensure you have enough supply for daily operations.
Consider staggered or group shifts, one-way traffic paths in hallways/common areas and reconfigure workspaces to accommodate social distancing. Policies should be in place to address employee hygiene, third-party access, mail/delivery requirements, office cleaning and sanitizing, use of common spaces and other important safety matters.
Employee flexibility will go far with addressing concerns related to COVID-19. Your company should review and update employee-leave policies to address FFCRA/state law requirements and to consider unique circumstances such as child or eldercare. You should also review updated Department of Labor (DOL), Equal Employment Opportunity Commission (EEOC) and state/local guidance regarding employee accommodation obligations related to this pandemic. Consider specific policies for pandemic leave or accommodation requests, including those related to personal and family health concerns.
Actively listen to employees to help address any additional concerns they have about returning to work. Consider conducting an anonymous survey to further encourage responses, and then review the results to determine whether these concerns have already been addressed or whether additional steps are needed.
Employers should accommodate employees who request altered arrangements, remote work or time off from work because of underlying medical conditions that may put them at greater risk during this time. The EEOC's guidance on COVID-19 and the Americans with Disabilities Act (ADA) notes that accommodations may include changes to the work environment to reduce contact with others, such as using Plexiglas separators or other barriers between workstations. Efforts should be made to consider all reasonable accommodations.
For more information on transitioning employees back into the workplace, please review NAA’s recent Best Practices resource, “Transitioning Employees Back into the Workplace.”