How to Sell Your Firm's Value in a Tough Market
If the market turns, service and market expertise will become chief differentiators for managers.
After enjoying revenue and NOI growth of 3 percent to 5 percent during the past four to five years, Mark Fogelman, President of Fogelman Management Group, sees signs of cooling.
“The market has been flat for four of the past five months,” Fogelman says. “People are becoming more cautious. Our industry can’t expect 3 or 4 percent year-over-year revenue growth forever.”
He adds, “It is interesting, when the markets are strong, everyone is focused on market selection and job growth. The feeling is that management is not necessarily driving the success. When everything slows down, management becomes a much great focus and there is a deeper dive into cutting expenses and aggregating costs.”
Fogelman sees a tightening market as an opportunity to sell his company’s value. During good times, he says apartment owners believe that management, at times, is a “necessary evil,” and that fee management commoditizes the administrative function, collects the rent, markets the property and performs maintenance.
“When the market is strong, these owners figure it is because their management company has kind of been on auto-pilot,” he says.
If owners start valuing management companies that offer service above and beyond their competitors, Toby Bozzuto, President and CEO of The Bozzuto Group, believes his company is well positioned.
He says the company’s prices are “incrementally higher,” but says he can make up the difference in increased NOI due to the service the company provides.
“The management business can be viewed as a commodity, and it can sometimes be priced as a commodity,” Bozzuto says. “But I believe that excellent service and real estate transcend commodity. At our company, we have chosen to deliver more ‘boutique-style’ service. For example, our clients can call me on my cell phone 24/7 if they need to.”
For other owners, a downturn could give them the chance to show their value.
FPI Management’s President Dennis Treadaway says his company’s selling point is its ability to be flexible to meet customers’ needs.
“We provide many services, but we don’t require our clients to use everything we offer,” Treadaway says. “We make recommendations. Hopefully, they follow them.”
If the market turns, Fogelman says owners’ focus will turn back to seeking high-performing management companies like his.
“When things slow, everyone looks under the hood,” Fogelman says. “So management companies need to step up their game. More value and emphasis will be placed on management and there will be an opportunity for strong, hands-on, locally focused operators to rise to the top and differentiate their skill sets. They basically de-commoditize the idea of what management services are all about.
“Management companies need to [increase] their knowledge of local submarkets,” Fogelman says. “They need to know where the jobs and employers are. This will help them improve their targeted marketing efforts, as opposed to [simply] operating with blinders on, like many have done for the past few years during these good times we’ve recently experienced.”