Expense Reduction Initiatives: Something to Crow About
Trammell Crow Residential (TCR) has emerged as a leader in implementing effective expense-reduction initiatives. As TCR's Vice President of Asset Management, Nyla Westlake has played a key role in making these initiatives a success. She recently sat down to discuss these strategies in detail and offer tips for other apartment operations and maintenance professionals looking to follow suit. Here is our chat:
NATIONAL APARTMENT ASSOCIATION: Could you please tell us a little about your background?
NYLA WESTLAKE: I have more than 15 years of experience in the multifamily housing industry, having started onsite as a leasing consultant and worked my way up through the ranks. I was on the management side for about eight years and then switched over to the asset management side in the last seven or so years. It's given me a full-circle understanding of the challenges of implementing new expense reduction initiatives.
NAA: Could you please describe some of TCR's expense reduction initiatives?
NW: Utilities is a huge focus for TCR. We log and benchmark usage and look for ways to reduce consumption. We work with a vendor/partner to help us maximize the recovery of water, sewer, and trash, while staying compliant with local regulatory guidelines. As a merchant builder, we are not focused on retrofits; we look to optimize the existing building configurations through smart operating policies. On our new developments, we look to invest in high value, quick payback engineering. For example, we’re specifying LEDS in our new parking decks. Buyers of our properties can realize an immediate return through operating savings. We've also saved quite a bit of money conducting sales tax audits on our common utilities; many states now allow residential common area utilities to be tax exempt. This can save anywhere from 3 percent to 4 percent of overall common area utility bills.
NAA: How is TCR different from its competitors?
NW: We don't manage properties directly; we’re developers and asset managers. So, we work closely with each of our third-party management companies to make sure we are staying on top of things like staggering the maintenance hours and other common-sense strategies. It makes no sense for the entire staff to be there the same time every day. You can reduce overtime easily just with smart scheduling, while extending the customer service hours available to your residents.
NAA: What is the biggest savings you have been able to realize to date?
NW: Tying the behavior of the maintenance staff [with results], incentivizing them for positive resident feedback. A great example of this is implementing best practices such as our Building of the Week program where we visit every unit every quarter performing inspections or preventive maintenance. Those maintenance associates are the ones residents are interacting with most, so there is an opportunity for us to have positive interactions. To do that, we have a certain number of units that have to be walked every week. By the end of the quarter, on an average 300-unit property, we'll cover 36 units a week. Residents are informed of the schedule, so there are no surprises. Mostly, it's a way for residents to know we care enough to be in their units and make sure everything is OK. It's really reduced the amount of reactive work orders. We'll do things like replace the AC filters, check the smoke detectors -- things that we're required to do anyway but would be phased in over the course of a quarter.
NAA: What has been the response from staff?
NW: It’s a change for them at first, but over time we've found that the maintenance teams really see the value in working more proactively. For example, they know what is going on in the units, what units look like before residents move out, and understanding the kind of work that will be needed to get done when going to turn a unit. They’ve also noticed that the number of reactive work orders is down considerably. They will have been in that unit at least four times over the course of a year. Best of all, it has really brought down our operating expenses on a per-unit basis, on average, anywhere from $150 to $200 per unit per year. We were able to save annually about $70,000 a year on the average property size, and then we were able to increase the value based on a range of cap rates exceeding $1 million through that initiative.
We know that if we apply these best practices it delivers value for us, but scaling this across our portfolio manually without increasing our resources, would be impossible. So, we’ve looked for ways to scale and monitor the application of these best practices. That has led us to a technology vendor who is helping us to approach this comprehensively, with a focus on adoption, usability and rewards, allowing us to make sure that the best practices are adhered to with enthusiastic participation of the onsite staff.
NAA: What advice would you have to other apartment professionals looking to have similar success with expense reduction initiatives?
NW: You need early wins. Identify the low-hanging fruit and broadcast the success of those initiatives throughout the organization. Try not to attack everything at once; take one initiative at a time and set some milestones for that. Set up regular weekly, biweekly, or monthly calls to monitor the progress on that one initiative. Then, set a timeline for the next initiative. If you try to do too much at once, you won't get anything done well. Assign different people throughout your organization some accountability. Assign an 'owner' to that initiative, and then set up the regular calls to monitor how well it is being adopted or received. Have specific milestones and metrics. Also, make sure there is something in it for everybody across the organization. If the staff or the team that is responsible for executing isn't on board or they don’t believe there is any benefit to them, then you have already lost. It has to be something that benefits them in some way or that makes their life easier or something they may receive recognition for. Too often, these initiatives aren't fully understood by the folks you are relying upon most to implement them."
NAA: Was there some advice given to you earlier in your career that has stuck with you and contributed to your success in this field?
NW: Yes. Don't underestimate the need for continuous improvement, no matter how well a site is doing; there is always room for more efficiency. Whenever you relax and take your eye off the ball, things can go wrong very quickly.
By Teddy Durgin
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