5/8/2012 Understanding Market Cycles Recovery/Bottoming Recovery 2010/2011/2012 The main characteristics driving market cycles Decreasing Vacancy Rates 1. Low New Construction Vacancy rates 2. Apartment Expansion Market Moderate Absorption New construction Recession 3. Cycle 2012/2013 2007/2008 Low/Moderate Employment Growth 4. Employment growth Negative /Low Rental Rate Growth 5. Rental rate growth Hyper- supply Expansion Hypersupply Recession Decreasing Vacancy Rates Increasing Vacancy Rates Increasing Vacancy Rates 1. 1. 1. Moderate/High New Construction Moderate/High New Construction Moderate/Low New Construction 2. 2. 2. High Absorption Low/Negative Absorption Low Absorption 3. 3. 3. Moderate/High Employment Moderate/Low Employment Low/Negative Employment Growth 4. 4. 4. Growth Growth Low/Neg Rental Rate Growth & Concessions 5. Med/High Rental Rate Growth Med/Low Rental Rate Growth 5. 5. There have been as Multifamily starts grew 21.1% many as 47 recessions in February in the United States Construction is since 1790 up 85.4% from a year ago 1
5/8/2012 Source: Axiometrics Agenda See, Feel, Touch & Why We Raise Rents Lease Representing & Retention Through Defining Value Recovery Rent Increases & Compare & Lease on Concessions Value Resident Experience Overcoming Cycle Objections 1.THE PRICING PARADOX: How do you know when it’s time RAISING RENTS WHEN OTHERS ARE raise rents & eliminate “How can I possibly compete if we raise rents CUTTING THEIRS concessions? when the competition is lowering theirs?” “ If NOI is down, how am I supposed to get it back up again without giving away the moon ?” “Tami, if you think raising rents when When occupancy is high isn’t going to result in a When others When NOI is occupancy by mass exodus to the cheaper place down the are cutting declining apartment street, you’re crazier than I thought.” theirs. type is less than 10%. Going-Out-Of-Business Your Community Can Do That, THE PRICING PARADOX: RAISING RENTS WHEN OTHERS ARE price increase? Too! CUTTING THEIRS We QUIT!!!!! “Why is the home office insisting on such a high rent increase !?!” Every Apartment Must Lease “Why is that software system pushing those rents so hard ?” Going Out Of Business "How can we possibly hold onto the occupancy we have worked so hard to Every Apartment Must Lease achieve!?!” 2
5/8/2012 2.RAISING RENTS WHEN NOI IS Monkey- See… Monkey -Do GOING DOWN “How can our competitors lease apartments for so Obtain increased rents in the initial lease much less than ours ?” without concessions “We have to compete and offer the same rents or concessions if we want to renew and lease!” “We have to lower our security deposit and/or Sell a rent increase at renewal application fee to keep up with theirs, or we might as well kiss our leases goodbye!” Think like An Investor Net Operating Income (NOI) NOI Decreases Rental rates are simply When too low relative to Rental rates are cut 1. operational costs Concessions are offered 2. Fails to increase rents when operating costs 3. rise Fails to obtain economic occupancy 4. Income MINUS Operating Costs to cover operating costs Income minus outflow The Land Communities that Experiencing occupancy Of Legends have financial problems, means a cash-flow Myth issues often do problem & income is needed 100% OCCUPANCY = SUCCESS when their occupancy is high “What’s the fastest way to create income ?” How to do we lease more apartments quickly? 3
5/8/2012 Representing & Defining Myth Value Myth Most rental rate objections “Competitive” raised by residents stem Residents lease because concessions & from the fact that they the rent rate is the lowest rental rate don’t understand or haven’t they’ve found cuts work learned the value of your apartments and community. Trump Price, Every Time Defining Value Value Based Leasing What This Means to a Leasing Professional Commodity or Unique Experience ? big-research.com Two Primary Factors Strategies that will really knock the Determine Value socks off of our residents 1. What someone gives up 2. What someone receives in return 1-10 “Is this particular community, apartment and the service I’ll receive a fair exchange for the asking rental rate?” 4
5/8/2012 Present the rental “Thank you so much for being patient while I talked & “Mr. Resident, we appreciate the trust you’ve placed renewal rate about the value of living in this apartment and in in us by being a resident in our community over the our community, for letting me know what you’re past two years. The renewal rate for your home this looking for and what’s important to you so we know exactly how to make you happy here! This year is only $xxx per month; and that includes our apartment leases for $xxx per month and that continued dedication to make your life here better includes all the special conveniences and services every chance we get.” we’ve talked about.” Resident-Focused Value “In a word how would you PERCEPTION AND PERFORMANCE describe your ideal salesperson.” “When you make a buying decision, how much of Views Knowledgeable Customer Focused that decision is weighted on the product, the Professional Problem Solver Situations company that supplies the product, and the Thorough Responsive salesperson with whom you deal?” Expectations Result Oriented Reliable 57% product Relationship Good Communicator Experiences 25% salesperson Oriented 17% company Importance of P rice Four Dimensions of Value Price 7.2 Resident Service Rights 1. Apartment Salespeople 8.3 2. Community 3. Company The greater the perceived value the Leasing Professional brings 4. Leasing to the lease, the fewer rental Professional rate objections they will encounter. 5
5/8/2012 LET THEM KNOW YOU’RE THERE ! Model For Creating Value At Your Service Shopping Renewing Leasing Living Moving in THANK YOUR RESIDENTS When they pay their rent... every time 1. When they compliment you, your company, or 2. community DO YOU DO WINDOWS? When they offer comments or suggestions 3. When they refer a friend or associate 4. When they complain 5. When they turn in a service request 6. PREPARE YOUR TEAM fOR RENT INCREASES The Most DANGEROUS RESIDENT... 6
5/8/2012 “ONE LITTLE THING” PROGRAM Thanks for the Memories Demonstrate Value as a Close Every Conversation With Value & Service Service “Thanks! See you next month!” Or “Is there anything else I can help you with ?” Trend: “Resident satisfaction is Hi, Jim how are you enjoying the patio OR you raved about on your first visit? Is “Is there anything— anything at all —you’ve more important than company been meaning to ask that could make your there anything in your home you would apartment more comfortable?” policy.” like taken care of? Lease to the resident’s Retention through Resident The Value Leasing Strategy value expectations and not T hink the way a resident Service Marketing & Leasing or prospective resident thinks to your own value pre- Your community doesn’t have to be a revolving door of residents entering and exiting. You can go beyond resident service, increase suppositions Persuasion: O ngoing effort and not an event resident retention and enhance your marketing and leasing efforts all at the same time. In fact, your resident-retention policies double as Positioning: S haping an image in the residents mind excellent marketing and leasing approaches for your community. One of the easiest ways to do this is to make resident testimonials visible Differentiating: S tanding out from the competition to the residents and prospective residents of your community, by preparing a testimonial album or better yet printing and posting them Presenting: D elivering a compelling argument for why on the walls of your Leasing Center or Clubhouse for all to see. Testimonials pack a powerful punch in that they give residents and they should lease or renew prospective residents the opportunity to hear great things about your community from people just like themselves. 7
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