February 2009 Newsletter
It’s All About The NOI
Only someone living in a cave the past three years would have missed the news about the economic turmoil we’re all living through. Home values nationally are off 18.5% from just a year ago, and San Diego real estate values have dropped over 39% since their peak in November, 2005.
The daily news brings reports of layoffs by the thousands, with December showing the single largest month of job losses in the nation’s history. Consumer confidence is at an all-time low as we battle the worst economic conditions seen since the Great Depression.
At Sunrise Management we’re VERY aware of the conditions we all face. Operating with a business plan that focuses on resident retention, we are taking serious steps to control expenses and improve net operating income at every stage of every asset we’re associated with.
Some of the initiatives you’ll be seeing implemented to improve NOI at the properties we’re managing include:
Providing value-added incentives such as cleaning carpets and painting apartments in lieu of cash incentives.
Rather than facing eviction for non-payment of rent, Sunrise is establishing payment plans for residents experiencing cash flow issues, helping to ensure their bills are paid while maximizing good will on behalf of the community owner. We find helping lessees who are tardy with their payments to catch up on their financial obligations works out positively for all concerned.
In addition to helping them get their expenses under control, the Sunrise program regularly reviews past payment histories and both present and future commitments. We enter each discussion with a list of firm objectives and guidelines, seeking to provide as much flexibility as is reasonable while ensuring rental payments are made consistently.
Providing value-added incentives such as cleaning carpets and painting apartments in lieu of cash incentives.
Sunrise’s professional staff accomplishes all this, even as we stay focused on spotting issues before they become problems, collecting overdue rent in as timely a manner as possible and monitoring potential delinquency cases.
Furthermore, like you we know how critical it is to retain residents in an economic environment like this, and we have plans for that too, including:
Rent freezes. To keep residents within the Sunrise family, we have already begun offering rent freezes on renewals and new leases. Over the next 12 months we anticipate doing more of the same, and are already seeing positive results.
Roommate Locator Services. Recognizing that some residents need help making their regular payments, yet are too overwhelmed by day-to-day events to find ways to reduce their monthly outlay, Sunrise has developed a Roommate Locator Service. With it we help residents find someone to help them offset their expenses.
Transfer options. While residents enjoy living in properties managed by Sunrise, reality dictates some may not be able to afford larger rental units. Seeking to retain the resident, maintain owner cash flow, and minimize the need to seek new occupants at a property, Sunrise now offers to switch a resident to a smaller floor plan without any financial penalty. Residents and owners alike appreciate the effort.
FRUGAL IS NOW CHIC
Sunrise’s plans for every community go far beyond watching every dime as if it were our own.
Observe our marketing strategies and you’ll see how they’ve shifted focus from luxury and resort lifestyles to the real estate version of comfort food. While restaurants offer meat loaf, we provide value, reassurance and convenience. We’re putting a focus on the individual amenities and services each asset provides, such as gym memberships, business centers and meeting rooms. By no coincidence, each service we focus on saves residents money.
Our team has further taken the situation in hand by instituting a series of seminars of value to property residents and community neighbors alike. Subjects being covered include:
Credit repair
Financial planning
Job fairs
As we see it, these seminars provide opportunities for residents to improve their lives, introduce neighbors to the properties where the seminars are being held, and allow Sunrise team members to get involved in a segment of their lives where we might not otherwise be invited. The sense of trust and camaraderie helps the team bond with participants, and bodes well for future relationships.
FOCUSING ON EXPENSES
Regardless of location or size, every property can benefit from a little belt-tightening. Some of the programs Sunrise has been putting into place across the board to watch owner dollars include:
Energy audits. We’ve been finding numerous rebates available to help reduce carbon footprints, water waste, energy waste, and improve recycling. Bulbs, appliances, fixtures, smart controllers, irrigation systems, design, placement, solar applications (active and passive) – these issues are all considered when our energy consultants provide a free review of a community.
Landscape walks. Maintaining an eye on waste goes beyond our free asset review as we watch for sprinkler placement to cover foliage, recognizing that some heads may need to be moved or removed altogether. We watch for landscaping that may need to be replaced, and seek opportunities to utilize native plants in an effort to minimize long-term water use. Our team members are on even higher alert during rainy season to avoid wasting water if the grounds are already getting wet. Because with Sunrise, it’s not only about improving returns – it’s also about doing the right thing.
Volume discounts. It’s amazing how consolidating purchases of certain commodity products can positively impact a property’s bottom line. The Sunrise system puts out every logical item on a community’s purchase list for rebid, including gardening, flooring, pool maintenance, appliances – even frequently ordered parts. Through smart inventory controls and strict purchasing guidelines, owners are seeing their costs across the board drop precipitously.
Ensure appropriate inventory levels. Our administrative and operational personnel check everything from paper towels to mulch on a regular basis. Our goal is a simple one – cover the asset’s needs on a just in time basis.
Review insurance costs. Big ticket services like property insurance are now being rebid annually to ensure competitive rates, appropriate levels of coverage, and that multiple policy discounts are taken advantage of wherever possible.
Review outsourced services. 30 years in the business have taught us that an asset’s site team is often qualified to take on some programs in-house and help shave down an owner’s costs. If team members have the qualifications and the bandwidth, we’ll be moving things off the balance sheet and onto their desks.
Managing staff responsibilities. We’ve been watching over the shoulders of every employee, adjusting staff schedules here, reducing overtime there, and cross-training at every opportunity. It’s amazing what you can squeeze out of current staff without too much pain to anyone.
Review service requests. Our service team learned long ago to watch for patterns among service requests. As soon as we spot a trend we’re on the job, determined to minimize the need for emergency repairs and any associated expenses.
Regular marketing review. Sunrise’s marketing department also looks for patterns to ensure a property’s dollars are being well spent. We’re constantly reviewing advertising results in search of the most effective message, most qualified leads, and renters and the lowest cost. The combination of our oversight and insight ensure every community’s ability to adapt quickly to shifting market conditions.
OF COURSE THERE’S MORE!
With each passing day our team members are finding additional ways to lower expenses, improve cash flow, and strengthen a property owner’s financial position. We urge owners to communicate their financial goals and let us help find ways to achieve them. Then we help put together low-cost, high-performance incentive programs. We’ve yet to find one of our teams that doesn’t live up to realistic owner expectations.
Sunrise is constantly reviewing the past and focusing on the future with a diligence that can only improve an owner’s financial position. It’s no surprise, then, that properties stay in our portfolio year after year.
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