12A — August 28 - September 10, 2015 — M id A tlantic
Real Estate Journal
www.marejournal.com
2015 NJ A partment /M ulti F amily C onference
By Elie Rieder, Castle Lanterra Properties The importance of active asset management in multifamily
I
including even some sophis- ticated institutional investors in multifamily properties.
site manager may not know their tenant base, the land- scaping can be unkempt, unit
corporate management may be choosing to focus resources on other properties, the on- site property manager may consider the property a rung on the career ladder, or the focus of the property staff may not be on maximizing perfor- mance but instead on avoiding mistakes. As a result, rents and oc- cupancy lag the market and property NOI is depressed, creating an opportunity for others. This is an approach that often leads to sub-optimal performance and a gradual erosion of the properties’ value
and cash flows. It does, how- ever, create opportunities for owners that are willing to invest in robust asset manage- ment capabilities. In order to avoid this and maximize value within a large multifamily portfolio, we find that it is essential to empha- size asset management and elevate it to a level of impor- tance that is as high as any other function of the firm. Rather than viewing asset management as a cost center and staffing it with lower paid employees, we at Castle Lan- terra view it as a core compe- tence. We also maintain a high degree of overlap within our acquisition and asset manage- ment divisions. This ensures continuity following closing and enhances our acquisitions capability by providing the acquisitions team with first- hand experience with business plan execution and actual property performance versus pro forma projections. In addition to emphasizing the value of asset manage- ment, we take an active role in ensuring that our property management teams are per- forming to their potential. Some strategies that we em- ploy include unannounced property visits, secretly shop- ping properties, and auditing collection and maintenance practices. This is followed by an open discussion in a positive environment where the emphasis is on potential means of improvement rather than criticism. We want our teammembers to adhere to the highest standards of customer service for our residents, and we encourage everyone to “think like an owner,” a mind- set that we underscore with incentive compensation that aligns their interests. We have found that these approaches can have trans- formative effects on property performance. Even when we maintain the same on-site property management team following an acquisition, we see occupancy increases, rent increases, and reductions in costs through preventative maintenance. We also see in- creases in tenant satisfaction, and of course, strong returns on our investment in asset management. Elie Rieder is the founder and chief executive officer of Castle Lanterra Equity and Castle Lanterra Properties. n
nvestors in multifamily real estate are often at- tracted by the high levels
o f depend - able cash flow t ha t many p r o p e r t i e s can gener - ate. Howev- er, few prop- e r t i e s c an be acquired and safely ig-
“Even when we maintain the same on-site property management team following an acquisition, we see occupancy increases, rent increases, and reductions in costs through preventative maintenance.”
Often when performing an on-site analysis of a potential multifamily acquisition, it be- comes evident that the on-site staff may not be representing ownership’s best interests. In some cases, the leasing staff may be inattentive, the on-
turns may be sloppy, etc. We see this even with reputable third-party management in situations where the owner- ship is disengaged and not ac- tively monitoring their asset. This may happen for multiple reasons: the regional and
Elie Rieder
nored by owners who are not hands-on in their approach. We do, unfortunately see this hands-off approach employed by many investment groups,
One Executive Blvd; Suite 204 Suffern, NY 10901
www.castlelanterraprop.com
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