Centralization

Like most apartment operators around the country, Memphis, Tennessee-based Fogelman Properties is thinking about how to incorporate centralization in its management model. 

But Fogelman Chief Administrative Officer Melissa Smith told Multifamily Dive that cutting headcount isn’t the driver. 

“All of our conversations around centralization are not all about cost savings, but perhaps repurposing the work and enhancing the resident experience,” she said. “So clearly that’s not taking all of the people out of it.”

Instead, Fogelman wants to meet its residents and prospects where they want to be. “A big part of that is online,” Smith said.

For instance, when residents use virtual tours, property staff are freed from showing apartments.

“Those tours are after hours and they enable us to provide additional benefits and flexibility to employees by closing on a Saturday or Sunday,” Smith said.

Although Fogelman is looking at tech as an enhancement, the company doesn’t expect to go as far as some of the REITs, like Arlington, Virginia-based AvalonBay Communities and Denver-based UDR, which are experimenting with properties without staffers. “We're in garden apartments so I don't envision us ever going staff-free,” she said.

Here, Smith talks with Multifamily Dive about centralizing administrative functions, the role of artificial intelligence and the continued tight labor market for maintenance technicians.

This interview has been edited for brevity and clarity.

MULTIFAMILY DIVE: What are you focusing on when it comes to centralization?

MELISSA SMITH: There are three things you can centralize — maintenance, leasing and administrative functions. We are focusing on administrative functions first for a couple of reasons. One, that's the rote work that happens over and over and over again. And when you have turnover — and in our industry there's still a lot of turnover — if we can move that off-site and not have to retrain and retrain on it, it benefits everybody. 

And then, two, everybody is looking for workplace flexibility and being remote. We're hoping we can sustain a role that maybe people can do remotely. And they can be with us long-term in this transitional market. One “simple” change in structure that can benefit many.

How are you looking at artificial intelligence to supplement your teams?

We are testing [artificial intelligence chat-based] products just to get to the low-hanging fruit that people are spending their time on. If they can have that handled, they can raise the level of performance for the property. 

I'm actually interviewing for a senior IT leader. I've been chatting with a lot of people across a lot of companies. It has been interesting. Everybody seems to be focused on having all of this technology and all this data, making sure that we are using it in the most efficient way and using the data in an actionable way. We’re trying to find that balance in our industry, which continues to be a challenge.

Do you think the number of people working at apartment properties will go down as companies adopt these technologies?

That's where I think a lot of the dialogue is happening. The old one-person-per-100-units doesn't work anymore, but I'm not sure where it shakes out. You're not dropping by a full person on a 300-unit property. You're not going to two on that size property if you're still keeping office hours open. So maybe you're at two and a quarter or something like that. Those people are still working, but they're just not working at the property. 

Are there any other factors to consider?

I also think it's going to depend on the age of the property, which it does now to some extent. You can do with less on newer, high-end luxury, but then the residents want the time and attention. Older assets are a little more time intensive and labor intensive. And then it depends on if it's a full garden or if it's mid-rise. I just don't think it's as easy as some people think. This is where it will be fun to explore centralizing some maintenance functions as well. 

How will maintenance teams change?

On the maintenance side, you’re trying to find your local experts. So you might have a service team of four people on site. You can't always have an expert. A lot of them are generalists. So if we have two plumbing experts in Atlanta, why should they be tied to one property? It's like calling a contractor but you have them in-house and they can go out to any property. So in my mind, that's another easy way to continue to promote people, allow them to have their niche, and that benefits all of our properties.

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Dive Brief:

• Arlington, Virginia-based AvalonBay Communities and Atlanta-based Gables Residential announced last month that they had entered into an agreement for AVB’s centralized service center to provide back-office financial administrative support services to Gables, which manages and builds apartments. 
• AVB, the No. 4 owner in the country, will be responsible for customer service and account inquiry support, billing,  legal and eviction support, delinquency notification and payment and security deposit processing services across the entire Gables Residential portfolio of over 25,000 apartments across 10 states and Washington D.C.
• AVB will not handle the operational and business decisions related to the Gables portfolios. “We are not offering property management services under our agreement with Gables nor do we intend to do so,” AVB CFO Kevin O'Shea said on the REIT’s Q1 2023 earnings call last month. “All business and operational decisions related to AvalonBay and Gables portfolios will continue to be managed separately by each company.”

Dive Insight:

Gables isn’t alone in farming out the back-office functions of its management portfolio. In March, Fort Lauderdale, Florida-based Altman Management Co. partnered with Atlanta-based third-party residential property management firm RAM Partners to provide back-office management services.

Gables has been focused on centralizing administrative functions across its portfolio over the last several years. “The new centralized service opportunity with AvalonBay’s customer care center furthers Gables’ strategy in which our business model reflects greater customer service demands and those of a changing industry,” Gables Residential CEO Sue Ansel said in the news release.

Executives at Gables and AVB have long-standing relationships. After a series of discussions between the management teams, the companies did a pilot program with AVB handling centralized service for a small portion of the Gables portfolio. After that experiment, the companies decided to move forward, according to commentary on the AVB earnings call. 

AVB, with 88,475 units in 12 states and the District of Columbia, opened its Virginia Beach, Virginia-based customer care center in 2007 as a separate business unit from residential operations. At the time, it was one of the first centralized service centers in the multifamily industry. 

“This agreement demonstrates the appeal of the innovative capabilities that we've created in the 16 years since we established the CCC,” O’Shea said on the call.

AVB’s benefits

O’Shea said AVB could “create additional value for the shareholders by offering support services to other institutional multifamily owners now and in the future,” though it isn’t currently “proactively looking” for other opportunities.

“We do hope, looking ahead, to be able to do more business like this over time,” O’Shea said. “And we think it does make sense for us to do it because it allows us to scale and more fully invest over time and import capability that allows us to further differentiate ourselves from our peers.”

Part of the appeal of the agreement was that it allowed AVB to make continued investments into technology, processes and people that benefit the company’s own portfolio. 

“It's a nice next step in our overall operating model journey, and we're excited for this first step and potentially future clients going forward,” Schall said.

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Yakov Belousov sees one big issue trumping everything else in apartment management – staffing.

"We're going to have to fundamentally rethink how we're staffing up properties and what the expectation is of our teams," said Belousov, executive director of operations for Alpharetta, Georgia-based property manager Pegasus Residential.

Pegasus is testing three staffing models – a five-day workweek, a four-day workweek and a centralized staffing platform – at its communities in an attempt to right-size operations for the future and move its employees away from working on weekends. In each case, the company is leveraging self-guided tours and virtual interactions. In the centralized model, it is moving the office and administrative responsibilities offsite.

Although many apartment companies are reevaluating what their leasing offices look like, Belousov thinks regional and field support teams will also need to be addressed. 

Here, Belousov talks with Multifamily Dive about how Pegasus, the No. 41 manager on the National Multifamily Housing Council Top 50, is thinking about removing managers and assistant managers, closing for the weekends and centralizing maintenance functions.

This interview has been edited for brevity and clarity.

MULTIFAMILY DIVE: What is driving the reevaluation of staffing in the industry?

YAKOV BELOUSOV: Everyone is looking for a work-life balance. They want more time with their family and with their loved ones. They don't want to be married to the job. The generation that's coming is conditioned very differently from the previous generations. The big thing that we're going to have to fix is the archaic staffing structure that we've had for years. So we're going to partner with technology and use the self-serve economy model that has been very prevalent since March 2020.

What does the centralized model look like? What tasks are you centralizing?

We've removed the assistant manager position and centralized that and removed the property manager and centralized that. The centralized folks can support multiple properties. The folks that we have on site are managing relationships for current residents and prospects and reenvisioning how we interact with our prospects, the community that we build and the programs that we have. It's almost like our sales associates have become social engagement folks.

From a maintenance perspective, we've created a hub-and-spoke system where a maintenance person is dedicated to the property, but everyone else is centralized. They support many properties, and the director of maintenance will take a look and see where the needs are. 

If you're a third-party manager, are you at a competitive disadvantage if you're resistant to these trends?

We're going as a society toward a self-serve economy. So I don't think this is going away. I think the people that are resistant will be the last to join, but it is going to happen.

How are clients reacting to this direction?

Because we are a third-party manager, we have to make sure our clients are on board with this. So our goal for clients that might be apprehensive is to start with a five-day workweek. We have case studies that show you are not losing any revenue, you are not missing out on leases, your occupancy is not dipping and your rent growth is exactly where it was before. Just because you're closing on the weekend, it's not hurting your business. 

When making these changes, what kinds of concerns do employees have? How do you manage these?

Absolutely. There are still concerns out there. Because of the amount of supply entering the marketplace and the deficiency in staffing, it hasn't been a significant concern. The demand for jobs is so high that we don't have enough staffing to fill them. Eventually, I think it's going to be an even greater concern. But like with anything else, people will have to repurpose some of their abilities and move in that direction. 

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Altman Management Co. has partnered with Atlanta-based third-party residential property management firm RAM Partners to provide back-office management services.

AMC, the property management division of Fort Lauderdale, Florida-based developer, builder, and manager The Altman Cos., will continue to handle resident-facing functions. Current back office AMC employees will be reassigned within Altman, given the option to move to Atlanta to work with RAM or be let go, according to Tim Peterson, chief investment officer for the company.

“This was really an option that allowed us to stay in property management, but avail ourselves of the scale that RAM has in the back office,” Peterson said. 

The partnership provides yet another sign that it's increasingly difficult for smaller property managers to gain the scale necessary in today’s high-tech environment. In 2021, Sandy Springs, Georgia-based Worthing transferred its property management division, including lease-up functions, to the Atlanta-based operator.

“We've been very focused on providing our residents with what we call an exceptional living experience,” Peterson said. “It became harder and harder to have the infrastructure that we thought was necessary in the back office to provide that experience to our residents and also to our associates.”

Tapping into RAM’s buying power was only one driver to the deal. The familiarity between the two firms also played a role, according to Peterson.

Going outside for efficiencies

Altman’s operations team had always focused on providing the best results for its properties, according to Peterson. But over time, as property management technology grew more essential and the cost of running the properties became prohibitive, the executives at Altman decided that they needed to bring in a partner that could offer more efficiencies than its roughly 7,500 units.

Over the years, Altman has generally operated between 6,000 and 9,000 units. RAM, No. 32 on the 2022 National Multifamily Housing Council Top 50 manager list with 51,932 units, can bring scale that Altman couldn’t.

“They had the ability to build a much more robust back office,” Peterson said. “This provides us the opportunity to leverage off of that scale and the infrastructure that they've put together while keeping the Altman special sauce and all of the resident-facing associates and activities in place.”

For instance, AMC employed one Yardi support person, according to Peterson. Companywide, RAM employs seven support people to run Yardi reports, including three former Yardi employees.

“Now, when we want to customize reports, we have immediate access to people that are super skilled at doing that,” Peterson said. “And we now have the national account buying power of a 60,000-unit-plus company, including property insurance, which has become a bigger and bigger issue for multifamily today.”

A long history

Executives at Altman and RAM have a history going back 33 years, making the partnership between the two companies a natural fit, according to Peterson. 

“We're corporate friends,” Peterson said. “We have visited with each other and regularly picked up the phone and talked to each other.”

As operations become more technical and expensive, Peterson could see other smaller property firms following Altman’s lead. 

“Our management company wasn't necessarily our number one profit center or even a profit center,” Peterson said. “And even with that, it was becoming more difficult by the day to make the investments that were needed. I absolutely believe that's a trend that's been going on for a couple of years and will continue.”

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Right now, Atlanta-based apartment manager The RADCO Cos. manages around 5,200 apartment units for itself and third-party clients.

However, RADCO’s new senior vice president of operations, Chris Simon, who came over from Fort Washington, Pennsylvania-based Toll Brothers Apartment Living, expects that to change very soon. “We want to continue pushing,” Simon told Multifamily Dive. “We’ve got approximately 11,000 units in the pipeline in some sort of development stage or incoming acquisition.”

But that’s only the beginning. By the end of 2025, RADCO wants to be at 25,000 units a year. Right now, third-party constitutes about 35% of the company’s units under management with the remainder coming from communities that it owns. But expect that percentage to flip over time. 

“The brunt of our growth is going to come on that expansion of the third-party market,” Simon said.

RADCO currently manages properties in Atlanta; Raleigh, North Carolina; St. Petersburg, Florida; and Virginia Beach, Virginia, but to reach 25,000 units the company will move into new metros, like the West Coast and Central U.S. Here, Simon talks with Multifamily Dive about RADCO’s growth plans, acquisition opportunities and centralization.

This interview has been edited for brevity and clarity.

MULTIFAMILY DIVE: How do you plan to grow the third-party business?

CHRIS SIMON: We're going to grow in a couple of ways. I think a lot of that growth is going to be organic from us pounding doors and ringing phones. But we're also in the market of acquiring other management companies. So if we do meet that goal of 25,000 units by 2025, I would assume a very large portion of that is going to be the acquisition of additional management companies. 

Do you see more management companies being sold in the next couple of years?

We're seeing this capital debt market causing a large strain on organizational capacities. We are seeing some people that want to get out from under managing these assets, especially some of these mom-and-pops that have larger portfolios.

How are you thinking about centralization as you grow?

We already currently have a centralized processing unit. And that has allowed us to alleviate some of the onsite positions and decrease the payroll from a property perspective. So not only are we lowering the staffing count, but we're getting better consistency across the board by centralizing some of those operations. Specifically, this really relates to the assistant manager's job. They oversee move-outs, deposit accounting and high-level ledger interactions. We have rolled all of that to a central processing unit at our corporate headquarters in Atlanta.

What kinds of things does your processing unit handle?

We have two different divisions. So we have a director of system operations that oversees that central processing unit team. Underneath that director of system operations, we have resident account managers who are responsible for assisting with collection efforts across the board. 

Secondly, we have business systems specialists, and they're responsible for the management of lead generation and follow-up. We're continuously adding to that team. If you have 20 properties, we've removed 20 assistant managers. Now we have four people overseeing all of these aspects that I just mentioned.

How has RADCO incorporated artificial intelligence?

I’ve been in the industry for 17 years now. While you've always had to keep your thumb on the pulse with technology, it's really starting to turn over from more of an AI standpoint. 

At RADCO, we've already got an AI delinquency software that we're utilizing. We've already got an AI revenue management software that we're utilizing. We have an AI digital market survey software that we're utilizing. 

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