Here Is One New Word To Learn And It Isn't Pretty

As I wrote and described in a white paper of two years ago entitled RESOLUTION, we in multifamily were entering the era of the ‘end of business as usual’. 

The construct and premise of the white paper was founded on three axioms:

1.       The fragmentation of our industry was its Achilles heel

2.       That ‘capital’ would soon chase down our inefficiencies and asset management decision making

3.       That unless there was an aggressive adoption of a digital transformation ( I called it “going digital at the core”) conventional operating methods would soon debilitate and expose the weak from the herd as easy prey for predators

Two years ago I set the timeline for a significant industry restructuring as five years. Two years have now passed, so we are now down to three years. 36 months, which is not a lot of time.

Look and see. In just the last few weeks we have seen the moves begin. Learn a new word: ACTIVIST.

Two companies of industry renown are just now under pressure – from activists. And so it begins. 

These activists are ‘capital’ style companies not operators. They smell the ‘opportunity’ for profit. Their actions will bring attention and attract even more activists and the frenzy will build. The herd mentality surrounding aggressive activism will create very strange and in many cases unwelcomed new bed fellows. New alliances and consolidations will occur at an increasing rate. It will be ‘white water’ time for many. As a defense, hiding out is no longer an option in the age of the automated patrolling and culling of business data and intelligence. Be assured that ‘big data’ is already at work to expose the weak and inefficient in our industry. The big data ‘radar’ screens are filling up as you read this, with a veritable slew of potential targets.

The end game is to create an ‘entity’ worthy of attracting massive capital infusion. The first phase will be in simple size consolidation. And we have already seen that happening. The next will be deciding on being an owner or a fee manager. We see that now happening. Building out an infrastructure of magnitude and import will set the activists on the hunt for the underperforming and exposed. It is always an activist’s belief that it can be done better and more efficiently and technology at scale holds the key. They know that housing will be at a premium in the years ahead. And with the supply limitations controlling housing as a ‘natural resource’ comes the opportunity for pricing arbitrage and access to state and federal subsidies and tax benefits. Such fertile ground.

The future will demand unparalleled disclosure of operating performance and the value being derived for investors. The metrics will steer many to privatization away from ‘public’ markets making the cost and availability of capital a devil-driven paradox. Others will see that the best protection is to be found in operating results and in the improved use of capital in asset decision making. 

My point in the white paper was that the new era will absolutely require the adoption of ‘digital efficiencies’ that can deliver increased ROI and better business intelligence used in decision making. It will become ever more understood that technology is the new finance. 

How long before local property offices seem like an airline check-in operation? How long before a national service handles all leasing? How long before the ‘internet of things’ totally monitors the performance of your local assets? How long before a robot says “Welcome to Happy Hollows – here is your key”?

Not long.

As always, I am here to help. Send me an e-mail at Mike.radice46@gmail.com if a conversation on ‘going digital at the core’ would be helpful to your planning for the future

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Mike

Does Your Multifamily Business Have Answers to These 5 Tough Questions?

The multifamily housing industry is one of if not the most fragmented industry in the United States. Fragmentation is characterized by the fact that no significant national housing investment vehicle yet exists that can attract capital seeking to dominate and secure national market control and gain financial synergies on a massive scale. However, capital markets and the next wave of technology driven by cultural influences will combine to consolidate and motivate the enablement of just such an ‘industry powerhouse player.’

Don’t be misled, the game is changing. We are rapidly approaching the end of business as usual in multifamily. The economic outlook for the future of the industry is too alluring for investors to ignore. Business model moves by Blackstone, Zillow, Renter.com and Greystar serve as clear evidence of this trend. Not so obvious, however, is the underlying importance of technology on executing a successful future outcome. Multifamily leaders (read, ‘survivors’) in the new era will be driven by how well they embrace becoming ‘digital at the core’.

Becoming ‘Digital at the core’ is about reducing asset investment risks, creating competitive marketplace advantages, and increasing asset values in light of the industry’s future structure. Anyone with a stake in multifamily cannot afford to ignore the impending mandate to become digital at the core.

When businesses become ‘digital at the core’ they are smarter, quicker, more efficient and significantly more powerful and competitive. When people work in businesses that are ‘digital at the core’ they secure unique advantages. They become knowledge workers that can find what they need, know, what they need to learn, do what they need to do, exactly at the right moment. And, they can take action from anywhere and at any time. The depth of benefits derived and being driven by this change are profound.

The mandate to become “digital at the core” is inexorable. It is driven by residents, workers, lenders, regulators, competitors, investors and technology itself. It is these constituencies, stakeholders and powers that make becoming ‘digital at the core’ a required strategy for survival.

The great businesses of the 21^st Century have already demonstrated what it means to become ‘digital at the core.’ This means, digital operations, digital workflows, and digital processes that permeate, and ooze within their business DNA.

Digital operations mean success, and here are some reasons why from Dr. Peter Weill, MIT Sloan School of Management’s Center for Information Research, Wall Street Journal:

ü  IT-savvy companies are 21% more profitable…

ü  IT-savvy companies make information technology a strategic asset

ü  They use their technology to reduce costs today by digitizing their core processes…

ü  IT-savvy companies use their digital platform to collaborate with other companies, customers, and suppliers

ü  It’s about the whole company thinking digitally

ü  For the IT-savvy business, there are two sources of their greater profitability: lower costs for running existing business processes, and faster innovation.

A survey of the landscape of successful companies in this digital age quickly surfaces those that have crossed the great divide, having moved from legacy data processing infrastructures to becoming truly digital at the core. By doing so they become not only highly competitive, but also highly valued. Nike, blending technology with sports shoes and clothing. JetBlue, integrating entertainment and communication technologies with air travel. DirecTV, putting advanced entertainment systems and choices in the palm of your hand. And of course there remains the ubiquitous Facebook, FedEx and Apple with its iTunes, Apple Watch and Apple iPay. Think of the success of Samsung with smartphones and smart TVs that put a seemingly endless amount of entertainment content at your fingertips. Amazon and now Alibaba that puts digital shopping and shipping and now even ‘entertainment media’ one click away for millions shoppers. And, UBER – where a ride is just a click away. Each and every one – creating and exploiting marketplace advantages by being digital at the core and gaining significant valuations and returns on their investment and innovation.

For multifamily executives, embracing the opportunity and challenges of technology, determining technology investment levels that the future will demand, might seem a bit overwhelming. It doesn't have to be.

.

Drive to answer these few important questions:

1.      Do I understand how advances in technology will change the basis of competition in multifamily?

2.      What will be required in technology to meet if not exceed the expectations of residents, customers, and business partners and investors? How would you describe those future expectations?

3.      Do your current business plans clearly incorporate the role of technology as a performance contributor, knowledge differentiator, and value creator?

4.      Do your technology plans and investments clearly identify and align with your views on the threats, opportunities, and economic outlooks you consider probable?

5.      How agile and flexible are your technology plans and programs in light of rapidly changing economic and regulatory compliance conditions?

In the end, the below list of key objectives for multifamily businesses will remain sacrosanct, and, yes, they too must be kept ever in mind:

v  Asset value development via new development, acquisition and divestiture

v  Risk mitigation

v  Resident acquisition and rent yield

v  Resident satisfaction and loyalty

v  Property management effectiveness and efficiency

v  Local marketing and brand and reputational development

v  For Fee Managers: customer acquisition and longevity

Blending these objectives into a technology strategy that addresses the above suggested macro questions will help you frame out a path forward.

The point is, that it will be technology that frames the future successful industry business models. Not just for the efficiencies technology can deliver but more importantly for access to the ‘knowledge’ that drives sound, risk mitigated decision making and operations.

As always I am here to help. If you would like me to lead a team session to help formulate your strategic technology planning send me an e-mail at: mike.radice46@gmail.com or call me at 603-580-5497.

Two Ways to Put More Profit in Your 2015 Expense Budget

1.       Reduce the expense that continues to surround ‘evictions and collections’ processing.

Over and over I see the following:

o   It’s like every case is almost a new experience….OK, for some it is…

o   Gathering the necessary paperwork remains a medieval practice.

o   Physically get the needed paper files.

o   Maybe, even then copy, pack and pay to ship them to a central office.

o   Make multiple copies of the files.

o   Pay to re-ship the copied files to the collections service or the law firm.

o   Review paper docs to determine what’s missing.

o   Make multiple copies of the files.

o   Hold multiple, multi-site conference calls to explain what is yet needed, from whom and why.

o   (Collections probability inexorably slides ever more negative due to time delay.)

o   The preparation of eviction packages with multiple law firms in multiple jurisdictions and are thus scattered on desks in paper packages across the legal country side.

o   Constant follow up (nagging?) to source missing documents.

o   The time and effort that goes into on-going ‘tracking and reporting’ is a huge time sink.

In this digital age it is possible to set up (1) electronic files to store all resident related documentation (2) create ‘shared secure electronic files’ for each resident case, providing real time access by collections services and law firms and (3) run compliance documentation audits to be sure that what might be need is there. Eliminate the copying and shipping cost and time. The property management company and the collections service or law firm can all now have real time shared access to needed documents-instantly.

Done properly all this documentation can be electronically sourced directly from property offices. No need to fill out shipping labels and pay for shipping! What is the shipping cost times how many packages?

We seem to understand the need for electronic maintenance task tracking. We all seem to understand the need for electronic A/P processing. Why should ‘evictions and collections’ task processing - which means REAL MONEY TOO - be treated so poorly and remain a paper based process?

Electronic document exchange and electronic workflows can easily handle all of this – stunningly well.

2.       Portfolio wide printer fleet management and support by using an outsourced ‘managed print service program’. (I have reviewed many and have suggestions.) Lower your printer equipment purchase and supplies costs, practically eliminate IT support expense and lower the cost of paper.

A managed print service program is no different in rationale than why you would hire a landscaper or a painting contractor. They probably can do the task quicker, better and cheaper. So it is with a managed print service provider. If you have more than 25 office printers in your portfolio and you are not subscribed to an outsourced managed print service program. What can I say? 

Why do you want to pay more than you should in printing, support and supplies? Do you think that all those cartridges and ink toner tanks that line the walls of office supply stores are there because they are low margin products for the retailers? Do the math on printer support. If you are good, 10% of IT help desk time is taken up with printer issues. How much do you pay an IT person? What does it mean to ‘leasing’ when the printer is not working? Do I really need that model of printer that can do 5,000, collated, stapled, three-hole punched copies a week? (What would it mean as a paid resident amenity if residents had access to a printer at the community to support their personal 24/7 printing needs?)

Too often we think that because our printers are spread out at local community offices and not all in a central location that an outsourced managed print services program will not make sense. Wrong. The savings can be stunning. And, you can find out just how much savings for FREE!

So, there you have it. Two ways to reduce your expense budget!

As I always offer - if you want to learn more about taking advantage of systems and programs that can provide these specific benefits, send me an e-mail at mike.radice46@gmail.com I’d be happy to help.

Mike