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
.
Mike
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