Webinar: Revenue Strategies in a Downturn

On October 20, 2022, we held a panel discussion on revenue strategies during a recession with multifamily and single-family rental housing experts. Learn from professionals which strategies will help you to retain and even grow revenue in a recession.


Diana Norbury

Diana Norbury

SVP of Multifamily Operations, Pillar Properties
Diana is responsible for Pillar Properties multifamily portfolio, with a focus on revenue management and business intelligence practices, talent management, operational systems, and lease-up and marketing strategies for their growing portfolio. Diana has spent over 18 years in the multifamily industry and graduated from the Georgia Institute of Technology.

América Melragon

América Melragon

VP of Revenue Management, Independence Realty Trust
America is responsible for the optimization of revenue streams, transaction based, project, service and recurring, as well as revenue generating partnerships. America has spent over 15 years in the multifamily industry and graduated from Northern Arizona University.

Evan Hoffmann

Evan Hoffmann

Industry Principal, Beekin
Evan is the former SVP (revenue management and marketing) at Aimco (NYSE:AIV) where he oversaw both revenue management and marketing for 30,000+ homes. Evan has spent 25 years in revenue management across several industries and graduated from Harvard University.

[00:00:02.410] – Evan Hoffmann

Good morning, everyone over in the States. I guess it’s still morning across all the time zones. Welcome to our discussion on Revenue Strategies in a Downturn. I’m going to give us a couple of minutes to make sure people have time to log on to get into the system. So we are going to mute our microphones for now, pop up the first slide as we go through that, and then we’ll just be back with you in a couple of minutes. Thank you.


[00:01:24.050] – Evan Hoffmann

For those of you that just joined, we’re just waiting another minute or two to give more people time to log on, and then we’ll go ahead and get started. I appreciate your patience.


[00:02:14.340] – Evan Hoffmann

Okay, I think we can go ahead and get started now. Thank you very much, everyone, for taking the time out of your day and joining us. I apologize for the cheeky title page, ‘Revenue Strategies in a Downturn or a recession by any other name’, but we may have some people in the audience that either think that we’re already there or that it’s inevitable for us. So I thought that might be a light-hearted way to get things started. I am joined by a couple of great industry experts. I’m joined by Diana Norbury, who is the Senior Vice President of Multifamily Operations at Pillar Properties, operating primarily out of the Pacific Northwest and in other areas, and América Melragon, she’s the Vice President of Revenue Management at Independence Realty Trust with a good sized portfolio in a bunch of different markets. But these ladies have some fantastic experience, and I’m hoping that we’ll be able to impart some information that you’ll find useful. And I’m Evan Hoffman. I am the Industry Principal at Beekin who is also the sponsor of today’s chat. If you want to learn more about us, feel free to stalk us on LinkedIn and you’ll learn a bit more about our background and our experiences.


[00:03:28.280] – Evan Hoffmann

But let’s just jump right in, shall we? And I think what we want to do first is kind of set the stage because it’s not really conflicting, but there are numbers and data points that are acting in somewhat opposition. For the most part. We all agree that new lease demand is declining, but is it abnormally declining or is it seasonally declining? And as usual in everything, revenue management, the answer to that question begins with ‘It depends’. And then there’s context and market and asset class and all those things. But I wanted to and I’ll throw it out to either one of you ladies, but what are you seeing and what’s the sense that you’re getting in the markets in which you operate?


[00:04:10.440] – Diana

Sure, I’m happy to kick it off. I mean, to be honest with you, initially, since this is what, year three now out of COVID, when we saw things slowing down, we had that freak-out moment for sure. But I had to quickly remind myself that this is not unlike anything we normally see in Seattle this time of year. I look back at previous history going back as far as when we first started. This is exactly what happens in September. So I won’t say that there aren’t factors that have affected our specific portfolio. I know that big tech is a big thing here in Seattle. Google, Meta, Amazon, all of those players, they have a hiring freeze, right? So that is definitely impacting some of our submarkets a little more than others, but it doesn’t seem that abnormal, especially just in terms of what rents are doing and our portfolio. Quite frankly, we have low availability still, so I think we’re in a good place.


[00:05:08.640] – America

I will say it was the exact same for us as with Diana’s portfolio. We proactively budgeted to see a slowdown in September, as we had the idea that this year might be a better year than what it has been, or at least a little bit more in line with historic slow down in Q4. Obviously, we budgeted that way, thinking hopefully the slowdown does not occur this year again, like it didn’t last year. But we are experiencing the same similarities as you are at Diana. What happened? Pre-pandemic is what is occurring traffic wise, which is a slowdown. It’s not an incredible slowdown, but it’s right on trend with what we expected.


[00:05:57.390] – Evan Hoffmann

All right, so then let’s kind of turn that to some people. Besides seeing demand, they’re also starting to see availability kind of pop up. And there’s a big difference that people are starting to see in stick America. You mentioned this, the difference between 30 days and 60 day pre-lease, that people are waiting longer to kind of pull the trigger. But when we look at retention, yes, September’s retention is down versus August, but it’s actually one of the best retention months in recent history, despite that 54.6% as reported. It’s not like we’re anywhere near the ten year averages or norm, so things are still quite high. So if there is a drop in demand and it’s not retention, then is it potentially consumer confidence? I know that’s a leading question, but do you guys have any thoughts?


[00:06:54.310] – America

Yeah, I think Diana and I had a conversation regarding this, how we see the patterns shift with prospective residents committing to an apartment 30 days and sooner versus historically, given the majority of our competitors in the areas where we operate require a 60 day notice like we do historically, we were able to pre release 60 days out, maybe even plus 60 days. Pardon me. This year alone, that pre lease number is more in the 30 day mark. So people are current residents, prospective residents are waiting longer to make a commitment. Whether or not they have given notice where they live, they’re just waiting a little bit longer. And I believe that ties into that consumer behavior of uncertainty, not really knowing our prices will continue to say lower.


[00:07:54.450] – Diana

Increase go ahead to add to that, I find that consumers are actually very educated now on how most department operators do their pricing. So they know either on the renewal side or on newly side, I’m going to wait because I know prices will go down. So they’re kind of waiting for the slowdown on the holiday period. If they know they’re not moving until November, December, they’re just going to hang out and they keep shopping. Right. And seeing what specials are out there. They’re very savvy to understanding that if they hold out, they can typically get a better deal. So we’re seeing the exact same things and we’re seeing actually more traffic than we typically have in years past, but just not as high as closing ratios. So the demand is there, but people.


[00:08:40.680] – America

Are waiting traffic wise. Did you see a shift at all? I know we did globally to more online leasing presence, especially at the beginning of COVID when we do not have physical availability. So that shift has remained where more prospective residents are completing every step directly online. I don’t know if you have experienced that.


[00:09:09.030] – Diana

We haven’t. We actually saw the opposite as we saw a huge return in office leasing and we tried to continue doing self guided tours, but most of our prospective residents want somebody to tour them around the community. So it’s kind of interesting what’s happening here, some communities more than others, depending on the exact neighborhood. But we haven’t seen that as much. Although I will say we are seeing just recently in this quarter a large number of people setting appointments and not showing up. And I don’t know if that comes back to that consumer confidence or I’m not really sure what’s driving that. I can’t figure that part out yet. But we’re seeing that a lot more as a drop off of people that say they want to tour and then don’t show up.


[00:09:53.540] – Evan Hoffmann

And then this is a twopart question. First of all, do we think that any drop in rate is disproportionate to what we’re seeing in terms of behavior or is this simply bolstering for Q Four and Q One next year? And there’s so far nothing out of the ordinary for us.


[00:10:14.280] – Diana

It’s not been anything out of the ordinary. We’re seeing decreases that we would normally see this time of year. And quite frankly, we’ve been trying to hold floor rents and then just adjust on homes that have been stale. So we’re really trying to hold right as much as we can until we get to a point. And of course you’re sensitive to what the marketplace is doing. I know we’re going to chat about this later, but concession usage is always the thing that pops up first is because people are trying to keep their market rents high but then attract close on people.


[00:10:42.990] – Evan Hoffmann

They’re actually touring and then do we anticipate? Mark, I’m going to ask you this one because I think you may have the broadest brush of asset classes in your portfolio. Are you seeing yet or do you anticipate starting to see people trading down?


[00:11:02.490] – America

We’ve experienced that already, as Anna was saying, market specific, a lot more of the urban markets. We saw some of that at the beginning of COVID. We’re still experiencing a little of that in the height of COVID. What we saw is the opposite, people trading up for more space as they became permanently home office. We see the majority of the trade out and I believe this is consistent with other companies as well. It’s not specific to my organization. But our higher asset class is where we saw the majority of trading down in size urban areas. Concentrated urban areas is where we experience at the most or maybe the demographic originally had a little more extra money to spend and they chose all the bells and whistles and the fancy downtown lifestyle and with the lack of confidence or continuity in their employment then we saw the moving down into smaller unit types as well as away from the urban area.


[00:12:18.930] – Evan Hoffmann

Interesting, that exact same thing you are okay, yeah. And then kind of the last broad brush before we start getting into what strategies might be deployed and it shouldn’t surprise anyone on here that we are going to agree to disagree on certain things. And by the way, I neglected to mention that we’ll be handling for the most part we’ll be handling questions at the end, but we have left the chat room public so that you can ask it at any time. And if we find something really compelling then we may call an audible and talk about it right then and there. But that is available for you. You should also know that there will be three polls in this webinar and we ask for your participation so we can learn what you folks are feeling about heading into Q Four in 2023 and the downturn in our business. And then the last bit of business on here was to kind of talk about rent to income ratios which yet again continued to kind of remain flat in that 22 to 25 to one ratio. It was data out this morning that said basically had it pegged exactly the same as month prior.


[00:13:29.280] – Evan Hoffmann

So it seems as if at least across the board from a national perspective, that salaries are keeping pace with rents. But then again, when you compare that to CPI Consumer Price Index, there are many other aspects, particularly fuel and groceries and so forth, that are actually increasing at a higher rate. And so it may be that is starting to pinch family budgets and it isn’t necessarily rent. But the other day the amount of money a family has been, not the money a family has. And so there may be some considerations there and you know what, the question just popped up now and I kind of like this one I’m going to go with this right now. Is anyone seeing higher month to month rates? Are you seeing a higher proportion of month to month of people occupying your units?


[00:14:21.840] – Diana

We have been actually, for the entirety of this year, have been struggling with high month to month. So I guess that comes back to that consumer confidence piece. We’re also seeing a lot of people leaving the Seattle area. So if you look at our reasons for move out, let’s say this year as compared to 2019, the number one thing we noticed was moving out of area and changing roommate composition. House purchase is always at the top in Seattle. So, yes, going back to that question, we’re seeing a lot of people willing to go to month to month and to pay an exorbitant premium for that as well.


[00:14:54.900] – Evan Hoffmann

So do you guys have targeted like, do you have a kind of either a rough or very specific target of how many leases, how many occupied units are on month to month? Do you have a goal like that on a monthly basis?


[00:15:10.890] – America

Go ahead.


[00:15:12.240] – Diana

I was going to say we do not, but we’ve never seen this amount of months and months. I think coming out of COVID was another piece of that. Right? Like, there are some people that are month to month because they got money. There’s, like, various reasons that have added to that compounding effect. So previously was just something we always kept an eye on, on weekly or performance calls with the Teams, right? Like, why aren’t you converting these folks? But the numbers were always very low in our portfolio. So this is the first time we’re like, we have an issue that’s starting to bubble up here, and so far it hasn’t created a huge problem, but it’s something we’re very aware of.


[00:15:48.480] – America

I don’t know if we’re not having a huge problem at all, but when COVID hit, we did sit down and strategically put a plan together to ensure that not a single community saw over 5% monthtomonth exposure. I’m happy to report that no one was even close to 5% exposure. But every year, as an initiative of revenue management, we do keep a close eye on a quarterly basis to ensure that we don’t have a single community that has surpassed or has too much potential exposure. We are very diligent going into Q Four to ensure that we do not have too much overexposure as well. And I know somebody else mentioned overexposure in Q Four and Q One that definitely is something that we manage not just via month to month, but standard lease expiration management at the unit type level throughout the year to ensure you don’t end up with over exposure in a less desirable or in a low demand at time of year.


[00:16:55.910] – Evan Hoffmann

Cool. All right, thank you. That’s really good. Very insightful. And it’s funny one of you keeps an eye on that, and the other is like, no, it’s a hard and fast rule. There’s so many ways to skin the cat in this business. That’s the part I really, really like. So we’re actually now going to go straight into our first poll, so please get your buttons ready. And if we could get the poll master to put that out so it’s available. The question is, will the US. Enter a recession in 2023? The first is we’re already in one. It’s just the indicators are lagging and people don’t realize, but we’re already there, definitely, without a doubt in 2023. And then a certain percentage of you said no, I don’t think that’s actually going to happen in this year. That doesn’t mean it won’t happen in 24, but it’s kind of a straightforward thing. So let’s see how folks kind of answer this answer the poll right now leading is we’re already in one, which I find interesting, and no surprise, no has the fewest number with definitely sometime this year kind of in the middle tier.


[00:18:03.860] – Evan Hoffmann

I’m going to give people just another minute or two to finish voting. Wow. So we’re already in one is now over 60% according to our audience. That’s pretty fascinating stuff. What do you guys think? Are we already in one?


[00:18:27.790] – America

I think so. I think it’s different from the last incentive. It just affected us in our industry. But consumer patterns are shifting and they’re different. And you see it if you follow the stock market, right?


[00:18:45.190] – Evan Hoffmann

Tell me. Interestingly enough, it looks like everybody that wants to vote is voted 64%, that we’re already in 127 percent, definitely in the coming year. And 9% said no, not happening. I think that really speaks to consumer confidence, not only on the other side of the aisle, but on our own from inside the industry. So there we are. Now let’s talk about how we might do what we need to do. If we’re already in one or about to go into one, what is there to do? So first off, we’re going to talk about rate and rate reduction or rate optimization. I prefer to call it back because this isn’t just about dropping rate. And how are people doing that within their systems? Do their systems have system settings where you could go to a more conservative model or you could go to a more aggressive model in a circuit market if you’re doing really well? Or are manual overrides allowed at either the property level or the regional level in order to make things happen? Or is everything centralized?


[00:19:59.590] – America

I can take a stab, go flat. The reality is data validation. What does your data tell you? Does your data tell you there’s a slowdown? Does your data tell you there’s a slowdown, different from last year, different from last month, et cetera? If you have partnered with a good revenue management software, some of those items will come to light right away, faster than any human could calculate. Those demand patterns and diana mentioned this earlier. It’s assetspecific is region specific. It just depends on your asset. Are we seeing a slowdown in demand? Yes. Is it different from what we expected or anticipated? No. Do I like giving concessions? Absolutely not. I despise concessions. Have I given concessions in my career? I absolutely had to with as much as it pains me, and occasionally it’s absolutely needed. You might have a revenue management software that allows you to build in a concession. You might not. There’s different ways of adjusting your software in order to create the output that you’re looking for. Whether it is increasing Occupancy faster, whether it is balancing the Occupancy supply demand in a twelve month period into the future. It really is asset specific.


[00:21:38.440] – America

What does that asset need and what is your data telling you? Will you meet your goal? Will you not meet your goal? Are you doing a quick back of the napkin math to determine what would I rather give up, occupancy or rental power rate? Power.


[00:22:04.160] – Evan Hoffmann

I’m totally not surprised that you are not a big fan of concessions because I know who mentored you in the business. We’ll leave that as an insight thing. But let’s go to the next bullet talk about concessions. I know that Diana, you use them. Or should people find the concessions online where you’re advertising it through marketing channels? Or is it used as a back pocket closing tool or some combination of the two?


[00:22:39.340] – Diana

I would say typically we’ll market it openly and the idea is to drive traffic from our marketing sources at the end of the day, pillars. And I think it depends on your goals. Coming back to what America was saying, like, we are a long term hold company. Our focus is on cash flow. A lot of times we’ll do a sensitivity analysis around do we need to drive right, or do we need to drive Occupancy to get to a bottom line that’s pushing our cash flow where we want it to be? Right. And so a lot of times it’s more attractive for us to do a concession that burns off right away because we get to keep our rates at the same place. And when that resident comes up to renew, they don’t have something either amortized or built into their rate that’s going to put them behind new market rent. Right. So we do use concessions. We budget for them, I would say sometimes generously, based off of what we know is happening with supply in the market. And that will be the first lever that we’ll try to pool. If we notice that we have homes that are sitting for a period of time, or we know that we’re coming up with an amount of unit type exposure that we’re not comfortable with right.


[00:23:43.860] – Diana

We’re like, okay, we’ve got all these two bedrooms, we’re coming into Q four, let’s just get rid of them, hold rate and offer concessions out. If we can afford it. So I’d say that’s the quick and dirty answer of how we typically use them. Do we use concessions as a back pocket closing tool? Sometimes, but it’s generally far less money. We’re talking about $500 to cover moving costs, right. Where we’re going to waive community fees up and right, exactly. But it’s not at the end of your tour. Oh, by the way, if you close on this today, we’ll give you one month free. We generally I don’t like that and I think you get that a hand very quickly because you’re leaving it at each different leasing personnel’s judgment, essentially. And then before you know it, you’re like, oh, we had eight leases this month on two bedrooms that everybody use their back pocket closing tool. It just gets dangerous.


[00:24:41.590] – Evan Hoffmann

Yeah, not a good answer because then you don’t have eyes on it. So we can get out of here.


[00:24:45.790] – America



[00:24:46.170] – Evan Hoffmann

While we’re talking about two beds, we had a question saying that has seen any real evidence where people are bunking up and are you seeing a higher roommate percentage of movements yet?


[00:25:00.490] – Diana

So that’s an interesting question. We’re seeing people moving out of two bedrooms, more so, and we’re seeing higher velocity in studios and smaller floor plans than we are seeing people come into two bedrooms. We’re getting a lot of traffic on them, but not closing. And I think maybe those two are correlated. But we also tend to see this here, at least in Seattle, where we have we try to avoid expirations of two bedroom unit type groups in the fourth quarter and first quarter realistically, because we just don’t see families really moving around that time frame. So it’s coming back to that question of like, is this just normal seasonality or is this something else? And so the notice to vacate pattern is different for us this year, which makes me think it is a little bit related, but I couldn’t say it with a lot of confidence just because we don’t see a lot of people bunking up yet.


[00:26:00.580] – Evan Hoffmann

Well, that leads to the household formation question, whether people are either they’re going to double up soon, we haven’t seen it yet, but I think at least I have. My personal belief is that we’re going to see a reduction in household formations and the data will bear it out by Q One. And whether that’s people just getting out of university or grad school and maybe going back home for a little while like we saw a couple of years ago, I think we’re in for some spell of that. I don’t think it’ll be anywhere near as drastic as it’s been in the past, but I think because retention is so good, household formation has to be one of the answers about why demand is off. And then occupancies we’re also going to have to talk about when we get to when we get to it, we’re going to talk about new deliveries of inventory and where people are a little nervous that there’s a lot of stuff coming online.


[00:26:56.360] – America

I think for us, where we have seen evidence of renters coming in with a roommate or existing renters leveling up to add a roommate, are areas of the country where that demographic is young, close to being recently out of college. That’s where we see the concentration of roommate situation versus other areas of the country where we operate, where it’s not as prevalent.


[00:27:32.440] – Evan Hoffmann

And then we’re going to shift the conversation a little bit to another potential strategy for 2023. And that’s the strategy of offering bundling and whether that is rather than a concession off of rate. Do you do things in buildings where you have storage units or you’re in a parking garage and you have parking spaces that people normally have to pay for separately from being built into the rate? One way around that to maintain the integrity of rate is to say, move in by and get six months free parking or three months of free storage or any of those other various and sundry things. Have you guys utilized that in the past? And would you consider that in the future?


[00:28:13.160] – America

Absolutely so, because I don’t like concessions, because confessions are a no no, we tend to supplement, especially on, as an example, longest vacant apartment. Diane, as you were mentioning earlier, if you have something that’s not moving, maybe it is because it’s so far away from a parking structure or too far away inconvenient location, that’s the time where I like to bundle to say, because I don’t want to lower my rate. So if I add a good or a service for a period of time, whether it be six months or for the entire length of your lease, knowing that next year, if you want it, you will have to pay it, but you will receive it for a period of time. That tends to work really well for me, and it has in the past and has allowed me not to have to discount my rate by offering just something additional. That’s also how we’ve kick started preferred parking program in many places. Is here’s a free parking spot for someone. As the other tenants or other residents see that there’s now a parking program, they want in on it, they want the exclusivity, and then we can kickstart parking garages, et cetera.


[00:29:33.110] – America

I like using that better.


[00:29:36.190] – Diana

I’ve not heard of a parking program. I like that I would have to steal your idea, but I agree. Bundling is something that got us through, like the entirety of covet. That was like the number one thing our go to was free parking. Free storage, just to either hang on to current residents or to attract new residents. It’s the easy thing to do. It also helps if your utilization is low. Once you get somebody into a storage unit, the likelihood that they’re going to move all their junk out after their three months are up or six months are up is very low. Or the other thing we would do is just discount, right? We would offer coupons for discounting parking or storage. It’s a popular renewal tool that we use. People love that. So yeah, I would say that’s normally the first little trick we’ll try to pull out when possible.


[00:30:26.910] – Evan Hoffmann

Great, great. And now, while I’m not a fan of concessions, I know that they have to happen. This one is my bucketbook and this is trading resident quality for movement. But have you guys either reviewed and then shunned it or said, you know what, maybe we’ll take a look at it or we’ll look at an alternative program to qualifying a renter because there are companies out there lease lock and all those guys that do all those different things. Have you looked at that stuff or have you simply said, you know what, I’m in the Sea building and I’m not getting at the same FICO cut points and so we’re going to change the criteria? How does that sit with either of you? I know how it fits with me.


[00:31:12.040] – America

I agree with you, surprisingly, that once you start lowering your standards, then you open yourself up for a lot of other potential negative effects. However, as we all experienced, if you were around in the recession of nine at that time, we did have to make considerations and adjustments where we were still protecting our assets and we dissected what are the qualities at that time? What were the qualities that we wanted and renters made exceptions in that manner. The company I worked for at the time, we did not experience any backlash. What we have been actively seeking to partner with, and we’ve had some partnerships, are companies that at a low cost or no cost to your resident help out in dire situations. As we know, some of our residents and across the country lost their jobs, business, they went out of business, et cetera. So instead of lowering our standards as a blanket, we’ve looked at asset specific needs as well as partnering with other companies that could help the resident come up with deposits, additional deposits, move costs, rent relief, alleviation, et cetera, in lieu of just lowering everything.


[00:32:51.860] – Diana

Right, I totally agree. I was going to say we were concerned with a handful of our assets that were impacted. Their demographic was impacted more by COVID that we would have difficulty getting residents that qualified and that we would have to adjust our qualifying criteria. And we decided against it because we felt was happening on the back end with delinquency later on down the road once we were postcovid. And it’s true we are having difficult they have a higher incidence rate of declines and conditional approvals. But to America’s point, what we’ve ended up doing is partnering with other companies that can assist that demographic with either getting in or getting some sort. Of security deposit alternative that ends up covering us a little bit better and making it easier for them to move in as well while they’re recovering from the impacts of what cob is done, to their credit and things like that. We’re just getting back on their feet and making sure that their finances cover the rent.


[00:33:57.520] – America

And in that same realm, I know somebody asked, are we seeing lower approval rates because of higher advertised concessions? And the answer is always yes.


[00:34:10.540] – Diana

You’re like, these people shouldn’t have moved in, but they did.


[00:34:13.620] – Evan Hoffmann

Let me ask you a question. When you qualified, will you qualify them at the full rent and not at the concess rent?


[00:34:19.990] – America

Full rent?


[00:34:21.030] – Diana

Yes, at the full rent. But I think what ends up happening is those people typically are because of their other, you know, what’s the word that I’m looking for? Obligations. Financial obligations that they have outside of the rent. They might squeak. Buying qualifications, you’re like, yeah, this person basically barely makes it. They’re conditionally approved and they’re banking on that, whatever it is, six weeks free of rent. And that happened a lot at a lease that we had, right? With every move in we were handing out anywhere from one month to two months free. And then that bit us in the back end for sure, because those people were really couldn’t afford to live there. Ended up happening. You were right, America concessions are bad.


[00:35:12.260] – America

They aren’t a necessary evil that I will just have to deal with, you.


[00:35:16.890] – Evan Hoffmann

Know, and but I’m also keep my eye on the clock. And we’re on slide five with 35 minutes of the conversation. And I knew this was going to happen with us because this was so action packed a category. So we probably won’t be able to get to some of the other things. Like how do you deploy a concession that’s a 15 minutes conversation? Do you do that advertiser upfront and all that good stuff. But I think we’ll have to table that. And then, by the way, both Diana and I will be at OPTEC. So if any of you plan on attending, please seek us out, send us a note via LinkedIn and we’ll be happy to talk about some of the stuff that we didn’t get to do in America. I’m sorry, you’re not making it this year.


[00:36:03.150] – America

Not this year, next year.


[00:36:04.950] – Evan Hoffmann

All right, so let’s jump in value add programs. And this is tricky, right? Because a lot of companies are maybe not doing as many kitchen and bath kinds of things and was foul flooring and all that this year. Just trying to be careful from a budgeting perspective. But is that an opportunity potentially to move in by XXX? And you’ve toured the thing with white appliances and you get stainless steel kind of a concept. I think that works better on the retention side. And we’ll talk about that once we get to the renewal slide. If we ever get there.


[00:36:39.410] – America

I mean, we have ongoing Valley Eye programs. While we did see a little bit of a slow down, just supply chain wise, we also have an internal supply chain department that alleviated some of the short period of time where we were a little bit in limbo in the past. In my past life, I have definitely used upgrades for existing residents. Mainly the one that comes up the most often is really flooring. Flooring upgrade seems to be something that residents really respond to very well. If it is an asset that’s 2030 years old, then obviously appliance upgrades are always welcomed by the resident who says, well, I’ve been paying my rent for five years. When are you going to give me in return?


[00:37:30.940] – Evan Hoffmann

And then there’s that. And then lastly, I assume that all of you, at least in one market or another, also have some concern about new deliveries coming online. And yours? Front loaded, mid year loaded. And I assume you’re going to have to take that into consideration.


[00:37:51.260] – Diana

Cars are evenly spread out through the entirety of 2023. And it’s a big year. It’s like 35% more year over year, basically. Yeah. So should be fun.


[00:38:03.860] – Evan Hoffmann

That sounds like a wild ride home by itself.


[00:38:08.060] – America

It sounds like concessions are coming.


[00:38:10.610] – Diana

Yeah, exactly.


[00:38:12.110] – Evan Hoffmann

And on that note, let’s talk about renewal pricing and retention strategy. So we’re going to talk about the fact that even though I have it listed here as the Q Four and Q One crystal ball, unfortunately there isn’t one. We all apologize for that. But assuming that front end demand continues to decline and this is kind of asked and answered, but just to kick off the chat is then will there be a greater premium on retention with softening demand? And the answer better be, well, of course, but then what are you doing about it?


[00:38:49.840] – America

Raising runs. Just kidding.


[00:38:52.110] – Diana

Yeah, exactly. Always.


[00:38:58.840] – America

I’ll take it in. Same as before. Right? You have to look at the health of the asset. You have to look at the rate at which these expirations are coming back to us. Are they significantly below market at market? And I know, Diana, you’ve been using revenue management for a long time, but if you’ve been a longtime user of revenue management, you know to stagger your increases if your software provides you with that ability. We do this regardless of COVID or where we are today. We take a look at the sheer number of expirations at the unity level and see where we will see higher demand, where we will see lower demand and try to balance that increase as well as retention number or desired retention number with the overall rental increase to the expiring residence. So same as we do on the front end, we take that extra hard look at the back end.


[00:40:08.440] – Diana

We do the exact same thing.


[00:40:09.850] – America



[00:40:10.050] – Diana

And then it comes back to an analysis around what are your company’s goals? Is it pushing rate? Is it cash flow? It depends on your owners. Initiative will end up playing into that piece as well. And how you set up your revenue management and how much you modify rents or hold firm and say it is what it is dealt or guy. Right?


[00:40:32.660] – Evan Hoffmann

Absolutely. Obviously, whether you’re publicly trading Wall Street looking at it, or whether lenders are looking at it or investors are looking at it, rate is sexier than Occupancy. But sometimes you have to make the hard choices. Right now, Mark, I like the fact that you talked about kind of looking at where the current resident is visa, visa market and the replacement rent. Do you also look at those through various means, a way of identifying those more likely to read it?


[00:41:05.140] – America

Not yet. Not today. This is on our roadmap because of how important it is to target those residents that have longer tenure with us that pay rent on time. Maybe they’re not late, or maybe it is a resident that’s late every month. So the part of increases comes from me, the part of overall resident, or our desire to keep a resident. That piece is supplemented by our operations team, our onsite team, to say, does America in apartment 101? If she’s late every single month, is it worth it for us to retain her this year? Or is it are we okay parting ways? Right? Every asset will be different. I do like to push up my rent so those that are furthest from market, I’m trying to balance out, keep everybody as close to market as we can as the market continues to shift. But the thing that we do differently here at IRT is we actually evaluate renewals every two weeks. And that also means is our take rate still strong or are we receiving more notices at a given asset in a given unit type that gives us enough time to restrategize and then identify?


[00:42:34.030] – America

Do we need to then offer something? If we received ten notices to Vacate and I only have five pending expirations that month, do I offer them something? Do I allow my team to negotiate? It will depend on how well expirations are accepting those renewal offers.


[00:42:53.440] – Evan Hoffmann

I think that’s what I’m hearing. That sounds more about you making the decision of who’s a better resident to stay or not stay. But what about the ability to actually understand from the residents perspective, whether they have a higher propensity to leave or not based upon a bunch of different criteria? How long they’ve been with you? What was their income when they first moved in? Where’s their rent today? Number of service requests? Did they move into the market? So were they a reload? So then potentially a reload out at some point in time? Kind of all those things that kind of helps one understand a stickiness factor, if you will.


[00:43:34.110] – Diana



[00:43:35.140] – America

Today I do not have one good answer for you I don’t know about you.


[00:43:40.840] – Diana

No. And we don’t consider those factors. I’d like to something we rely upon heavily is resident satisfaction surveys. We can see a direct correlation of the properties who have the highest resident satisfaction scores in a number of survey points. They have the highest retention. But we’re not able to combine that with our renewal algorithm that comes out of our revenue management system to determine is this person going to be more likely to renew than another? So yeah, I think there’s something we’re missing in that process. I will admit, in revenue management systems, the one we use, at any rate, I’ve yet to find one that I’m really happy with the renewal process. I think there are key factors that we’re missing in that. And we could improve. We’re probably leaving money on the table or retention on the table either way you look at it, right?


[00:44:35.290] – America

Yes. What we have been able to adjust, as Dana was saying, it’s information we wish we had, but we don’t. So what we can adjust are touch points. Does community A renew faster or receive accepted renewals faster than community B? And is it because they have an extra touch point or is it because they have less work orders on average? What is the difference between community A and community B as it pertains to retention numbers? And when we have communities that exceed expectations, we take a hard look to say, what can we take before.


[00:45:22.910] – Evan Hoffmann

Got it. Good stuff. And then in the interest of time, I’m going to put all three of these things in one little bundle and concessions, gift cards, unit upgrades, yay or nay on the renewal side of the house.


[00:45:35.360] – Diana

I think the answer is it.


[00:45:36.600] – Evan Hoffmann

Depends on every revenue management questions.


[00:45:41.510] – Diana

The beginning of this year, coming out of COVID, we were like, you’re not getting anything, you’re getting a rent increase.


[00:45:49.540] – America



[00:45:50.110] – Diana

Exactly. So we’ve used hardly any of any of those things. We did use I will actually I take that back. We use coupons. So again, we created these little coupon booklets and we gave them to every resident and they loved it. It was for like, free guest suites. It was like get one night free out of a two night or two or three night stay, a free Amenity reservation of the clubhouse, little things like that, one month of free parking. I would say those were the gifts that we used. But there have been times where we’ve given concessions upfront for the same reasons. If you start to build in, you look at where new market rents are today, or you’re heading in Seattle, we have to offer our renewal increases 180 days out. And sometimes you don’t know what’s going to happen with rate or you know, you’re going to come into a time where rents are softening. So the cost to replace that resident right. You know, turn cost, vacancy loss, upcoming concessions because of supply that’s about to come online, we’re like, sure, just give this person $1500. If they renew and they’re anywhere close to market, it’s worth it to us.


[00:46:52.480] – Diana

So, you know, I think it just depends on what’s happening in your submarket, what’s happening to that specific asset exposure. There’s, like, a lot of factors that come into it.


[00:47:03.790] – Evan Hoffmann

And then is it safe to say that when you use I don’t know about the coupon because that’s you’re partnering with other people unless that actually costs your company money or not, but, like, straight up gift cards. Am I correct in assuming that you use that as a marketing expense and therefore it doesn’t impact top line revenues, but comes as an expense below the fold?


[00:47:25.010] – Diana

Correct. At least for us. And I hate using gift cards. I never use them, hardly ever. So we used to in the past. I think they’re a mess to keep track of, and they can artificially inflate a marketing budget that’s already tough to get approved for a number of reasons. You’re always trying to, like, prove the efficacy of your marketing budget. So we don’t use them or have it in years.


[00:47:48.860] – America

We’ve used them sporadically when needed, but we try to steer clear. And when we have used them, yes, they do hit the marketing budget.


[00:47:57.790] – Evan Hoffmann

Good stuff. Okay, for those of you that are still with us, we’ve got poll number two. How are your 2023 budgets impacted? Did you write them where you’re lowering your revenue expectations versus 2022? Have you reduced expenses year over year or both? Or did you guys go in kind of flat versus this year? Let’s see what folks are doing with their budget. If you’re completed with the budget process or you already know that this is where the company’s direction is going.


[00:48:38.510] – America

So we’re tougher this year. I will say that much.


[00:48:42.490] – Diana

Yeah, agreed. In terms of revenue expectations for us, we increase them. We always do, every year. And honestly, expenses went up too, and that is inflation. And you look to offset that here and there. But taxes, insurance, like, there are some things that utilities you just cannot control. Right? And so we’re actually prepared to deliver budgets that might not look that pretty, but are realistic, knowing what the market conditions are, seem to be looking like.


[00:49:19.380] – Evan Hoffmann

Well, interestingly enough, I guess I’m a bit surprised by this, but people are still voting. But it seems like that’s a runaway. That’s flat versus this year. And because you were given an opportunity to vote as reduced expenses or reduced revenue, one of the two are both flat. Is flat across the board. I find that really fascinating. And then number two is actually you’re lowering both. So even within our industry, our consumer confidence is at least people participating in this poll is definitely not pie in the sky. Yeah.


[00:50:01.390] – America

All right.


[00:50:04.460] – Evan Hoffmann

One of my favorite topics, and this shouldn’t be any different than any other day because it’s probably the most important thing we do is managing expirations and lining them up to meet historical demand or demand that’s anticipated to change because of new inventory coming online and how do we move things around. But one can get a bit more drastic in a downturn with expiration management and that would be whether you close out particularly overexposed lease lengths entirely as opposed to doing it completely with rate, offering shortterm stays three and four months to somebody just to move them up. And then you’re betting on the come that you’re going to be able to give an increase in four months because you moved them from February to June or something like that. And then expiration management unit upgrades. This is a trickier one to do soon because the logistics of that are kind of a nightmare, but I thought I’d throw that in there. What are your thoughts on these? Or something completely different?


[00:51:12.190] – Diana

We do all of those, I would say upgrades probably that happens like once in a blue moon and that’s somebody that you’ve had in their apartment for eight years and they’ve come to the end of their life cycle on something in there or that we already know we’re going to be upgrading appliances or that type of thing. So we’re like, yeah, sure, right. It’s like a nobrainer lease. Expiration management is something we look at on a weekly and monthly basis. It’s the number one thing that we always manage around seasonality, really, regardless of downturn. And we will let residents know right out the gate. Like that term is not available. You’re going to have to pick something else. And the reason being is because you get a lot of lease breaks, things you can’t control, and that will be the one thing that will save you. Right, so yeah, I don’t have much to add to that. And then we’ll use a lot corporate partners to kind of fill in the gaps of terms or get rid of we’ve got too many two bedrooms and we just need to get those filled until we can get to Q One or Q Two.


[00:52:14.640] – Diana

So even if it means taking a hit on Rate, but you reduce your vacancy loss, those are all the little tricks.


[00:52:22.390] – America

Same, I think obviously step one using a revenue management software is right off the bat a big help. That doesn’t mean you let the software run and never do a hood check, right? And I say that I know somebody earlier commented they ended up with too much exploration. Like Diana was saying, I love to use technology, I think we should use technology. I think our industry is maybe even a little bit lagging in technology, but you still have to fine tune that technology. There are still things that happened. We learn year after year after year. And Diana, we experienced the same thing with lease breaks in specific regions that happen specific times of year. If we manage that expiration so that we have little to none and we end up every single year with all of those last minute breaks and move out. And our curve is completely smooth by the end of. So understanding the individual needs of your assets is number one. And then leveraging your revenue management software to ensure that you really are optimizing your exposure and your revenue growth.


[00:53:41.590] – Evan Hoffmann

Great lead into Prop tech and marketing investment. Well done. So I think we can all admit in some level that can property technology ease the decline in both multifamily and singlefamily rental? The answer is yes. But I think we all agree, though, that’s beyond simply revenue management systems because it’s also kind of how those are deployed, how they’re used, and then at the same time, internally, since we said retention is the most important thing from a marketing perspective, will people start to invest in reputation management programs, resident engagement programs? And then I think we’ve talked about concessions enough. We can leave that one off. But who wants to take a stab at Prop tech and marketing shifts or changes?


[00:54:34.540] – America

I can. I currently work for a company we are 100% bought into utilizing technology to our advantage. What are the areas that we have low visibility into, as you mentioned earlier, that Diana and I would like to have, which is really identifying the overall I’m going to use worthiness, but overall worthiness of our residents. Right. Is this the resident that we want to have stay here? Do they have a propensity of moving all the time? Will they stay long term? And we would love to see some of that technology be readily available for us to make better recommendations when it comes to our assets. For sure. I love seeing companies pop up. I think it’s fantastic.


[00:55:29.210] – Evan Hoffmann

I couldn’t agree more. And within revenue management systems, do you folks change settings either seasonally or as you see downturns coming? And were you able to kind of adjust what you’re not really massaging the numbers, but you know full well what’s coming and the system may or may not be able to do that.


[00:55:51.940] – America

And some software, some revenue management softwares, we have the major ones. There are some smaller ones out there popping up as well. But depending on your software, some softwares require daily adjustments, others at least seasonally. But to your point, we’re not manipulating the rate. We are adjusting how quickly we either need to see the rent come up or how comfortable we are with favoring. Occupancy versus revenue.


[00:56:26.590] – Diana

Totally. Yeah. Or like the window of time that it’s identifying trends. Right. Like, if you need to make that narrower or wider for the system to kind of make those adjustments or predications around future availability and things like that. Absolutely.


[00:56:44.380] – America

So as we saw residents committing to or future prospects committing to an apartment within a 30 day window versus a 60 day window, you must adjust your settings. The moment you notice these things happening, you adjust accordingly so that you are not leaving any money on the table.


[00:57:05.890] – Evan Hoffmann

And then we’ve got three minutes left and the last slide is our poll. We’ll do this one quickly and hopefully we’ll have two minutes for a question or two. The last one we’ve got here is that prop tech are the rescue and capital investment. Are the people out in the audience, are their companies increasing their budgets for prop tech spend, decreasing them, or are they going to be flat versus 2022? Increase popped up pretty quickly. Let’s see if it holds it. It looks like we’re good. It looks like 60% plan on increasing their Prop tech spend. So that kind of flies in the face of the budgets. Unless, of course, that means they’re taking away from something else. So either training or marketing maybe goes down to increase pro tech spend. Or there is something in creative marketing that’s being reduced in order to take advantage of marketing technologies and CRM systems and things like that. It doesn’t answer everything. Wow. It’s now popped up to 67%, so that’s a fairly impressive number. And we have 120 seconds to answer any of your questions that may remain. We’ve tried to fold the questions into the conversations, so it wasn’t like, oh, James from wherever it has asked this question, we just kind of folded into the conversation.


[00:58:56.920] – Evan Hoffmann

Hopefully that worked well for everyone that was interested and we were able to kind of answer your question appropriately. And we are now at 459. We want to be respectful of everyone’s time. America and Diana, thank you so much for the hour and the effort put into this and getting prepped for it and all that wonderful stuff. Really, really appreciate it. And again, if anyone wants to catch up with Diana and or I at OPTEC in Vegas the first or the 3 November, please reach out in advance. I know I’d love to set up a time to chat more about these things or anything else that may be on your mind. Thank you very much, everyone. We’ll talk to you later. Cheers.