The business forecast for the multifamily industry is cloudy. The winds are changing at a supersonic pace. We all know why: COVID-19 has basically obliterated all expectations for 2020.
Today, if you don’t know how you stack up against the competition in these changing times, how do you know where to set your goals, forecasts and budgets? How can you ensure that you won’t be the last to react to changing metrics that drive NOI? What tools can you use to determine if re-forecast numbers are in line with submarket trends and performance?
Reforecasting is absolutely critical in today’s environment—and adjusting performance expectations to catch up with trends requires innovative tools that give you daily updates to transactional performance from competitive assets. Today, those tools are available with RealPageÒ Business Intelligence and Performance Analytics Benchmarking. An extra bonus: you can manage your portfolio without being in the office.
According to Tracy Saffos, Industry Principal at RealPage, “RealPage currently collects data on over 16 million units, and that's a very large chunk of the total inventory in the country when you consider that there are about 22 million investment-grade apartments in the US today. After almost 20 years of collecting data, there are literally billions and billions of transactional data points to power our BI and Benchmarking capabilities.”
In a recent RealPage webcast entitled Smart Solutions: Outpace the Competition with Benchmarking & Business Intelligence, Ms. Saffos and Kristen Brooks, Director, Business Intelligence and Benchmarking Consulting & Training asked a peer group of customers representing multiple levels of the multifamily industry to share their unique perspective on what is happening in the marketplace, and the ways they use RealPage’s BI and Benchmarking tools to maximize their day-to-day and long-term decisions.
Webcast participants included Rick Brieman, Vice President of Atlantic Realty Group, Micheal Bailey-Tonini, Senior Manager, Operations and Technology at the ZRS Management and Ariel Hanson, Regional Manager at GoldOller Real Estate Investments.
To watch the RealPage webcast COVID-19: TBD, please go to https://www.realpage.com/webcasts/smart-solutions-outpace-competition/.
Ms. Saffos began the conversation by diving into budgeting and re-forecasting. The question was how the participants were using these tools to shift strategies and re-forecast budgets given the disruption caused by COVID-19.
Rick Brieman noted that the Atlantic Realty Group has been using Business Intelligence to focus on their leasing efforts throughout the rest of the year, especially in terms of the challenge of addressing rates. BI enabled them to re-forecast move-outs throughout the rest of the year, which was critical given the unknown effects of ending eviction moratoriums. “We know Business Intelligence will provide the resources so we can make good decisions on rates and occupancy to balance that throughout the rest of the year,” said Mr. Brieman.
GoldOller Real Estate Investments’ Ariel Hanson said her team was able to recover missing revenue using BI's Expense widget to discover savings in spending. Surprisingly, savings actually exist during the pandemic. Where? From amenities that are closed right now, for one, because there is no current upkeep expense. Canceling resident events and keeping offices closed were another source.
Pre-Pandemic vs. Now: The BI Difference
Ms. Saffos shifted the conversation to BI-enabled visibility pre-COVID and now. “I asked the participants what kind of market performance changes they were able to see when the pandemic hit that they would not have seen without Business Intelligence,” she said. “And I wanted to know what KPIs or benchmarks had they been watching most closely now in Benchmarking or Business Intelligence that were not a primary focus prior to the pandemic.”
For Micheal Bailey-Tonini at ZRS Management, it was all about billing and collection.
“Delinquency analysis has taken a whole new meaning this year,” he stated. “Before, we monitored collection stats twice a month to see what percentage of our monthly billing on the whole was being collected. Now we're diving into an ocean of accounts receivable data on a daily basis to really understand the aging schedule of our delinquency. We are really interested in daily and weekly collections stats. And having access to those data points in the form of KPIs and widgets in BI has been tremendously valuable to us.”
Rick Brieman at the Atlantic Realty Group pointed out the challenges with the pandemic in regard to the moratoriums on evictions and renewal increases, as well as the absence of charging late fees to residents. The challenges, however, opened up an opportunity because without evictions and additional inventory in the market, Atlantic was able to increase market rents on new leases. Additionally, they were able to capitalize on people who were ready to make buying decisions in the market, despite this being a pandemic, because there were still people who needed to move. He noted that Business Intelligence enabled Atlantic to see what that looked like from a rate perspective, and that they were able to take advantage of that.
Recently, RealPage had enhanced their BI solution by rolling out multiple new KPIs for deeper analysis of delinquency and collections. Delinquency and collections metrics are being watched much more closely now vs. pre-pandemic, and RealPage’s enhancements are designed to maximize the ability to derive insights from the data.
Atlantic Realty Group had been monitoring cash flow and rent collections with the drastic change in the economy. With Business Intelligence’s enhancements on the delinquency side, Atlantic was able to see how they compared to prior months on a day-by-day basis. Prior to COVID, Atlantic was monitoring that on a weekly basis or a couple of times a month.
According to GoldOller Real Estate Investments’ Ariel Hanson, “BI has rolled out so many new KPIs, reports and dashboards that are really delinquency-driven. That's been really the biggest performance change on our properties. BI has allowed us to very quickly look at our portfolio as a whole and where we're sitting today vs. the same day last year. We can see if this month is going to be a tougher month than it was last year. And it's been very interesting to look at that day-over-day data. Without those tools in BI, that kind of information would take hours, if not be impossible to compile. So, on the fourth of the month when rent is late, I can see that we're at 76% rent collected. But last year, we were at 79%. It's nice to have those tools available. And that's definitely been what we're watching more closely within BI.”
The discussions on re-forecasting and anticipated use of BI led to the issue of retention. Eviction moratoriums would be lifting and move-outs due to non-payment of rent would be taking place. The market movement would once again begin to change. Ms. Saffos asked the group how they would leverage BI tools to make actionable decisions about maximizing NOI and asset value given move-out losses. Certainly, occupancy would be taking a hit.
Ms. Hanson said that GoldOller Real Estate Investments’ focus would be on current retention. She found BI’s many lease retention widgets and ability to create custom reports particularly useful at maintaining retention. Of course, with the decline in occupancy would come the opportunity for a lot of new leases coming in the door. Ms. Hanson noted that they would be using BI tools to look at their screenings and ensuring that the percentage of failed screening would stay low so that they did not set themselves up to get back into the delinquency issue that they had already been facing.
Mr. Brieman pointed out that Atlantic was very concerned that they would see a huge dump out of residents because of eviction moratoriums being lifted. Atlantic planned to use Business Intelligence to re-forecast fourth quarter and first quarter move-outs to phase in that eviction process so that they did not end up with too much inventory at the end of the year and heading into the colder months, which are typically a slower time in the market.
Brieman added that Business Intelligence would allow Atlantic to focus on clawing back some of the rate that may have been lost in the market with the inability to increase renewal rates due to local moratoriums. They would also be able to adjust their new lease pricings, perhaps offset some of the losses on the renewal side and take advantage of the increases later in 2020.
For, RealPage BI had been extremely useful in tracking payment plans before and during COVID. He said that ZRS’s future focus would be on predicting what percentage of their residents who didn’t engage in payment plans would default. And with that, how flexible they would need to be in their approval thresholds to offset the unexpected rental losses. The granular accounts receivable data in BI had been invaluable.
He was also complimentary of RealPage BI’s capabilities in creating detailed COVID payment plan reports that allowed ZRS to see what was still outstanding. Said Mr. Bailey-Tonini, “We're excited to begin building reports that take a closer look at the eviction lifecycle to better understand the concentration and markets, as well as the corresponding timelines for budgeting purposes. This will be huge in evaluating whether or not a bottleneck exists in our workloads and if we need additional assistance to offset the collection efforts.”
The Benefits of Benchmarking
RealPage is the only company in the industry to offer a BI solution featuring deep transactional data coupled with the insights of economists and data scientists. The benefits are proven. But forecasting always requires a less rigorous measurement tool to make the next move: gut instinct. How did RealPage customers confirm what they already knew might be happening in their gut?
Kristen Brooks, Director, Business Intelligence and Benchmarking Consulting & Training at RealPage followed up with the example of Benchmarking.
“Gut comes in when you're looking at the market trend, how it's moving and how you're moving in relationship to your market,” said Ms. Brooks. Having the ability to check your gut and say my renewal conversion has dropped to 40%, I feel like that should be fine. But you look at the data in your market and your comparables and say, theirs is still at 60%. What am I doing wrong? Or seeing theirs drop to 30%, and you're converting 40%, that's a great win. It confirms that you're doing something right and maybe outperforming your market. Having that confirmation really helps you move forward more confidently during an uncertain time.”
Ms. Brooks added that adhering to best practices for Benchmarking would increase that confidence. She gave the example of using Benchmarking for rent comp surveillance, which creates the ability to understand asset or portfolio rent and revenue performance in multiple ways. Comparing to actual lease transaction data reveals the rents residents are actually paying for new leases and renewals, data you would never have been able to see before. Using Benchmarking in this way can give a more comprehensive understanding of how those rents stack up against the market.
Ms. Saffos brought up another best practice—analyzing portfolios from different directions. This means using configurable unique score carding on a portfolio to measure weighted performance metrics, which can be different KPIs and different weights. The benefit is quickly knowing who is already outperforming in critical metrics and who needs a push.
GoldOller’s Ariel Hanson had the final word. “Benchmarking has been a huge resource for us over the last year, she said. “We've been subject to call-in market data for so long. Having a clean, more reliable source of data has allowed us to position our assets based on daily leasing transactions and make more strategic decisions for the future. We're moving guesswork. And being able to benchmark our assets against our own portfolio and then compare that to the competitive zip code or sub-market has been invaluable to us as an organization.”
BI and Benchmarking are for Everyone
You might believe from the discussion that BI and Benchmarking tools are designed solely for use by strategic departments. The truth is that they’re much more versatile.
According to RealPage’s Kristen Brooks, the tools are most actionable when rolled out to every level in the organization: “When a manager can log in and see what she's being measured on, when a maintenance supervisor is able to log in to track how his make-readys are performing, what their work order closure time is, it’s a regional manager's dream to be able to monitor the entire portfolio and make decisions quickly, but having data to support those decisions.”
Ms. Brooks spoke from personal experience, from the time in her career when she was a regional manager. Much of her day was spent making decisions based on her gut. It was paramount that she had the data to support a decision, and that the metrics could be looked at from the manager level all the way up to the C-suite. So, BI and Benchmarking were most successful when integrated in everyone's role in some way.
Ariel Hanson agreed that the benefits should be spread around. She had worked at companies where only the regionals or VPs had access to the tools. At GoldOller, they give access to their community managers because the metrics prove their success.
Micheal Bailey-Tonini pointed out that, with the huge shift in technology in the industry in recent years, there was a new reliance on data to make informed decisions.
“We at ZRS are doubling down on our access to BI,” he said. “We're excited to see how these tools continue to evolve and watch our teams immerse themselves in data and begin to really optimize their assets. We want to make sure that not only the strategic departments and executives have access, but also the regional managers and the property managers, because ultimately, they're the ones responsible for reviewing the BI data and ensuring that we can make quick, actionable decisions from it.”
That’s a sign of confidence when the view ahead is anything but transparent.
To watch the RealPage webcast COVID-19: TBD, please go to https://www.realpage.com/webcasts/smart-solutions-outpace-competition/.