Facing continuing difficulty in securing financing for apartment complex projects, TLC Properties is seeking opportunities to manage other owners’ properties as a means to expand its business.
“With the economy as it is, and banks pretty tight on lending, it’s hard for us to expand by building more properties,” said Zac Albers, who became chief operating officer at TLC in August, after the resignation of Sam M. Coryell, son of founder and CEO Sam E. Coryell.
With experience in managing roughly 2,600 of its own units in 14 complexes, officials at TLC identified a new opportunity for growth.
“We have decided that we have the infrastructure, the technology and the ability to manage for others,” Albers added.
Since adding that line of business two months ago, the company is in the early stages of talking to owners. So far, the company has a pending agreement with an undisclosed company, Albers said.
TLC owns developments such as The Abbey, Martin Riley and Coryell Crossing, with one-bedroom units generally starting at just less than $600 a month, according to
TLCProperties.com.
The company maintains occupancy rates between 95 percent and 97 percent, Albers said, noting that the recession led to a bit of a rebound in the renters’ market, leading to the end of move-in specials for TLC tenants.
At The Wooten Co., Director K.C. Cowan said she’s seen a slight increase in occupancy for the 4,200 units owned or managed by the company. The company has full or partial ownership of about half of its units, Cowan said.
The Wooten Co.’s overall occupancy rate is 92 percent, up 2 percent from a year ago. On the fee-managed side, the occupancy rate is 94 percent, compared to 91 percent for the company-owned units, Cowan said, noting that the company owned rate is artificially lower because 30 units sit empty in one property that is undergoing renovations. Among its properties are Concord Manor, Dryden Place and Willow Creek, and monthly rents start at $299 a month, according to
TheWootenCo.com.
Equal treatment
All property managers must be licensed by the state as brokers, Cowan said, and fiduciary responsibilities apply to the management company’s portfolio for both company-owned and third-party-managed developments.
Cowan said an across-the-board approach is imperative.
“We wouldn’t last very long in the fee-managed world if people perceived us as playing favorites to properties that the owners of this company had a personal investment in,” Cowan said. “We are very, very careful about that.”
At Debco Management Inc., which solely handles third-party management, consistency across the board comes from working with companies that share Debco’s management philosophy, according to Judi Samuel, broker and partner.
That philosophy, she said, is a combination of service and value for tenants and revenue generation for owners.
Screening prospective tenants is essential, Samuel added, even if it means units sit empty during the process.
“If you get good tenants in your properties, you’re much more successful,” she said, noting that Debco’s portfolio of roughly 1,500 units has an occupancy rate of 90 percent. Primrose Circle, La La Lee Apartments and Woodcliffe Apartments are among the multifamily developments managed by Debco, according to DebcoRentals.com.
For TLC, ideal third-party clients are owners of class-A or class-B properties who don’t want to operate with a hands-on approach, Albers said.
Class-A properties, he said, are typically no more than 10 years old with extensive amenities such as pools, basketball or tennis courts, and fitness centers. Class-B properties are older, with fewer amenities.
“It is feasible for us to take over, and an owner to get a check every month and not have to worry about their property,” Albers said.
And because TLC already is managing a large number of units, it can take advantage of some economies of scale, Albers said. For example, TLC already handles much of its maintenance with a centralized staff that responds as needed at the company’s properties.
Tenant trends
Expanding into third-party management isn’t the only recent change for TLC, which also has added a resident utility billing system to pass water and sewer costs on to its tenants, who are now responsible for water, sewer and electricity.
Albers said that change was in response to projections of steep cost increases for water and sewer.
City Utilities spokesman Joel Alexander said water rates will increase 8 percent on Oct. 1, the start of CU’s fiscal year. Sewer services are handled by the city of Springfield.
In May, Springfield City Council approved wastewater rate increases to fund $50 million in system improvements and raise the operating balance of the city’s sewer fund to $20 million from $8 million. As a result, residential rates are expected to nearly double by 2017 to $28.07 a month.
Samuel said Debco isn’t using a resident billing system for water and sewer, but Cowan said Wooten Co. added a resident utility billing system about six years ago for a few properties that are master-metered for gas and electricity.
Each of the three companies also is taking a different approach to move-in specials, aimed at enticing new tenants.
While TLC provides free cable and Internet, as well as after-hours security, Albers said the company considers those standard amenities for many complexes, and TLC doesn’t offer other giveaways or incentives.
With occupancy rates above 90 percent, Debco reserves move-in specials for seasonal dips in occupancy; Wooten offers free Internet and DirecTV at some of its sites but has scaled back on its specials for new tenants.
“We are encouraged by the direction we’re going,” Cowan said.[[In-content Ad]]
