Creative Asset Management Strategies

by Katie Sloan

Save money and improve the student experience.

Several years into an economic slump, owners and managers may find their markets to be highly resistant toward rent increases, yet they must still bear the burden of rising costs in major line items such as taxes, insurance and utilities. Now that the low hanging fruit has been picked with regard to cutting controllable costs, owners and managers must summon all of their creativity and guile to find new areas to cut expenses, or they will find themselves falling behind.

With creative thinking, property owners and managers can save thousands of dollars while still delivering a great experience for students. Focusing on green initiatives, security, safety, and technology, asset managers can be more efficient at streamlining operations and maximizing profits. Whether the strategy involves simple measures, like switching to low-flow showerheads or recruiting police officers to live onsite for a discounted rental rate, the savings can be considerable. Even small savings — $5 per month for every student, for example — can make a big difference when they’re multiplied by thousands of beds. When annualized, these savings represent real, quantifiable value in the minds of lenders, potential buyers and investors. In turn, they help to add needed value and liquidity to an owners overall portfolio.

Efficient, cost-conscious management is essential in a tough economy. The ideas that follow can help property owners maintain profits while exceeding the expectations of student tenants and their parents.

Green Initiatives

Capital Investments Save Money and the Planet

While they are readily accessible and relatively affordable, many owners do not take advantage of off-the-shelf products that save water, electricity and, ultimately, money. Swapping out conventional toilets and showerheads for water-saving models can add up to big savings from a modest investment. An update to low-flow showerheads, for example, yields savings in both water and electricity costs, yet the property will recoup the investment in months rather than years. For virtually every household appliance, fixture or building component, there’s an environmentally friendly alternative that also has the potential to save money. Local vendors and contractors can help evaluate the cost efficiency.

Shift Excessive Utility Costs to Students

Another area where asset managers can achieve significant savings is by shifting uncontrollable utility expenses to the tenants where property infrastructure and market forces permit. Determining if your market will respond favorably to a non-inclusive rental rate is the first question to be asked; what are other competing properties charging or passing through to their tenants for utilities? In evaluating the real cost of a unit’s rent versus the competition, including the cost of utilities, it may become clear that competitive properties have already offloaded some or all of the utility expense to their tenant base. Shifting the utility cost to the user benefits the property’s bottom line, and students become more aware of their own consumption patterns. Ultimately, students will be far more likely to become energy conservationists when they are responsible for paying the bill.

The increasing use of smart meters and other monitoring devices can help managers and students pinpoint energy usage, helping them find savings through simple strategies like running appliances after 8 p.m.  Many utility providers will install programmable thermostats at no cost, and still others may actually compensate the owner for the opportunity to install the technology, as it helps them manage demand load. Owners and managers should also stay on top of any rebates, tax savings or other benefits offered by federal and state governments and local utilities. While it’s likely there will be fewer of these incentives, they can make a big difference, especially when executed via a portfolio wide procurement and systems upgrade program.

Safety and Security

Safety and security is a key issue for students, parents and property managers. Technology can be a big help here, enhancing security while reducing costs. One issue for many managers is determining whether security personnel or technology can do an equal or better job of keeping students safe.

24/7 Electronic Monitoring

While some situations may require personnel, other security needs can be met more inexpensively and even more effectively by cameras, programmable gates and other electronic measures. While it may not be their primary use, security cameras in multiple areas can help encourage good behavior and cut down on destructive or costly activities. A camera trained on the trash area, for example, can help identify students dumping bulk garbage, such as mattresses, that the waste removal service won’t take. By knowing who they are, property managers can contact them and give them the option of removing their junk or paying to have it hauled away.

In one case, security cameras even exonerated students who were suspected of tossing the outdoor furniture into the pool one night. As it happened, a giant windstorm had swept through the area that evening and the camera revealed that the wind, not the students, had pushed the furniture into the water.

Bartering for Live-In Police Officers

If the physical presence of a guard is determined to be necessary, there are choices beyond traditional security companies, where the quality of the guards varies widely. One option is to recruit a police officer that will live on the property and patrol on an agreed-upon schedule in return for reduced or no rent. In addition to being more professional as well as having better training and resources, a live-in police officer brings with them the authority to make arrests, which can be a powerful deterrent to criminal behavior.

Technology to Monitor Operations

Technology Provides Big-Picture View

As property professionals know, good maintenance is the key to retaining tenants. This is another area where technology can be very effective by providing a bird’s eye view of how the property is being managed, identifying problem areas and enabling management to deploy staff more effectively.

Most property management software today allows an owner to access property management reports in real time through an Internet portal. One important use is to track the overall pattern of service requests, the time it takes to respond and resolve problems, and how often they occur. Not only can owners and managers make sure essential repairs, such as plumbing problems, are fixed quickly they can also detect unproductive patterns. For example, an excessive number of reports of leaky dishwashers could indicate they’re past their useful life and may need to be replaced across the complex. Similarly, a pattern of issues could indicate that major building systems need repair or replacement and that an overhaul could be cheaper over the long term.

Having visibility across the system also enables managers to use their maintenance staffs more efficiently and find the right balance between salaried employees and outside contractors. If maintenance is spending a disproportionate amount of time on a particular type of repair, such as HVAC, it may make sense operationally and financially to have specialty contractors address those problems.

A win-win for managers and students

While student housing may be a relatively recession-proof asset, it still requires a vigilant and creative approach to keep it running efficiently and profitably. While each property will have its own needs, the good news is that there are a lot of cost-saving, efficient options in the areas of green initiatives, security and safety, and technology. Taking a fresh, creative look at how assets are managed can be a win-win for property professionals and their student tenants.

— Robin Rains is the managing director of asset management at Kayne Anderson Real Estate Advisors.

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