As we all manage our businesses and lives during the COVID-19 lockdown, we decided that it would be helpful to share the experiences of some of our clients, how they view the situation and how they are managing their operations. Over the next several weeks we will present to you in a Question and Answer format responses from select clients. We will present 3 different parties each week.
For the first in a series we are interviewing Drew Breneman of Rise Invest, Jeff Michael of Horizon Realty Group and Roger Daniel, owner of Daniel Management Group.
Let’s start off on a personal level, how are you dealing with the adjustments to work environment? How has the nature of your job changed?
Breneman: Your thoughts create your reality. I’ve decided to think of this new environment, as an opportunity to enjoy the additional family time and knock out work projects we never found the time to do. I’ve been working 6-7-day work weeks regularly, even working on some holidays. My wife, son, and I have all enjoyed being home together and seeing more of each other while we are all home.
I’m still very much looking to buy assets right now if something makes sense. But with less activity in the market, I’ve shifted some of my time that from acquisitions to those internal projects we’ve been wanting to do for a long time. I think of these projects as investments in our businesses that will pay off coming out of this. My companies are better organizations now than they were even 60 days ago.
Michael: Video conferences. I must admit, given the development of the technologies it has not been all that bad. Of course, while it does not replace in-person meetings with staff, it is a more than adequate Band-Aid. So long as emergency situations as “fires,” figuratively speaking, are kept to a minimum, much of our work, at least internally, can be done remotely. I am sure many elements of our new remote access will have to be permanent fixtures for the foreseeable future.
Daniel: The biggest change for us, like for many businesses, has been learning to run the office side of property management entirely remotely. Daniel Management Group has a significant third-party property management portfolio. It has a scattered site portfolio in the city and that has always run without on-site office staff. However, for our larger properties with on-site staffs, both in and out of state, we are in uncharted territory. With the right technology, however, we’ve been able to make a lot of adjustments that make it possible, though less than ideal. We are certainly communicating with our residents more, making sure we inform them of our updated procedures and supplying them with as many resources as possible-where to go to sign up for unemployment, how to sign up for direct deposit with the IRS, a list of companies that are hiring, etc. Their success is our success, ultimately.
How are you managing your employees to allow them safety and still provide excellent management and operation of your properties and/or business? Are there any specific solutions or actions that your team has employed that you are particularly proud of?
Michael: Of course, we are putting their safety first and following all CDC guidelines. Where is it possible to do so, our property managers are on-site, with doors closed and appropriate signage asking that all business be done via telephone or email, except where impossible to do so. Of course, we have heightened all cleaning processes and invested in several expensive commercial dry-vapor cleaners in order to be able to be able to perform more exhaustive cleaning of touch-points and the like. In terms of results that we are proud of: at the Merion in Evanston, our senior living community, we took drastic and swift measures to ensure the safety of our senior residents there. They were difficult decisions to make, but ones that put the health of our residents first. We are proud to report that so far, the Merion residents have not reported any positive cases of Covid-19. Finally, we are particularly proud of the April rent payment drive that we instituted. We enticed those residents that we able pay their rent to do so. For those that did pay in full by April 5th, we pledged 2% of the collections to the Greater Chicago Food Depository. With the great help of our residents, we were able to donate $40,000, enough to pay for 120,000 meals!
Daniel: Our office staff is working entirely remotely. Daniel Management Group was doing this at some level before so this is not a huge shift for us and is not impacting our capacity to provide good service our clients expect. We are following the CDC guidelines on the maintenance side. Our maintenance staffs are cleaning common areas, with an additional focus on high touch points. For the safety of our residents and out maintenance staff, we have shifted to only completing emergency work orders. In all cases, our staff is practicing social distancing and wearing personal protective equipment. As is always the case, we are maintaining a written record of our cleaning and maintenance efforts.
Breneman: All of my businesses were already very lean organizations both in the office and at the properties. We haven’t needed to reduce headcount or pay for anyone since we were already setting the companies up thinking we were going in to a recession or some sort of pull back in the near term. I’m proud of how many apartment units we have leased virtually. We already had professional photos and floor plans for leasing and now have added videos. We sign leases and receive payment virtually. A lot of our competitors just have non-professional photos only so this has helped us a great deal, but the credit is due to the leasing agents pushing through and getting the job done with what resources we have.
Changing the way we work sometimes produces unintended consequences, good or bad. What change has surprised you the most in this environment?
Daniel: Daniel Management Group has moved a lot of its leasing process online-including providing 3-D digital tours of our vacant apartments and videos of occupied apartments (supplied by the existing residents). I’m surprised by how strong the demand for our apartments still is and how willing people are to lease without actually touring the apartment.
Breneman: I am surprised that I value our office space even more now. I have a contrary view to more commonly shared view that office space demand will drop dramatically after this. When I evaluate my week and compare notes with others on how much we are actually getting done, we’re not getting as much done working from home as we were in the office. When you work from home every now and then, you think you’re as productive at home as you were in the office. But now working from home week after week, I’m seeing that is not the case. Plus, your mindset is just different being at an office.
Michael: Getting back to the video conferencing, it has shown me that it is not only easy but very productive to make more “touches” with our employees and to check-in with them visually. Often, we get stuck in our offices and are unable to physically go out and see our various property managers. The video conferencing has helped to bridge that gap.
Let’s talk more about actual operations. What are the stresses you are experiencing operating your properties and managing your tenants or business during this period?
Breneman: On the apartment front, we’ve collected over 99% of our rent. On the commercial side, we’re on pace to collect all of our rent as well, but in order to that I’ve needed to spend an enormous amount of time working with our tenants. With some of our national tenants that has required being very firm with the terms of the lease. With less strong tenants that has required working out custom deals for them to defer a portion of their rent to later in 2020. We haven’t done any rent abatements or deferrals beyond 2020.
Michael: Obviously, the first and foremost is trying to keep your building free of positive cases and isolating and minimizing the intrusions into the buildings as much as possible. That is stressful because you do not want to suffer an outbreak in close living quarters. Second is the obvious stress in collecting rents. We are trying our best to be sensitive and appreciative of the horrible situations that our tenants are in while striking the balance of needing to collect rents in order to pay our expenses and to keep the lights on. Nobody asked for this situation or caused it. I particularly do not have any appreciation for the narrative that some Aldermen, such as Matt Martin, are putting out there that tenants should not have to pay rent for extended period of time because landlords can absorb it. That is not productive to the situation. We are all in this together and a solution has to be a cooperative bilateral one.
Daniel: It’s the certainty of the expense side-debt service, insurance, taxes, etc. converging with the uncertainty of the income side. We have residents with long histories of timely payments who have lost their capacity to pay. Their stories are heart-wrenching and we want to do right by them but, yet, we also have very real obligations to meet. It’s an unenviable position to be in.
Considering the changes experienced during this period, which do think (or want) to continue after recovery? What positives are you finding in this time that you hope to continue after this pass?
Michael: I hope that our sense of community and that we are all one people all in this thing together, that sense of oneness will continue. We are only as strong as our weakest link in the “stay at home” moment. The spirit that we all need to work together, no matter who you are will hopefully persevere throughout.
Daniel: In the practical sense, I think we will see some “new normal” from an operating perspective. The best operators will provide video and virtual walkthroughs of their apartments when they list them. This dramatically improves the experience of a prospective renter as they can increase their efficiency dramatically during their apartment search, reducing the number of apartments they actually tour to one or two. I also think employers will continue to trend toward working remotely.
Daniel Management Group has been a proponent of this for some time. It will allow employers to attract the best talent and provides the efficiency and flexibility that today’s work force demands. Finally, I think we are going to see an increased use of personal protective equipment or PPE on the maintenance side. Residents are going to demand it and operators are going to want increased protection for their residents and maintenance staff.
In the more general sense, it is inspiring to see people using this as a time to recalibrate, to remind themselves what matters and to take a more compassionate and humane approach to their day-to-day lives. I am hopeful we can use this approach as a society to heal old wounds and tackle the challenges we are facing as a country.
Breneman: I think it is very positive more things are being done electronically. Even the banks that required everything be done in person are allowing us to open accounts and do more remotely now. I see this as very positive and hope we see full adoption of things like electronic signatures, video conferencing, accepting only scanned copies of documents, etc. coming out of this.
Any other thoughts you would like to share?
Daniel: Daniel Management Group’s slogan is “Management Matters.” This is never truer than in challenging times. The most sophisticated, experienced and efficient operators are in the best position to succeed.
Owners will rely on their management companies more than ever. Our company was borne out of the 2008 crash and we have always relied on our institutional experience to manage and reposition properties for success. We are relying on that experience now more than ever.
Breneman: This is a good reminder that health is your most valuable asset. Take this time to enjoy time with your family and invest in your business/career. Accomplish the things you couldn’t find the time to do before that will pay off in your business when we come out of this. If you’re in sales, build out your database and be ready to crush it when things open back up. If you’re an owner, finish those projects internally and at the properties you haven’t found the time to complete yet.
Michael: We are a strong City with strong-minded people. We will get through this. We need to watch out for each other and help those in need but we will get through it and come out stronger on the other end.
Drew Breneman is the Founder of Rise Invest. Drew has been in the real estate business since he was 19 years old. He has participated in the acquisition, development, and financing of more than $500 million of real estate projects across the country.
Jeff Michael is the COO of Horizon Realty Group. Family owned and operated for over 35 years, Horizon invests in and revives both vintage and historic apartment buildings in some of Chicago’s nicest neighborhoods.
Roger Daniel is a founding principal of Daniel Management Group. Daniel’s business was borne out of The Great Recession of 2008 where Daniel acts as a third-party manager for owners of multi-family properties in the north and west sides of Chicago. Daniel also owns and operates multifamily properties in the same footprint.
This article was originally published on Interra Realty: https://interrarealty.com/part-1-how-is-covid-19-affecting-your-apartment-properties/