Properties are changing hands more than ever, so industry executives share their methods for making a transition as smooth as it can be.
Property management changes are one of the most basic processes in the apartment industry. Considering how often they happen, one would think the method for transitioning all the necessary property information from one company to another is standard and simple. But that’s far from true.
Stephanie Brock recalls an example from a few years ago, when she was working as division president for Riverstone Residential Group. A corporate client handed over the keys to roughly 5% of the units at a property only a few weeks after she had taken over the asset. Unfortunately, the departing management company didn’t log them on its way out.
“When we took over, we didn’t know we had all of those notices that needed to come out. Performance dropped significantly,” Brock says. “Those are the types of things that can happen if you don’t jump in quickly.”
Brock has been thinking a lot about property transitions lately. She was named president of U.S. Residential Group last May, and one of her primary goals from the start was to bring in multiple new properties from both new and existing clients. Already, the company has grown its portfolio more than 65% in the past four years, from 24,000 units in 2011 to more than 40,000 units in 2015.
“One of the biggest concerns a client has when they transition a management change is how performance can drop between the transition time and up to 30, sometimes 60, days,” says Brock.
A transition necessitates a temporary pause in day-to-day workflow, which ultimately disrupts the management company’s general performance. On average, Brock says, a property can experience a dip of 1.5% to 2% during the changeover. While an owner usually understands this, the goal is to mitigate the loss as much as possible.
“You have try to figure out the best way to get your arms around the data, walking the property, getting into every unit, and understanding what you have so the performance doesn’t drop,” she notes.
Although maintaining performance through a transition can be difficult, there are a number of steps managers can take to ensure that performance doesn’t slump too much. Brock and her peers across the industry pinpoint six checkpoints for executing smooth management transitions.
1. Clarify the Long-Term Game Plan
Before an incoming manager does anything else, says Kellie Falk, managing director of Newport News, Va.–based Drucker & Falk, they must obtain a clear understanding of the owner’s objectives for the property.
“Knowing the bigger picture for the client and the asset and what the current and ultimate goals may be are critical [to enable] us to hit the ground running in the right direction,” she says.
Once the owner has explained their ultimate goal for an asset, including renovation plans or exit strategies, the incoming manager should provide a checklist to ensure that everyone is on the same page.
“Going into a new relationship, we will have presented them with a written action plan that speaks to the areas we see as critical and our plans to resolve [them], including details of cost, time, anticipated results, etcetera,” says Falk.
Mary Herrold, vice president of marketing and business development at Oakbrook, Ill.–based JVM Realty, says her firm will also typically run a market analysis and provide recommendations to maximize value, which could include proposed renovations and suggestions if the client asks for them.
“We give them our initial observations and recommendations and seek their feedback, because what we’re doing is recommending how we’re going to position [the property], what we think it’s going to need, and the approach we think we should take,” Herrold says.
Next, the new management should obtain a detailed item list that clearly defines everything about the community, from pet policies and amenities to number of elevators and front desk management— anything that could make or break a customer experience, Herrold explains. She and her team try to ask the owner for every piece of information they need at once, to minimize the number of times they have to go back and ask the owner more questions.
“We’re treating it as if we were going to be the owner. We’re the owner’s agent, always,” says Herrold. “Communicating up front, especially, is going to enhance the entire experience and shorten the period of time [needed] to maximize value.”
2. Get the On-Site Team on Board
The on-site team is the next actor that could inhibit the property from maintaining its performance.
“Change is tough for people, and people like to know what’s going on. As soon as you’re able to communicate with an on-site team or with residents, my recommendation is you do so,” Herrold suggests.
The first thing to address with on-site personnel is their own futures. If the outgoing firm has another nearby property they can transition their workers to, that’s great. But if it’s in the employees’ best interests to stay with the property, the outgoing company should facilitate an employment opportunity with the incoming firm.
“Respect whatever the current associate wants to do. If they want to talk to me as the incoming management company, I think it’s incumbent upon their existing employer to allow me access,” says Brock. “It’s an important part to address as soon as possible, so people can calm down and know where they’re going and what they’re doing.”
3. Hit the Ground Running
Once the owner introduces the new team to the outgoing company, it’s up to these two parties to work things out smoothly. Incoming management should identify a point person to field all questions so that information is organized through a single channel between the new and old teams. Multiple channels of communication will only increase the chances of things falling through the cracks.
Then, the new team should get on the property as soon as the owner allows.
“Thirty to 45 days is best so leadership, including regional managers, vice presidents, and maintenance, have time to learn about the property. This also gives the transition team time to staff the property, uncover potential issues, and ensure that systems are set up by the transition day,” says Kristin Stanton, senior vice president of operations at Greensboro, N.C.–based Bell Partners.
Leasing professionals should also get up to speed so they can work with any prospects who walk through the door. Brock notes that the bottom line could take a hit if the transition were to go through during spring or summer, when leasing activity spikes, and agents hadn’t had the chance to catch up on the community yet.
In the meantime, everyone involved should be working to grasp all the data and technologies the former company hands over. The goal is to obtain and synthesize all the information available so you can ask the pertinent questions about the history or technology before your team takes over.
With the vast quantity of property management and data software programs available, many managers don’t work on the same platform. If the outgoing company uses different software from the incoming firm, the data they export may not integrate directly into the new manager’s software.
“Technology throws a lot of curveballs at the process,” Stanton says. “There are larger learning curves, integration's to figure out, and occasionally delays with transitioning administration or software.”
Not surprisingly, this means the operating systems could be down for some time. Brock says a good exchange could mean systems are off line for just a few days, while Stanton has found that online services can be off line for up to two weeks.
“Ask good questions during due diligence to understand the technology on-site. If possible, connect your internal teams with the companies that manage the software prior to takeover, to help understand the process and tools,” Stanton suggests.
Human errors should also be taken into account. There’s always the possibility that records weren’t kept as diligently in the weeks leading up to the transition.
“Inevitably, something got put in a drawer or a file cabinet prematurely,” says Brock.
4. Get It in Writing
Unfortunately, if every asset tied to the property isn’t expressly revealed in the contract, companies on both sides may forget to ask for or provide them. A common oversight is digital assets, including social media accounts, URLs, and marketing materials.
Herrold has run into problems with people failing to hand over the materials or even deleting the social media accounts. JVM Realty now asks for the rights to the digital assets in their contract.
“The digital assets are the same as the physical assets. Creative assets, high-resolution images, art work for logos, floor-plan images—all of [them], because those can cost a lot of money,” says Herrold. “They belong with the property.
“There are times when this doesn’t go as it should. It’s a shame, because it hurts the owner’s business and wastes a lot of time,” she continues.
Herrold has also learned she must ask for warranty information if the building is less than 5 years old.
“Who’s on the hook for fixing anything that didn’t get done the first time? Make sure those things are in writing and that they’re expected,” Herrold says.
5. Communicate with Your Residents
When property transitions go smoothly, residents should barely notice a change is occurring.
“While resident satisfaction and easing concerns are paramount, we don’t typically see issues from residents during transitions that have a negative impact. I say ‘not typically,’ so that means it can, and has, happened,” says Falk.
Immediately after taking over a property, the incoming manager should contact the residents through e-mail and send a note to each unit. To make them feel comfortable and welcome, tenants should be given a way to reach out to the new on-site team.
“We find old-fashioned communication to be the most effective way of transitioning a new team beginning the first day we’re there, and continuing through different avenues, like meet-and-greets, community events, and social media, until we’ve eased any fears,” Falk adds.
Notify residents immediately if there will be any blips in their regular service, such as suspended maintenance requests or the inability to process online rent payments.
6. Be Prepared for Anything
As standard and common as these transitions may be, the process will never be perfect.
“Expect change,” advises Stanton. “Every property and transaction is different, so you may have to change some of your typical processes and time lines.”
Brock suggests staying in contact with the former manager for at least 30 days, if not 60 days, after the transition. At that point, she says, all the bills should cycle through and all the rent payments and financial information should be transferred over.
Be aware the outgoing company may not be as cooperative or professional as you might expect. That may throw a wrench into the process more than anything else.
“Obviously, someone is getting terminated and somebody has been chosen,” says Brock. “It’s not necessarily comfortable to be on either side.”
Herrold agrees, recounting times when an owner had no idea of the state of the property at the time her team took over.
“We had one owner whose toes would curl if he knew the condition in which we took over [his] community,” she says. “We were shocked, but you manage what you get. There’s probably a reason why there was a change being made.”