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Path to Partnership; The Apartment Developer's Dilemma

I have been fortunate to have the occasion to work with a group of promising young folks and get to hear their hopes and expectations. As I listen, I can’t help but think back to my own career path and chuckle at how little changes generationally. Their wants are no different than mine were at their age. Their frustrations that it all happens too slowly are the same. Their fundamental lack of understanding is heartwarming, as are their expectations.  Since early in our careers, those of us who are smart, hard-working and motivated have generally focused on the idea of ownership. We see the entrepreneurs who employ us and want to be similar. They embody a version of our concept of success. When we are young, being a partner means having a seat at the grown-ups table. It’s our opportunity to affect change or enable our visions. It’s the gateway to profit and security. There may even be a little pride in the title of ‘owner’ which we covet- if we’re confident enough to admit it. But because we are smart, hard-working and motivated; we also want things well before we’re ready for them, before we even understand what it is that we think we want. Of course we don’t recognize that we’re not ready; after all we have been told that we are bright and unique snowflakes since we were three years old. So I thought that I might offer some ‘tough love’ advice and words of wisdom to the......
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Structural Integrity; The Apartment Developer's Dilemma

Many of the topics that we discuss in this blog are related to three basic themes;   1.       The Industry is broken and in need of a major overhaul. 2.       As our product becomes increasingly complex, the skill set of the developer has diminished. 3.       It is within our power to reclaim the glory of our profession.   For those of us dedicated to the betterment of the profession, one of the major challenges that we face is that our firm’s lack integrity. Now by that I don’t mean that they are liars. Nor do I mean that they are out polluting our rivers and streams, etc. I use ‘integrity’ in a broader and more exact sense. Integrity is achieved when each of our members is working in concert with the whole. In other words, when our highest ideas and values can be witnessed in even the simplest of our work and projects, there is integrity.   Let’s begin with the following principles; Each of us is made up of three primary components; the physical, the intellectual and the spiritual. We, as individuals, operate more happily and effectively when those three aspects act in unison. Put another way, when our actions operate in concert with our values, we achieve harmony. There are also three primary aspects of our lives; work effort, personal effort and sleep. If we live in accordance with our values in only two of the three, then our quality of life and greatness of achievement will be lessened.......
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Will We Be Heroes; The Apartment Developer's Dilemma

For anyone who has followed The Developer’s Dilemma series over these past months, I expect that a primary theme has been revealed; that our glorious profession is in tatters due to apathy and abdication. We have hired the wrong people and then not trained them properly. We have become a simple proxy to Wall Street and Connecticut insurance executives. Etc. The key perspective in this is that ‘we have done this to ourselves’ through greed and laziness. And now we all sit here waiting for things to get better. Hopefully a secondary theme has emerged as well; that this is completely fixable. We should all see that this economy, while terrible for many of us at an individual level, is from a macro-perspective, actually a wonderful and necessary reset button. And I don’t just mean a great opportunity for capital to acquire at fire-sale prices, shitty properties that likely never should have been built. Like the Great Fire of Chicago or Sherman’s March through Atlanta, the Crash of 2008 razed our entire profession and gave us a blank, albeit scorched canvas. Development is going to necessarily rise from the ashes again in the near future. And it will be up to us to decide whether it’s as that same old crow or as a glorious new phoenix. So what did we do during these three years of purgatory? Did we learn that our firm structures and training programs were insufficient? Did we learn that we had forgotten the breadth of our......
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The Mentorship Model; The Apartment Developer's Dilemma

Over the past few months we have discussed some of the underlying problems within the wonderful profession of real estate development. We have also bantered about individual solutions to prepare ourselves (as the next generation) which have ranged from education to understanding the key success traits for our own self-improvement. Hopefully these have been fairly logical. But, if so, then why hasn’t it just naturally happened? Sadly, ‘obvious’ and ‘easy’ don’t always go hand-in-hand. I would suggest that self-improvement is one of the most difficult things to achieve- especially on our own. Often we are just not equipped to step back and look at ourselves objectively. And, even if we are, we don’t necessarily have the tools to affect the changes that we need. And when it comes to creating a good developer- it really takes a village. It would be nice if we could learn everything that we need to know from our superiors or the more experienced folks within our firms, but unfortunately, my generation and the one before me has left our profession in shambles. The built world is an uglier, less urbanistically successful place for many of our incursions into it. The reason for this is that (statistically speaking) you likely work for a spreadsheet monkey who was never taught or didn’t embrace the romance of what we do. He can’t teach you because he doesn’t know himself. If you want to be great, you will need to actively seek out the folks who can develop in......
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Time Travel; The Apartment Developer's Dilemma

I’ll bet that each of us has said, at one time or other, ‘I wish that I knew then what I know now.’ If you haven’t yet, you will. And I can promise that if I had a Way Back Machine, I would do more than catch a David Bowie show on the Ziggy Stardust Tour; I would give myself some great advice. Sadly, the best that we can do now is to submit our wisdom and musings to cyberspace. I would tell my younger self that, as a developer, you are a CEO. And as such, you need to develop a CEOs toolbox. But what does that mean? Within our individual toolboxes are both hard and soft (as you may have guessed) tools. A hard tool would be the ability to run a proforma, whereas a soft tool would be speaking ability (or presentation skills). The difference between the two is that you acquire hard tools and develop the soft ones. I’ve found that the real differentiators in one’s life and career, come down almost solely to the soft skills (As an aside, in the near future, we will discuss how one of the primary failures of the real estate development industry is that it has shifted to hiring for and developing hard skills in its young folks rather than the ones that actually determine success). So if soft tools are the key to growing our CEO toolbox, then logically not all tools are created equal. What are the top......
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The ROI of an MBA; The Apartment Developers Dilemma

Our conversation following my most recent blog, To MBA or Not To MBA went down some very interesting paths (although for some reason, the comments on ULI did not aggregate on MFI); so much so that I believe that it might be useful to further flesh-out some of the thoughts. The most remarkable to me, was the concept of ‘the ROI of the MBA.’ It has been asserted that the only way in business to evaluate a decision or an investment is based on its ROI. As my view of real estate development and the developers’ role in society is more holistic, my natural reaction is to reject the relevance of this singular point of view. In fact, anyone who has read my blogs probably already knows that I would argue that the sole pursuit of ROI maximization is destroying our urban fabric because it leads to a myopic view of the world. Suburban sprawl for instance is ROI maximization run amuck. I would suggest that we have a higher responsibility as creators and visionaries than can be calculated on a spreadsheet. After all what is the ROI of donating time or money to philanthropic organizations? Or being kind to others? Or traveling the world? Or reading voraciously? Each of these inputs informs our decisions as individuals and professionals, but none have predetermined effect on our salary or future promote.  There are a few other challenges with the ROI metric as related to the viability of the MBA: The MBA is......
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To MBA, or not to MBA; The Apartment Developer's Dilemma

So I have been inundated over the past couple months with real estate friends and mentees who have asked the same question ‘Should I go back and get my MBA?’ I’m not sure if it’s the economy (I will admit that, as a developer, the world can be quite boring when there are no cranes in the air), or perhaps it is just that they feel that it will open doors in the future. With the last few folks who asked these questions I had one of three answers; Definitely, Maybe and Probably Not. The reason for this is that an MBAs actual value to you is wholly dependent upon the career path that you intend to take. The thing to understand about a University is that it is a business. And as a business, it is in the business of creating a product- the MBA. For it to efficiently create that product for 20 – 100 students, year after year, the parameters of what are taught must be standardized to the point that they can be consistently replicated (i.e. dumbed down). What our MBA factories programs are really well equipped to do is turn middling managers into upper-middle managers- and of course allow us to use the phrase ‘B-School.’ They will NEVER teach you to be a leader…which is a key component to being a good developer. So back to how I answer my friends when the question is asked: Ehhhhh- Maybe? For developers who intend to stay developers, you......
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An inconvenient truth about consumer reviews

I know consumer reviews are scary.  Trust me.  Having worked in public relations my whole life, user-generated content that can disparage a brand I’ve been working years to uphold, has kept me tossing and turning more than one night.  Something you used to have control over is not totally in your hands anymore: your public image (e.g. branding, advertising, marketing collateral, and even to some degree, the press being generated about your company).  Sure, people could complain about your property, but that was typically somewhat contained.  Today, anyone can publicize their praise or contempt for your brand by going online.  What’s worse than consumers finding it?  Consumers looking for it, especially renters.  In fact, 58% of renters, who are also active on social media, told us at Apartments.com they search for additional apartment information and recommendations online when looking for a new place to live.   My name is Tammy Kotula, and I’m addicted to review websites I have to admit that over the past two years, I’ve also become obsessed with reading reviews.  Whether it’s choosing a new restaurant to go to in Wicker Park, booking a hotel or purchasing a book on Amazon, I find myself consulting consumer reviews with nearly every purchase I make.  (Check out Chris Brown’s post on the zero moment of truth). In turn, I’ve also become less bashful about interacting with brands I LIKE on social media and leaving negative reviews for the places where I have received subpar service.  Let me just add......
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How Much Money Is Your Multifamily Complex Losing? - Part 2

Utility Billing Audit SpreadsheetA Simple Way To Conduct A Utility Billing Audit Here's how to conduct a quick and simple audit: Know the rules of the game. Collect relevant billing data. Build a spreadsheet and graph the data. 1.  Know The Rules Of The Game Before starting an audit, familiarize yourself with the state and local rules that govern how you can bill residents for utilities.  These rules can be found at your state's PUC or at a local National Apartment Association (NAA) Affiliate;  a searchable directory is located here:  http://www.naahq.org/about/join/Pages/AffiliateDirectory.aspx. In Colorado, assuming there's a proper lease in place, owners can charge 100% of the master-meter bill back to residents.  In Texas, however, owners must deduct a portion of the master-meter bill for common areas and other non-resident utility costs such as those for parking lot lighting, pools, hallway heating and air conditioning, etc.  Texas also has specific rules on how much of a service fee can be charged. Understand that the onus is on the owner to ensure that resident bills are calculated correctly, regardless of whether you outsource to a third party billing provider or manage the process yourself. 2.  Collect Relevant Billing Data Gather the following: Master-meter billing data for at least the last 12 months Amounts billed to residents for the same period. A comparison of this data will help you gauge how your utility billing program is performing. 3.  Build A Spreadsheet And Graph The Data A spreadsheet makes it easier to graph the billing data so that......
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How Much Money Is Your Multifamily Complex Losing? - Part 1

Utility Billing ProblemsOwner loses nearly $200,000.  Find out why and how you can avoid this situation "How much money do you estimate was lost?"  We put this question to a multifamily owner whose complexes total nearly 500 units.  His answer was shocking.  "Nearly $200,000 over three to four years."  Our next question was obvious…"How?" "It was very difficult to identify," the owner replied.  "Each year, the amount of money we paid for our master-meter water and sewer bills increased, but the amount we recovered from our resident utility billing program slowly decreased.  We relied on a billing provider to manage the process for us but the losses happened gradually enough that we didn't catch the errors." When the owner investigated more closely, he discovered that his local water utility had increased the master-meter water/sewer rates several times, but the resident bill calculations had not been updated with those rate changes.  The owner was continually paying more for utilities but collecting less. Common Utility Billing Problems While this is an extreme example of what can happen when resident utility bills are calculated inaccurately, it also exposes two very common problems in multifamily utility billing, i.e. under- and over-billing.  These problems can create significant financial losses for owners or lead to aggravated tenants. Under-Billing Costs Owners Under-billing usually occurs in submetered complexes when the master-meter rates increase but those rate changes are not carried over to resident bills.  It can also happen when common area deductions (CADs) are higher than necessary, or when legally billable......
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