Founded in 2007 with the purpose of acquiring, repositioning, and operating multifamily and hospitality assets in California, Hawaii, and Arizona, Cirrus Asset Management directly manages and asset manages a portfolio valued at more than $1 billion. The firm’s ongoing commitment to high-tech marketing and cash flow maximization has allowed its clients and owned portfolio to thrive in the recent economic downturn. Cirrus is an operator and fee manager of a 45 property portfolio.
THE CHALLENGE: Gain Competitive Advantage and Rent Growth Premiums with Scalable Technology
Carrie Roth wanted to implement a revenue management platform at Cirrus for three years. The problem, according to CFO of the Calabasas, Calif.-based apartment owner and fee manager, was the company seemed to overextend itself during the early adoption of apartment technologies. To launch a revenue management program, Roth needed an easy-to-implement system that delivered quick results.
“With a few rent controlled communities in the Los Angeles area, a couple of student housing deals, and some communities coming out of receivership, we wondered how revenue management would handle that,” says Roth. “It took us awhile to gain traction, and it took me a while to be ready to pioneer this one with so much at stake.”
Still, a Cirrus affiliated company in the hospitality sector was proving out revenue management to company executives, and the prospect of gaining additional rent lift in an apartment market projected to show improvement was difficult for Roth to ignore. In addition to rent growth premiums relative to market, Roth was eager to introduce flexible leasing terms to further empower the on-site sales efforts, making ease of adoption a key metric during the selection process.
“Most apartment firms have a lot of analytically minded people at the corporate level who get revenue management, but property folks have to lease, get units ready, and make sure the property looks great all the time,” Roth says. “If you start taking them away from that with software platforms they don’t understand, you are going to waste a lot of time and make people relatively unhappy. After a lot of investigation, we thought the Rainmaker LRO™ system was visually attractive, made sense intuitively for site staff and the graphic representation of the generated output was very user-friendly, so it was time to get a toe in the water.”
THE SOLUTION: User-friendly, Flexible Technology Coupled with Training for a Complete Revenue Management Solution
Cirrus began implementing the LRO™ system in July 2011 and Roth reports Cirrus has seen little if any push-back to implementing LRO. She attributes the quick adoption to comprehensive training guided by Rainmaker coupled with a desire among leasing agents to throttle sales by leveraging the software’s capabilities in setting flexible lease terms tied to greater rent premiums.
“Frankly, I think the psychology is the biggest sell. The price change isn’t just what the CEO said or wanted, it’s pricing customized to their community, based on all this data moving through the system,” Roth said. “They’ll do a seven-month lease for $15 more dollars a month and who knew a 7-month lease would be worth such a premium? The system knew it, and now leasing agents are up-selling in ways they never thought they could, and that’s what they want to do: close the deal.”
Helping Cirrus on the training side was a team Roth says was equally patient and tenacious in assisting its adoption. “The hardest thing about rolling something like this out is finding balance between teaching what the software is doing versus overloading people with a bunch of information they don’t need,” Roth said. “Rainmaker strikes that balance but they don’t lighten up after the initial introduction. They don’t let you go halfway and cancel out of training or pricing calls just because you are busy. They hold you to it.”
THE RESULTS: Ease of Adoption; Budget-Busting Revenue Growth
Within a couple of months after implementation began, Cirrus had already seen significant results. By year’s end, the firm had more than 300 units across five properties experiencing similar results.
“We had property managers standing up at company meetings telling everyone they got $50 more a month on their first three rentals out of the gate,” Roth says. “That says a lot about Rainmaker and LRO: their rollout is phenomenal, they get on-site buy in and they are there for our managers at every turn. Our implementation has been superlative.”
The upshot of implementing LRO at Cirrus has been a long line of property managers and leasing professionals looking for their property to be next in the roll out of LRO. At the corporate office, Roth said properties on the LRO platform are already outperforming market, their peers, and most importantly outperforming budget.
“Those properties that have adopted LRO have seen rent increases 1 to 2 percent greater than even the 2 percent premium we budgeted,” Roth said. “We went into this believing there were rental increases coming, we are on a rising tide, but we want to be at the front. The opportunity was not just to get the general market growth but to push rent increases closer to 5 and 6 percent.”
Best of all, Cirrus is seeing opportunities to flex its new found revenue management proficiencies against more transient renter populations at its properties in Hawaii and even sees applications for LRO at its affordable communities. “As long as there is loss-to-lease out there, these systems add value. You don’t just have to be core market, class A, conventional anymore. That’s how the philosophy is maturing throughout the industry,” she said.
Ultimately, Roth still feels like a multifamily technology pioneer. “I suppose I still like being at the front end,” Roth said. “The overall penetration of revenue management is only around 20 percent, and I know those who adopt now are going to get the biggest benefit before the market is completely competitive with this great technology.”