Building the ‘Bell’ Brand: Why Bell Partners Left the Senior Living Markets
- Sep 01, 2011
Lessons learned during the downturn, the decision to exit the commercial real estate and senior living markets, retaining top operations talent, and the importance of branding are among the topics explored by Bell Partners President Jon Bell, Chief Operating Officer Bob Slater, and Chief Investment Officer Lili Dunn during a recent interview with MHN Editor-in-Chief Diana Mosher.
What are the biggest challenges facing the multifamily sector right now, and how is Bell Partners approaching them?
We think the largest issue facing the sector is lack of job growth. Recently, apartment demand has been supported by favorable demographics, roommates uncoupling, 20- and 30-somethings no longer living with parents, and residents displaced due to the foreclosure of their single-family home. While we recognize that much of the employment growth that is occurring is in the prime renter age cohort, we will need more job growth to sustain the current momentum.
Another issue is retaining talent, particularly in operations. It is always a challenge to attract and retain great people, but we think we are good at it. Of course, when you are successful, others target your people. Given the spotlight on the apartment sector, companies are emerging that are new to the sector, further straining the available talent pool. While we set high standards that include a strong work ethic, we also continue to try to offer a unique, fun, family-oriented culture that attracts and retains great people.
Lastly, we are concerned with the growing level of proposed apartment development throughout the country. While it may take a while to get delivered, excess supply will likely temper the strong rent increases we are experiencing today, particularly by 2013 or 2014.
How has the industry changed since 2008? What lessons did your company learn during the downturn that will be valuable going forward?
While not a new lesson, we were reminded once again that it’s your people that make the difference. This notion can get misplaced in good times, but it becomes crystal clear when times are tough. Our people really rolled up their sleeves and helped pull Bell, our clients, and investors through a very difficult time of economic contraction.
We used the economic downturn as an opportunity to fortify our senior executive team. We added a new Chief Operating Officer, Chief Investment Officer, Chief Financial Officer, Chief Technology Officer and Senior Vice President of Property Operations, all of whom previously had leadership roles at best-in-class apartment REITs. Over the past few years, this exceptional leadership team has built upon our previous successes and positioned our company as a leader in the industry. We are poised to take advantage of new opportunities.
When the downturn began in 2008, we went back to the basics. We focused on retaining existing residents and created the Bell Assurance Program to make it easier for residents to stay with us. We attempted to offset rental revenue declines with a high occupancy “heads on beds” strategy. We utilized revenue management software to “lose less” during the downturn. Like others, we cut expenses, renegotiated contracts with our vendor partners, and revisited and deferred renovations. And then, when the tide turned, we had to change the paradigm of our associates who were accustomed to leasing in a recessionary environment. Some employees, of course, had never leased in a positive rent growth environment and needed encouragement to push rents as suggested by our revenue management technology. Now we are enjoying the strong fundamentals and resulting cash flow growth.
As some sage said, “a recession is a terrible thing to waste.” I am confident we used it advantageously.
Tell us about the recent announcement that you will be selling your senior living holdings; why was this decision made and how will it impact your business?
It’s tough to be in a number of businesses and be great at all of them. It’s hard enough to be great at any one of them. Although we recently announced the sale of our senior living portfolio, this course of action had been discussed for a number of years as part of our strategic plan. We felt our senior living communities were most attractive bundled as a single portfolio, and the timing seemed right to market them for sale and harvest value for our investors. We intend to focus all our efforts going forward on becoming a best-in-class apartment company.
What other strategic changes have you made to the business in the past year and what were the reasons?
We are in the process of exiting the commercial real estate business. Unlike our senior living portfolio, we feel value here is maximized not by bundling the properties into a portfolio, but by selling individual assets at the appropriate time. We sold the high-rise office building where we are headquartered last year and expect to sell at least four shopping centers this year, with more to follow next year. Again, this execution is all part of a deliberate strategy to be a best-in-class apartment company.
We are also working to fortify our capital base. In the past, and with much success, we have relied on a stable of high net worth investors, as well as joint venture institutional partners, for our equity and believe we have served them well. While we expect our high net worth investors to remain an important part of our capital strategy going forward, we will continue to seek institutional investment capital to create a programmatic approach to enhance efficiency and diversify our cost effective capital resources. We are consciously seeking partners that fit well with our organization, and Lili Dunn—our Chief Investment Officer who came over from AvalonBay—and I are focused on this effort now.
Tell us about any changes to the management team and what the new talent will add to the end-user (renter) experience.
As mentioned previously, we used the downturn to upgrade our senior executive talent. We added new Chiefs—Operating Officer, Financial Officer, Investment Officer, and Technology Officer, as well as a new SVP of Bell Apartment Living (property operations). Our most recent additions are Chris Gilmore, our VP Training, and Heather Kelley, our VP Reporting. Chris comes to Bell from Marriott, and has been very impactful in a short time. Already, we’ve rolled out a successful field training program to enhance the leasing experience for our prospects, including new content around selling value. Heather comes to Bell from American Express and will be instrumental with our new Business Intelligence platform. Finally, we expect to add a VP of Construction/Renovation Services in the near future. Our goal remains to have public company quality infrastructure and leadership in a private company setting, and of course having the right people is critical to our success.
Your company has garnered a reputation as a marketing thought leader. Would you care to comment on this aspect of the business: what approach has been embraced by
the marketing team? And what thinking is behind your strategy?
We think marketing expertise is a core competency for any apartment company that seeks to be best-in-class. We have young and talented marketing team members who are close to our customers in both lifestyle and use of technology. Their insights and experiences inform our on-line marketing strategies, keeping us relevant and forward looking. While our goal may be similar to that of other apartment management companies—to obtain qualified leads that have the highest propensity to rent at the lowest cost per lease—we believe our approach is more successful, particularly in the areas of social and mobile marketing. In addition, we are building marketing tools for our property teams that are self-service and scalable. We have also established an overall branding strategy and are aggressively working towards building the Bell brand. By the end of the year we will have renamed and re-signed over 30 communities, bringing them under the unifying “Bell” brand name.
How has the renter profile changed since 2008?
Are expectations basically the same—or is there much more of a focus on amenities, design and green living?
Renters seem very focused on location and the perceived value for their rent and less on a community’s amenities and features. Although residents are attracted to the “green” concept, they don’t seem willing to pay for it. We are seeing price savvy residents who are requesting longer-term leases to lock-in current rents. We are also seeing socially and virally active residents; if a resident is dissatisfied, the internet is becoming the preferred sounding board.
How has the summer leasing season been? Has your team been raising rents and what’s your philosophy regarding yield optimization technology?
We were a relatively early adopter of revenue management software in 2008, and have deployed, or will soon finish deploying, revenue management software across the vast majority of our portfolio under management. By year-end we expect to have over 175 communities utilizing revenue optimization technology. This tool, however, is only as good as the people who manage it. As a result, we’ve recruited team members who are exclusively focused on managing revenue and therefore have in-house expertise to maximize the power of the software.
We’ve taken an intentional approach to drive both new lease and renewal rents. Our new lease average effective rent has increased almost 4 percent since the beginning of the year already, and just over 10 percent since the beginning of 2010. The average renewal rent change was up to 5.6 percent for Q2 2011.