How Top CEOs Are Dealing With Rising Energy Costs, Other Challenges

By Teresa O’Dea Hein, Managing EditorOrlando, Fla.–What Keeps You Up at Night? might seem like a personal question but five leading multifamily CEOs were willing to share their industry concerns at a general session held during the 2008 National Apartment Association (NAA) Education Conference & Expo at the end of June in Orlando, Fla. in the Gaylord Palms Resort & Conference Center.“One of the things I think about daily is the high cost of energy,” said Steven D. Bell (pictured at far right), chairman & CEO of Steven D. Bell & Co., noting that he is concerned about Congress’ inability to address the issue. Bell took this opportunity to announce a four-day workweek for the months of July and August as a way to help this company’s employees deal with ever-escalating gas prices. This initiative was greeted by cheers from the audience—only a few of whom work for this firm. Bell said they will evaluate the program’s effectiveness in early September. “We can’t get into a situation where we’ll be providing no service for a day.” The company is also looking at other strategies, including encouraging maintenance and cleaning staffers to live onsite, and is reviewing its rent discounts. It’s also considering having one on-call maintenance person handle several properties. Plus, Bell added, to cut down on residents’ driving, the company is considering bringing in more services, such dry cleaning pick-ups and even manicurists on site. In March, Steven D. Bell & Co. and a joint venture partner acquired 86 properties formerly owned by United Dominium. To put that transaction into perspective, Bell said, “Previously, our company had never acquired more than nine properties at one time.”David Stockert (pictured at far let), CEO of Post Properties, noted that they also offer rent discounts to employees who live onsite. Stockert said that Post is exploring a four-day workweek for its corporate office staff. Terry Danner (pictured at near right), CEO of Riverstone Residential Group, a Consolidated American Services (CAS) Group Services, said, “Every day is a lawsuit waiting to happen. Lately, it seems like we’ve had to become INS agents and workers for the Department of Homeland Security. And the doubling of the cost of gas is cutting the take-home pay of our associates.”Still, Danner and his team are prepped for growth, planning to reach 300,000 multifamily units under management. Currently, the firm is at about 100,000. Like most industry experts speaking at this conference, Danner doesn’t expect conditions to improve by next year’s NAA expo. “A lot more residents are living on the edge nowadays. It’ll be later 2009 or 2010 before things get better, given the overhang of houses out there. We as Americans like our luxuries—our Starbucks, going to movies, eating out. This has given us all a wake-up call to more frugal and better savers.”During this CEO Roundtable, audience members were also able to use handheld keypad devices to vote at this interactive session. Interestingly, a majority said they did not think that their employers placed enough value on training, despite, for example, the investments that the participating CEOs had outlined. When asked what type of format they preferred for educational seminars, most attendees voted for classroom training rather than online or on-the-job programs.Danner noted that in Europe, “green initiatives are much farther along.” To do its part for sustainability, Riverstone has implemented a number of green measures, such as using nontoxic cleaners, timers on lights, scanned documents instead of faxes, refillable ink cartridges and no Styrofoam coffee cups.Stockert noted his company’s use of Xeriscaping and green roofs where possible as well as recycling.Keith Oden (pictured at near left), president, COO and trust manager of Camden Property Trust, observed, “Cognitively, people appreciate the benefits of green but they haven’t yet been willing to pay for it in their rent checks.” Camden also offers a number of employees the opportunity to buy restricted shares of stock so that thay have an ownership stakes in the company.Oden acknowledged that Camden had become the first multifamily company to make the Forbes Magazine list of the “100 Best Companies to Work for.” He explained, “You have to be a great place to learn in order to be a great place to work.” In fact, Camden University graduates gat a 3.5 percent merit increase the day they graduate.Oden also pointed out that while market conditions are challenging in Florida, Phoenix and Las Vegas, it’s more positive in Texas and North Carolina. “The big-picture trend that will assist us is that the homeownership rate will continue to fall,” he added. “For the past several years, the market has turned a group of really good renters into really bad homeowners.” Oden believes the low number of multifamily starts this year – the lowest in 22 years – “will set us up for good recovery in 2009, 2010 and 2011.”Sue Ansel, COO of Gables Residential, moderated this interesting program.