Keeping Property Occupancy and Collection Rates High is Critical
- Apr 30, 2009
Kenneth Olson is the president and CEO of POKO Partners LLC, a Port Chester, New York-based development and management company whose projects are focused mostly in the tri-state area. While POKO Management initially served as a fee management company, it transitioned into portfolio management due to the company’s experience as both owners and operators.Olson talks to MHN about projects that POKO currently has under development, the company’s management strategy during the economic downturn, and hidden opportunities to be uncovered during the recession.MHN: How many units do you manage? Do you own all of them? Olson: POKO currently manages more than 650 residential apartment complexes located throughout the tri-state area, and we own 90 percent of those properties.MHN: Do you have any interest in selling any of these properties and/or acquiring apartment properties or distressed assets? Olson: We are not sellers; we are long-term portfolio owners. We are actively looking to acquire distressed assets or to provide management expertise and services to owners of distressed assets. MHN: What is the status of the development business? What development projects are in the pipeline, and how is the credit crisis affecting business—your own and the markets in which you do business?Olson: The current environment is certainly challenging and everything that we do is harder than it was two years ago. The deals require more time to put together and require a great deal more attention. That said, POKO Partners, the development arm of POKO, is still quite active despite the downturn in the economy, due to the type of mixed-income and mixed-use properties that we develop. Currently, we are nearing the end of the pre-construction phase of Wall Street Place in Norwalk, Conn. and 1501 Pitkin Ave. in Brooklyn—the adaptive reuse of an old theater into affordable rental housing and retail space—and we are moving forward with Clinton Commons in Bridgeport, Conn. and Threadmill Apartments in Stonington, Conn., both of which are still in the approval phase. We have always had a bias towards rental housing, and everything we do has a significant affordable component. Our target development areas tend to be in low- and moderate-income areas, and as a result we are seeing a somewhat more receptive credit market. The market for truly affordable housing is still high in demand in many markets.MHN: What other factors besides credit crisis are impacting the business and presenting challenges?Olson: The only negative impact is on the credit side. MHN: Are there any hidden opportunities to be found in the recession?Olson: We believe that there are opportunities in the market today. POKO has the capacity to manage and work with a broad and diverse group of assets, as both owners and managers, and therefore we remain active in looking for opportunities that fit our profile. Since a significant portion of POKO’s income is derived from the management side, which largely focuses on affordable housing, we feel that we are in a strong position to grow, not only because of increased government support but because non-profit entities will need our expertise as the need for affordable housing increases.MHN: Please expand on this: “POKO’s take on property management is that since they are both owners and managers, they not only watch the bottom line, but also operate from a cash flow perspective, which is hugely important to owners.”Olson: POKO is an owner first. Unlike many management companies that are top line-driven, we are bottom line-driven. This means we are interested in creating cash flow for our owners, which is a major difference between us and many other fee management companies. We understand the importance of both revenue and operation costs when it comes to running a multifamily property and how critical it is to pay an immense amount of attention to operating expenses. The dual role of owner and manager is instrumental in creating a positive and lasting relationship with stakeholders, institutional investors and the broader community. During a time when workouts and foreclosures are becoming commonplace, multifamily property owners are paying close attention to the bottom line. While most owners commission third-party managers to oversee their assets, they soon realize that not enough attention is given to managing expenses—a crucial matter in today’s economy. MHN: What’s your strategy for NOI, offering concessions to attract renters and renters insurance? Olson: Obviously keeping property occupancy rates and collection rates high is critical, but we are also always looking for creative ways to manage the operating expenses more effectively. By doing so we are putting money in the owners’ pockets. The more cost effectively a property operates, the better the results. Even in situations where the resident is paying utilities, if we can save money on utilities, that gives our properties a competitive edge.