Cash Cow

Technology can bring money to a property, but not without some expense and labor

By Scott Morey

The following is an column from the May/Jun 2007 issue (Volume 72, Number 3) of JPM^®, Journal of Property Management.  

Can technology really increase a property’s cash flow? This in many ways is the million dollar question for many of us. Often technology is sold to customers with high expectations and it seems those expectations are rarely ever met. Companies and individuals in the industry have chanced millions of dollars on technology solutions they were convinced could increase property cash flow.

Given the business we are all in, maximizing cash flow is most often done by optimizing rents or finding ways to save money in the goods and services we purchase. But technology has found its way into the industry and as a result, extra cash has found its way into companies’ pockets.

The multifamily market has a historical track record of using technology successfully to increase revenue either through offering telecommunications-related services or through yield and revenue management models used by companies like Archstone Smith. The use of telecommunications as a tenant offering is a cost-plus model in offering cable, phone and other services to tenants. Revenue and yield management is about making unit pricing more of a science than a guessing game.

The results have been significant for those companies investing the time and money in implementing these types of solutions. However, these solutions rarely get the amount of attention they deserve and their benefits are often minimized.

A handful of ways can improve the bottom line when procuring goods and services using technology. Energy management is becoming more commonplace, making it easier to audit complex billing statements and optimize energy use. Large firms are also making significant and continual investments in this area. Groups like BuildConn and CABA  are associations providing information on energy management solutions and other building automation technologies.

“E”-procurement solutions offered by companies like SiteStuff can lower the cost on maintenance, repair and operation goods at the property level. SiteStuff “pools” groups of real estate companies’ resources to purchase goods at a lower cost. It can also assist in the bidding process, using its knowledge of the real estate goods and services markets to lower the cost of those items.

Security services technologies are also getting more advanced, promoting a higher quality of service with fewer security personnel. One pioneer in this is area is a company called Vigilos in Seattle . Vigilos’ technology automates tasks so guards respond to fewer false alarms and can resolve true security concerns. It also supports remote monitoring and event notification to specific users.

These types of solutions can save money at an individual asset and portfolio level, but it takes time and effort to properly assess and implement them. The return on investment, however, can be significant and is certainly achievable. Use this as an opportunity to learn about those ideas, adopt appropriate level solutions, and differentiate your portfolio from the market.

Scott Morey (scottmorey@realfoundations.net) is managing director of RealFoundations’ London office.