Converting Old Experience Into New Knowledge

Work Through Change to Survive Crisis and Thrive, Says IREM® Panel of Industry Leaders

“Converting Old Experiences Into New Knowledge” was a highlight event at IREM’s 10th Annual Legislative and Leadership Summit held recently in Washington D.C.  It featured 12 veteran practitioners drawn from IREM’s leadership who shared what they learned from the S&L crisis of the late 80s and early 90s that can help you survive today formidable marketplace challenges and then thrive tomorrow.

Group participants agreed that the current financial crisis is more severe and far reaching that the S&L crisis; also, that the factors that provoked both and the remedies to address them differ greatly. Nonetheless, the key challenge now as then, they concurred, is to segregate what is temporary change from permanent change, what is short term and what is long term, and manage through the change that is imposed.

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Conversation Highlights
The program participants agreed implicitly that the savings and loan (S & L) crisis that impacted the real estate market two-plus decades so ago created experiences that have generated knowledge which is now quite useful for coping with today’s unprecedented market conditions.

The S&L crisis was provoked by relatively contained phenomena—over building and over leveraging—that decimated the savings and loan industry. The way out came through a singular institution, the Resolution Trust Corporation (RTC), set up by the federal government in 1989 to liquidate real estate assets that had been declared insolvent. RTC dispersed these underwater assets relatively quickly.

Today More Severe
Today’s crisis is more severe, with a broader base of problems. It’s far more complex, defined by massive job losses throughout the country and a severely depressed economy. All the disappearing jobs lead to disappearing support for real estate lending. So banks are more inclined to bolster their balance sheets by hanging on to liquid assets than to lending. A crisis of confidence triggered by troubled properties has become pervasive. And the current crisis is being addressed by many government initiatives, not a singular RTC.

Moreover, 20-plus years ago, the RTC hired lots of outside management to handle the assets involved, but banks today are trying to do it all themselves, pressed by a desire to maintain capital levels.

But even given that the marketplace is far more complex now than then, the panel participants underscored that the basics of successful property management still are proving to be the knowledge base for coping successfully now and going forward.

Must Manage Through Change
The challenge, according to panel members, is to segregate what is temporary change from permanent change, what is short term and what is long term. The trick is to manage through the change that is imposed. And, cautioned one of the panelists, “don’t chase trends as many did 20 years ago, for example, by chasing RTC business and then being left out in the cold.”

Stick to your own plan and core business, the panelists advised. And position yourself to pursue new opportunities when the time is right. This definitely is not the time to let up on the accelerator; rather, it is the time to train and motivate your people.  As an IREM Member stick to your core t ethics and knowledge base in order to survive and thrive.

Keep Morale High
An unspoken consensus that ran through this IREM think tank is the notion that our own staff is the key to our survival and future prosperity – that “we can get through this crisis if we have a strong corporate culture that keeps morale high.”

But downsizing means we have fewer people covering more bases.  We are asking our people to do a lot more than in the past, doing more with less as their portfolios grow. Managers coping with more than a traditional workload now also have to cope increasingly with troubled tenants, workouts and rent reductions without jeopardizing their own debt coverage.

Our people are swamped, panel participants agreed.  They are very busy and so tend to think (erroneously) that business is good. Still, they seem to be more realistic that things will be worked out.

If we don’t treat them fairly as they should be treated now, they will go elsewhere sooner or later, panelists said. Recognize that the younger generations “want it now.” And get into the trenches with them.

“Do things in new ways, but also be sure our people know the basics, that they know Property Management 101.  In the end, clients tenant and residents will thank you.”

Find Good People Now
We all should be looking for good people who can help us out of our problems now that we’ll want to keep later. Recognize the importance of education so our people are ready when things turn around.

Develop a business plan for every property (doesn’t have to be hundreds of pages).

Looking to the future, panel participants concurred that we have to reward our people today as difficult as it is now – including the 20-somethings who are getting a lot of good training thanks to the current crisis environment.  By doing so, they will stick with us when things get better (as they inevitably will) and new opportunities are presented to them. This includes compensation, education and psychic reinforcement for work well done. Spread compliments around, however informally, when merited; it’s a very low-cost morale booster and motivator. Know your people’s problems (so you can let someone leave early if that makes a difference for them personally one day). Bring in lunch once in a while. Try out a four-day workweek. Motivate them now.

Encourage freedom to perform.

Be honest with your people.

Help Staff Succeed
Be a cheerleader. Leave your personal and professional problems at home. Help your staff be successful and you’ll be successful, stabilize your business and then move forward.

Outside of our own particular organization, the panel participants advised, we have to be known as the go-to folks when anyone is seeking or recommending a third-party manager. We can’t forget the outside world for referrals (often, it’s not what you know but who you know). Get on speech platforms. Write to the local newspaper. Send gift cards. Recognize individual people.

Use IREM to expand relationships; tap into our members’ wealth of knowledge and experience. (“Over 30 years, I’ve never called a fellow member with a problem and had someone say “no.”)

Nurture Outsiders
We have to create and nurture relationships with outsiders, such as lenders and owners, through whom we develop our business. They have to know our company and us. We have to build our own brand around the professional expertise of our people, our longevity, and our performance. And not just with owners and lenders, but with mortgage bankers and real estate attorneys. 

Also, create special value, perhaps an expertise in sustainability, which will remain a key issue for a long time to come.  Establish a competitive edge.

Light at the End of the Tunnel
The panelists see light at the end of the tunnel. Industry statistics are pointing upward. Opportunities are out there for investors and property managers. Banks will work through their problems, not as quickly as in the RTC era, but they will.

As one participant observed, “I wouldn’t change what I’ve been through the last couple of years. It’s made me a better practitioner and person. And maybe we can minimize the impact of the next 20-year cycle.”

Program Participants:

• Lawrence (Larry) Baiamonte, CPM, Nationwide Insurance, Columbus, OH
• Edward (Ed) Boudreaux, Jr., CPM, Capital Consultants Management Corp., Dallas, TX (2002 IREM President)
• Craig Cardwell, CPM, Allen & O’Hara Education Services, Memphis, TN
• Jo Anne Corbitt, CPM, The Matthews Company, Nashville, TX (1997 IREM President)
• Richard Forsyth, CPM, Westerra Realty & Management, Salt Lake City, UT
• John (Jack) Gallagher, CPM, Polinger Shannon & Luchs Co., AMO, Chevy Chase, MD (1996 IREM President)
• Ronald (Ron) Goss, CPM, RPM Management Co., Inc., AMO, Little Rock, AR (IREM 2010 President-elect)
• Barbara Holland, CPM, H &  L Realty Management Co., Inc., AMO, Las Vegas, NV
• Richard Muhlebach, CPM, Richard Muhlebach, LLC, Woodinville, WA (1998 IREM President)
• Regina (Reggie) Mullins, CPM, Penzance Properties, Washington, DC (2008 IREM President)
• Carolyn Perrigo, CPM, Transwestern, AMO, San Diego, CA
• O. Randall (Randy) Woodbury, CPM, Woodbury Corporation, Salt Lake City, UT (2010 IREM President).
• Moderator:  James (Jim) Evans, CPM, Bruce G. Pollack & Associates, Inc., AMO, Grand Blanc, MI(2010 IREM Secretary/Treasurer)
• Assisting Moderator: Russell (Russ) Salzman, CAE, IOM, IREM, Executive Vice President and Chief Executive Officer