HOUSTON, TX - It was a bleak summer for Houston apartment managers and owners, with year-on-year effective rents dropping by 3%, occupancy levels falling to 86.4%, and job losses continuing unabated. However, surprising news came from rapidly growing Texas property manager NOI Capital Partners—its Houston properties were over 96% occupied, and their net rents were nearly unchanged from a year earlier.
Source: NOI Capital Partners
Houston's rental market has been the weakest among the major Texas cities—lagging far behind Dallas, Austin, and San Antonio—and NOI Capital Partners manages in some of the hardest hit submarkets. Yet, in the last year, NOI raised its average occupancy level by 7.4%, while charging $0.05 per square foot higher net effective rent than its competition.
"I talk to a lot of owners, because I'm on the marketing side," said Richard Wagner, company director, "and everyone immediately assumes that we must be spending like crazy to have such high occupancy. Not so: we cut average operating expense this year by 4%, and our net operating income has jumped more than 6%."
What then has made NOI Capital Partners such an anomaly among Houston property managers?
Wagner points out that when times are tough, tenants tend to opt for fewer frills, but they still have to live somewhere. "You have to be the apartment community providing a better place to live. It's clean, it's safe, everything is in good working order, and you fix problems. Weak rental markets really punish poorly run properties."
NOI Capital Partners Managing Director Jim Marfuggi believes there are three areas of challenge. First is assembling a capable on-site team and training and motivating them to do what needs to be done. Second is attending to the physical condition and appeal of the property and the units. Third is the owner's support for sensible business objectives and methods. "Creating an exceptional living environment doesn't have to cost a lot of money", he confided, "but it does take an immense amount of attention to detail. If we can get 100 little things right every day, that's what makes our residents happy to call our properties home."
Based on how NOI Capital Partners has bucked the downtrend in Houston apartments, it must be getting a lot of things right. NOI has grown to 2,000 managed units in Houston since its start-up in 2008, and it manages another 2,000 units in other Texas markets. Prior to that, the firm's principals spent 15 years operating more than $3 billion in multifamily assets nationwide.