LRO Helps Multi-family Owners Optimize Rent Pricing
Laramar Group Gains 3% LeaserRent Lift with LRO Revenue Management
JUNE 25, 2008. Rainmaker Group and Laramar Group, a fully-integrated real estate investment and management company, announced the results of a pilot program testing the revolution LROsm System, an automated rent optimization system that resulted in an increase in Laramar's lease rental rates by three percent over standard leasing practices.
In an effort to optimize asset performance of its 20,000 multi-family units comprised of investment and fee-based management properties, Laramar tested the LRO system at several select communities for six months. Rainmaker's pilot program measured revenue-billed-per-unit at two similar Laramar communities, one using LRO and one without, in each of six markets. After testing the system and verifying the performance, the communities using the revolution LRO System had a lease rental lift of three percent over same-market communities using Laramar's customary rate setting procedures.
"Our success depends on how profitably we manage the properties we own, as well as those of our fee-management clients," said Laramar CEO Dave Woodward. "To maintain our leadership position, we constantly look at advanced management technologies to increase revenue while improving our operating efficiency. Thus in the fourth quarter of 2007, we partnered with The Rainmaker Group to design a pilot program to test its revolution LROsm automated lease rent optimization system."
The revolution LRO system analyzes hundreds of factors that influence rate setting, including historical demand and current market dynamics, and mathematically developed [change to 'develops'] pricing recommendations. In Laramar's Phoenix test community, LRO forecasted a soft period in lease pricing in future months, which helped Laramar successfully maintain leasing velocity. At the end of the test period, Laramar's Phoenix LRO community was operating at nearly 96 percent occupancy in a market hard hit by the mortgage crunch that averaged only 90 percent occupancy.
"In early '08 we were able to maintain a steady revenue stream without the concessions we had to give at our control property, " said Justin Sato, Laramar's assistant VP of portfolio analysis. "LRO took the volatility out of vacancy loss by keeping us in a better occupancy position."
Laramar also hired an in-house Pricing Revenue Manager, Patty Garver, to maintain its optimized lease rent program.
"As Laramar prepares to implement the application across its nationwide portfolio, we have applied a number of new processes to ensure a smooth transition for all our properties," said Woodward. "Having a pricing manager is a critical component. Patty helps onsite community managers play an active role in evaluating comp set rates, floor plans and other factors that go into the LRO pricing algorithm," he said.
With the pilot test completed and its new lease rent optimization processes and system proven, Laramar plans to begin full deployment of revolution LRO among the assets it currently manages, and to share the results with clients it works with as part of the third party fee-based, ownership agreements it has with other investors.