West Coast Apartment Owner Had 97% Rent Collection in April
Owner and developer CityView had narrow rent loss in April across its 6,000-unit apartment portfolio.
Los Angeles-based apartment owner and developer CityView had 97% rent collection in April across its 6,000-unit portfolio. The company, which develops and manages apartment assets throughout California and other Western US markets, took a swift and proactive approach to mitigate rent loss, and has been largely successful in partnering with tenants. However, it expects to see further dislocation in May and June as the unemployment rate continues to rise.
“It has been an interesting six weeks. April rent collections were significantly better than we initially anticipated,” Sean Burton, CEO of CityView, tells GlobeSt.com. “We had a little debate in the firm in doing prep work, and most people thought that rents were going to be 20% to 40% off. We have collected 97% rent from our residents.”
By comparison, the company typically sees 99% to 99.5% rent collection. Burton says about 2% of the portfolio has been impacted, and the firm is partnering with those residents to create individual payment plans. “Everyone is different, so we set up a task force within the firm to deal with issues as they come up,” says Burton. That task force, called the Residential Tenant Task Force, includes property and asset management team members as well as the CFO and Burton himself.
Burton credits the firm’s early response with the strong rent collections in April. The company started reaching out to tenants in March. “We were very proactive. We sent a letter to every single person in our portfolio prior to April 1 about what we were doing to keep the buildings safe and what our property management and maintenance personnel were going to be doing,” says Burton. “We recognized that many of them may experience real hardship due to COVID-19, and if that happened, we encouraged residents to reach out to their respective manager to figure out how to get through this. We felt proactive communication was going to be really helpful, and I think it turned out to be.”
CityView’s investment strategy has also helped to mitigate rent loss. The firm has been selective in acquiring properties and development sites, and has stuck to pretty rigid market standards, like access to quality jobs, strong income requirements and proximity to local amenities. “We are in strong gateway markets on the West Coast and we pick projects that are in proximity to really solid jobs, transportation and culture,” adds Burton. “We are also careful when we lease a unit, and we require three-times the income.”
While Burton is encouraged by the strong April performance, he is realistic about the challenges ahead, predicting that May and June will present greater challenges. “I think May will be worse, both across the country and across real estate,” he adds. “As of April 1, some people had not yet lost their jobs and other people had lost their job only recently. I think there will be more people that have lost a job or have been out of work for a whole month on May 1, so we are anticipating more dislocation. We are still trying to stay ahead of it and see who has developed issues.”
The expanded unemployment benefits and the stimulus payments will certainly help residents pay May rent and beyond, but Burton doesn’t think it will do enough to offset the impact from the pandemic. “[The CARES Act] is definitely going to play a role. The stimulus checks, the unemployment benefits and the PPP will help—as they actually get into people’s pockets,” says Burton. “I think, even with all of that, we are going to see a more challenging May. As the economy starts to reopen, hopefully in mid-to-late May, some of the effects will be mitigated. However, nothing it going to open in April, so the biggest impact is going to be in May and possibly June. We are more optimistic in an upswing throughout the summer.”