Month: December 2015

Houston apartment owner sees occupancy slide with price of oil – Houston Chronicle


Occupancy rates at Nova Asset Management’s well-leased portfolio of 16 apartment complexes in Houston are starting to slip amid sustained low oil prices.

The Houston-based owner and manager of 6,000 local apartment units is just starting to see the effect of the slowdown in Houston’s economy from energy layoffs, said Neal Verma, president and co-founder of Nova Asset Management.

About one-quarter of the portfolio is Class B, with rents for one-bedroom units averaging $850 a month. The complexes are typically between eight and 20 years old.

“In the B class properties, a lot of tenants do have some kind of connection to the oil and gas industries,” Verma said. “We used to have 100 percent leased. Now we’re seeing 95 percent leased.”

At a 300-unit Class B property, 15 people normally move out each month. In the last three months, that’s crept up to between 20 and 30 vacancies, Verma said.

Three-quarters of Nova Asset Management’s portfolio is comprised of older Class C properties with rents averaging $600 a month.

The Class C properties, which frequently house construction workers, may lose some tenants as the pace of new office building construction begins to taper off in areas such as the Energy Corridor and the Galleria. The Class C occupancy rate has dipped below 98 percent, but has been close to 100 percent recently, Verma said.

“A lot of those jobs are finishing, but no new construction is happening in Houston,” Verma said.

Nova Asset Management recently collaborated with property management software firm RealPage on a new way to collect rent payments. Tenants pay using eMoneyOrders at area retail stores.

Multifamily company launches new payment method to curb thefts – Houston Business Journal


Neal Verma once had a problem on his hands.

On the first day of each month, Verma’s apartment residents brought hundreds of dollars of cash to Verma’s front offices to pay their rent. Some even brought in blank checks and money orders because they didn’t know how to write English and relied on employees to fill them out, Verma said.

With upwards of $100,000 in cash, blank checks and money orders coming in, thefts and robberies became an issue. Some employees succumbed to the temptation of blank checks, depositing them into their own bank accounts. Hold-ups and break-ins were common.

“It’s a rampant problem in the industry,” Verma said.

The president of Nova Asset Management rents apartments to predominantly Hispanic residents, many of whom deal primarily with cash and don’t use a bank. Houston is the second-most “underbanked” city nationally with 40.6 percent of the population who don’t have a bank account, according to the government.

As a result, Verma used to accept cash and money orders at each of his 16 apartment complexes — Class B and C properties located primarily on the west side of Houston. Founded in 1992, Nova Asset Management is a Houston-based multifamily company that owns and operates about 6,000 apartment units across the Bayou City.

Verma estimated he was losing about $40,000 each year. So he explained his dilemma to RealPage Inc., a Carrollton, Texas-based multifamily company that provides property management software and services to apartment owners and managers.

Realpage (Nasdaq: RP) had been thinking about this problem, too, and came up with a new payment method — called eMoney Order — that allowed users to pay their rent at any of the 24,000 supermarkets, drugstores and convenience stores in RealPage’s eMoney Order system across the country.

Instead of bringing cash or money orders to the front office, residents would pay their rent when they went grocery shopping. It’s similar to the way Reliant Energy allows residents to pay their electricity bills at their local supermarket.

Verma agreed to test RealPage’s solution, and began rolling out the eMoney Order system in each of his properties in 2012. After three years, all of Verma’s properties use the system.

It took several months to teach residents about the new payment method, but they adapted quickly, Verma said. Now, none of Nova Asset Management properties accept cash or money order, and as a result, thefts and crime fell dramatically, Verma said.

“Our theft and crime has gone down to zero,” Verma said. “It’s really worked out for us. It’s been totally transformative for our industry.”

Houston apartment vacancies climb as energy, construction layoffs mount – Houston Business Journal


Neal Verma started noticing them a few months ago — move-out notices that blamed layoffs as a reason. They trickled in, one by one, into his 16 apartment properties — Class B and C complexes located primarily on the west side of Houston.

“The oil slump is definitely affecting us,” the president of Nova Asset Management Inc. said. “ It’s a huge hit to the multifamily industry.”

Founded in 1992, Nova Asset Management is a Houston-based multifamily company that owns and operates about 6,000 apartment units across the Bayou City.

Most of Nova’s apartment communities average about 300 units. Typically, Verma said he sees about 15 move-outs a month — and about a 5 percent vacancy rate — due to regular attrition: tenant changing jobs or moving to a new city.

However, in recent months, Verma says he’s getting an extra 10 move-outs a month, pushing his vacancy rate closer to 8 percent.

As oil prices plummet to near seven-year lows, energy companies are laying off IT workers living in Nova’s Class B properties. And as new office and multifamily development cools, contractors are laying off construction workers living in Nova’s Class C properties, Verma said.

“We have a lot of tenants working for oil and gas and construction. A lot of them have been let go,” Verma said. “This greatly affects our bottom line because now you’re talking 25 vacancies at each property, which will add up to a couple hundred units. It’s extremely worrisome.”

Verma is starting to do more marketing to attract new residents to replace those who are leaving. He is putting up more fliers in restaurants and businesses and advertisements in newspapers and online portals. He also plans to double his incentive for resident referrals from $200 to $400 per resident.

There’s a silver lining to the oil slump however, Verma said. As vacancies mount in Class B and C properties, there may be opportunities for companies like Verma’s to purchase properties on the cheap, he said.

During the energy boom, apartment properties — even a Class C complex with a 30 percent vacancy rate — were being listed at $40,000 to $50,000 per unit, “a ridiculous” price, Verma said. He expects prices to come down to perhaps $20,000 per unit during the oil slump, he said.

“We’ve been in this industry for a long time, so we’ve seen a lot of ups and downs,” Verma said. “This doesn’t faze me. We’ll hunker down and do the best we can and see what we can do to fill out our properties. It’s going to be time to buy apartments again.”

Technology curbs theft of rent checks – Houston Chronicle


Houston apartment owner Nova Asset Management is using technology to solve a problem that was costing it $30,000 to $50,000 a year: theft of rent payments.

“We would have all types of theft with the night drop-off,” Nova president and co-founder Neal Verma said. “We even brought in mailboxes you couldn’t break from the outside. People would use fishing wire and a piece of gum and would literally go and fish a money order out. We tried everything under the sun to prevent it. It was like a never-ending nightmare.”

The company eliminated this source of loss by changing the way it collects rent at more than 6,000 apartments units. Tenants at its 16 local apartment complexes no longer drop off checks or money orders at the front offices. Instead, they can do so at thousands of retail stores where they might already be shopping.

Verma said he had considered creating vending machines to accept payments but knew it would take time and money to set them up. After explaining the problem to an associate at RealPage, a publicly traded property management software firm near Dallas. The firm said it had already been working on a solution.

RealPage asked Nova Asset Management to test its RealPage eMoneyOrder service, which, after some fine-tuning, is now widely used by property managers across the country, according to RealPage.

Since early 2014, tenants of Nova Asset Management’s complexes have had an option to make real-time cash payments for their rent at 24,000 retail stores such as H-E-B, Fiesta, Wal-Mart or Ace Cash Express that have partnered with RealPage. The rent rolls come up on the stores’ computers, and payments such as rent, water and late fees are applied and pushed out to RealPage, which credits the charges on Nova Asset Management’s rent roll ledger.

The cost to tenants is $2, or about the same as a money order in many cases. Residents still have the option of paying online by check or credit card. It cost Nova Asset Management a few hundred dollars per complex to set up, plus a small ongoing fee.

“I think that it’s a good system for people that do not have Internet service at home. It seems to be faster, since all you do is give the coupon, and they process your payment quickly,” renter Xochlit Rendon said in a statement through Nova Asset Management.

Matt Davis, senior vice president of payments at RealPage, said in an email that while most renters in the U.S. use checks or automated payments for their monthly leases, “there is still quite a significant resident segment that wants to pay in cash or money order.”

While the financial services industry refers to these consumers as “unbanked” or “underbanked,” Davis likes to call them “cash preferred.”

“For this sizable group of tenants, the process is costly and laborious,” Davis said. “First, they must go to a location that sells money orders and purchase one or more to cover the cost of their monthly lease expense. Money orders can be very expensive if you buy them at your credit union or bank, or cheaper if you buy them at the post office. Some retailers place limits on the amount you can buy, so a resident might need to purchase multiple money orders to pay their rent and utilities.

“After successfully purchasing the money orders, the resident must return them to their property office. This process can be costly, time-consuming and can result in lost money orders and unpaid rent.”

Nova Asset Management estimates the change has also saved the company nearly $200,000 in administrative costs. Bookkeepers who used to spend 80 percent of their time processing payments have been freed up to do other tasks and can manage more than one property.

Nova Asset Management, which was founded in 1991 and manages office buildings as well, has bought and sold 20,000 apartment units in Houston. Its 16 complexes average 300 units with an average of 750 square feet each.

From about 2000 until 2014, money orders were the most popular payment method at its Class C properties, which are typically complexes that are at least 30 years old and make up about 75 percent of its portfolio, Verma said. Before that, most tenants at those complexes paid their rent in cash.

Rents at Nova’s Class C properties average $600 a month for one-bedroom units, Verma said. The other 25 percent of the portfolio is Class B properties, which are frequently between 8 and 20 years old and in better locations than the C properties, he said.