HelloPackage Podcasts

HelloPackage - How to increase your NOI using a modern package management system.

May 23, 2019 Season 1 Episode 1
HelloPackage Podcasts
HelloPackage - How to increase your NOI using a modern package management system.
Chapters
00:00:00
Introduction - Marvin Banks and Kevin George.
00:00:31
HelloPackage - Why we built the product.
00:08:58
Package Lockers - A good solution in the past.
00:15:04
Total Cost of Ownership - What is involved.
00:25:08
The Numbers - How to increase NOI.
00:34:05
Package Lockers - Where they make sense.
00:38:43
Cost Justification - When fully leased.
00:46:08
Close - Summary of ideas.
HelloPackage Podcasts
HelloPackage - How to increase your NOI using a modern package management system.
May 23, 2019 Season 1 Episode 1
Marvin Banks, Kevin George, and Jim Grady.
Increase your NOI using a modern package management system.
Show Notes Transcript Chapter Markers

Recorded Wednesday, May 22, 2019

HelloPackage (www.hellopackage.com)

To listen to this podcast, click on the green button above. See the Chapter Markers and/or the Transcript tabs to move to the podcast section most interesting to you.

Below are some details about this podcast:

Marvin Banks and Kevin George discuss how to turn the 'package problem' into the 'package opportunity' and increase the apartment owner's NOI by selecting the right package management system. Yes, the correct package management system can increase the NOI. Listen as Marvin and Kevin share their ideas.

Guest 1: Marvin Banks, former president of Cortland Partners, former CFO of Gables Residential, and currently president of M. Banks Realty Partners.

Guest 2: Kevin George, former CEO and COO of InfoTycoon, and currently COO of Package Solutions, Inc., the makers of HelloPackage.

Moderator: Jim Grady, Founder and CEO of Package Solutions, Inc., the makers of HelloPackage.




Jim::
0:00
I'm Jim Grady, I'm the founder and CEO of Packaged Solutions, Inc. which is the maker of HelloPackage. Today on the call, I have Marvin Banks, who is a former president of Cortland and also the former CFO of Gables Residential. And also Kevin George, who was CEO and COO of InfoTycoon, both of which have a lot of experience in the multifamily apartment business. So we're going to talk briefly about HelloPackage and why it's something that a lot of apartment owners are now starting to take a look at as an alternative solution to lockers for solving the package problem, and also creating a package opportunity. So with that, why don't I start with you Kevin, and maybe you could just tell us a little bit about the problem of packages and the opportunity you see and why we went about building HelloPackage the way we did. Then maybe Marvin can talk about a few other things that might be interesting for apartment owners.
Kevin::
1:05
Sure. No problem. So, we've been kind of studying this problem for awhile and what we've found is that there's really sort of a tectonic shift that's happening in the world and the world has really changed. It's really different now than it was even just, you know, as little as two, three, four years ago. And that shift is really the volume of ecommerce. There's just a whole volume of ecommerce transactions had come about very substantially. It's growing at about 20% year over year. And so this seems like that's, you know, maybe growing faster and certain properties, but, overall it's growing about 20% year over year in terms of the ecommerce volume.
Kevin::
1:56
But, it's not just smaller packages anymore. It's also all the different shapes and sizes of the packages. There's over 3 billion items available just on Amazon alone. And, you add up that plus all the other ecommerce channels that you can order things from and have them delivered, it's really just crazy how many different types and sizes of packages there are all the way from the small, small packages all the way up through large TVs and furniture and everything else in between. So we see this growth is happening 20% year over year growth, which is a study that we've seen on that, the volume of packages, the size of the packages is just really complex. And then you add in that deliveries are coming more and more frequently and that's not just from the UPS and Fedex, and the postal services of the world, but it's also Amazon and there's so many of on demand delivery services now like Shipt and Dliv, and others, Postmates, etc. They're popping up all over the place as well. So what's happening? So you got all these new volume of packages, all different sizes and now you've got more and more frequent delivery of these carriers that come into the properties more and more frequently. And if that's not enough, larger retailers are now starting to deliver directly from their stores, including Walmart, Target and others. Walmart, you know, just started doing this and they have almost 5,000 stores nationwide. So literally they have 5,000 new distribution centers online that they can deliver directly from the store to your residence. I heard a stat just the other day, listening on the news and they said, 37% year over year growth in ecommerce just for Walmart.com alone and with 5,000 stores, nearly 90% of all the population in the United States lives within 10 miles of a Walmart store.
Kevin::
4:09
So bringing those 5,000 stores online is going to increase the number of deliveries even more. So we see that as a very, very set of rapidly growing, very complex challenges that's happening here in multifamily, first and foremost, because of the high density living environment that is multifamily, and a demographic and psychographic profiles of the residents that are always ordering things online and what's really driving all of that Jim, is two key things. Two key things are driving every single bit of that, and they are speed and convenience. Speed and convenience is what we all want when it comes to ordering things online and having it delivered. Used to be a week now, you know, day or two, or even an hour or two, deliveries happening. We're seeing more and more and more of that. So that's what we see as happening as the problem. You know, turning that into an opportunity, is what we're all about here at HelloPackage.
Jim::
5:11
Okay. So Marvin, you not only have a strong resume with very large apartment owners, but also are currently an apartment owner as well. So what's your perspective on the problem slash opportunity?
Marvin::
5:26
Well, I think the problem is one that most of us I have overlooked. Uh, and that's because the industry has had some tailwinds that its back from a demand perspective for the last number of years from the millennials. But we all know that will not last for forever. And the problem is, we're losing asset value because we're losing leases. And the reason we're losing leases is our staffs on site, who we've hired to lease apartments are having to spend an inordinate amount of time handling packages, from checking them in, to notifying the residents, but then dispersing the packages when the residents come in to pick them up. And so this is a tremendous amount of time, easily on most properties you can spend at least, at least two hours a day with your staff addressing packages. And quite frankly, the math is undeniable. If you just think about a property that's got that 300 units and is 93% occupied at a stabilized performance level, then your staff is leasing 279 apartments per year, year in and year out.
Marvin::
6:48
And if I've got four people in the leasing office, FTEs, if you will, leasing 279 leases each year, then the math is quite undeniable. It's about 25 hours per lease. And so if I'm spending a couple of hours a day handling packages, well that's at least 10 hours a week or 520 hours a year that I'm addressing package logistics and those are hours that I'm not leasing. And if I lease apartments at about one per every 25 hours, well then I'm missing over 20 leases a year that could be generating revenue in NOI and then current valuations, a 20 multiple on that NOI. So it's big dollars. So that's the real issue. I'm losing value for my investors. Now the reason I'm losing the value is because my leasing staff is having to spend all this time on packages.
Marvin::
7:58
So, I need to address the package logistics. I never intended to be in the logistics business. I don't want to be in the logistics business, but I'm in it. And the reality of the situation is I cannot get out of it. Packages are going to becoming to my properties because I've got high density living and the people who live in my apartments are ordering these packages. So the real issue is the loss of value, from a loss of revenue because I'm having allocate time to non-value created activities. And so I need to have a solution that gains my hours back so they can be spent doing what they're paid to do, which is the most valuable thing they can do, which is leased apartments.
Jim::
8:59
So, I thought the problem with the lockers, you know, because lockers have been around for a number of years, I thought that the problem has been solved. So I'm getting my leasing hours back. Right. I mean before I was still bodies at it and my staff and all that. And so maybe that's not an efficient way to do it because you're not leasing, you're handling brown boxes, not white piece of paper called leases but brown boxes. But when you put it in lockers and you solve it, right. I mean, what's the difference?
Marvin::
9:30
You solved it four or five years ago. Lockers were a great early solution to a problem that existed four or five years ago, in terms of volume that existed four or five years ago. But we've all seen the increase in volume, and the projected continued increases in volume of ecommerce and package deliveries. So what has happened is the logistics issue here has become more complex. As Kevin mentioned, a more complex from the number of packages being delivered, the varying sizes of those packages being delivered, and the number of people delivering those packages. There's no longer just UPS and FedEx. I can deliver packages tomorrow afternoon if I want to if I just sign up with Uber, and going to a local retailer and picking up a package and delivering it. So there's an ever increasing complexity here. And while lockers were a great stop-gap solution four or five years ago, they have become obsolete, because the dynamics associated with ecommerce have continued to become more and more complex. And I think everyone realizes that in a complex situation, you have to throw intelligence at the solution. And so we can either throw intelligence through our people, and that's my leasing staff on site. Or I can throw intelligence had it through a smart solution that's technology driven software, which is what, HelloPackage is.
Jim::
11:19
Okay. So Kevin I'll direct back to you. So can you somehow prove, I mean not just opinion because opinions are fine, but that doesn't necessarily mean it's proven. Can you prove that some more intelligent or software-driven solution is better than lockers. I mean lockers have been around a long time. They've been around a hundred years. I mean proven technology, right? Open the door, put it in, close it, secure, you know? So what makes this HelloPackage thing a better return. You know, if I'm looking at it financially, how do I justify it. Is it more expensive? What's the deal with it? Well, the total cost of ownership, we've done some comparison studies on that. Total cost of ownership for the package is substantially lower than lockers. But there's a way that we look at things here at HelloPackage, which is what Marvin was touching on it as well. I think like Marvin said, lockers were fine and a really good solution for the time, you know, three or four or five years ago. But what's happened is this volume and the sizes and everything really is just overcoming the capacity and the ability of lockers to handle it. So what we've looked at, I think as a storage problem, when the lockers came into the marketplace, you know, 10, 12 years ago, and now in the last four or five years just to make them, you know, a little bit faster and a little bit nicer and make them a more decorative and things like that. It's great, but they still are lockers at their core, and they're just not very efficient way of storing packages. So as an example, you get a small package and you only have, you know, medium and large lockers available in the bay, you're storing a small package, which may even have some extra space in the package itself, inside a space that's much larger than as needed. So just the efficiency of the capacity or the density, if you will, of what you can fit into a locker system versus what you can do with a smart, open shelving system. The capacity for the HelloPackage system as four times or five times the capacity of a locker system.
Jim::
13:48
But I don't understand what that means in real dollars. That seems trivial to me. Right? So if I'm looking at, I'm thinking, okay, so it's got more density, but we're talking about packages. I mean, is that really translating into real dollars or, is that just kind of like, oh yeah, it's more efficient, but nobody cares.
Kevin::
14:06
So the efficiency is super important when it comes to space. Your space is precious to you. Um, this also, if users try to keep up with the growth, and as I mentioned earlier, ecommerce is growing at 20% year over year, but it's also still only 10% of all retail sales. So we're just at the beginning of this 20% year over year growth is like, so last year's peak season is next year's steady state. So last year, what you saw in terms of volume on your property during the holiday period is what you're going to see next year. Every day. That's what's happening. That's how fast the ecommerce is growing to be able to handle that kind of capacity, you'd have to continue to throw more and more and more and more lockers at it. Very inefficient.
Jim::
15:05
So is that your argument then? Both of you guys are on the financial side of this thing? There's, this is what we're talking about on this call, right?
Kevin::
15:15
I mean total cost of ownership includes like three different, three different numbers really. Number one is what does it cost in terms of the hardware component to be able to manage the capacity and the growing capacity that you need to handle the new volume of packages that are coming each and every year. You need that. So you need hardware to do that to some degree. Our solution has a component of hardware to it, which is four to five times more efficient and lower cost, even at the beginning, than locker systems by far. And over time to handle the 20% of year over year growth, our system is much, much more efficient for the cost as well.
Kevin::
16:02
Second thing is the software side of that. We're a software company at our heart. All the advances in the software that we're bringing into the platform, including leveraging machine learning and artificial intelligence to handle this as more of a throughput process, not a storage process is much more efficient and that software frees up more time for your leasing staff to do, like Marvin was saying, which is doing their highest value activity, leasing apartments. So efficiency comes in terms of time spent or less time spent on managing packages, our clients are seeing very, very nice return on that. We've heard as much as up to 75% of their time has been returned to them for managing packages and that's super high value. As Marvin was saying before, a 20 cap rates,
Jim::
16:58
So what do lockers give back?
Kevin::
17:06
They do give some back for sure. But what they don't do, they never get rid of the issue of oversized packages, and oversized packages are about 23% of the overall volume of packages. So 77%, they might handle some of that, but 23% you're still coming into your leasing office and that is just on the inbound side. So not only does our system handle the inbound packages, our system is an inbound and outbound system for all your returns, which is 30% of all ecommerce is returned, 40% for apparel and also outbound ship that your residents want to ship outbound.
Jim::
17:48
Do I have to turn your outbound to use your inbound, or can I just do inbound?
Kevin::
17:55
You can do just inbound.
Jim::
17:57
Okay, so if I'm overwhelmed by volume, I can say, I'm sorry, we don't do outbound. We don't do returns. But you can do it later, right, if you wanted to?
Kevin::
18:08
You can. But the thing is you're still providing a service to your residents that your leasing team currently is doing. Your leasing team is getting involved in pushing packages out as well.
Jim::
18:22
Okay. That makes sense.
Marvin::
18:25
Jim, I'm focused on a topic or a concept that Kevin brought up maybe directly but or tangentially. And that is efficiency. As an owner and investor in apartment properties, I'm focused on the efficiency of every dollar that I disperse. So I disperse dollars two ways. I invest in the property and then I incur expenses to operate that property. And I want every dollar that I disperse, I want it to be dispersed or put to use in the most efficient and effective way possible. And so in the case of the investment in the physical space, I have limitations. I've had to pay a lot for the land, or the property, and I've had to pay a lot to build it or to renovate it. And so I've gotten limitations associated with it. One of the issues that has forced lockers to become obsolete is their lack of density or efficient density? They take up a lot of space or only a partial utilization of that space at any point in time. If I have 60 lockers and all 60 of them have packages, that's not total efficiency because there's a whole level air in each one of those locker bins. I can't see it because the doors are closed but a lot of that space has air in it and it's just not efficient. The second, because of my space limitations, as volume grows, I just can't continue to add more locker infrastructure systems because they just take up too much space. And the reason they take up too much space, is because there are inefficient in their layout, and that can not be changed. Not to mention, packages are coming in different sizes now, and they don't just fit in the small, medium or large boxes that are there.
Marvin::
20:35
Plus if I, well this gets to the second, which if I'm spending dollars and I do every day, to operate the property, I want those dollars spent in the most efficient way possible. And efficiency is about valuation to me. And so if I've got locker systems and I've got 60 locker bays, and I get 90 packages, well then the overflow, and that's assuming that all 60 fit into the 60 lockers, the overflow comes right back into my office, and it's the same situation all over again. And it's not that I have 60 lockers, and one day I get 90 packages. I may have 60 lockers, and the normal volume is more than 60 a day. Many owners, they know how many packages they get at their properties. They're getting more and more and more packages, and they exceed the capacity of these static fixed locker systems. And they don't have the ability to add more of those static fixed locker systems, because they just physically don't have the space.
Jim::
21:47
So what about if I put in lockers and they overflow, or they're not efficient because they input small packages and large locker bins. What if I just put in a room, because they've got rooms, you know. You got your lockers and just do a room too. So what about that? That sounds efficient. Find some space, put in a room. I mean that's your overflow.
Marvin::
22:17
There is no space. That's the issue with the physical limitations of the apartment asset. They have, per se, physical limitations. I can't just add space and so if I can't add space, and I can't add new supply of space, but there's an ever increasing demand for that space, then I've got a problem. And that's where, obsolescence occurs and that's what's happened to lockers. They were perfectly fine four or five years ago, given the volumes. They're no longer fine. And as a result, that then spills over to the operational side of the business and it takes my leasing staff time, which takes away time that can be generating revenues, which takes away asset value. So the obsolescence associated with what was a good solution four or five years ago causes me to look elsewhere.
Marvin::
23:16
And you combine that, as I mentioned before, with the complexity associated with a package logistics in terms of sizes, volumes, and numbers of carriers, there's somewhere in this situation, someone's gotta be smart. I'm either going to have my leasing people use their brains, which means they have to use their time or I'm going to have a smart software solution that can think and adapt and react to address the issues that arise. And that's where HelloPackage is from an intelligent solution perspective, plus it has the added benefit of five times the density of the static fixed lockers. So I get two wins. I get more utilization of the limited space I have, and I get more efficient operations because it's a smart solution and doesn't require as much time from my staff. So your original question here was, do lockers save time for leasing staff? And the answer is yes, but only partially because there's an overflow that gets right back into the leasing staff and there's a space limitation so I can't put in enough lockers to address the volume of packages, which creates more overflow, which takes more of my leasing staff. So lockers were a solution years ago they have, they became a partial solution and now they're becoming obsolete because the circumstances in ecommerce and package delivery have just overrun that old infrastructure.
Jim::
25:10
Okay, so Marvin you're a CPA. So I got all that conceptually Blah, blah blah. Sounds good. Sounds like a sales pitch. Like okay, lockers are bad, HelloPackage is good. One i old technology. But you know, it's been around a long time. Proven in many ways and your's is new fangled, shiny, some people call it, but I have no idea. I like the future and all that but so sometimes I get all hung up, and I don't know how to quantify all this stuff, because ultimately some people in the world have to actually put numbers to things and make things make sense financially. So do you guys have a model or a way to quantify or is there something on your website? Can I punch some numbers in, and you know, say okay but this and this adds up to that, then okay. I'm more persuaded because concepts we'll take you so far. But sometimes you've got to get down some math. So how do we do that? Prove it, you know, show me right? Don't tell me the concepts. Tell me the numbers. How does that work?
Marvin::
26:16
I'm certainly data driven in my decision making process, and as I talked about before, the math is undeniable on how many hours it takes to generate the lease given the certain size of a property, and how many people you have in the leasing office. It's undeniable. It's not questionable. The next thing is, wow, if I can generate 20 additional leases, what's the value of those leases? Well, average rent across the country according to Yardi, are right at $1,400 per unit, per month. So one lease, much less 20 is generating $17,000 or close to $17,000 of additional revenue per year. And I really don't have any incremental expenses associated with that lease. As a matter of fact, my utilities expense actually drops a little bit because now the resident is paying the utilities versus me, the owner paying the utilities on a vacant unit. So with $17,000 of additional revenue from just one lease, at a 20 multiple, you're talking about $340,000 of additional revenues, excuse me, additional property value associated with just one incremental lease, and the math shows that you could potentially get 20 additional leases when you've freed up all of your man hours from what they're currently doing now handling packages.
Marvin::
28:01
So there is a tremendous amount of value creation here that's math, and so it is clearly demonstrable and clearly achievable. So that's the math that plays into it. So it's a pretty easy decision to look at a return on investment or an IRR, whichever metric you're looking at that justifies the returns here. If I could add a new washer and dryer to an apartment unit and get $50 more per month from leasing that unit, well I run the ROI on it and I wind up making that decision, because it's a good return. When you run the ROI here on what you get from additional leasing by having a technology driven software solution versus an obsolete fixed static solution, there's no question which way to go.
Jim::
29:09
Okay. Do you guys have a model or something I can punch my stuff in, and like I hear you. I mean in broad brush, you know, kind of space shuttle view, but I'm saying for my particular property, is there a way I can go to your website or something like that, and punch down some numbers or I just call you or what I do? I mean like, yeah, we got it so let me give you my numbers, right? I want to give you my specific numbers for my specific property that I have in mind, I want you to tell me what my return is, and I would like for you to contrast that because nothing operates in a vacuum in the world. There are alternative solutions to everything. So I'm always comparing whatever you're telling me to most likely what the status quo is, which may be I'm doing nothing, I have no solution, or it might be that I have actually stepped forward and you know, purchased some lockers and, I might be at the margin where I'm buying new lockers because I'm looking to expand, or I'm going to just be making my first purchase. But no, nothing operates in a vacuum. And uh, you know, so that's the part I think that people myself, if I were an apartment owner that I would want to see. Like I hear you. Okay. Conceptually that sounds good. What's the math?
Kevin::
30:29
So, the answer your question, Do we have a model for that? Yes, we absolutely have a model for that. It's a capacity planning model that actually shows total cost of ownership of our solution based on your size of property for your entire portfolio and your current capacity or current volume of packages that you're receiving, and also planning for the growth to 20% of year over year growth. So we can compare and contrast that directly to locker systems to show you that total cost of ownership, just in terms of that, you know, just the overall total cost of ownership we're seeing and we've done the comparison, we'd done all the details around this, so glad to walk through any of these with anybody who wants to just kind of chat and see what we, what we have to offer. It's somewhere in the neighborhood of around 40 to 45% lower total cost of ownership over a one, three and five year model. We're glad to work through that with anybody. We're using the industry standard numbers in terms of the size of the packages and distributions. But also, the efficiency of our platform about our hardware, when you need to add, when you don't need to add it, and then comparing and contrasting specifically with locker systems.
Jim::
31:49
But can I run that on my own without dealing with a salesperson? All that stuff. I mean you seem like a nice guy but I just don't know if I want to talk to you. Can I just run it on my own, or is that not available?
Kevin::
32:01
This is not on our website today, but we are looking to add that in.
Marvin::
32:04
So Kevin has addressed the total cost of ownership and there is a model that we can walk through people on an individual basis on. We also have, which is my focus, and I'm not so much concerned about what the cost of ownership is. I'm concerned about what the return on investment is. I don't mind spending dollars if I'm getting more dollars back in terms of revenue and value creation. And so we do have an ROI calculator that is on our website that allows you go in and specifically put in the number of units in your property, your average rent, how many people are in your leasing staff, and it will then spit out just the math on how many hours you spend generating each lease and what your potential return on investment is from implementing the HelloPackage system. And so that's individually tailored and everybody can use it on a one off basis.
Marvin::
33:13
And that's what I focus on as an owner, which is what's my return on my investment. Total cost of ownership is certainly important as well. Perhaps more important when you have a situation where you've got a problem you need to address that doesn't have a benefit that's demonstrably recognizable, but when you have a benefit that's demonstrably recognizable, then you look at return on investment. And the ROI calculator allows people to look at that because there are, it's undeniable, the additional leasing that's achievable here through freeing up leasing hours today that are held hostage to package logistics.
Jim::
34:06
I mean, you guys are definitely drinking the Koolaid on this thing for sure. I mean, you've got, you know, you're kind of fired up about it, but is there any other case that where lockers or some other solution makes sense. They've got a better return on investment or is it just across the board? That's it. I mean, Bang, it's just a better way. You know, like when running water came out, you know, was like there was no going back. Running water was it. So is that what this is or is there, w
Marvin::
34:36
Well, just as lockers were an appropriate solution four or five years ago because volumes were significantly lower than they are today. Volume of ecommerce activity. If you're an owner who has a property with very little ecommerce volume, but you still get packages and it takes some of your time away from relation staff, then lockers could be a solution for you.
Marvin::
35:04
If you don't think your resident profile is going to be one that continues to increase their volume of online purchases, but it will be a short lived solution for you if your resident profile starts to order more online and get those delivered. But today if you have a relatively small volume of deliveries, then a static solution appropriately sized could address your issue. It will not optimize your opportunity. And certainly once you get to a certain threshold of package delivery at your properties, then there's an optimization analysis that comes into place. And clearly a software-driven, technology-driven solution to address the complex issue, and address it in a way that generates the highest return is what you should be focused on.
Jim::
36:11
Okay. Kevin, you want to add anything to that? Or is it just running water.
Kevin::
36:15
I think there's more to it than that. I agree with Marvin. I agree with everything Marvin said, but I think the one thing that we haven't really talked about is what parts of the receiving and dealing with packages is causing, your leasing to staff to have to get involved with it. So if you don't have a system in place right now and you do have low volume, and you have a resident profile that's not going to order very many packages online, lockers could be a pretty decent solution. Lockers are also not as efficient in terms of when delivery services are coming to your property for them to put a lot of packages in the locker takes, you know, a good bit of time for them to log in the package, put it into the locker, and like every other service you've ever seen, they want to be super efficient in how they do their business as well. So what we've seen and what we've heard about through all the clients and perspective clients we've talked to, and what I've kind of recognized over the years even before I joined HelloPackage, is that there's a challenge with carriers or people that are bringing packages to your properties, doing their job. To use the system that's in place for them to use it, it needs to be super efficient for them. It needs to be fast and efficient so that they can do their job fast and efficient. And we're talking about speed and efficiency before. It's the same thing for carriers. One of the issues that happens, that takes up a lot of times for the leasing staff, is when a carrier comes in and just leaves packages and doesn't do what they're supposed to do with the system.
Kevin::
38:07
If a system is slow, if the system is inefficient and how to do that, the carriers won't use it. They'll just leave the packages there, and then your team is going to be brought even further into dealing with packages. Even if you have a relatively low volume, the packages, if they're still going to get involved in that process, if the system that you put in place, like a locker system, doesn't have the efficiency that's needed by the delivery services. That's one of the things that we bring to the table with our system. It's super efficient for the carriers, as well as a residents.
Jim::
38:44
Okay. So got it. So is there anything else that you guys, you know, put on your financial hat. Is there anything else that you want to add on the cost justification side? You know, that you go, oh yeah, that would save me money or make me money or you know, anything like that you want to add?
Kevin::
39:08
I think as Marvin laid out very clearly, it's really a calculation in terms of how much time does your staff views managing packages or dealing with some sort of a package challenge, how much does that taking away from your top line rent? It's really comes down to the top line rent impact. And I sort of look at it as, you know, the more packages you're dealing with, the more packages are stealing rent money from your property. It's just a simple calculation.
Jim::
39:45
And that versus any other solutions, right? I mean it's always in comparison to the next best solution, whatever that happens to be.
Marvin::
39:56
Well, Jim, there's another factor here and that is, if I free up a bunch of leasing hours with my leasing staff and they lease a bunch of units, I cannot achieve more than a 100% occupancy or quite frankly, I can't even achieve 100% occupancy, because we have frictional vacancies. Somebody moves out and units have to be cleaned, it's down for a week or two weeks before it's reoccupied. And that's in an ideal situation. So there's frictional vacancy that occurs here too. So for me to assume I'm going to get, for example, 20 more leases on a property, could run into actual space limitations. I don't have that many units or apartment homes to rent. But that's not the end. That doesn't limit my revenue opportunity and my valuation increase opportunity because we, most of us in the industry, use a revenue optimization software program. Because guess what, determining what the rents are going to be is a very complex situation, because it involves traffic and involves competitors.
Marvin::
41:18
It involves occupancy changes. A Variety of factors is complex. And so what we used to address the complexity of that, is a software-driven solution. They're called revenue optimization programs and there are of them in the marketplace that are very, very efficient. And so what happens when you use those is that once your occupancy gets to a certain level, and it's generally around 94, 95%, you start to see those revenue optimization programs kick in with a boost to revenue growth on incremental leases going forward. So while I wouldn't suggest to anyone that they're going to get a 100% occupied, I will suggest, because it is the reality that once you get to 94 to 95% occupancy, your revenue optimization programs are going to start to generate higher rates of rental growth or incremental leases from that period forward. And it's the way those systems work.
Marvin::
42:23
They're just like the airline pricing models. And so you've got a complex situation and a software driven solution was employed to optimize the opportunity. So in the case of freeing up leasing hours to lease more units, I'm going to have some space limitation, the actual number of apartment homes in my community, but that doesn't limit my revenue opportunity, because I will get more than normal rental rate growth once I start to hit certain occupancy levels. And I think everybody in the industry understands that and we've all experienced that and we all like to experience that because that allows us to outperform. And when I outperform, my investors are happy. And guess what? Real estate of the capital intensive industry, tremendous amounts of capital are required to invest in buying or building a property. And so we spend a tremendous amount of effort in our industry on raising capitals.
Marvin::
43:31
And to the extent we can be more efficient or more effective in raising capital, that's a tremendous win win for everyone. And so if I'm outperforming at my property level, outperforming the submarket because I've got better amenities, more efficient return on the dollars I spend through something like HelloPackage, then I'm likely to outperform at the sub market level. And when I outperform, I much more attractive to investors who want to invest in my next deal. And so there is a whole mosaic of valuation opportunities that exist with being more efficient and effective and optimizing how you spend your dollars and what type of return you get on those dollars. It's not just asset specific, it overflows into all the other facets of the business. And so the space limitation, I only have 300 apartment homes in my community, limits my ability to only rent 300 when the reality is I'm probably only running 290 because the frictional vacancy on an annual basis. But that doesn't limit my revenue opportunity, because of the revenue optimization programs I use and the outperformance, which then leads to a more effective and efficient ability to raise capital to grow my business
Jim::
45:05
Man, who would have thought all this is centered around a brown box. That's incredible.
Marvin::
45:16
The same thing happened with setting rent pricing. Years ago, we used to say, well gosh, let's push our rents up $10 a month to see if it stick. Well, it did, so well and let's move up $15 a month and see if it sticks. And so we went through this whole trial and error process, and then we looked around and saw that the airline industry was using revenue optimization programs. And so that was deployed in our industry and it has meaningfully increased rents and revenues, and as a result, asset values.
Jim::
45:51
Sounds like a software, Marvin.
Marvin::
45:59
The only way to address complex problems efficiently is with a software driven solutions.
Jim::
46:04
Yeah. Which is a prepackage brainpower. That's what I like thinking about as. I've been in the business my whole life. So okay, well listen, I'm going to wrap it up because we talked about a lot of things, but the main idea I think is just the complexity is going to grow, the volumes are going to grow, more carriers, more stuff coming in and going out. If you do outbound returns, all that for your residents. And it's a very important amenity. People, arguably, maybe the most important amenity, the one that's most used. So, putting a high tech, very forward thinking, custom designed, purpose built, hardware and software solution in place, most likely will give you a lower cost of ownership because he's filled, upgradable software, gets better every day, you know.
Jim::
46:52
And, then if you can get a return on that because your staff is more efficient because the residents stay longer, they want to stay there and want to be there, you know, you're kind of high tech man, you know, you're leading the charge, you're doing something really cool and it's a very high desirable amenity.
Jim::
47:12
So, I've had a Marvin Banks, a former president of Cortland, CFO of Gables for 11 years, a current property owner, CPA, very financially oriented. And Kevin George, who was CEO and COO of InfoTycoon, has over seven years experience in the industry as a vendor selling to apartment owners, and he's now the COO of HelloPackage, at Package Solutions. And Marvin is an investor, under full disclosure. And I so appreciate you guys.
Jim::
47:51
If somebody wants more information, go to www.hellopackage.com, and we'll be happy to run the analysis for you, and show you specifically show you how it works for your particular property. And with that I'm going to sign off. I thank you guys and I appreciate it and I will talk to you soon. Bye.
Introduction - Marvin Banks and Kevin George.
HelloPackage - Why we built the product.
Package Lockers - A good solution in the past.
Total Cost of Ownership - What is involved.
The Numbers - How to increase NOI.
Package Lockers - Where they make sense.
Cost Justification - When fully leased.
Close - Summary of ideas.