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Every Friday, join us as we dive into the latest in real estate multifamily with David Moghavem, Head of East Coast Acquisitions at Trion Properties. David invites top experts who know the ins, outs, and trends shaping the real estate multifamily market across the nation!
Whether you’re a seasoned investor or just curious about where the next big opportunity might be, Deal Flow Friday brings you the weekly inside scoop on what’s hot, what’s not, and what to watch for in today’s ever-evolving real estate scene.
David Moghavem (01:39)
All right, welcome to another episode of Dealflow Friday. I'm your host, David Mogavum. And today we got Brandon Van Deventer, co-founder and managing partner of Cress, also known as CRE Strategies. Brandon and his co-founder, Tony, they've started Cress. It's a premier real estate advisory firm that we use and many other institutional clients use that specialize in asset management ⁓ for multifamily real estate across the United States.
and Tony have been super helpful again on our portfolio and many other of their clients. it's an honor to have you Brendan. Thanks again for hopping on and hope the weather's holding up in your neck of the woods ⁓ in New York or New Jersey. And ⁓ hope you can make it to NMHC next week. I guess by the time we release this, be after NMHC, but hope we can catch you there.
Brendan Van Deventer (02:13)
you
Yeah. Yeah. Appreciate you having me, David. And yeah, we're doing all right right now. Hoping we get on my 6 a.m. flight on Monday to get out there. So we will see. We will see. But I'm optimistic and excited to get out there. So, yeah, I really appreciate you having me on. And like you said, yeah, we're I just want to clarify and reiterate what you said. We are a third party asset management firm focused on multifamily housing. The way I describe it to folks is kind of we
We sit in between the capital stack and the operations of an asset. We're not a property management company. ⁓ And really our role ⁓ revolves around ensuring a revised business plan gets executed and becomes reality at both the asset and portfolio level. as of today, we asset manage about 10,000 units across 45 states, primarily in the Sunbelt, where most of the distress has been over the last, you know,
David Moghavem (03:23)
So,
Brendan Van Deventer (03:29)
well, really starting in 2021. And then we have some activity in the mid Atlantic as well, history out on the West coast and then in the Midwest, but core portfolio today is really the Sunbelt. And I think just an important thing to note is we really don't kind of look at ourselves as a reporting function.
We really view ourselves as like an operating, know, in sense an operating partner alongside the capital.
where effectively, know, like sponsors like you guys, equity partners, lenders, like they don't need more spreadsheets and just like blank reporting. ⁓ generally by the time we get a call or we get involved, like the groups already know what the problem is. We're really brought in to say, here's the reality. Here's kind of what we see from a full transparent view. Here's how we believe that it can be addressed. And then we help you go along and address those situations. ⁓
to the best of our ability.
David Moghavem (04:31)
Yeah, asset management, what we found through this post-Reheigh, it's extremely important and it's probably some of the least glorious type of work. When things are going well,
Brendan Van Deventer (04:34)
Thank
David Moghavem (04:43)
You don't get enough credit as an asset manager when things are going bad, you get all the blame. And I think what you guys have done in helping our properties and some of our partners and being that part of like an operating partner and going into the nitty gritty of the performance of the property and seeing ways to become better has done ways for our portfolio. And so I'm excited to go into it and
⁓ It really takes a sharp mind to be in the asset management and it's not just sharp mind, but attention and detail, which you guys have a lot of.
jumping right into it, I think what we're feeling in 2020, what we felt in 2025,
head going into 2026 is one of those trends where you're getting muted, right? Growth negative trade outs even on the top line and then expense growth and X and higher expenses on the on the expense side. And I'd like to pick your brain a little bit. what are some of these expenses that you're seeing just the new reality getting higher and how are you?
advising your clients on mitigating or optimizing some of those expenses to kind of weather the expense load.
Brendan Van Deventer (06:00)
Yeah, so I mean, it starts with insurance and that's been a trend that has carried through really since 2021. We are now seeing that normalize and come back down, not near the levels where they were when these deals were acquired, but it is trending back in the right direction. We do work with a group at a locked in in Portland, Oregon that will help some of our clients do similar to what you guys do.
⁓ help create like a portfolio policy, which is helping. ⁓ Yeah, so master policies, is helping, ⁓ but still a challenge. And a lot of these groups that only have, know, three, five, seven assets, they can't leverage that. So it's making sure that those are just being repriced as aggressively as possible, you know, within the limits of the loan docs each year. And then outside of insurance, like,
David Moghavem (06:31)
Master policy, yep.
Brendan Van Deventer (06:56)
payroll, I would say, is the biggest one that we've seen really blow up. ⁓ And it's not just the actual cost of the employee. ⁓ We've seen the insurance and the overhead for those employees kind of go through the roof. Yeah, the load that we've seen kind of across the board. we're, at our level, we're trying to figure out is that load just...
David Moghavem (07:10)
The load.
Brendan Van Deventer (07:22)
more of a heavier pass-through burden from the management companies at this point, or are their costs actually increasing substantially? And I think it's a little bit of both. But the challenge is you need to pay for the right people. And we'll get into the people component a little bit more, it's the most thankless job. You talk about our job being challenging. I would go to say the on-site management job is the most critical piece of the multifamily space.
David Moghavem (07:37)
Exactly.
Brendan Van Deventer (07:52)
from an operational and execution perspective. And it's the most thankless for sure, ⁓ especially as you get further away from the sponsor and the capital stack. It's like more and more of an afterthought. And it really is where the business plans that you and our team are trying to drive really like rubber hits the road there. ⁓ So you need to have the best people, but the costs have just gotten to a point where it's challenging to make deals work.
David Moghavem (08:11)
So
Brendan Van Deventer (08:21)
when they're already acquired, when your costs are going from $1,700 a unit on acquisition to sitting at $2,000 a unit, mid cycle. It's easier on the front end to deal with that. And then,
I'd say some of the other pieces that we see really get blown up when deals are distressed is on the marketing spend side. And it's being driven by the different super, super tiers, I call them.
David Moghavem (08:44)
Mm hmm.
Brendan Van Deventer (08:51)
of like CoStar for the apartments.com and then Zillow's new packages they're rolling out. And like the first lever that all of, know, everyone wants to pull when traffic flow slows down is we need to increase our marketing spend on Zillow and go from, you know, diamond to diamond plus or the highest levels we can get to. That doesn't generally translate from an ROI perspective. What we are generally trying to do now is
David Moghavem (09:05)
Right.
Brendan Van Deventer (09:19)
moving away from a lot of those ILS platforms, putting a lot more emphasis into like SEO and maximizing our organic search there and then heavy influence on pay-per-click campaigns. Cause like you guys do this now as well, working with Flair and your team, you know, the marketing side to really bolster that. that's the nicest thing about pay-per-click and like the SEO spend is
David Moghavem (09:42)
So,
Brendan Van Deventer (09:47)
Once you get the SEO set up correctly and optimized, it's kind of a set and forget and you're not spending an exuberant amount of money on that each month. And then the pay-per-click, you're gonna hit a point of diminishing returns, like at a certain point, like you're not gonna spend $10,000 a month on pay-per-click. At a certain point, that threshold, whether it's $1,500, $2,500, $3,500 in a market is
David Moghavem (10:05)
thank
Brendan Van Deventer (10:12)
gonna be maxed out so you know you're kind of capped.
So we focus there and then our biggest focus, you know, to help minimize our marketing spend effectively comes when we really figure out what's going on when those leads are coming in. Like what we often find is like, yeah, great. You can go spend an extra $5,000 a month on marketing, but if those leads are sitting unattended to in your CRM, like who cares? Like it's not doing any good. So it's really getting in identifying, you know,
David Moghavem (10:38)
Right.
Brendan Van Deventer (10:44)
where those lapses are through platforms like Flare when we're doing secret shops ⁓ or, ⁓ you know, and then effectively making sure that the teams are following, you know, the policies and procedures we want them to when following a plead. like, I'm kind of blending a lot of things together here, but like the AI component of this, you know, everyone's now using nurture boss or meet a lease, which are great tools. The issue becomes then a lot of the onsite teams.
David Moghavem (10:45)
you
So ⁓
Brendan Van Deventer (11:14)
Like old habits of calling, texting, emailing leads have gone away and it's really now reliant on these automated messages
where we like to those teams to focus is like blending them together. Like I love an automated text or email going out right away from, you know, a meet a lease or a nurture boss or whatever platform perk, whatever platform these groups are using. within that first seven days of a prospect in the CRM, I still want somebody in the office.
calling them, texting them, and emailing them personally every single day. That's like a non-negotiable for us. ⁓ Because the cost per lead has exploded. Everything just continues to go up. So we need to make sure that every single lead is being treated as gold and spend as much money as we on marketing. But if that component's broken, you're not going to make any strides. ⁓
David Moghavem (11:48)
Mm-hmm.
Yeah, on
the on the production on the promotion side, I think there was a couple of trends you hit on there that are that I want to reemphasize. One is the move away from ILS or not away, but the move of allocating costs away from ILS to SEO and the fact that that's like the new way.
Tenants are finding communities and they're looking at reviews. They're looking at affiliations and referrals and seeing how SEO plays a role in that, whether as just being the top listing on apartments.com isn't going to cut it. ⁓ And then we use these tools like you said, Flair, we use Elise and we use a lot of these ⁓ robots. And I think it's tools that make the prospecting more efficient.
Brendan Van Deventer (12:41)
and
David Moghavem (12:54)
but you still need that human end to end. So what we've done, and I'd love to hear your take on this, it kind of blends again to promotion and people, is centralizing some of the staff and allowing for centralization to take care of things like leasing, or sorry, marketing and collections, and then having the end to end human on some of the follow-ups and the human touch.
Brendan Van Deventer (13:00)
you
David Moghavem (13:23)
to kind of get that lead through the finish line and get them into a unit.
Brendan Van Deventer (13:29)
Yeah. I, to, and to be clear, like I don't, most situations we're not fully removing ourselves, like removing clients' properties from a Zillow or an apartments.com. It's generally, we're just not upsizing, you know, the, subscription. And we're trying to find like the sweet spot where we can be still somewhere near page one, but you know, not spending an exorbitant amount of money on it. And then, I,
David Moghavem (13:40)
Right.
Brendan Van Deventer (13:57)
And then really like the focus on on the SEO for us when you're talking about like search parameters is trying to get your property onto that first page of Google when folks are searching, you know, apartments for rent in Tucson, you know, apartments for rent in Fort Worth, whatever it is, like those kind of phrases and.
David Moghavem (14:19)
Right.
Brendan Van Deventer (14:21)
The ideal scenario is you show up in the top three of the map pack, like when you're searching for the businesses, like when you filter businesses. So, and that's all driven by, you know, the website set up, the keywords, all the hyperlinks, like the back linking, all the descriptions on the photos in the background, and then super heavily influenced by reviews, like you mentioned. And that's, know,
David Moghavem (14:33)
you
Brendan Van Deventer (14:45)
new legislation continues to come out around pricing and reviews and solicitation and whatnot in our industry. So where we have kind of pivoted that strategy on the review front is we will never pay a resident for a review, but we will incentivize our site staffs for getting positive reviews. ⁓ So, you know, for every five-star review that a maintenance tech, a super, a leasing agent, manager, regional, whoever is mentioned in,
David Moghavem (14:47)
So
Brendan Van Deventer (15:12)
they'll get a $25 bonus as part of their commission
that month. And then we'll do team goals as well. So we're really striving to push all those properties over a 4 % or a 4 star rating and then continuing to hit them because you need the volume of the reviews as well to continue pushing your ranking up on Google. So that's a huge emphasis.
David Moghavem (15:24)
Four star. Yep.
Brendan Van Deventer (15:33)
In terms of the centralization, so yeah, so we are starting to see
a lot of fully vertically integrated shops like yourself and then third party management companies start to implement this. Really the roles we're seeing them do it on are renewals and delinquency and marketing. mean marketing, even you guys, that's not a fully, I would say centralized role, in a portfolio setting, like a...
That's what trying to say. In like a micro portfolio setting, like you have a marketing team. ⁓ So like that's a key element. Yeah,
David Moghavem (16:11)
Right. And a leasing staff onsite, yep.
Brendan Van Deventer (16:16)
yeah, exactly. I just want to make that clear for like you guys. it's, yeah, we've seen it work. What we haven't seen, at least at the third party level yet, is like, is necessarily the accountability because the manager kind of loses control a little bit of those processes.
when it's centralized. if we're using any management company ⁓ and they have five properties in a region in close proximity and they come to us and say, hey, we want to remove the assistant manager and centralize your delinquency and renewals with four other assets that your client might not own, we haven't seen those scenarios work very well. Because generally, we'll see
we'll generally get complaints from the onsite staff that, hey, we have too much volume, we still need the extra person, this isn't working, and now we're effectively paying for an additional staff member plus the centralization of the renewals and delinquencies. So we've seen that as a challenge. I think as the technology improves, that will become more more proficient. And I have liked the follow-up component of a lease on renewals and delinquency once the initial notices are out.
but I still think there's something to be said for somebody just hammering the phones, pestering people to get stuff signed and agreed to. And that just doesn't happen through texts and emails in a lot of times, especially when it comes to something as sensitive as collections. I think it's still very important to have a point person at the properties to be doing that. But for now, who knows where this evolves? ⁓ I've heard
David Moghavem (17:43)
Right.
Human, a human touch.
Brendan Van Deventer (18:04)
demos of some pretty spooky voice bots that would fool me. So we'll see.
David Moghavem (18:13)
Yeah, so, you know, we've seen the centralization play out. We've tested on some parts of our portfolio and then I've also seen deals where we're acquiring that they just switched to centralization and you just see an uptick in delinquency. And I think it's not necessarily the issue of the centralization, but it's the implementation and what tasks you're giving to a human versus what tasks you're giving to maybe someone that's central. I think...
the issuance of giving the demand letters, the process of doing it correctly. That's something that you could probably centralize because there's a standard process of, right, you need to give it at the fifth of the month if they're late or in the 10th of the month. And there's a way it needs to be written and there needs to be a way it gets delivered. There's such a specific process that maybe by centralizing it, you can be in control of that. But
Brendan Van Deventer (18:41)
Yeah.
David Moghavem (19:10)
If no one's calling that resident to see if maybe they need a workout or maybe they skipped, then you're going to see your delinquency creep up. And so I think there's a point of really just emphasizing on the implementation of it rather than just blaming on the centralization of it.
Brendan Van Deventer (19:28)
Yeah, which I think is a lot easier said than done. I think it really, I think from like an outside perspective, I think it can be a lot more effective for companies specifically that are fully, virtually integrated, having these centralized components, because it's like your person that you have direct control over, that you are training, that you're able to like find these gaps a lot faster than when it's a third party.
David Moghavem (19:32)
Right.
Brendan Van Deventer (19:57)
To me, it just makes it very challenging when there's one person covering multiple assets that are not owned by the same group from an accountability standpoint and from maybe they're spending more time on these three deals because they have a better relationship with the client and they have a larger portfolio with them and now I'm getting the scraps of the time left over. So it's a tricky situation, but I think for groups that are fully vertically integrated.
David Moghavem (20:05)
Mm-hmm. There's no accountability as you see. Yeah, exactly.
Brendan Van Deventer (20:26)
I definitely see the benefit ⁓ of having that and having that person sitting in your office or sitting remote somewhere where they're able to just hammer away on your portfolio. I think that makes a ton of sense as long as the systems are set up correctly ⁓ for that.
David Moghavem (20:43)
Right. ⁓ I want to move towards the other facets of asset management. know, actually we jumped ahead and we didn't even talk about the framework that you've been putting out, the four P's, the promotion, people, product, and pricing. I think it's a great way to encapsulate how asset management works. I want to move to pricing a bit.
Brendan Van Deventer (21:03)
Sure.
David Moghavem (21:07)
because I think one of the biggest trends that operators are experiencing is the negative trade-outs on new leases versus the renewals that you can get either flat or positive renewals. And the idea that people will stay even if the market rates lower for a good rep for a good property and how strategies for retention can actually help you during this downturn. And I kind of want to pick your brain on that of how are you
Brendan Van Deventer (21:30)
you
David Moghavem (21:36)
advising your clients of keeping retention strong in order to not get, ⁓ I guess, affect that gain to lease onto their own properties.
Brendan Van Deventer (21:48)
Yeah, mean, you kind of hit the nail on the head like pricing is such a, I mean, it's such a hot topic in the industry right now. And it's dynamic. Like it's changing, you know, seemingly weekly with some of the legislation coming down and the fee transparency that's coming through. So, yeah. So, I mean, I guess the the broadest standpoint we have on pricing right now, especially for distressed properties is like you have no pricing power.
David Moghavem (22:01)
Mm-hmm.
Brendan Van Deventer (22:18)
Right? When you're, when you're 84 % occupied, you have zero pricing power. So the name of the game on the front end has to be like, fill your building with qualified residents, ensuring your screening criteria is tight. So you don't have a huge backdoor eviction issue, but focus on getting in those folks in the front door. And from just, I know you asked about the renewals, but like from a front door perspective, we try to be careful with concessions, like with, with properties that are
David Moghavem (22:38)
you
you
Brendan Van Deventer (22:47)
at such a, you know, distressed state. ⁓ We really like to move the base rent, like the gross rent down and limit the concessions to really only increase like speed of movement.
⁓ Just to get them in, get the right people in, know they qualify for sure, ⁓ get them at the door and then you can start pushing rents. Where...
Kind of the back end of this is the renewal side. So, you know, the standard for renewal retention that you would underwrite used to be 50%. So our goal now is 65 to 70 % retention because every person that moves out is 3X the cost of a new lease. So
David Moghavem (23:30)
So
Brendan Van Deventer (23:31)
effectively, ⁓ 3X the cost of a renewal, you know, staying in. So we've seen pretty consistently, you know, zero
David Moghavem (23:39)
Father, how
do you calculate, just for the audience a little bit, how do you calculate the 3X? Because part of it is turnover costs and then the gain to lease, right?
Brendan Van Deventer (23:42)
Yeah.
Yeah, yeah, so you've got,
know, somebody moves out. We offer them a 5 % increase. They're 15%, you know, say they're 15 % below market right now. We offer them a 5 % increase. They move out. So, you know, have the turn cost, like that person, if they're below market in today's sense, they've probably been there for quite a bit of time. They've probably beat the crap out of the unit. So you've got, you know, massive turn costs, marketing costs, and your downtime on that unit, and then likely some sort of
David Moghavem (24:03)
marketing costs.
Brendan Van Deventer (24:14)
know, waived app or admin fee or moving concession on the front end. ⁓ So you're just getting crushed ⁓ in that sense. So we're basically advising clients like massive emphasis on resident events now, like still, even when cash is tight. And then we're trying to host these, you know, renewal parties whenever we can to try to just show further appreciation for our residents. We're baking in, you know,
raffles for ⁓ in clustered renewal grouping. So for the first 20 people that renew their lease for January, February, March, we're entering them into a raffle to win a, whatever it is, $1,500 gift card, $2,500 gift card. And then in most cases, we're offering basically no increases. ⁓ And in some situations, we're offering, if we're offering a one month free renewal or a new lease concession on the front end,
we'll start with a 350 to $500 renewal concession and we'll go effectively up to that one month if we need to, to retain somebody. So massive, massive, massive emphasis on the back door, not only on distressed properties at this point, but even once we stabilize them, like it's just so critical to keep like quality paying tenants in the building and just continue to inch them up.
⁓ as you can obviously once you stabilize you can start getting a little bit more aggressive with your renewal increases, but That's that's been kind of our emphasis with this and it's
David Moghavem (25:52)
And by
the way, I love the approach of not being afraid to give a renewal concession because I think the real issue in this market is finding good quality tenants to make sure you don't have a backdoor eviction issue.
And when you start going heavy on the upfront concession and then you're trying to not give renewal concession to show, Hey, this is market. ⁓ these, these are rents you, what you end up doing is you're not rewarding good paying tenants and you are rewarding people in the front door that may be a fraudulent or can't afford their, their rent. So I think not being afraid to give a renewal concession to just keep a good quality tenant in your
Brendan Van Deventer (26:30)
Yeah, yeah.
David Moghavem (26:37)
apartment building is super critical in this time of the cycle.
Brendan Van Deventer (26:41)
Yeah, and it goes against everything that was being done before, Where for like 18, 19, 20, 21 and prior up cycles where it's just get them out, renovate, rip it up. Yeah, it's a little bit more retention focused now on that. And yeah, it's interesting. It's definitely interesting on the renewal front there. And especially when you consider
David Moghavem (26:45)
Right.
Trade out,
Brendan Van Deventer (27:10)
Like something we've dabbled in and we've moved away from, to be honest, is a lot of the deposit alternatives ⁓ that are out there. Because a lot of, especially at the class C, B minus properties, a lot of what we were seeing was properties that had a deposit alternative and then a concession, even if it's month two, month four, whatever it is, you'll have somebody move in, they might qualify, they move in for free, effectively with no deposit.
they don't pay the first month, they don't pay the second month, then you have them filed on, but depending on what market you're in, they might be in your building for four months, five months before
David Moghavem (27:40)
So
Brendan Van Deventer (27:47)
you get them out, and then they beat the crap out your unit, and then you have to pay the eviction costs, especially in markets like Colorado, where you just get murdered. ⁓ Now you have a unit back with no security deposit. ⁓ So you're gonna get the cost covered through one of those units up to a certain.
David Moghavem (27:54)
Okay.
Brendan Van Deventer (28:06)
up to a certain point on those programs, but you've now lost effectively five months worth of ⁓ real revenue and a real resident and likely additional costs returning that unit, marketing the unit at downtime. ⁓ It's just a tough cycle in that sense.
David Moghavem (28:24)
Yeah, I want to revisit the backdoor eviction issue you touched on. I think a lot of operators are feeling somewhat of a backdoor eviction issue of having these unqualified tenants or tenants that can't afford a rent and getting stuck with them. Exactly the scenario you just pointed. How are you combating or minimizing?
some of those issues? Is there a tool that you guys are using? Is there an approach you guys are doing? What's some advice you could give to operators to fix some of the backdoor eviction issues that they're experiencing, whether it's Colorado and Atlanta, any of these markets where you're seeing it?
Brendan Van Deventer (29:04)
Yeah.
Yeah, it's, I mean, this is such a sensitive topic because it's people's livelihoods and people's, you know, homes. And it's, it's a part of this business that I quite frankly hate. ⁓ And it's a part of this business that's really challenging for the onsite teams. So like they build these emotional connections with residents ⁓ and they will start giving leeway to residents if you don't stay on them. So.
The general approach that we take as harsh as it sounds and as harsh as it is, is there are no payment plans. If rent is due by the third, if we have to give notice by the fifth, we can file by the 10th. No matter the circumstance, we are filing on that resident to start the process. And what we have found is one, it really will speed up the process with the resident to move faster if they're
have the ability to and won't drag out the payment plan process. And then two, if there are subsidies in these markets, most of these subsidies won't actually help a resident until there is an eviction filed. ⁓
David Moghavem (30:13)
Right, so now you're rewarding
for them to not pay until the evictions file.
Brendan Van Deventer (30:17)
Yeah, I mean,
it's just like a tricky standpoint. Like we basically will investigate and find what is the most, I want to be careful what I say here, stringent policy the municipality allows. And then we can frame that within our lease. And we have our teams follow that script and that process for every single resident. If we get to a point where they get a judgment and as part of the judgment, there's a payment plan stipulated by the court.
We'll do that all day long. Unless it's a resident that's violent, but if it's stipulated by the court and they miss the payment plan after the judgment's granted and the sheriff shows up five days later, that's when a payment plan is able to be implemented. ⁓ Other than that, it's like a no payment plan policy. We file kind of as soon as we can. there are some markets where that's painful, right? Like, again, back to Colorado. Colorado, you can only...
David Moghavem (30:48)
Mm-hmm.
Brendan Van Deventer (31:16)
bill the resident for filing fees if you win the judgment. So if you have a resident that pays late every single month, you file and it costs you $450 to file on them. ⁓ You don't get that back if they then pay by the end of the month. So there are some markets where it's a tough, you know, it's a tough, ⁓ I really gamble on that. Like, do you let them ride? And if you don't,
60 days behind. So ⁓ most markets you can bill back filing fees, but some of them, even if they pay just for being late, but it's a challenging situation. And then there is one piece of tech that we use on the collections, kind of to offset the collection issue is FlexPay. So they have to have no balance, but effectively we give the option for residents to enroll in FlexPay.
David Moghavem (32:02)
So
Brendan Van Deventer (32:13)
Property gets paid on day one. And then the resident has the ability to, I think, break it up over two or three payments to FlexPay ⁓ over the course of the month, like whenever their paychecks come in. ⁓ But if they miss a payment, they're all FlexPay and they effectively get kicked into the eviction process. And they can
enroll into FlexPay if they have any sort of balance ⁓ on their ledger. I'm actually not positive how far back they look on their ledger and see kind of what their history has been.
but that is a piece of tech that we offer. So it's like most stringent policy we can put in place from a collection standpoint. Cause like we need to take the emotional piece out of the manager and like let us be the bad guy. She can still empathize, he can still empathize with the resident, but you know, it's like coming from the ownership group that this has to move forward. And I give them the option to move the flex pay if they can. And then, you know, where
David Moghavem (32:54)
Mm-hmm.
Brendan Van Deventer (33:11)
where possible, we try to help with subsidies, ⁓ especially in a lot of the distressed assets. But that's kind of how we try to combat it. It's not a perfect one. I guess the last thing I'll say is making sure the screening criteria is as ⁓ tight as is reasonable for that given sub market and for the asset class type. So that's like another huge piece. ⁓
David Moghavem (33:32)
Right.
Brendan Van Deventer (33:40)
some of that is kind of hard to, is kind of challenging to figure out because it's a little bit of a black box with some of these like screening tools now ⁓ in terms of really what is being factored in, ⁓ in that sense. But that's, those are kind of the, I would say the criteria we use to try to minimize the evictions or really the bad debt as much as we can. But the problem is when we step into a property like,
chances are your economic occupancy is going to go down before it comes shooting back up because we're going to clear out all the bad apples from your property. But then that's been our biggest lift. Like every case study I do, effectively the biggest margin and most consistent margin we have is your economic occupancy. When we, know, quote unquote, stabilize where we kind of get through a deal, it's going to be up 7, 10, 15 % from where it was when it started.
⁓ just because of this like stringent kind of nature we have on the collection side.
David Moghavem (34:41)
you have strict policy and then using some of these applications that can help with de-risking like FlexPay. And I think that's important because there's other companies out there that are willing to take that risk that allow for owners to take the emotional part of the equation out like a FlexPay. ⁓
Brendan Van Deventer (34:53)
you
David Moghavem (35:02)
Flex, you have the guarantor, you have some of these other tools, and by doing that, you can de-risk your own deal with some of your own collections, and you establish a culture. And I feel like post-rate hike, as insensitive as it sounds, there's a little bit of a culture of not necessarily paying or paying on time. And so if you can establish that in your property, hey, we have rules, it's coming from upper management.
things need to be paid, they need to be paid on time. And then by the way, you can use these applications like FlexPlay, Garen Tour, ⁓ in order to make things happen, but this can't come from us, we can't cut you a deal, but you can use some of these other applications to do it. I think you'll see a lot more success in your collections and your bottom line overall. And then, yeah.
Brendan Van Deventer (35:48)
Thank
Yeah, yeah. And that's a good point.
That's spot on. And I actually forgot another piece that we use. Because we do have properties and companies that will use Guarantor and CoSign. Really where we have them focus is as Guarantor alternatives, not necessarily deposit alternatives. Just enhancing credit, basically.
you get significantly more coverage doing that than you do with like a deposit alternative. ⁓ So that is a great point. Like those are a couple other items that we will offer. If somebody is like qualified with conditions, you know, the condition might be you need to enroll with COSIGN or enroll with Gara Tours, which gives us up to, you know, six to 12 months of coverage. ⁓ Or if they do beat up a unit or they do have to move out in a short period, we are covered.
David Moghavem (36:45)
Yep. I want to keep moving a little bit. know we're coming up a little bit on time, so one of the last P of the four P's you mentioned, product, I think we're at a time where we're seeing very thin ROI on typical renovations and typical terms. And I'd love to get your take on what you're seeing out there from a product perspective might not be
Brendan Van Deventer (36:57)
you
David Moghavem (37:14)
dollars and cents ROI, but what are you seeing as the highest ROI from a product perspective?
Brendan Van Deventer (37:21)
Yeah, this is, it's like a tricky standpoint. You know, it's a tricky proposition at this point, because yes, to your point, there is very little ROI in renovating units. ⁓ If you look at it from like prior renter to new rent, you're going to achieve on a renovation. Where we are still seeing ROI is if you're looking at, you know, classic unit one by one versus a renovated one by one at this point in time.
you are still seeing, like we are still able to achieve a premium on that, ⁓ where ROI, where an ROI will make sense. The only time we're really quote unquote renovating a unit right now is if a unit is just blasted and like completely, you know, moved upon repair. Yeah. So that's like one component. The reality and the most challenging aspect of this is
David Moghavem (38:08)
Right, well you're spend the cost anyways, yeah.
Brendan Van Deventer (38:21)
If you don't have units available, like I don't care how much traffic you have. I don't care what your pricing is. You can't fill your building. like you have to figure out the most cost effective ways to get as many units as online as possible. And a lot of that is, you know, at times when we step in, it's conversation with the equity partner. It's a conversation with the lender where it's like, guys, like.
David Moghavem (38:30)
Mm-hmm.
Brendan Van Deventer (38:48)
It doesn't really matter what we do here if we can't fill units. ⁓ So we'll generally figure out, walk, we'll go walk every unit, every vacant unit, figure out what the scope would be to turn them back to just move in ready, we'll say. And then we will work with the management company and site teams and figure out, all right, here are the easiest units. There's 40 units down, 20 of them we can get turned.
If we hire a third party to come in here and knock them out in the next like 10 days, and then 10 of them, the site team can do as they work through work orders and 10 of them are just down, like fully need to be renovated. And we'll kind of stack them and we'll say, all right, let's get these 20 knocked out. You know, it's going to cost us $2,000 a unit, $2,500 a unit, whatever it is, and just labor costs to get that knocked out. But now we have the units ready for the team to move in and lease.
David Moghavem (39:30)
Right.
Thank you.
Brendan Van Deventer (39:46)
And then the onsite team will start working through, you know, the rest of that product. And then the other 10 will generally just sit until we get to a point where we filled up the rest of the units and we can now, you know, doesn't make sense at this point to spend the dollars to, to, you know, bring those back online where we're seeing like the biggest ROI in product is, is really in like the curb appeal. So
David Moghavem (39:48)
So you
Brendan Van Deventer (40:12)
you know, making sure that the track
and it's like the basics, right? Like the trash is picked up, like the landscaping is in at least decent shape to show like a little bit of care. You know, the entrance is clean. The leasing office is presentable. The staff is getting up, you know, when someone's coming in and greeting them, we have some sort of refreshments in the office. The spaces are activated with music, like little things.
David Moghavem (40:17)
Okay.
Brendan Van Deventer (40:40)
to really make sure someone doesn't feel like they're just walking into a property that does
not care. If it has a basketball hoop, there's a net on the basketball hoop, like a tennis court, there's a net on the tennis court. Little things like that get noticed immediately. And that's what we try to have these teams focus on. And then what is the ultimate tour path? That's one of the first things we do when we show up at a site. We drive the property.
David Moghavem (40:47)
Right.
Brendan Van Deventer (41:09)
Identify whatever issues we find and then we walk the whole property with the team Talk through those items and we have them take us on a tour and like the first dollars will spend when like cleaning up a site is is really cleaning up the tour path so From the leasing office to the pool and then from the pool to the model like making sure that is at least presentable So they have a clear shot at giving someone like a direct tour Where they don't have all these other burdened issues to to kind of talk through
⁓ It's kind of where we work from there.
David Moghavem (41:42)
I think the common theme with your answer is that they're
Brendan Van Deventer (41:45)
you
David Moghavem (41:47)
They're items that are back to basics. It's not like, Hey, if you put in this fancy tech, this, that you're going to get the best on. No, it's back to basics, have a clean property, a presentable property, attention to detail, which starts from the people on site. And you'll be surprised how a small amount of dollars and cents for a turn or for the tour path to be presentable will have a huge ROI into your property.
Brendan Van Deventer (42:17)
Yeah, yeah, exactly.
David Moghavem (42:20)
to wrap up, Brendan, you're coming up on over two years now at Cress, starting Cress. again, it's been awesome having you on some of our own deals. How do you envision Cress evolving over the future in the next three to five years as we get out of this cycle?
Brendan Van Deventer (42:39)
Yeah, mean, so we're, like I said, we're at about 10,000 units right now. ⁓ Ideally, we can continue to build with a core group of like 10 to 15 clients here and scale with them. The goal would be to get up to about 25,000 units. Still, think primarily staying Sunbelt, Mid-Atlantic focused, ⁓ maybe expanding into the Midwest and really
I think where our business has evolved over the past two years is it started with just sponsors. Then it moved to sponsors and fund to funds, then sponsors and fund to funds and kind of mid-market institutional equity groups, then to debt funds, now to some agency lenders. And I think we're building like a really interesting collaborative network with this, where we're now at the point where we can introduce
David Moghavem (43:11)
you
Brendan Van Deventer (43:35)
our sponsor clients to equity, our equity clients to sponsors, our lenders to operators, like operators to lenders. And I think just creating this dynamic ecosystem where we can not only help folks on the AM side and with new acquisitions and dispositions and loan mods and whatever they might need, but we can really start help connecting more people that we trust and they then in turn will trust within our network. that's...
That's kind of how I envision the next three to five years going. It's been so organic at this point. Like our entire growth has come from really organic word of mouth and trust because it's hard to like pitch this business. You have to kind of see it in action to really understand it and appreciate it.
David Moghavem (44:18)
Right. It's heavily reliant
on referral too because AM ⁓
Brendan Van Deventer (44:25)
100%. Yeah, 100%.
David Moghavem (44:28)
especially you say, hey, working with Tony and Brendan has been great. They did X, Y, and Z. You guys should use them. It seems like a fit. It's all word of mouth in that regard. Referrals is key with that.
Brendan Van Deventer (44:37)
Yeah,
absolutely. Yeah, we've, I mean, we've been lucky in the sense too, that like the folks that we have on our team working as portfolio managers are incredibly talented, like 10 to 15 year plus, you know, institutional backgrounds. And I think we'll continue scaling that way where, you know, anyone touching any of our clients' assets is an extremely experienced, you know, investment professional. And we've been lucky in how we've been able to grow that. I, you know,
Obviously as part of that growth, we envision growth in the team and with a similar pace as we go there.
David Moghavem (45:13)
Well, Brendan, ⁓ it was great having you. Love what you and Tony have created at Crest and ⁓ looking forward to seeing you hopefully next week.
Brendan Van Deventer (45:23)
Yeah, I appreciate the time, David. Thanks again for having us on.