Continental Group finding condo renters
The Continental Group made its name managing condominium and homeowners associations -- it now manages 1,300 across Florida. Now the Hollywood-based company is expanding into the trickier business of managing condo units for rent.
Trickier, because there are thousands of condos for rent competing for tenants. Continental's clients, often strapped for cash, have small marketing budgets. And Continental must try to persuade associations looking to pare expenses to invest dollars into sprucing up the building and grounds to lure renters.
So the company must get creative, using back-to-basics techniques such as posting flyers at retail strip centers and paying people to stand on street corners with big signs advertising free rent. Such techniques have helped bring them to 1,120 units in South Florida alone.
STAYING ON
When Continental, a subsidiary of publicly-traded FirstService, got into the business in 2004, they figured developers needed someone to manage rental units for a short while -- while they converted rental buildings to condominiums or to rent out units awaiting a new buyer.
But as the real estate market faltered, the conversions and sell-outs failed and Continental stayed to manage the units. Lenders who took over units through foreclosures also began to approach the company to manage for-rental condos, and Continental started marketing its services to banks, receivers and institutional owners.
Last year, this division brought in 4.4 percent of Continental's $281.5 million in revenue. While small, the business is an opportunity for Continental to branch out as many of its association clients cut back. Foreclosures have left associations unable to collect the dues they need. Some 20 associations have dropped Continental's services in the last six months, said Stephan R. Titleman, president of property management for Continental.
CUTTING LOSSES
In managing for-rent condos, Continental's primary responsibility is to help unit owners minimize their loss.
Those owners need income from the units -- fast. And they don't have much money to spend on marketing, said Danielle Cooney, vice president for the commercial property management division.
''We're going back to the old way that we used to market,'' Cooney said. That includes posting flyers and brochures and marketing to employers.
Cooney and her team are forgoing print advertising for free Internet listings, most successfully on Craigslist.
Continental even tries to get the attention of potential renters through ''human directionals'' -- people on street corners with big signs that offer free rent or simply announce the rentals.
Until about a year ago, rentals ran mostly on their own, Cooney said.
But it's become much more competitive to put renters into units, despite relatively low apartment vacancy rates of 4.6 percent in Miami-Dade and 5.5 percent in Broward, reported real estate services firm Marcus & Millichap.
`SHADOW MARKET'
That's because those rates don't reflect the for-rent condos on the market, which form a ''shadow market'' that drives down rents and pressures owners to give concessions, said Evan Kristol, a vice president in Marcus & Millichap's Fort Lauderdale office.
At the same time, many of the units' owners need the condo rented and generating income so they can quickly sell to an investor. ''We have to ramp up the rental'' rapidly, Cooney explains.
The units can be in a constant state of flux, with potential buyers coming in and out, unknown durations of rental availability and new owners suddenly taking over.
''We go through a lot of cases where there is actually a sale pending that never goes through,'' Cooney said.
To manage the potential chaos and get units rented quickly, the firm has a roving team of staffers who specialize in putting new tenants into rentals. To save money and work more efficiently, Continental also often does work in-house which it used to contract out, including completely remodeling units.
Getting the units in rent-worthy shape can be a challenge. When Continental does not manage the association, it can be much tougher to get the community to spend money on things like lawn maintenance and landscaping. Yet keeping the community attractive is key to luring potential renters.
In addition, the association or its management company may be trying to rent the units itself.
''It's a niche of the marketplace that is highly competitive,'' said real estate advisor Michael Y. Cannon, executive director of Integra Realty Resources-Miami. Besides other association management companies, Cannon said real estate agents, rental management firms such as Greystar and J&G Property Management and even lenders' in-house rental management divisions will be vying for the rental management contract.
And, ''We're competing with a lot of actual individual owners who are dropping their rents extremely low because they're facing foreclosures,'' Cooney added.
The company hopes to pick up business from individual owners. In Central Florida it manages 1,100 such units and has begun offering that service in South Florida. But it's tough to make profitable, Titleman said, and will require economies of scale similar to what the company has in Central Florida