Windward Sun Apartments is a 1980’s era apartment building located adjacent to the campus of California State University, Northridge (CSUN). Prior to LBPM, the building was suffering extended periods of vacancy and inconsistent occupancy throughout the year. During the summer there was sufficient demand from returning college students. But, that demand did not extend beyond the start of the fall semester, resulting in subsequent vacancy periods of a month or longer for unrented or new vacancies. Consequently, ownership had concluded that a predominant student population was detrimental to the stability of the building, and had been promoting efforts to attract tenants not driven by the seasonality of the university. This appeared to have compounded matters by creating more tenancies that would expire during off-peak rental months.
Recognizing the demand imbalance created by the CSUN semester schedule, LBPM embarked upon a leasing campaign that capitalized on the basic supply vs. demand dynamic of the local apartment economy. We concluded that the demand for apartments was strongest during the months of July and August preceding the commencement of the fall semester. In fact, demand was so strong that we could rent practically every available apartment during that period within two weeks of vacancy. And, units rented during those months achieved a premium of 20% more than the stabilized rent during the balance of the year.
With our client’s consent, LBPM began structuring every rental agreement to expire no later than June of each year. Tenants would be given the option of renewing at the market rate (the premium set during the summer months), or their tenancies would terminate upon the conclusion of their lease terms. All new tenancies were required to commit to a lease term that would extend occupancy until the subsequent summer when demand was again the strongest of the year.
Within only two summer rental cycles, Windward Sun boasted an average annual occupancy rate of 98%. The gross income increased by 39% within 20 months, and annual expenses had fallen to the lowest levels in 10 years. Today Windward Sun Apartments is considered the preferred address for CSUN students and non-students alike. Increased revenues have enabled the owner to enhance common areas and to address deferred maintenance, thereby increasing the building’s appeal to existing and prospective tenants.
LBPM has employed this strategy at other college area properties, as well as properties subject to different seasonal influences, such as within beach communities or vacation destinations. Understanding the economic factors that impact regional and local markets is just another way that LBPM delivers “proper” management to its managed properties.