NOI Strategies

‘Exceptional’ Real Estate Operations

By Glenn P. Murray

At NOI Strategies, we are seeing incredible demand for business process optimization resources that specialize in the following primary areas:

Leasing Customer Relationship Management (CRM)
Customer-centric methodologies for maximizing profitability and revenues.
Solution Providers: Argus Lease CRM, Ascendix, Sonoma

Electronic Invoice Processing (EIP)
Eliminates paper and data entry from the accounts payable process.
Solution Providers: Yardi PAY, AvidXChange, Basware, Nexus Systems

Business Intelligence (BI)
The collection, integration, analysis, and presentation of business information to support business decision making.
Solution Providers: Argus Insight, Argus Enterprise, Resolve, Asset Eye

The main objective behind each of these, of course, is to get the job done faster and cheaper. However, exceptional solutions will help you to get the job done ‘smarter’. Smarter means dealing in exceptions. It means making sure that those exceptions that need your attention get it. It means converting your reactive processes into proactive processes that actually help to reduce exceptions over time. It also means changing the way you think about exceptions. The problem with the way many solutions handle exceptions is that they are rendered as ‘problems’ that need your attention. On the contrary. Exceptions are just as much about opportunity. Recognizing this inherent value is the first step toward realizing your own exceptional operations.

Cap Rates Increasing....Back to Basics?

By Glenn P. Murray

Reversing a trend that began in 2001, cap rates turned higher in October (Wall Street Journal, November 28).  Average cap rates for apartments buildings were up to 6.10% from 6.08% in September.  Office buildings jumped to 5.80% from 5.54% for the same period. 

The implications are simple to understand:  as cap rates increase, property values decrease (you can learn more about cap rates and how they are calculated at http://en.wikipedia.org/wiki/Capitalization_rate). 

Where cap rates go from here is unclear.  What is clear is that net operating income (NOI) improvement initiatives are important regardless of cap rate fluctuations.  NOI is an indication of an individual property's performance and therefore its value.  Unlike cap rates, NOI is the one factor in the valuation of real estate assets that can be controlled.  Even modest gains through business process optimization and outsourcing of non-core services can help to counter rising cap rates.

What is your NOI strategy?

Automated A/P: Making 'Green' by Going 'Green'!

By Glenn P. Murray

When I founded rCash back in 2000, few if any commercial real estate companies believed in the value of automating their accounts payable process. Today, almost every major owner and asset manager has either implemented or is in the process of implementing an automated A/P solution.  Few innovations can claim to have had such a resounding effect on this industry. 

There are now several automated A/P solution providers designed specifically around the requirements of commercial real estate.  In addition to rCash (which was sold to Yardi Systems in 2006), leading providers include AvidXChange, Nexus Systems, and OpsTechnology.  Numerous horizontal solutions are also available.  (Click here for a comprehensive listing of solution providers).

Why is A/P such an ideal candidate for automation?

• it is extremely paper intensive
• it is highly distributed
• it is data entry intensive and subject to a high error rate

Take a look.  Your own Sarbanes Oxley compliance efforts probably exposed the A/P process in particular for its high error potential and loose controls.

So how does automating A/P provide your company with strategic value? 

Without automated solutions, the average cost to process a single invoice is $19.00.  Companies that have implemented automated A/P solutions do it for less than $13.00 per invoice.  In most cases, real estate companies are realizing a cost savings of 35% or more! 

Let's take a moment to translate what this could mean for your organization from a valuation perspective.  First, multiply the number of invoices your company processes each month by $6.00 (i.e. - 10,000 x $6.00 = $60,000.00).  This number represents the fully allocated improvement in your monthly NOI.  Next, annualize that number and divide it by your average portfolio cap rate.  (i.e. - $720,000 / 6% = $12M). 

Want some?  Of course you do!  Optimizing portfolio value is what we do here at NOI Strategies and your A/P process is a great place to get started.  Our formula for operational performance is simple:  Optimize; Reduce OpEx; Improve NOI; Improve Asset Value.  Our expert resources are the most qualified to help you find and implement the right solution for your organization. 

Converting A/P into a 'Green' Machine

And if you think that making 'green' is just passé, then I am sure you realize that going 'green' is all the rage these days. What could be better for the environment than removing all of that paper - not to mention the transportation of it back and forth from vendors to the properties to the central office - out of the A/P cycle? 

Saving money and the environment.  Now how cool is that!