Dive Brief:
- Arlington, Virginia-based AvalonBay Communities and Atlanta-based Gables Residential announced last month that they had entered into an agreement for AVB’s centralized service center to provide back-office financial administrative support services to Gables, which manages and builds apartments.
- AVB, the No. 4 owner in the country, will be responsible for customer service and account inquiry support, billing, legal and eviction support, delinquency notification and payment and security deposit processing services across the entire Gables Residential portfolio of over 25,000 apartments across 10 states and Washington D.C.
- AVB will not handle the operational and business decisions related to the Gables portfolios. “We are not offering property management services under our agreement with Gables nor do we intend to do so,” AVB CFO Kevin O'Shea said on the REIT’s Q1 2023 earnings call last month. “All business and operational decisions related to AvalonBay and Gables portfolios will continue to be managed separately by each company.”
Dive Insight:
Gables isn’t alone in farming out the back-office functions of its management portfolio. In March, Fort Lauderdale, Florida-based Altman Management Co. partnered with Atlanta-based third-party residential property management firm RAM Partners to provide back-office management services.
Gables has been focused on centralizing administrative functions across its portfolio over the last several years. “The new centralized service opportunity with AvalonBay’s customer care center furthers Gables’ strategy in which our business model reflects greater customer service demands and those of a changing industry,” Gables Residential CEO Sue Ansel said in the news release.
Executives at Gables and AVB have long-standing relationships. After a series of discussions between the management teams, the companies did a pilot program with AVB handling centralized service for a small portion of the Gables portfolio. After that experiment, the companies decided to move forward, according to commentary on the AVB earnings call.
AVB, with 88,475 units in 12 states and the District of Columbia, opened its Virginia Beach, Virginia-based customer care center in 2007 as a separate business unit from residential operations. At the time, it was one of the first centralized service centers in the multifamily industry.
“This agreement demonstrates the appeal of the innovative capabilities that we've created in the 16 years since we established the CCC,” O’Shea said on the call.
AVB’s benefits
O’Shea said AVB could “create additional value for the shareholders by offering support services to other institutional multifamily owners now and in the future,” though it isn’t currently “proactively looking” for other opportunities.
“We do hope, looking ahead, to be able to do more business like this over time,” O’Shea said. “And we think it does make sense for us to do it because it allows us to scale and more fully invest over time and import capability that allows us to further differentiate ourselves from our peers.”
Part of the appeal of the agreement was that it allowed AVB to make continued investments into technology, processes and people that benefit the company’s own portfolio.
“It's a nice next step in our overall operating model journey, and we're excited for this first step and potentially future clients going forward,” Schall said.
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