Residential management companies adopt new approaches.

In a tight economy, residential real estate organizations must operate more leanly. As a result, many management companies are considering the advantages of practical mergers that reduce general operating costs but will enhance the quality of service that can be provided to a client.

Over the last several years, the residential real estate management industry is experiencing a shakeout that has yielded the following results: many large real estate companies have been absorbed into the market, leaving fewer players; smaller, sole proprietor management companies have emerged on the scene (few with strong staying power, but many promoting lower fees); and mid-sized management companies have emerged as active players in the merger and acquisition marketplace.

New Affiliations Prevail

It is these mid-sized management companies, recognizing that more service must be delivered by fewer people to more properties who have looked toward affiliations - in the form of mergers, new acquisitions or non-conventional partnerships - as a strategic way to position themselves in the highly competitive residential real estate marketplace.

This past year, Frederick Rudd, president of Rudd Realty, a full-service residential and commercial real estate organization merged with Eichner Management Associates to form a larger residential management company. Our experience has yielded several important observations: o Since our merger, overall operating expenses for both companies has been significantly reduced.

Customer service programs have been enhanced as a result of shared experiences between the two firms, producing a more unified client response. The menu of services available to clients has been expanded as a result of the melding of the expertise and interests of the two principals.

Eichner-Rudd is now able to offer additional services in the form of purchasing, construction management, insurance, brokerage, mortgage refinancing and other consulting services to all of its clients. The experience of the last year has demonstrated that work styles, basic operating philosophies and general expectations must be compatible for a merger to be successful.

Our experience has been so positive that other formal and informal affiliations are being pursued in order to examine the possibilities of new relationships that will meet two important business objectives: to increase scope and quality of services available to our existing clients; and to increase revenue opportunities by maximizing existing resources and developing new ones. These two objectives have become the criteria by which new affiliations are being evaluated in commercial and retail brokerage and construction.

Perhaps the most significant by-product of our merger experience over the past year has been to realize the present economy mandates that we examine all available opportunities for expense reductions and enhanced economies of scales throughout our firm. The resulting benefits have been seen in the increased quality of services that we can now provide to our clients. Today, economic realities have permitted us to use the tools of merger and affiliation to realistically expand in a downsizing economy.