Landlords Ask Renters,
'Cash or Credit Card?'
NEW YORK -- Would you like to pay your rent by cash or American Express?
That's the latest incentive one major apartment-building owner is offering residents in New York City in an effort to lure tenants into its buildings during these sluggish rental times. Related Companies LP teamed up with American Express Co. to allow tenants to pay their rent with a credit card at any of its 5,000 units in 16 luxury rental buildings under the American Express Automatic Bill Payment program.
While doing so, the renter can collect points under the AmEx Membership Rewards program that can qualify a tenant for free trips, entertainment and other bonuses a lot faster.
"The way people bank, pay bills and manage their money is completely different than it was 10 years ago," said David Wine, vice chairman of Related Companies LP, during a conference in Manhattan recently. The credit-card option is a way for the landlord to address this change, he said. "It's a simple idea. We don't know why we didn't do it sooner," he said.
"It wasn't that long ago that all of us would have laughed at the idea of pulling out the card to pay for groceries ... but it's now part of our daily routine," said Glenda McNeal, vice president of New Industry Development & Entertainment at American Express. Rent payments is the next step, she said.
Paying the rent by credit card for only one year could build up enough reward points for a cardholder to qualify for a trip to Ireland, a jeep mountain bike, a Tourneau watch or private golf lessons," said Ms. McNeal.
For the landlord, it means "no late payments, bad checks or collection hassles, and faster payment," Ms. McNeal said.
Mr. Wine admits the perk is aimed at attracting tenants to his company's buildings during a tough economic environment.
"It is a challenging marketplace. We looked at what we had and what we could offer more than any other owner of luxury rentals," said Wine.
As a company that's been operating for more than 30 years and survived through other economic downturns and recessions, Related is always looking for ways "to put us ahead of the pack and make our buildings the most attractive for the renter in New York City," Mr. Wine said.
Indeed, the market has become a renter's paradise, and many apartment owners have been jockeying for ways to entice tenants into their buildings. Gone are the double-digit annual rental hikes that residents had been facing in the late 1990s through 2001 period.
Layoffs, especially in the financial-services sector, as well as historically low mortgage rates, have taken a toll on occupancy and rents in the city's rental buildings. Job losses have caused demand to fall off, and low mortgage rates have pushed many renters into the homeownership market.
Newspaper ads offering two or even three months' free rent are commonplace. Many throw in free health-club memberships to boot.
Michael Moran, managing director of rentals at the Corcoran Group, said rents have plummeted 30% over the past two years. He estimates more than 15 new rental buildings, containing about 6,000 rental units, have hit the Manhattan market over the past two-and-a-half years. And he expects another 6,000 to 8,000 units to be added over the next two years.
Although he has seen a slight uptick in rents for the first time in more than two years, he's not convinced the market has necessarily bottomed. Incentives are still out there, and this is generally the busiest rental period for Manhattan apartments, he noted. No one knows what the market will look like in October, he said.
Paul Purcell, cofounder of real-estate consulting firm Braddock & Purcell, said most of the leasing activity has come at the newer buildings that have opened. "We've seen no pervasive rebound across the board," he said.
Mr. Wine admits times are tough, but he's seen worse.
"I was around in the early 1990s and it was worse. This is not as bad," he said. Over the past month, the company's latest development, The Westport, has signed about 100 leases, he said. People are seeking out higher-quality buildings, he said.
"The great run-up in rents that occurred in the late '90s and early 2000 had people paying a lot of money for inferior apartments," said Mr. Wine. Many of these tenants are now finding they can get new higher-quality apartments for the same price, he said.
Mr. Wine admits his company does offer incentives, such as free rent.
"The market requires you to be competitive and we are competitive," Mr. Wine said. However, he said his company is focusing on services.
The rent-by-credit-card option is part of a package of new perks, called RelatedStyle Services, aimed at stepping up tenant services. The package also includes a "personal-assistant" service, where someone will track down a nutritionist, massage therapist or health-club trainer, or even make dinner reservations or secure concert tickets for a tenant. Party planning and personal shopping are also offered.
The perks package also includes a "move-in coordinator" that will help tenants hook up cable, telecommunications and other services when they move in.
Mr. Moran said the credit-card option makes good business sense from both sides. The tenant doesn't have to worry about writing checks, or checks getting lost in the mail, and can qualify for trips. For the landlord, the automatic credit-card charge will ensure rents are always paid on time, and eliminate the extra paperwork and accounting associated with sending out letters. "It's quick, clean and efficient," Mr. Moran said.
Apartment Investment & Management Co. has been offering the rent-by-credit-card option at 630 of its apartment buildings across the country since September 2000. However, Related Cos. is believed to be the first to make the option available in Manhattan.
Email your comments to rjeditor@dowjones.com.