Ian Taras is a prized tenant at The New York apartments.
How prized? So far, the management has rewarded him with two compact disc players, two bicycles, a pair of roller blades and five $150 gift certificates-all for recruiting people to become fellow tenants.
”I can`t think of another resident here who has referred more than one person, and the person has signed a lease and moved in,” says Terry Whittaker, general manager of The New York, 3660 N. Lake Shore Drive.
Taras, who is president of his class at the University of Chicago Medical School, says many of the 10 people he has referred to the building are friends and classmates.
”I tell people about the building because you might as well reward greatness, and the building is a great building,” says Taras. ”When I like something, I share it with friends. I didn`t think this should be kept a secret.”
Rewarding existing tenants for spreading the word and bringing in new residents is now a big marketing strategy at large complexes, especially in the highly competitive downtown high-rise market, where ”What have you done for me lately?” has become a common question from new and old tenants alike. ”These programs tend to be introduced when and where markets are softest,” says Robert Sheehan, economist at the National Apartment Association. ”I`m seeing them across the country and in Chicago they are most common in the newer luxury buildings.
”You see these most where you are trying to get new tenants and trying to keep the ones you already have,” he says.
Token of appreciation
”They do something for us and we do something for them in appreciation,” Whittaker says of tenants who have referred new residents to The New York. ”It`s a way to bring in new people and hopefully encourage existing ones to stay.”
Right now Whittaker`s building is offering $100 gift certificates to existing residents who refer new tenants. The gift certificates can be used toward parking, the health club or other services offered at the building. The existing tenant receives the reward after the new tenant signs the lease and moves in.
Existing tenants also receive rental incentives for bringing in new residents at all buildings managed by Habitat Co., says Lori Postma, Habitat`s marketing director. In the city, these buildings include Cityfront Place, Presidential Towers, Columbus Plaza, River Plaza, Huron Plaza, Asbury Plaza and Elm Street Plaza.
Sign of hard times
Some buildings with incentive plans are on rocky financial ground, according to some building managers, citing Burnham Park Plaza, which has defaulted on its $24 million Department of Housing and Urban Development loan; The New York, which has defaulted on a $64 million bank loan; and Presidential Towers, which has defaulted on a $159 million loan to HUD. Burnham Park and The New York also owe $2 million and $4.3 million, respectively, in Urban Development Action grants.
But Sheehan says a building`s financial status is not usually a deciding factor when tenants are choosing a place to rent.
”People might ask about it, but it won`t be the reason they decide to rent an apartment,” he says. ”The person`s ability to pay the rent and the building`s location have more to do with that decision.”
Taras, noting he ”heard something” about The New York`s financial problems, says they have not affected the services offered at the apartment building and have not scared off any of his friends.
”I`ve still recommended the building to friends,” Taras says. ”Some like it and some don`t. Those who don`t usually want to live in a smaller building of a vintage style, but most who have come to see the apartments here like what they see.”
Dual incentives
It`s not unusual for apartment management companies to offer dual incentives-rent discounts to new tenants and various financial rewards to existing tenants for making referrals, Sheehan says.
Incentives also can have a seasonal nature, he says. ”It`s true, you may see more of these incentive programs in winter when the market is usually soft,” he says, ”but these programs have become a widespread marketing tool year round.”
Tenant referrals brought 42 new residents to The New York in 1991 and 35 in 1990, according to Whittaker, general manager of the 4-year-old, 593-unit building.
At the Cobbler Square loft apartments, 1350 N. Wells St., residents who refer new tenants receive a $250 check once the new resident moves in, says property administrator Carol Livingston.
Since the 297-unit Cobbler Square opened in 1985, it has offered incentives of $100 to $250 per new tenant referred, and existing tenants
”quite frequently” refer their friends to the building, Livingston says.
”We don`t keep track of how many have been referred and actually signed leases. And, there`s not a star tenant who has referred more than one tenant who has signed a lease and moved in.
”We think the tenant referral system is word-of-mouth advertising at its best. Those who are referred here already know something about the building. They`ve heard about the building from someone who is experiencing the building for themselves.”
At Cityfront Place, tenants who refer new tenants receive a $250 discount on their rent for the first referral, $300 discount for the second and $350 for the third referral.
Passing the word
”It`s been a very successful program,” says Habitat`s Postma. ”We have wonderful residents who are pleased with the place they live and they tell their friends and business associates.”
Cityfront, which opened last May, is one of most recent additions to the Chicago high-rise market.
Postma, who works in Cityfront`s leasing department, says Habitat has had a tenant referral program at its buildings for at least five years.
”It`s made sense from the beginning for us to have a program like this,” says Postma. ”If you have qualified, happy residents who can bring in others, it makes for a wonderful kind of neighborhood. It`s a way for some people to bring in people they want as their neighbors.”
Jill Chertow, Burnham Park Plaza`s leasing director, says residents who bring in new tenants get a $250 credit on their next month`s rent for the first referral, a $500 credit for the second and a free month`s rent for the third referral.
Chertow says she can think of four or five residents who have referred two tenants, but no one has referred three tenants and received the month`s free rent.
Those shopping for apartments this time of year will also see more incentive programs in place.
”It`s a costly marketing tool,” says Sheehan. ”But companies that have any incentive program in place are willing to pay to keep and get new tenants because they realize some income is better than no income.”
