"What Viva does is it gives us a tremendous source of qualified rental leads," says Doug Crocker, CEO at Equity Residential. "A lot of Internet traffic is just information surfing and it's hard to know which leads are qualified." The reason Viva can supply such high quality leads to apartment owners, according to Viva CEO and co-founder Scott Ingraham, is that its system allows the prospective renter to put his/her requirements out for bid. "You know when someone is willing to go through this process that they have a degree of seriousness about doing a transaction," says Crocker.
Ingraham says that his competitors, which include Apartments.com and Springstreet.com, don't provide the same degree of interactivity that Viva does with prospective tenants. Because up to 40% of all prospective tenants are expected to use the Internet to search for apartments by 2003, Crocker says that the digital dialog Viva fosters with potential tenants will be extremely valuable. He says it was Viva's ability to nurture this dialog that was a key reason the seven REITs chose Viva.
Equity Residential and the other REIT partners have been given an incentive to use the Viva system to do rental transactions. Monday's deal with Viva includes equity warrants that will be issued based on a given REIT's transaction volume contribution to the Viva network, according to Crocker.
"We project that our firm will become profitable by the second half of 2002," says Ingraham. While Viva has high 75% to 80% gross margins, Ingraham says that the cost of rolling out the product across ever increasing numbers of markets has kept the firm in the red so far. Viva started with six markets in April and increased that number to 15 in October. By the end of next year, Viva expects to be in 50 markets nationwide, which Ingraham says will give the firm exposure to virtually all the top markets. The deal with the seven-member REIT consortium will increase Viva's registered apartment base by 400,000 units to 1.2 million units over the next several weeks, says Ingraham.
The total of the seven REIT consortium's investment in Viva will be $10.3 million and the consortium will have one seat on Viva's eight member board, according to Ingraham. The other REIT investors are Archstone Communities, Post Properties, United Dominion Realty, AvalonBay Communities, Gables Residential and Camden Property Trust.
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