Property managers share ideas for building profit in today's market.
urchasing and repositioning undervalued properties
is the investment strategy du jour, and effective property management often is
the secret to building success. "Property management is at the heart of
our business," says Jerome N. Lehman, CCIM, president of Prudential CRES
Commercial Real Estate in Boca Raton, Fla. "We sell investment property
but we make the projections work by controlling the future through property
Today's blueprints include increased competition for sales product,
abbreviated investment hold periods, and shorter leasing cycles, escalating the
need to improve performance on a daily basis. "Establishing operational
procedures to add value and creating an exit strategy are two important
components that property managers should comprehend," says Roy L. Hanlin,
CCIM, CPM, real estate manager for Coldwell Banker Commercial/McLain Real
Estate in Huntsville, Ala.
This changing industry aspect has heightened - and expanded - the roles
property managers play. "Few professions have experienced as much change
and challenge," says Lynda Clarke, CPM, senior vice president and head of
the property management division for NAI Norris, Beggs & Simpson in
Portland, Ore. "What used to be a primarily custodial, reactionary field
is quickly revealing its financially progressive and sophisticated side."
Along with added financial responsibilities, property type
specialization has increased the need for more training in technology and
client services. From serving net-lease investors who own the corner Walgreens
to global companies that amass nationwide office portfolios, property managers
must go beyond the basics to provide a specialized response to what is an
increasingly specialized field. Upgrading technology offerings at multifamily
properties, handling specialized healthcare operations, assessing capital
improvements in terms of a property's investment strategy, managing single-tenant
net-lease properties, and improving retail financial performance are all
examples of how property managers have expanded their roles to become an
integral part of a building's investment potential. In the following essays,
property managers from different industry sectors explain what they add to the
mix and how it sweetens the deal.
ADDING VALUE THROUGH TECHNOLOGY
by Steve Donohue, CPM, president, Western National Property Management,
Technological innovation has dramatically altered the landscape of
today's apartment market. What formerly was a novelty is now a necessity for
today's growing profile of technologically savvy apartment residents. From the
leasing office to the individual apartment units, technology is at the forefront
of all aspects of multifamily management as property managers focus on
delivering cutting-edge solutions to boost efficiency and foster convenience.
Here is an overview of some of the leading technologies available today.
As an alternative to paper brochures, many apartment
communities install electronic kiosks in the leasing center. Customers who are
waiting to speak with an agent can browse the property's photographs and maps
and view floor plans for vacant units with convenient touch-screen technology.
Virtual Leasing Centers.
Prospective residents unable to visit a
property can access an online leasing center. Customers can view a community
through virtual tours, Macromedia Flash movies, and still photographs; browse
available units; apply for a lease; and even gain rental approval. This method
is most popular with out-of-state customers, but also serves as a timesaving
measure for customers who prefer to research the community before visiting.
The increasing popularity of wireless Internet has
made Wi-Fi an important characteristic for apartment units. Beyond simply
offering Internet service to residents, many communities are equipping each
apartment with Wi-Fi.
With time and convenience key concerns among today's
apartment tenants, resident portals are perhaps the most well-received
innovation in the market. This Web-based technology enables residents to pay
rent, view payment histories, place work orders, and communicate directly with management.
While many communities have yet to deliver these technologies, their
availability soon will be integral to remaining competitive in today's crowded
multifamily market. As renters become more technologically savvy, property
managers must ensure that they are delivering services that keep pace and
provide tenants with the most convenient experience possible.
Adding technology amenities often improves an
apartment property's investment profile suxh as the Laurel Canyon
community in Ladera Ranch, Calif.
Photo credit: Western National Property Management
ADDING VALUE THROUGH KNOWLEDGE
by Lynda Clarke, CPM, senior vice president, NAI Norris, Beggs &
Simpson, Portland, Ore.
Today's property managers are involved in multiple aspects of investment
strategy, including developing and assessing short- and long-term capital
improvements and construction to maximize a building's value, particularly
before a sale occurs. Property managers now make their recommendations to
owners and manage their properties with a focus on an exit strategy, rather
than just maximizing the immediate cash flow.
This enhanced focus makes it imperative that owners hire experienced,
credentialed managers with strong business and finance skills and knowledge of
the markets they serve. Property managers are the watchdogs of property values
and oftentimes are the most knowledgeable individuals when it comes to
assessing a property's value. Property managers must have:
an understanding of surrounding competitive projects as compared to
their managed asset;
knowledge of upgrades and improvements being made to achieve the
information about the tenant mix in competitive projects; and
a solid grasp of the economic drivers that may influence a building's
short- and long-term occupancy.
To deliver these skilled services, property managers acquire additional
training and skills.
While property managers still are responsible for traditional duties such
as customer service; operating expense oversight and vendor management;
overseeing tenant improvements, lease negotiations, and budget analyses; and
marketing to fill vacancies, they now also are responsible for forecasting
market trends, learning new laws and regulations affecting construction and
development, and creating strategies to address a project's unique needs.
Managers also must optimize an asset's value by advising owners on how to
invest in their properties to extract the highest return.
As commercial real estate development increases this year, property
management is taking on an important role for investors. Property managers are
at the forefront, advising clients on how to best maximize the value of their
commercial real estate investments.
By focusing on property management, Younan Properties boosted occupancy at Sepulveda Center in Los Angeles 20 percent, reduced operating expenses 30 percent, and recently sold the property for $50.5 million, generating a 125 percent return on investment.
photo credit: Younan Properties
ADDING VALUE THROUGH TENANT MANAGEMENT
by Sheldon A. Gross, president, Sheldon Gross Realty, West Orange, N.J.
Owners of net-lease buildings, especially single-tenant buildings, often
believe that they do not need a property management company to assist them.
However, net-lease buildings place a lot of regular maintenance
responsibilities on their tenants' shoulders. Many net-lease tenants must
obtain and pay for all operating expenses such as utilities, cleaning,
landscaping, repairs, and taxes. Hiring an effective property management team
for these types of properties ensures that each lessee is performing all its
Triple-net-lease property managers send a team to every property on a
monthly basis to ensure each tenant is maintaining its space in accordance to
the lease and to the satisfaction of the owner. Property managers also should
review lease obligations, maintenance reports, and insurance policies with
tenants. Property managers also can offer tips to tenants on reducing energy
use and costs through items such as lighting upgrades, alternate energy
sources, and recycled materials.
One of the most common mistakes
single-tenant building owners make is to neglect a building's systems
and infrastructure. While the tenant pays for repairs to these items, it
usually is the owner's responsibility to replace them. In every property
management assignment, the first item of business is to inspect the heating,
ventilation, and air-conditioning systems; roofs; gutters; drains; and
downspouts to make sure they are functioning properly. Tenants should make all
necessary repairs to these systems to maintain them and avoid replacement.
Additionally, while owners and landlords may know the status of their
buildings in general, they often are unfamiliar with each individual tenant's
space. Effective property management teams know everything about all tenants
and use appropriate software systems to track leases, repairs, and other
management aspects as well as create in-depth, real-time reports for landlords
For net-lease building owners and landlords, experienced property
management teams can help effectively manage a property and solve repair,
insurance, and energy problems before they spiral out of control and wind up
costing more time and money than necessary.
ADDING VALUE THROUGH FINANCIALPERFORMANCE
by Allen Bowman, CCIM, CPM, director of property management, RBI
Management Services LLC, Scottsdale, Ariz.
One approach to increasing retail property value
is to improve financial performance by creating more income and
prudently minimizing expenditures. A crucial element of this approach involves
implementing accurate cost recovery.
As markets tighten, some companies find themselves playing the real
estate market or acting as entrepreneurial consultants. Companies that occupy
the space they own tend to invest more heavily in the shopping center and often
less carefully in personnel. They waste far too many staff hours getting
approvals, discussing layouts, arguing the merits of various options, and
conducting inefficient meetings.
Personnel costs are the most expensive aspect of running almost any
business. The cost of labor-intensive delays is well known to most independent
consultants, brokers, and service companies in real property industries. Large
companies with in-house staff tend to ignore salary and related costs
associated with property management and at the same time pick at material
costs. The standard response to such problems is to institute a charge-back
system - an in-house rent collection system. This is supposed to make space
users more accountable for their costs; however, the success of charge-back
systems is predicated on markets, sales, and departmental budgets, all of which
can lure tenants into asking for more than they need.
Facility and property managers are presented with several challenges in
these circumstances. They must:
convince their clients not to skip steps and approvals necessary to
get the space they want;
keep time sheets to track and budget the hours they spend producing a
project, including meetings, reviews, and approvals;
formalize agreements with their clients, not only for the cost of
physical improvements and rent, but also for the cost of rendering service; and
incorporate and actively track budgetary limits in their space and
building standards, placing financial limits on such items as furniture costs,
finish costs per square foot, overtime utility charges, and services that would
be provided for a fee by any outside service provider.
ADDING VALUE THROUGH OPERATIONS
by Patricia M. Wassik, CCIM, CPM,
president, Health Connect Properties, Denver
Higher occupancy rates, stable tenants, and a growing healthcare field
make medical office buildings a popular choice for today's commercial real
estate investors. Understanding the maintenance details of surgery centers,
ambulatory care centers, and other specialized healthcare properties gives
investors a clearer picture of MOB operating costs and their effects on a
property's financial performance.
MOB property managers bid out service contracts for maintaining
equipment such as heating, ventilation, and air-conditioning, and other
building systems. In new buildings, most systems are under warranty; however,
manufacturers often require a preventive maintenance plan to be in place during
the warranty period. It is the property manager's job to develop a specific
preventive maintenance plan to ensure all service contractors are performing
the work necessary to keep the warranties in place.
Most MOBs require a contract covering all HVAC equipment as well as hot
water heaters, emergency generators, sump pumps, and water softeners. Medical
tenants may have unique systems, such as
steam generators and compressed air systems. While the tenant may have
its own equipment contracts, the property manager must be aware of the
specialized equipment and its upkeep since it ties into the building's general
Most new buildings cannot obtain a certificate of occupancy without
having an elevator phone monitoring contract in place. Typically elevators are
under warranty for one year; after that, the standard contract is for five
General building maintenance contracts are necessary for items such as
minor plumbing and electrical repairs and trash clean up, which can be provided
on a weekly or on-call basis. Cleaning and trash removal are separate
contracts. While property management only may contract the daily cleaning of
common areas, it is more cost effective and provides better building security
to have tenants use the same service. It is a standard MOB procedure to have
tenants contract their own biohazard waste disposal, which removes the building
owner from liability.
Other recommended maintenance contracts include fire and safety systems,
pest control, window cleaning, parking lot sweeping, and lighting inspections.
Specialized properties such as medical office
buildings present management challenges, but well-manages MOBs often
attract stable tenants.
photo credit: Health Connect Properties