Property management

True Value

Property managers share ideas for building profit in today's market.

P 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 management."

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.

by Steve Donohue, CPM, president, Western National Property Management, Irvine, Calif.

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.

Electronic Kiosks. 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.

Wi-Fi Capabilities. 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.

Resident Portals. 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


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 competition's value;

  • 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



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 obligations.

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 and owners.

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.

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.

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 utility systems.

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 years.

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


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