By Robert Shovan, CPM, CCIM, Senior Vice President
When an investor acquires an asset, a certain level of return is expected based on the initial acquisition price, periodic cash flows, and disposition price. They rely heavily on skilled property managers to effectively operate and position the asset as it progresses through the investment cycle.
Every client is unique and has a different way of tracking performance, mitigating risk, and ensuring an asset performs to the original underwriting. All real estate investments eventually boil down to a single property in a specific market—a property manager who has intimate knowledge of their market will offer the best level of service and bottom-line value to the client.
From the property management perspective, the following best practices can make a significant impact as it relates to a property’s financial performance.
- Support the leasing team by providing operating expense information, know the telecommunication providers who serve the property, and update building rules and regulations that summarize exterior signage rights.
- Know how your property compares to the market competition and ensure the client knows the strengths, weaknesses, and improvement opportunities.
Tenant improvement construction
- Select efficient and cost effective general contractors.
- Match the general contractor’s experience to the asset type—general contractors who serve Class A, trophy assets may not be appropriate to use for improvement needs at bulk warehouses.
- Understand the tenant’s business and keep the client informed of any performance issues.
- The tenant’s business performance has a direct effect on the property’s ability to achieve its desired net operating income.
- When a tenant can no longer fulfill lease obligations, know when to call it quits and work with legal counsel to get the space back on the market in a timely manner.
Building operation and energy performance
- Recent technological advances have made it easier to monitor energy performance.
- Tools, such as the USEPA ENERGY STAR® Portfolio Manager, and real time energy monitoring allow building engineering staff to view building energy consumption.
- On-site engineering and maintenance staff is the best way to observe daily operations and analyze ways to implement no- or low-cost saving opportunities.
Competitive service providers pricing
- Defining accurate scopes of work helps reduce costs and eliminate unnecessary expenses so local service providers can effectively support building operations.
Real estate tax appeal and consultants
- As occupancies change and properties trade, local real estate tax consultants can be a valuable ally in advising the property owner of any opportunity to minimize real estate tax assessments.
- After a property is acquired, a methodical review of any existing emergency response plans, building rules and regulations, and site-specific operating instruction documents provide an opportunity to learn about the property and ensure the accuracy of the documents.
- All of these documents are needed to mitigate physical risks to the property.
Seasoned property managers understand a one-size-fits-all approach is ineffective for operating real estate. An asset’s financial performance peaks when the property manager understands the clients unique needs, their business plan for the asset, and the local market tailors their services to fit those needs.
Rob joined Cushman & Wakefield in June of 2012 and is responsible for overseeing the Asset Services team that manages 19 million square feet of office, industrial, and medical office assets in the Baltimore market. He has over twenty years of property and facility management experience.