REDnews Property Management Summit BY RAY HANKAMER Takeaway Summary from three panels: During “the year of COVID,” property management has had to layer on numerous protocols focusing on health and cleanliness in managed properties, whether retail, office or other. Technology has stepped up just in time to facilitate virtual showings of buildings, automated planning/scheduling for preventative maintenance and other duties. Keeping in touch with employees working remotely has been key, staying in touch not just on business issues but also “water cooler conversation” issues about family and any built-up stress levels. Collecting rents has been challenging and close interaction with tenants and their business challenges has been key to professional representation of building owners in these uncertain times. Close coordination among all the in-house “teams” in the property management organizations has been important to staying in touch with pop-up problems and managing them. Panel 1: A View from the Top: Managing the Property Management Business Moderator: Kaci Hancock, REIS Associates. Panelists: Taryn Sims, Wulfe Management Services; Connie O’Murray, JLL; Bill Brownfield, Brownfield & Mayerhofer, Inc. • Do what you must to keep existing tenants happy; meet the needs of the property owner; develop and maintain relationships with brokers, capital market people and other industry professionals in property management • Keep in mind that new business may come from newly acquired buildings, lenders foreclosing buildings or new-built buildings • Always be focused on increasing revenues and decreasing expenses: Management 101; follow what your competitors are doing so you know the “market” • Property management is growing to include more and more responsibilities, such as tax protest, insurance management at policy renewal time, and installation of the latest technology, especially with the new demands for cleanliness due to COVID • Depend on vendors and contractors’ expertise to help your maintenance chiefs access the latest tricks of the trade at the lowest cost, and at the earliest moment, to ensure your tenants know you are at the top of your game • Don’t be shy about adding administrative fees to tenants/landlords for vital services you perform that were not anticipated when you were hired or when leases were signed; look to maximize all income, including parking fees, and remember that your building’s value is based on a multiplier of NOI • Lease formats have evolved from a majority Base Year Lease to majority Triple Net Lease; abstracting fairly and honestly each individual tenant lease in your building is important when it come times to compute building operating expenses at year end, and who is responsible for them • There are numerous issues to consider when calculating escalation and sometimes conflicts, such as when landlords deem some expenditures necessary today to lower future operating expenses; property managers must be aware of each individual lease’s economic terms
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• In Houston, office buildings are approximately 75% leased but only 36-38% actually occupied, with many employees working remotely; in New York City 90% work remotely [partly due to impossibility of social distancing in high-rise elevators and mass transit into the city] • When considering add-on fees, landlord and manager need to keep in mind that prospective tenants consider total rent paid under a lease and not just base rent; in 2020 all buildings experienced higher expenses in cleaning and security • Managing and growing your property management team should take as much of your time as just managing your buildings; draw new hires form internal promotion, from up and coming newbies to the industry, and from employees of competitors who are seeking to switch; even look outside of CRE to hospitality and other industries where facilities maintenance and management are central to an employee’s work; recruit from high schools and colleges and provide a professional “ladder” for entry level personnel • Train your team ongoing; property management firms provide a lot more services to their landlord clients today than they did in years gone by; if the landlord asks for extra services not anticipated or included in original contract, do not forget to bill extra for them • As a manager you should strive to be more than just a custodian of a building— how can you build value for your client’s building? • Property management is a collaborative endeavor, and you should strive to maintain relationships with your fellow professionals, even though they may be competitors • Encourage professional achievement through the various courses from IREM, LEEDS, CCIM, CSM, CRM, etc.; highly educated people on your management team help attract new tenants and these credentials back up the recommendation from existing tenants to new tenants to your building • In these intense times of the pandemic, some clients are demanding weekly meetings from their property managers instead of the previous standard of monthly meetings; managers should know details of the viability of their tenants’ businesses, retail or office, to predict their survival and the ongoing viability of leases, and thus cash flow to landlord; today property managers are more involved than ever before with their tenants’ day to day problems Panel 2: Why Good Management Is Important Once Again Moderator: Kaci Hancock, REIS Associates. Panelists: Sheryl Green, Camden Property Trust; Lori Bryant, CBRE; Chase Crawford, Granite Properties. • Good management of a property must include maximized ROI, good budgeting, collected rents, preventative maintenance and timely repairs; a good asset manager is always looking at the bigger picture, i.e. the positioning of his building in his immediate competitive set; ameliorating the financial investment of his client (the building) through strategic management is the final goal of property management; knowing the competition is key for the asset manager to make capital improvement (not just maintenance) suggestions to ensure the building remains competitive
