Colorado Real Estate Journal - January 2016
Property management is not the most glamorous side of the commercial real estate industry. We are the boots on the ground, dealing with an infinite variety of issues that sometimes makes you laugh. If I had to relate property management in military terms, we are the infantry – the brave souls storming the battlefield with nothing but determination and adrenaline. I am sure most would rather be in a tank or a plane, but the war cannot be won without boots on the ground. That is similar to the commercial real estate industry. The greatest business plans and ideas will not be successful without having the proper property management team in place. There are many factors that will assist in our ability to drive value and maximize the role we play in the commercial real estate industry. These factors fall into three categories: understanding the asset, creating the proper platform to drive success, and leveraging the platform to creatively solve the roadblocks in the investment strategy. A shortsighted property manager might think that understanding the asset is making sure it has what it needs to operate. The floors are dirty, let’s get them cleaned. The heating, ventilating and air conditioning unit is broken, let’s get it fixed. I’m not saying those are not important, but we have to take understanding an asset to the next level. This process starts by working with your asset manager to have a detailed review of the goals and constraints of the asset. It is impossible to effectively operate an asset if we don’t have a clear building strategy and defined goals. Are we focused on driving rates, driving occupancy or repositioning the quality of the asset? Are there constraints on the access to capital? How long is the hold period? All of these questions affect how we should be approaching our operating and capital plans. Once we have worked through these issues, we can properly create a long-term plan that gives a clear road map to success. So now we have a plan, but we must identify who will be completing the work to accomplish the plan. This is where creating a custom platform for each asset is so important. Not all buildings and business plans are the same, so we cannot approach them in a uniform manner. We need to be flexible and customize the platform to ensure we have the right tools. For example, if a building is being completely overhauled, it would require a larger staff than a building that is stable. Think about the requirements of the plan and hire around those requirements. Some assets need a high level of tenant interactions, while others may be financially complex. Each member of the property team should be selected for the specific role he can play on implementing the business plan. Also, this is true about which vendors make the correct partners. While you may have a trusted landscape company for your Class A office building, it may not fit in the business plan for your industrial properties. Each decision should be made with the business plan in mind; that way you ensure you have the right tools in your toolbox as you work through the processes. Finally we know what we are doing and who is doing the work, but a major question still remains: How? Harking back on the fact that no two buildings are the same, our processes have to adapt. Creative problem solving is key to a property manager taking an asset from good to great. Let’s say that the business plan calls for Class A tenant relations; do you think the standard ice-cream social is going to work? Think outside of the box on what will make the asset unique and memorable. By getting to know your tenant base, you will learn what they enjoy. Once you have that information, you can create a customized tenant relations program that wows. This also is true when it comes to all aspects of operations. A very normal question is, “What projects have the best bang for the buck with the existing capital constraints?” However, once those projects are selected, there are many details that drive value still left to be resolved. For example, the proper selection of which LEED credits to pursue will have a dramatic effect on the return on investment of the project as a whole. An individualistic approach and leveraging your platform, combined with passion and creativity, will unlock those hard-to-reach, final few percentage points of return. The reality is that the boots on the ground overseeing the daily implementation of the business plan will have a dramatic effect on whether or not an investment in an asset will be successful or a complete failure. This fact places a large burden squarely on our backs, but it’s a burden that property managers are more than willing to shoulder. Taking the time upfront to properly align your people, partners and processes will have substantial rewards. While a lot of this may seem straightforward, it is extremely hard to implement as bullets are whizzing overhead.