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Weekly Updatesit's late Friday afternoon and you are running behind for a dinner meeting with a major client. You have to give a presentation on Tuesday, your best property manager just resigned and budgets are due. Monday is a holiday, but it looks like your plans have just come to a grinding halt--you need to work that day just to catch up. It gets worse; the boss just called to tell you that your property is for sale... again.
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Take a look around you. Today's real estate world is global, instantaneous and 24-7. Properties are bought and sold at the drop of a hat. Each day, a seemingly new emerging country enters the real estate market. How many of us have experienced a change in building ownership or management in the last few years? How many of our companies have experienced a recent change in executive leadership?
As our real estate world spins ever faster, it's often a struggle to not only acquire or sell a property, but to figure out how to put the right players in place, achieve the owner's objectives and retain tenants.
WHAT DO OWNERS WANT?
Simply put, owners want top managers who know their stuff. Easy enough, right? Not necessarily. When you're juggling a variety of tasks, mistakes are bound to happen--reports are late, due diligence is incomplete and ten ant retention is at risk. Not surpris ingly, owners and executives around the globe have strikingly similar desires in terms of how they view real estate managers today. They are finding that many managers are not conversant in the financial performance of their properties and their communication skills are lacking finesse. Many times managers are so busy looking after the small stuff that they forget the real reason they are there--to look after the owners' goals.
So how do you make sure you are managing your properties to the best of your ability? The following ideas provide some tips I've learned along the way.
BACK TO BASICS
Start by setting the stage. If you've ever been to a play, you know the final production happens after much hard work and preparation on the part of the actors and the crew. The actors must research their characters and rehearse their lines, while the crew runs through lighting cues and prepares props. Imagine how frustrating it would be for the audience to view this preparation instead of the final, polished play. The same holds true in the real estate arena. Practice definitely makes perfect.
In one of my recent training classes, I polled the students to see how many of them reviewed their property's monthly financial statement, includ ing variance reports, on a regular basis. Much to my surprise, no one raised a hand. I immediately gave the students in class a homework assign ment to go back to their offices and review the most recent financials for their properties.
Just like an actor needs to know his lines, property managers need to know where the money goes. It's impossible to understand either your property's performance or your owner's goals if you don't have a good grasp of your financials. Reviewing them on a regular basis will help you effectively spot trends and make it easier to keep the performance of your property high.
Great actors are only as good as their supporting cast, so it is also important to surround yourself with people whose skills complement yours. If your skills lie in the area of people management or financial analysis, try to round out your team by hiring or developing an existing ream member with excellent skills in the physical plant, or in construction. Be willing to hire someone who may be better than you in certain areas. You can learn from them.
FOCUS ON WHAT'S CRITICAL
We're all flooded with a seemingly endless round of "dailies." There are always plumbing issues, employee concerns and tenant troubles to grab our attention. Although these problems do need to be resolved, focusing solely on them can cause us to lose sight of what's really important--achieving the owner's objectives. I was recently asked to sit in on budget meetings as part of a consulting assignment for a small shopping center owner. The property team was in a quandary over which capital improvements the owner might require. The answer to their dilemma was relatively simple--they needed to ask the owner what his objectives were for the property.
Real estate managers must understand that an owners priorities can shift; mergers take precedence, new players jockey for position, generational differences arise. It's crucial to be able to keep pace with both the matket and the shift in priorities of those at the top. You must be able to act and react with them.
If you have a child, you know that when you have the opportunity to review his or her homework, you also have the chance to re-learn things you may have forgotten--math, English or history skills. In property management, we also have an unexpected second chance to re-learn competencies and skills, like the ability to shift focus, to be flexible and to embrace new ideas.
VALUE CREATION IS KEY
The real estate managers primary responsibility is to create value. However, managers do not always understand how they can impact value; the concept can often seem overwhelming. Whether your owner is planning to sell his property in the near future, or is a long-term holder of real estate, he wants to generate and maintain value, Try to whittle the concept down into these more manageable pieces:
Know your property's position in the marketplace. This is crucial, as is a solid understanding of your competi-tion. Your goal is to accurately assess the market around your property to determine whether you will be able to achieve market rents for your owner. Unless your property is in a remote location, chances are you will face competition for tenants, customers or clients from other nearby office buildings, retail shopping centers or apartments.
The first step on the road to value creation is to assess your property objectively. You will need to know everything--the good, the bad and the ugly. Does your retail shopping center have difficulty attracting customers due to its secondary location? Are the appliances in your apartment complex outdated? Conversely, is your shopping center located at the most desirable location in your market? Does your office property boast great tenants and a fabulous management team?
Next, find out as much as possible about the properties that compete with yours and how they impact your owner's goals. If the owner of your office building thinks he or she can command $35 rents (per square foot), but market tents have fallen to $33, your job is to recommend and set rental rates with the goal of increasing value.
Do your homework. Make sure you know your property inside out, physically and fiscally. When did you last conduct a property inspection, visit your tenants or scrutinize your variance report? Unfortunately, we don't always take the time to correct issues until it's too late--and some-times at the cost of losing a tenant. Undoubtedly, similar issues will arise down the line. But don't let them sneak up on you; be proactive.
When you conduct a property inspection, think like both an owner and a tenant. What issues are likely to detract from the tenant's success, or the building's prosperity? What are the hot button issues? If one of your tenants moves out, or a prospective tenant chooses another property, assess the reasons why. Did they find a more suitable space or a better rate? Were there any unresolved communication, maintenance or billing issues?
Now you're ready for the next step--conducting a market analysis. Where will your tenants (and their clients or customers) come from? To determine this, you will need to research the economic and demographic factors of both the region and the neighborhood where your property is located. Certainly, economic conditions of your neighborhood, region or even the country as a whole will affect rental rates, is employ-ment slowing down? Is the population increasing in your area? Both factors will affect the demand for office space, retail stores and apartments. Typically, demographic factors will include such things as age, race, sex, marital status, household income, family composition and education.
If you don't have this information already, how do you start? If you don't have an in-house research group, begin with your property's broker. Most brokerages have a wealth of information and reports to share on market statistics and analyses. Other real estate managers are a good resource, as is online information. Before visiting a new city or taking on a new property, I always check my CPM directory for an IREM colleague to call. I've never been turned down! Another trick if you're working in unfamiliar territory is to research key brokerage companies in the area. They generally have a listing of local brokers and managers you can contact, and may even offer free online market reports.
Figure out what gives your property the competitive edge. Your property may not be the newest, but it may be the best. What attributes does your property have? What unique characteristics separate it from the competition? Knowing what factors give your property the competitive edge is the key to achieving higher rents. Compare these factors with those of your competition using a comparison (comp) survey or grid.
Here's a short list of typical site attributes to get you started:
* Location
* Age
* Building exterior
* Building interior
* Parking
* Access
* Visibility
* Signage
* Tenant mix/synergy
* Floor plate
* Building systems
Brokers and appraisers are an excellent source of market comparison information. Sample comp grids may also be found on IREMFIRST.org.
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