Frequently Asked Questions
Q: What does an Asset Manager do for me?
A: The Asset Manager plays a central role in the successful operation of your property. Specifically, the Asset Manager acts to direct, monitor supervise and evaluate the various service providers (property manger, property staff, leasing personnel, landscaping vendor, service contractors, etc.) to see that they are acting effectively to achieve the owner’s objectives. The Asset Manager will also be responsible for investor reporting and communication. The Asset Manager is the owner’s advocate.
Q: Does my property really need an Asset Manager?
A: An Asset Manager is generally viewed as being very important for the efficient operation of commercial real estate. An Asset Manager should act as a staunch advocate for the owners of the asset by setting objectives, pushing for tight expense controls, active property management and aggressive leasing.
Q: I already have a Property Management firm, what more do I need?
A: Experienced real estate investors will tell you that property managers must be actively supervised by credible and experienced personnel in order to maximize property value. Property management firms are, according to a Regional President of CB Richard Ellis, “only as good as the owners require us to be”. The practical impact of that reality is that your property is likely to receive less attention and focus unless you have an active and aggressive advocate on the job representing your interests….and that is what an Asset Manager is supposed to be doing.
Q: Where does the Asset Manager add value?
A: There are literally hundreds of decisions that impact a property’s financial performance. Some of the areas where a good Asset Manager can have the biggest impact are:
• Strategic Planning – asset managers are essential in making certain that the property has an appropriate strategic plan to maximize income and long term value as well as monitoring the tactics required to achieve the plan’s objectives.
• Tenant Selection – all tenants are not created equal. To determine the proper tenant mix (exposure to certain industries, credit quality, etc.) and evaluate the quality of a specific tenant requires market knowledge.
• Lease Negotiation and Review – your property income and value are directly tied to the strength of the leases you sign. Knowledge of the specific market, contract norms and owner priorities are essential to maximize value.
• Tenant Improvements – construction expenses continue to rise and a good asset manager will diligently ‘value-engineer’ space plans and build-out specs to assure dollars are not wasted. Tenant improvements are often the single largest expense in a property’s budget and a 10% savings can mean that tens of thousands of dollars go directly to the bottom line.
• Operating Expenses – daily operations must be actively managed. Experienced owners will tell you that property managers are prone to write checks (with your money) to make problems go away quickly. Often the tenant is responsible for the expenses and property managers ‘keep the peace’ by failing to carefully enforce the tenants’ responsibilities under the terms of the lease. This common situation can easily impact the bottom line to the tune of tens of thousands of dollars.
• Vendor Selection – proper procedures for competitive bidding among vendors is essential to achieve the best pricing and service. Property managers have a tendency to stick with the same vendors unless they are monitored and this can cost the owners money.
• Capital Expenses – timing the replacement of capital items (HVAC systems, elevator maintenance, parking lot maintenance and the like) has an enormous impact on the financial performance of the property. Property managers are known to make the ‘easy’ decision to replace systems sooner than necessary in an effort to minimize the ‘hassle factor’ for themselves. Active asset management can make a tremendous impact by pushing for repairs and aggressive maintenance rather than replacement and ensuring tht each such decision is carefully evaluated.
Q: These TIC properties are somewhat complex, how does an Asset Manager help?
A: It is that complexity which makes an Asset Manager that much more valuable. The Asset Manager handles all aspects of the property’s operations on behalf of the TIC owners. This relieves the TICS from most routine decision-making responsibilities. An Asset Manager also helps preserve the ‘passive’ status of the TIC investors’ involvement which can be important in preserving a tax deferred 1031 exchange.
Q: How common is it to use an Asset Manager to administer commercial real estate?
A: Every single institutional owner of investment grade commercial real estate utilizes Asset Managers, every one. Knowledgeable, professional institutional investors like Prudential, Northwestern Mutual, TIAA-CREF, CALPERS and others all employ asset managers.