Equipment failures, bad tenants, thefts, accidents, natural disasters…. Every commercial property owner must eventually have to deal with one or more of these issues. So, you’ll need to have a solid management team in place when that time comes. Here are three important tips that owners should remember when hiring a property management firm.
1. Hire the best property management firm in the local market. Unfortunately, some owners mistakenly believe that a management firm’s size is directly connected to the level of client service they will receive. So, they’ll simply hire the largest or best-known property manager available in the area rather than conduct the proper due diligence. Bigger is better, right? Not always. I have been involved with many formal RFP pitches and owners seldom ask questions of the property management team. Just asking them about NOI and cap rates will give a sneak peek as to the level of understanding a manager has regarding adding value to an asset.
Every owner needs to feel secure that their property manager understands the financial complexities involved with an asset. After managing an asset for several years, our management team went through a sales tax audit and the result was a $44,000 invoice for improper sales tax collection. However, we knew that the auditor did not understand the intricacies of how sales tax worked on this topic. It took me two years of rigorous appeals before I was able to successfully prove that the judgement was incorrect. Few management firms are willing to devote that sort of time and energy unless they have a strong work ethic and a high level of expertise.
2. Choose a manager who will positively impact your revenue. A client-centric manager will consistently work hard to develop cost-saving energy efficiency policies, lower your operating expenses, manage real estate taxes, seek additional revenue streams and maximize operating expense recoveries. Commercial landlords cannot assume that the mere fact that a property manager is industry-certified means that they will immediately bring this sort of expertise or dedication to their asset.
Most recently, my team took on a new client and our experienced building engineer discovered he could improve the HVAC system to significantly reduce energy consumption. His insight helped save ownership $30,000 annually, which translates to a $500,000 value-add on a building with a 6% Cap rate. It takes a highly-trained professional to find and fix those types of expensive inefficiencies. Cheaper, less experienced managers/engineers may save you money in the short run, but no matter the property type you’ll always add more value by hiring a better qualified, well-motivated professional.
3. Hire a highly-skilled leader experienced in building talented and dedicated teams. The best property managers must be knowledgeable about several related fields including asset revenue streams, operational processes, taxes, construction projects, etc. But even the most qualified manager needs to be highly skilled at personnel recruitment and management first and foremost. Common sense says that any team cannot possibly do a great job for you if the manager is an excellent leader, but the chief engineer, for example, is a below average performer. The entire property management team must function as a seamless, well-oiled machine to deliver the best in class results.
It takes time, patience and practice to build a talented and cohesive property management team. Managers must be adept at identifying, developing and rewarding their team’s star performers. A good leader knows that their team will work hard as long as the members feel they are being valued. Meanwhile, team members should feel confident that their leader is watching out for them by providing the adequate support, compensation and training. A manager who fails to deliver those necessary tools will always struggle to retain their best personnel. Be sure to ask how long a team has been working together before you hire them. If the group has remained loyal to their manager, then chances are that he/she has earned their trust and respect.
ABOUT THE AUTHOR
Melissa Hazlewood brings more than 16 years of commercial real estate experience to Franklin Street as Senior Vice President of Property Management for the firm. In her role, Ms. Hazlewood provides senior-level oversight of property operations and management for commercial properties in Orlando, Tampa and Jacksonville. She graduated from the University of Central Florida with her Master of Business Administration, concentrating in Business Finance and received her bachelor’s in Business Finance. Ms. Hazlewood holds her LEED Green Associate accreditation from the U.S. Green Building Council (USGBC) and is a licensed real estate salesperson in the state of Florida. She can be reached at [email protected].