Creating value through real estate management.

The typical client looking to select a management firm generally makes the mistake of comparing the font sizes of management reports. Questions like: Are the month-to-date and year-to-date comparisons in adequate detail? ... How do the numbers tie into a reconciled bank statement? ... Will the general ledger cut down on the time required to file year-end returns? ... Are the questions of a client who may very well end up selecting the wrong agent.

This typical client is not our client. Our clients recognize that value is created through leasing decisions based on cutting edge market knowledge, and tenant selection based on criteria such as:

1. Credit

2. Homogeneity of use with other building occupants

3. Estimated longevity of business

4. Highest sustainable rental rate offered

5. Cost of tenant acquisition due to build-out, concession and brokerage costs.

The billing and collection of rents, the preparation of management statements, the commencement and monitoring of collection actions; trumpeted as the "essential" functions by many management firms, are basically providing, "back office" accounting and legal functions. Managing agents who only provide that level of service generally demand and receive fees of no more than 2% of a property's gross income, nor do they deserve more.

Our gauge of the effectiveness of a managing agent is how they handle the marketing of vacant space, the subsequent negotiations with single or multiple prospects, and their level of communications with their client of negotiating progress and choices.

Our clients expect the following as space becomes available:

STAGE 1: The conducting of market surveys so as to support a consensus decision as to a pricing target

STAGE 2: The available space is physically prepped to enhance its attractiveness to potential tenants. Marketing material is prepared and distributed to cooperating brokers through e-mail and postings on our Web-site. Lines of businesses and logical customers are canvassed directly and advertisements are posted in appropriate publications

STAGE 3: Inspections and viewings generated by the marketing program which have resulted in offers are analyzed and spread sheeted so that the bottom line financial benefits of each offer can be compared on a present-value basis. Rental rate, length-of-lease, concession terms and landlord build-out are all factors which, when distilled into a present value formula, allows for a side-by-side comparison of any two or more offers. Next, when the choices are narrowed, a credit profile is established for each prospective tenant, which is then built into the formula by weighing the discount rate. This further refinement of the financial model for each tenant's offer allows our clients to make informed and timely decisions as to which deal is financially the most secure.

The biggest enemy of value creation in managed properties is tenant rollover. The next stage in the decision process is the most critical and the informed client chooses a managing agent more for this value added input than for any other skill set...the agent's ability to handicap the tenant that is "right" for the property.

This quality of "rightness" will be different based on the property type. For example, in retail, tenant mix is very important for both traffic flow and lack of product duplication.

The right tenant for an office building may be one that needs to expand to additional floors in the future.

The growing value of your property is the final test of the agent's skill sets.

John Maltz, SIOR, Greiner-Maltz can be reached at 718-786-5050, via e-mail at jmaltz @greinermaltz.com or at www.greinermaltz.com.