Owners' forecast Journal of Property Management - Best practices and projections for the road ahead - The Journal of Property Management
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Journal of Property Management
January/February 2021 Vol. 86, No. 1
Owners’
forecast Best practices and
projections for the
road ahead
› The rise of industrial demand
› New HVAC technology
› Anchor tenants in Shanghai
Contents January/February 2021
Features
IREM Maintenance and Risk
® 16
06 Owners’ outlook
Management Certificate
10 Tribute to Lloyd
Hanford Jr.,
Effective building maintenance starts with a skilled maintenance team. And the demand for well- CPM Emeritus
trained maintenance professionals is at an all-time high.
As a leading provider of real estate management education, IREM has expanded its curriculum to 12 Tried and true
include a Maintenance and Risk Management Certificate. By earning this certificate, your maintenance
team will learn best practices and action steps for running a comprehensive maintenance and risk 16 Art of adaptation
management program that reduces potential loss and preserves the owner’s investment.
IREM Industry Partners
20 Marketing
Earning this certificate requires taking an online course and exam automation
Elements of the course include:
• Developing a customized maintenance and risk management program
04
Dashboard
Departments
22 Committee central
Landlord concessions,
• Conducting and monitoring property inspections “mini cities” in malls, and 24 Technology
New pricing! office predictions
• Maintaining building systems
$430 members 28 DE&I
• Developing emergency and disaster plans $510 non-members 30 Global practices
32 Property spotlight
Experience the difference a trained maintenance team makes in optimizing 34 New certifications
a building’s performance. 36 Member updates
30
REM-013
37 In memoriam
Learn more at irem.org/MaintenanceCertificate.
Cover image: iStock.com/GaudiLab
irem.org/jpm | | 1
President’s letter
After weathering the storms of 2020, as the 2021 IREM
Jan.Feb 2021 / Vol. 86, No. 1
President, I’m turning the page over to a new year and a
fresh, clean start. The historic challenges we faced? Those
are left behind, and we’re all back to our own version of
President | W.A. “Chip” Watts IV, CPM, CCIM the “business-as-usual” state of affairs we’d been pining for
President-Elect | Barry Blanton, CPM throughout the previous year.
Secretary/Treasurer | Renee M. Savage, CPM, CCIM
CEO/Executive Vice President Oh, but if only that were the way
Denise Leduc-Froemming, CAE, MBA, CPA | dfroemming@irem.org of things.
Vice President, Knowledge Solutions
Wendy Becker, J.D. | wbecker@irem.org
As leaders in real estate manage-
Vice President, Marketing and Business Development ment and in our communities, we
Donna August | daugust@irem.org
excel by meeting challenges head
Image: iStock.com/andresr
Production Manager
Jared Kimball | jkimball@irem.org on, armed with a clear under-
Director, Corporate Business Development/Advertising Sales
standing of the situation and a
Brian Lozell, CPM | irempartners@irem.org game plan for how to navigate
our way (and our owners’ ways)
Chip Watts, CPM, CCIM
JPM ®, Journal of Property Management (JPM ® ISSN 0022-3905) is published to the best possible outcome. And
bimonthly by the Institute of Real Estate Management, 430 N. Michigan Ave.,
Chicago, IL 60611. Internet: www.irem.org. This publication is provided as a this much is clear: As tired as we all may find ourselves example of that than completely reimagining the future
medium for the expression of individual opinion concerning management
practices and procedures. The articles and advertisements printed herein (researchers have dubbed this “crisis fatigue”), the chal- potential of an underperforming property? In the feature
do not necessarily represent the endorsement of the Institute of Real Estate
Management or of the majority of its members excepting such statements that are lenges of 2020 remain the order of the day as we start the on adaptive reuse on P16, you can read about what distin-
so designated. The editors exercise only a general supervision of the material and
Access to the latest assume no responsibility for claims made in advertisements or for opinions and new year. This issue of JPM offers a look at owners’ outlooks guishes it as a unique form of property redevelopment
statements expressed in articles.
Technology, Trends, & and the conversations that are top of mind as we take a and how that translates into a need for specialized manage-
IREM ®, Certified Property Manager ®, CPM ®, Accredited Residential Manager ®,
ARM ®, Accredited Management Organization ®, AMO ®, Income/Expense Analysis ®,
moment to plan for the year ahead. ment experience.
Hot Topics whenever Expense Analysis ®, MPSA®, and JPM ® are registered marks of the Institute of
Real Estate Management.
you need it. Striving to meet our owners’ goals and objectives is what An exciting addition to JPM that I’m proud to see make its
Reprints: Material in this publication may not be reproduced in any form
without written permission of the publisher. For volume reprints or e-prints, defines our work every day as property managers; in that first appearance is our new column on diversity, equity, and
email jpm@irem.org.
way, this year is no different than any other. You can get a inclusion (DE&I). Take the opportunity to get a better idea
Copyright ©2021 by the Institute of Real Estate Management. All rights
reserved. Periodical postage paid at Chicago, Illinois, and at additional close-up look into one property investor’s current view of of what DE&I really means and why it’s important in this
mailing offices. Subscription rates: $62.95 for one year; single copy $8.53.
the market in the owners’ goals feature on P6. One step we debut installment on P28.
IREM® Accelerators: Remittances, undeliverable copies and subscription orders should be sent to
the JPM ® offices.
can all take in finding our way through the upcoming year’s
Postmaster: send address changes to JPM ®, Journal of Property Management,
challenges will be making our spaces as safe as possible for As we were finalizing this issue of JPM, we received the sad
ON-DEMAND Fifth Floor: 430 N. Michigan Ave. Chicago, IL 60611. Printed in U.S.A.
Institute of Real Estate Management Diversity Statement | IREM practices those who use them. Check out the technology column on news of the passing of former IREM President Lloyd D.
diversity. We are an inclusive organization that embraces and values differences
and welcomes individuals of all races, genders, creeds, ages, sexual orientations, HVAC on P24 for an overview of some of your best options Hanford Jr. Lloyd was a true pillar of IREM, and you can read
Curated, convenient learning gender identities, and national origins and individuals with disabilities, providing
for ventilation and airflow systems as part of your approach about his life and impact in a tribute to his legacy on P10. We
an equal opportunity environment among its members, vendors, and staff.
to accelerate your career success. to building and occupant wellness. also remember our other IREM members who passed during
Institute of Real Estate Management Sustainability Statement | The
Institute of Real Estate Management (IREM) is dedicated to supporting real 2020 in our annual tribute on P37.
estate management strategies that advance an environmentally sustainable and
economically prosperous future. One of the enduring values that IREM offers to our
members — where we excel—is in our commitment to insti- Throughout this new year, we’ll continue to support you,
Visit irem.org/ondemand tutional learning. The many years that IREM has been serving our members, in the ways you want to be supported. We
to learn more and register today! the real estate management profession have seen a long, unbro- all stepped up to face real challenges in 2020, and I look
ken chain of lessons earned from lessons learned. Go beyond forward to making sure we continue to do so in 2021.
industry standards and look to best practices as we all continue
to grow as real estate professionals. Read more on P12.
Prefer real-time interaction? Check out
our upcoming ACCELERATORS: Live
Where one sees a challenge, another spots an opportunity; W.A. “Chip” Watts IV, CPM, CCIM
Webinars schedule at irem.org/webinars Publication Management
847-205-3000 | glcdelivers.com IREM members are opportunity seekers. What better IREM President
irem.org/jpm | | 3
dashboard
From mall to A renter’s market
“mini city” 2021 forecast In cities with historically robust
Brookfield Property Partners is rental markets, landlords are
giving approximately 100 shopping CBRE recently released its 2021 U.S. learning to make concessions
malls new lives as “mini cities.” Real Estate Market Outlook, looking at to fill up their units with
Brookfield estimates it will spend retail, multifamily, data center, office, desirable tenants.
between $800 million and $1 billion and industrial spaces, among other In New York City, where median
annually over the next few years as it industry considerations. Below are rent prices are at their lowest since
adds office and/or residential space to some of the highlights of the report: 2011, here are some ways landlords
the shopping destinations. Another are attracting renters:
25 shopping malls will be refurbished > Nearly 250
million No fees. Seeing a lease without
with the intention of selling them. square feet of industrial net a broker’s fee is enticing to
All of the shopping centers were part absorption is expected in 2021, more
potential renters.
of Brookfield’s 2018 General Growth than the previous five-year annual
Properties (GGP) acquisition. average of 211 million square feet. Free rent. A month or two of
Source: ICSC, “Brookfield to convert GGP malls to mixed-use
free rent is no longer just a nice
‘mini cities’”
> U.S. multifamily investment is offering—it may be essential.
expected to increase by 33% in 2021 Wiggle room. Landlords are more
to $148 billion. open to negotiate on issues like
Changing work landscape (Read more about the demand for industrial properties in the
property spotlight column on P32.) length of the lease or other policies.
The Urban Land Institute recently released In-unit amenities. For renters
the “Future of Work 2020: A global real > After record growth in 2020, concerned about keeping social
estate players’ point of view,” which e-commerce sales are forecasted to distance and reluctant to use a
surveyed 555 real estate professionals slow in 2021 as brick-and-mortar public laundromat, in-unit washers
worldwide. The report offers professionals’ sales rebound. This predicted and dryers are becoming hot
predictions of what long-term changes they decline in the rate of e-commerce selling points.
expect to see in work and office spaces. sales growth would be the first
Source: Forbes, “Manhattan’s rental market is all about
decrease since 2008. concessions and more concessions”
96% expect increased demand for Source: CBRE
flexible office footprints
Images: iStock.com/IGphotography/alvarez/Easyturn
66% expect flexible lease contracts
60% expect more widespread use “Learning and innovation go hand in hand. The arrogance
of coworking facilities by large of success is to think that what you did yesterday will be
corporate occupiers
sufficient for tomorrow.” —William Pollard
Source: Urban Land Institute, “Future of Work 2020”
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| Jan.Feb 2021 irem.org/jpm | | 5
feature | ownership
Owners’outlook A reflection and look at what’s to come
By William Sheridan, CPM, CCIM
In a world currently filled with more uncertainty The decision to transition
than I’ve experienced in my lifetime, it’s only appropriate In late 2019, we decided to sell our student housing
to write an article discussing how 2021 might look. At first property in Chico and began looking for a new opportunity.
blush, one might very well consider the Ouija board as reli- The uncertainty being injected into the real estate rental
able a source of guidance these days as any other. But upon business in California presented a risk that was too
reconsideration, I find there are some great lessons worth great for comfort, so we began to consider investing in
sharing from my perspective as a small owner of multifam- other states. Moreover, the city of Chico is essentially a
ily property in Northern California. single-industry town, with the primary employer being
the California State University, Chico. That reality also
My home in Chico, California, has certainly had its share presented significant financial risk. As long-term cash
of challenges over the past few years. My wife and business flow investors with a goal of achieving stability well
partner, Geralyn Sheridan, and I have been most fortunate into the future, we ultimately determined that investing
to have weathered the storms well. This outcome is thanks exclusively in California was no longer looking like a
in large part to our business and property management sensible approach.
decisions, along with, of course, a certain amount of luck.
Search location determination
The lead-up to 2020 After careful consideration, we focused our search in
We are risk-averse cash flow investors and always have been. two markets: Reno, Nevada, and Denver, Colorado. As
Our view is simple: Why purchase an asset for the long previously mentioned, we rely on our professional network
term that does not generate an acceptable cash flow? This of colleagues and mentors for decision support. That
aversion to risk has led us to be generally cautious when cadre is also key to our business continuity strategy.
making business decisions. Leading up to 2020, the pillars In Reno, several friends I have known for years oversee
of our multifamily operations were based on strong under- local management operations and are personally invested
writing of our residents, responsive facility maintenance, in that metropolitan statistical area. Unfortunately, we
the retainment of strong cash reserves, and an overarching found nothing there that sufficiently whet our appetite.
philosophy that if we take good care of our property and our
residents, the profits will surely follow. We then explored Denver. As an alumnus of the University
of Denver’s Burns School of Real Estate, where I earned a
Image: iStock.com/Andrei Stanescu
Our thoughtful and studious approach to the profession has master’s degree in real estate, I have friends and advisors
led us to carefully study the practice of being a real estate who I knew could provide the local support we would need
investor and operator both in professional organizations if investing there. Fortunately, I hold a real estate broker
and within academia. This combination of a solid education license in Colorado, which we knew would allow for a
and a well-maintained professional IREM network have smoother transition. Each of these factors made Denver
proven to be invaluable to us and our business strategy. an appropriate locale to consider.
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| Jan.Feb 2021 irem.org/jpm | | 7
feature | ownership
Asset class determination salon services, the neighborhood bar and grill, and a suc- Meanwhile, our Colorado asset is
When we went in search of an opportunity, we decided that cessful pizza restaurant. We liked the diverse tenant mix, at 91% occupancy, with most of the
a pure multifamily asset was not something we wanted to the asset class of the tenants, and the quality of the asset. vacancy coming from a brand-new
pursue, so we studied various other asset classes. The most building with space just being finished. We thoroughly think through questions
desirable was the logistics subclass within the industrial After some discussion, we prepared a letter of intent and We have had only a couple of COVID-19
asset class, but that proved to be unfeasible for a couple of optioned the property. At the same time, we prepared an workouts from commercial tenants.
like: “Does current or emerging technology
reasons. First, it would probably be a single user, and in late offering memo for us to be relinquished of the student In both cases we agreed to cast the threaten the tenants’ business models?”
property in Chico. Our sale in California consummated in deferred rent across the entire term
2020 that simply presented too much risk. Second, being
and “Do COVID-19 or social distancing
a competitive player calls for a large facility, probably over December 2019, and we closed on our new Colorado prop- of their current leases with the incre-
500,000 RSF. I would have wanted precision-leveled floors, erty in January 2020. mental income stream subject to the requirements threaten the viability of the
32 feet or more in clear height, and modern construction. normal bumps to adjust for inflation. tenants’ businesses?”
A nice wish, but beyond our means. Fast forward—February 2020
In early 2020, we were well postured to address a market Our management philosophy has
Other possible choices included grocery-anchored properties cycle. Having said that, nothing could prepare us, or any- served us well in the past and serves
with inline tenants, properties that included essential busi- body else, for COVID-19. us well today, despite industry
nesses like medical office and other service-provider tenants, challenges brought about by the pandemic. And we aren’t businesses?” This approach will give us more clarity and
or flex space in great locations. We utilized this search crite- On Feb. 28, we notified all tenants of the serious nature of the only ones. Jeff Lapin, CPM, vice president of property foresight in decision-making on all levels as we move
ria in line with our financial limits and began to explore. this pandemic and sent a copy of the CDC guidelines to management with Rocklin, California-based Coastal Part- forward. When looking at a prospective asset, we apply the
each tenant. This was immediately after people from around ners, LLC, echoed this confidence. “We are optimistic about same asset-class consideration in our search criteria, but
The search and the nearby Travis Air Force Base tested positive for this the market prospects in most areas in 2021 based on the we will evaluate the tenancies or potential tenancies to
the purchase new virus. strong pre-COVID-19 economy and how quickly the econ- ensure these entities are essential in nature.
First, we took a run at a omy is currently recovering.” He added, “Our goal remains
beautiful 65,000-square- In the ensuing months following the outbreak of COVID-19, the same as it was before COVID-19, which is acquiring Practice restraint
foot flex space in Broomfield, we fared somewhat better than many. We attribute our good properties that have significant upside potential based on The rush to keep deal flows going can be insatiable for
Colorado. When studying the fortune to our adherence to applying industry best practices solving preexisting issues with marketing, market position- investors, brokers, and lenders throughout the nation.
tenant rollovers, we consulted and ethical behaviors toward all tenants and to our careful ing, physical challenges, and large vacancies.” On Oct. 22, 2020, Trepp noted in its podcast that large
with experienced tenant reps considerations when making the Arvada purchase. commercial mortgage-backed securities (CMBS) borrow-
who advised that we should Lessons learned ers, primarily with shopping malls, are now offering and
budget $50–$70 per square Post-COVID-19 outcomes Claudia Yorton, CPM, of C.Y. Property Management, Inc. in obtaining approval to engage in “deed in lieu” workouts,
foot for tenant improvement As we enter 2021, I can evaluate just how we have fared. Chico, California, is looking ahead to 2021 with an eye on whereby mall owners hand over the keys and a quitclaim
allowances—a cool $1 million keeping properties competitive. “Going into 2021, we would deed, losing all equity. It was reported by Trepp that some
in tenant improvements for Our Chico multifamily asset, a conventionally financed advise that property owners and managers keep rents $40 billion in loans are in the pipeline or have already
We are a 20,000-square-foot space. 84-unit property, has experienced a normal cycle of notices stable, keep a close eye on the competition, focus on tenant deeded back property. Also concerning, especially with
optimistic Then, we obtained the roofing and re-rents. We did have one COVID-19 request for relief, retention and satisfaction, cut unnecessary costs, and start respect to CMBS deals, are the looming maturities that
about the report, which indicated that the but that tenant had a capable co-signer; clearly our under- planning now for big expansion and new strategies to must be refinanced. Lenders will adjust spreads as a risk
65,000-square-foot roof would writing policy paid off there. As of this writing, that asset is implement as soon as the market starts to open up again.” mitigation on these lower-quality properties and borrow-
market need replacement soon at a cost unaffected by COVID-19, but our concerns for the next few ing costs will increase substantially for some.
prospects in of $750,000. We passed on that months remain as the impact of COVID-19 benefits phasing I believe the next pandemic is around the corner and will
most areas in opportunity, as it seemed like out takes hold. probably occur within our lifetimes. We want to be ready As we move through the new year, investors would be well
2021 based a fast track to oblivion. and generally well prepared. Below are a couple of key advised to curb their desire for deal flow in favor of a more
Our decision to diversify outside of California was in part takeaways from our experience as property owners responsible asset-class selection criteria.
on the strong Next, we found a five-building, a result of the single-industry community based in Chico, heading into 2021.
pre-COVID-19 mixed-use property in nearby as related to California State University, Chico. On May 12, William Sheridan, CPM, CCIM, is the
economy and Arvada. It was newer, with 2020, California State University Chancellor Timothy White Tweaked asset management criteria 2021–2022 IREM regional vice president
buildings constructed between ostensibly closed the entire CSU system, including the We have changed our search parameters for any future for Region 11, encompassing chapters in
how quickly 2002 and 2019. Its construction Chico campus. In August 2020, when the limited students business we may engage in. We now augment our asset California and Hawaii. Together with his
the economy was top notch—all steel and did return, many proceeded to socialize in groups, and class approach to include an essential tenancy consider- wife and business partner, Geralyn, he
is currently concrete with brick curtain COVID-19 spiked. Immediately thereafter, the campus was ation. We thoroughly think through questions like: “Does has 36 years’ experience in the acquisition,
walls. The tenancy was primar- again shut down for all on-campus classes. Our old asset current or emerging technology threaten the tenants’ development, operation, and disposition
recovering. ily medical office, professional appears to be struggling, and we are fortunate to be watch- business models?” and “Do COVID-19 or social distanc- of multifamily and mixed-use assets in
—Jeff Lapin, CPM consultancy, some multifamily, ing from afar. ing requirements threaten the viability of the tenants’ California and Colorado.
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| Jan.Feb 2021 irem.org/jpm | | 9
feature | tribute
Lloyd was born in San Francisco in
Tribute to
1928 into a real estate family. After
graduating from the University of He earned his CPM in 1954 when he was
California, Berkeley, and serving in
the U.S. Army, he joined Hanford- 28, becoming actively involved in the
Freund & Company, the business organization before taking the helm as
his father founded in the 1930s that
he would later run. The company IREM’s president in 1969. He followed
remains in operation today and is in the footsteps of his father, Lloyd D.
Lloyd Hanford Jr., an AMO-accredited firm. An appraiser
who held the MAI designation,
Lloyd was also owner of Hanford-
Healy, a national valuation and
Hanford Sr., who had been president of
IREM 11 years earlier.
consulting company.
CPM Emeritus As an IREM instructor, Lloyd was exceptional, both for the
intellectual curiosity and knowledge that he brought into the
classroom and for his ability to energize and engage students
like nothing else we have ever experienced. The only lessons
seem to be that eventually things turn around. But the
missing data point is ‘WHEN’.”
Honoring the legacy of an IREM icon seeking their CPM designation. Teaching at a time when
IREM classrooms were often filled with 100 or more students, In 2019, when the IREM Global Summit was held in San
Lloyd became a mentor and advisor to thousands of newcom- Francisco, Lloyd was among the past presidents who were
ers to the field of property management who were fortunate on hand to share their perspectives with current IREM
enough to learn from a true master. In 1983, Lloyd was leaders and get together for an evening of camaraderie and
recognized as the recipient of the first Lloyd D. Hanford Sr. storytelling. A number of years had passed since Lloyd last
Distinguished Instructor Award, named for his father, who attended an IREM Global Summit, and he and his wife, Noel,
IREM lost one of its also was a highly respected educator. It was a public acknowl- were warmly welcomed. “As the 2020 IREM president, I was
most inspirational and influen- edgment of the many lives he had touched as a teacher. so fortunate to meet Lloyd in San Francisco last September
tial leaders when Lloyd D. Hanford Jr. at the IREM Global Summit,” says Cheryl Gray, CPM, upon
passed away on Nov. 25, 2020, When he wasn’t imparting his wisdom in the classroom, learning of Lloyd’s passing. “He was so gracious, and his
at the age of 92. Lloyd was sharing his expertise through his writings, which passion for our industry was ever-present through all the
frequently appeared in the Journal of Property Management, challenges of 2020.”
Lloyd Hanford Jr. served IREM in mul- The Appraisal Journal, and other academic publications.
tiple ways—as a leader, an educator, Indeed, he never stopped studying and writing about real Lloyd was a dedicated tennis player and an avid downhill
a writer, a mentor, a colleague—along estate. As recently as April 2020, observing the COVID-19 skier and, later in life, he enjoyed golf and bridge. As he
the way elevating the stature of the pandemic and contemplating how it might impact commer- wrote on his Facebook page: “Gave up downhill skiing at
real estate management profession cial real estate, he wrote a blog post entitled “What Is Real age 75 and took up golf. A mistake.”
for the benefit of all engaged in it. Estate Worth Today?”
In addition to his enthusiasm for skiing and real estate,
He earned his CPM in 1954 when he “Today, we are caught in a worldwide pandemic that has, at Lloyd also had a passion for travel and for helping at-risk
was 28, becoming actively involved least temporarily, locked down most of the global economy,” youth. The latter he demonstrated through his involve-
in the organization before taking the he wrote. “Everything is closed and people are staying at ment with The Guardsman, a Bay Area group that provides
helm as IREM’s president in 1969. He home.” After remarking that some retail businesses may not outdoor education programs and scholarships for disadvan-
followed in the footsteps of his father, make it through the crisis, that rising unemployment could taged young people. His passion for travel led him and Noel
Lloyd D. Hanford Sr., who had been mean falling demand for office space and missed rent pay- to embark on more than 50 cruises to exotic destinations
president of IREM 11 years earlier. ments, and that any planned travel is likely to be deferred, around the world.
“IREM has lost an extraordinary mem- Lloyd concluded that “These concerns and hundreds more
ber whose family laid the groundwork should tell us that no real estate professional has any more Lloyd is survived by Noel, his wife of 66 years, and his two
from the beginning for what IREM is than a ‘gut feeling’ as to the worth of any property. There sons, Tim and John, all of whom were with him when he
today,” says Tan Tek Lum, CPM, IREM’s is no current data to review and no recognizable demand died peacefully at his home in Rancho Mirage, California.
1982 president, who considered Lloyd to study. Often, we are able to draw from past experience He is also survived by two grandchildren and two
“a dear friend and mentor.” to develop a view of the future, but the present situation is great-grandchildren.
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feature | best practices
Tried
and true
Adopting best practices can optimize operations
and keep tenants and properties safe
By Robert S. Griswold, CPM, ARM, CRE, CCIM, PCAM, CCAM, GRI,
and Ann Reisch, CPM, CRE, CCIM, RPA
A “best practice,” those services for maximum benefit In some cases in the real estate
as defined by Black’s Law Dictionary, and efficiency. industry, a best practice can also be
is “an optimally efficient and effective an industry standard. In other cases,
mode of proceeding or performing a Industry standards, on the other they may be different—sometimes
particular activity in business; it’s a hand, are benchmarks that are used significantly different. When there are
description of such a mode of proceed- to determine whether there’s been various methods and ways to perform
ing or performing prepared so that a failure to adhere to the most basic a service, function, or task, sometimes
other people or companies may learn minimum expectations in each situa- the outcome falls somewhere between
and follow it as a guideline or rule.” In tion. Failure to meet these minimum these two extremes.
lay terms, a best practice is the best standards is the basis for many of
Image: iStock.com/ Orbon Alija
way to perform an activity under the lawsuits we see in the real estate Since 2010, IREM has published best
optimal conditions and circumstances. industry. In litigation against prop- practices for the delivery of real
As we strive for excellence in the erty owners and property managers, estate management services. These
services we provide, best practices can it’s critical to determine whether the practices are reviewed regularly and
serve as a roadmap on how to provide industry “standard of care” was met. updated as needed. IREM has just
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| Jan.Feb 2021 irem.org/jpm | | 13
feature | best practices
released a new and revised edition of this pub- various sources: broadcast news, print media, and online. experienced company that can best meet those needs
lication that should be reviewed by all property When newsworthy events occur on a property we own or while optimizing value.
owners and professional property managers. Data security is critical for companies manage, news media sources routinely show up on the
“Best Practices: Real Estate Management Service” scene uninvited and with no advance notice to report their Tenant/resident privacy
includes 62 best practice statements organized of all sizes, whether large global own version of the “news.” Their objective is to deliver a Privacy is a concept that is much discussed, but not often
into four categories: Management company, corporations or small local firms. fast-breaking news story that will generate clicks, and accu- fully appreciated as an important issue in property manage-
Client relations, Management of the property, racy may not be their top priority. Recall the old journalistic ment, with serious negative implications if proper policies
and Tenant/resident relations.
It lies at the core of running adage: “If it bleeds, it leads.” The news media, combined with and procedures are not in place. Our residents and tenants
a successful business. citizen “journalists” in social media, relish bad news that have the right to determine whether, how, and to what
Incorporating these best practices into your com- can be sensationalized, and there are rarely any repercus- extent biographical, personal, and/or financial information
pany’s operations ensures that you are operating sions for the spreading of false information. about them is communicated to others, especially sensitive
in accordance and compliance with other real tenant/resident safety. Let’s explore a few of the practice and confidential information. The business of leasing and
estate management companies that strive for excellence. statements a bit further. Therefore, it is imperative for property management profes- managing property requires the collection and storage of a
They may also serve as an aid to the defense of your case sionals to develop and implement a coordinated approach to considerable amount of sensitive and confidential informa-
should you find yourself facing a lawsuit filed against Data security addressing the media in a prompt manner at an established tion in the normal course of business.
your firm. Data security is the process of protecting digital data from location to minimize rumors by providing consistent, accu-
identity thieves, data breaches, or devastating cyberattacks. rate, complete, and timely information from verified sources. Individuals have the rightful expectation that all the data
Adopting these best practices is not just prudent for With the increased use in society—and especially in the Recognizing the media as a resource to help you deliver per- they provide will be kept private and not shared with others,
protecting property owners and professional property man- real estate industry—of computers, laptops, tablets, smart tinent, critical, accurate information minimizes distractions except as agreed upon in writing in advance for application
agers from the negative results of litigation; it may also give devices, websites, networks, and other digital equipment, for emergency responders and can reduce chaos during screening or the like. Failure to protect this information
your firm a competitive advantage in the marketplace as it is extremely important that management companies emergency situations. Advance planning for these events violates a person’s privacy, may be a violation of laws and
you compete for third-party business. Property owners are emphasize the importance of data security and instill a cul- and determining how the company and its employees will applicable regulations, and can lead to identity theft or
always interested in minimizing their risk in owning real ture of safeguarding the confidential data that is entrusted represent themselves to the news media is vitally important other unintended consequences. The management company
estate, so having a third-party professional property man- to real estate management organizations. to ensure the company projects a favorable impression in should develop, maintain, and enforce policies and
ager that develops and implements policies and procedures the community. procedures on maintaining tenant and resident privacy
that are consistent with those best practices is certainly Data security is critical for companies of all sizes, whether and determine under what circumstances information
a worthy goal. large global corporations or small local firms. It lies at Systems efficiency must be shared.
the core of running a successful business. It gives others Advances in technology and evolving business concepts
As the result of a continuously evolving business climate, the confidence that their data is being collected, trans- regularly create opportunities for innovation and improved Member benefit
advancements in operating practices, and additional ferred, stored securely, and reviewed only as needed. Data systems efficiency. By reviewing industry journals and The updated “Best Practices: Real Estate Management
knowledge gained through mutual collaboration, IREM security can make or break your organization; one single publications, management company leaders may identify Service” is included as a member benefit for IREM
formed a working group of competent industry profes- vulnerability is all that an attacker needs. Many times, new ideas and opportunities that could enhance or improve members, and is available for purchase on irem.org.
sionals from a broad cross section of product types and these breaches are unwittingly through third-party ven- their current practices, capabilities, and performance. By
geographic locales. This working group discussed, debated, dors with access to your systems, so your approach needs routinely identifying and exploring new ideas and evaluat- Robert S. Griswold, CPM, ARM, CRE,
and refined their ideas and incor- to include your vendors and suppliers, too. Data secu- ing them, compared to your assessment of the quality and CCIM, PCAM, CCAM, GRI, served as the
porated their practical experience rity is important for companies to ensure the safety and efficiency of current operations, a management company chair of the Best Practices publication
to create additional new practice confidentiality of their data related to clients, employees, can maximize its efficiency and performance in the delivery revision working group. He is an author
statements while updating others. tenants, and others. Implementing data security measures of services to its clients. and president of Griswold Real Estate
Included in the newly revised edi- ensures business continuity in today’s data-driven envi- Management, Inc., AMO, in San Diego. He
tion are new practice statements ronment. Not only does it help to avoid data breaches, Contracted vendors is also an IREM instructor and a member of
on the topics of data security, news but it also shields your company against unnecessary Contracted vendors play an important role in providing the IREM Governing Council.
media response plan, systems financial costs, damage to your company’s reputation, and the services necessary to operate a property optimally.
efficiency, contracted vendors, and a loss of company profits. Having a broad, technologically Providing services beyond those of the employees working Ann Reisch, CPM, CRE, CCIM, RPA, served
tenant/resident privacy. up-to-date data security plan in place lowers the risk of on the property, they are an extension of the management as the vice chair of the Best Practices
a data security breach and is necessary in the current team. A property manager is only as good as the entire publication revision working group. She is
The latest Other significant updates were business environment. team, and no matter how good the in-house staff may be, principal at Reisch Consulting Group, Inc., in
edition of made to the existing practice state- a weak contracted vendor can wreak havoc on even the Incline Village, Nevada. She is also a member
Best Practices: Real ments concerning client property News media response plans finest customer service reputation. It is incumbent upon of the IREM Governing Council and has held
Estate Management insurance; insurance claims; prop- In today’s fast-paced information technology environment, the management company to determine the appropriate several other positions at IREM, including
Service is available erty security; environmental, health we have become accustomed to instant media reporting scope of work needed from each contracted service director of the IREM Foundation and chair of
now at irem.org. safety and hazard control; and and the “24-hour news cycle.” We obtain our news through provider and to retain the services of a qualified and the Industry Standards Advisory Board.
14 | ®
| Jan.Feb 2021 irem.org/jpm | | 15
feature | adaptive reuse
It seems you can’t go a day Regardless of the influences that have brought AdRu to
without seeing headlines about the creative ways in which the forefront of the commercial real estate industry, it’s
an obsolete space is getting a new life, whether it be a retail becoming another core property type, much like multifam-
location turned into a warehouse, an old schoolhouse into ily, retail, office, industrial, or self-storage. In fact, according
multifamily rental units, or a former train station into a to research I published in a 2018 paper with the CCIM
shopping destination. These transformations are examples Institute, there are more completed and underway adaptive
of adaptive reuse (AdRu)—a term that has gained recogni- reuse projects nationwide than all of self-storage inventory
tion in recent years. or construction. So why doesn’t AdRu have its own category
and ongoing research coverage like other CRE property
The growth of AdRu has been driven by many factors: types?
• Declines in developable and entitled land within urban Adaptive reuse challenges
metropolitan statistical areas (MSAs) The challenges to adaptive reuse development and investing
• Increased demand for affordable housing alternatives in are well recognized by those who have ventured to dip their
contrast to cost-prohibitive new construction toes into these waters. Among the most common chal-
• The retail “e-volution” resulting in thousands of closed lenges in AdRu are:
retail stores that need a new purpose
• Creation of Opportunity Zones from the 2017 Tax Act • Costs due to the unknown of what might be involved in
• The evolution of the environmental, social, and governance successfully repurposing a building
(ESG) movement bringing capital to vacant buildings or • Local government opposition—few cities and counties
blighted urban areas via “impact investing” understand adaptive reuse or maintain a segregated
Art of
adaptation
By K.C. Conway, CCIM, MAI, CRE
Image: iStock.com/asbe
A property management perspective of adaptive reuse
16 | ®
| Jan.Feb 2021 irem.org/jpm | | 17feature | adaptive reuse
goals of the redevelopment. The good news is Managing an AdRu property bespoke to specifically fit a particular reuse. Maintaining
The Greyhound Bus that, as expressed in my conversation with With an established understanding of adaptive reuse and systems requires knowing who designed them and where
Terminal in downtown
Birmingham, Alabama,
Mouron, we can begin to outline a general frame- its challenges, let’s focus on the property management per- parts can be sourced, but perhaps it’s more important to
will be converted to work for how to view AdRu projects and maximize spectives of this type of asset—after all, it’s a CPM that is know what your Plan B is for restoring a system if it goes
Rendering by Michael Cherepak of Williams Blackstock Architects
office space. a project’s chances of achieving long-term opera- likely to be entrusted with the management of such a com- down and takes days to repair. Allocation of common-
tional success. plex asset. There are essentially three aspects of property area expense among users will be a perennial challenge,
management unique to adaptive reuse that are not always requiring more time to explain and document the fair-
Adaptive reuse explored fully appreciated. ness of the allocations. Leasing approvals will take longer,
The best starting point is to establish a good as you will likely be dealing with a startup company or
understanding of what constitutes an AdRu build- 1. Use combinations and points of friction smaller business with less credit.
ing, and then examine the issues and challenges Most adaptive reuse properties involve more than one
confronted by the property managers who eventu- use. Not all uses play well together, and management Mouron’s bottom line is, “Do your homework and make
ally will undertake management of these types of can be challenging. For example, multifamily and sure that you get paid to manage an asset to the owner’s
assets for owners. hotel uses, generally speaking, are not complementary. expectations.” From my experience, the traditional 3.5%–5%
Multifamily residences tend not to be able to absorb management fee is inadequate. AdRu owners tend to pay
zoning ordinance to address the unique issues in The main distinction in this definition is that to qualify their pro rata share of common area and concierge at least a 100-basis-point premium when they hire their
repurposing a building, which run the gamut from site specifically as an adaptive reuse, the property must undergo services from an adjoining hotel use. Friction and second management team to replace the original one that
utilization/density and setbacks, to parking and life safety a change of use. Merely updating or restoring a legacy office litigation are common between the HOA and the hotel couldn’t manage to expectations due to a low manage-
• The absence of data to quantify key metrics needed for building to a more modern office use or a retail store to operating entity and its agreement. However, office ment fee. These assets are more complex and require an
financing, such as income and expense ratios, compara- another retail use—such as a department store to a sport- and hotel uses are accretive. Before one undertakes the experienced management team. The message to owners/
ble sales to derive capitalization rates, typical absorption, ing goods store—are not changes of use. The change of use property management of a mixed-use AdRu, understand investors is to budget more for their property management
tenant retention and vacancy rates, and allocation of is key. The following elements are collectively necessary for the friction points that can result between uses. Parking expense—it will pay dividends in tenant retention and
common-area expenses when multiple uses are involved a project to qualify as adaptive reuse: and allocation of common-area expenses are typically overall operations.
• Lack of established appraisal methodologies—every the two most contested areas of property management
adaptive reuse project is unique, and there are few seminars • Existing structure in an adaptive reuse property. Conclusion
and courses on AdRu to educate appraisers and lenders on While adaptive reuse projects may involve some level of Adaptive reuse projects have evolved to a point where they
how to value or underwrite an adaptive reuse project new construction or an expansion/addition of space, they 2. Tenant leasing and retention should be considered an asset class of their own, just as
• General fear of the unknown by all project participants, always start with an existing structure. Tenants that opt to occupy an AdRu property generally we have seen take place with self-storage. The trend is
from the developer to lenders have two common characteristics. First, they tend to be moving toward more AdRu projects as cities struggle to
• Functional and/or economic obsolescence younger companies that want something different than repurpose vacant buildings since the COVID-19 pandemic
The result has been that most adaptive reuse projects are All adaptive reuse projects commence with a property in a a generic office building, but they lack the credit worthi- began. Look beyond retail for adaptive reuse. Think about
undertaken by local, high-net-worth entities that can devote state of disrepair, high rate of vacancy, or with its highest ness and time in business to satisfy permanent lending uses like car dealerships that are going online, along with
50% or more of the needed capital as equity and who are and best use in transition. In essence, the old use is no requirements. Large credit tenants tend to stay in tradi- everything else. Understand the definition of adaptive
motivated more out of philanthropy or civic-minded goals longer productive or economically viable, and the relevant tional and institutionally owned buildings for a variety reuse and that critical change-in-use distinction. ESG and
to address a local blight. These individuals have been the tenants have left. of liability and security reasons; your leasing success will impact investing are finally bringing much needed capital
pioneers of AdRu, but now we need AdRu activity to expand come from a smaller and less credit-worthy tenant. Sec- to adaptive reuse opportunities.
to traditional CRE investment and institutional capital • Change of use ond, AdRu tenants tend not to move at lease expiration,
channels to truly expand and become mainstream in every The project must involve a repurposing of a property’s as they invest more in tenant improvements. The AdRu Finally, managing adaptive reuse properties is more complex
MSA. One current project that epitomizes this statement is prior structure and use, not a mere re-tenanting with building itself is as much a part of their business identity than managing most other properties. Don’t underestimate
the adaptive reuse of the legacy Greyhound Bus Terminal tenant improvements. This key point distinguishes our as their name. That translates to higher tenant retention the cost of doing the job right. AdRu profitability is most
in downtown Birmingham, Alabama, by Michael Mouron, methodology from other industry research on AdRu. ratios. In my experience analyzing adaptive reuse proj- influenced by property management after cost overruns in
chairman of CapStone Real Estate Investments. ects across 40 states and over many years, the average repurposing the building. To property owners and investors,
• Economic viability tenant-retention ratio in adaptive reuse projects tends my advice is to not go cheap when hiring property manage-
In conjunction with my legacy role as the director of The new project must pass the ultimate test of highest and to exceed 85%, regardless of use—office, retail, ment firms any more than you would
research for the Alabama Center for Real Estate (ACRE), best use for the property. Not only does the reuse need to or residential. when working with engineering firms
I was fortunate to speak with Mouron about not just the be physically possible and legally permissible, in the upfront decision to undertake an
story of this unique project, but also his own history with but it also has to be economically viable. Local government 3. Added complexity AdRu project.
adaptive reuse, in a podcast at ACRE. (This conversation is incentives are sometimes necessary to make a project Make sure you get paid properly to manage a more
in Episode 71.) These kinds of projects can vary tremen- economically viable due to the cost of assemblage, higher complex property. Despite the fact that most adaptive K.C. Conway, CCIM, MAI, CRE, is principal
dously, and every case must be treated appropriately to repurposing costs with a greater cost-overrun risk factor reuse projects’ mechanical systems have been recently of Red Shoe Economics and CCIM chief
reflect the unique qualities of the existing building and the than new construction, and speculative lease-up risks. updated, they are hybrid in nature and are often made economist.
18 | ®
| Jan.Feb 2021 irem.org/jpm | | 19IREM Industry Partners | automation
Making customers happy automation is listing syndication.
Using up-to-date pricing and avail-
Today’s prospects and renters don’t
want to be limited by office hours ability information from your property
Going green
Marketing
and physical locations. They expect management software, automation IREM is a proud recipient
automated, self-service tools that new updates your listings across multiple of a Yardi Energy Efficiency
smart technology and websites can online rental sites daily. Grant. This grant has allowed
offer, including self-scheduled and IREM to offer programs and
Increasing staff efficiency
automation
self-guided tours. With automation resources that support real
solutions like intelligent text response Marketing automation is your secret estate managers in reducing
and chatbots, you can provide cus- weapon in an increasingly chaotic the environmental impact of
tomized, automated responses to digital marketplace. Automating their portfolios. To learn more,
questions from prospects while processes saves time, giving back the visit irem.org/gogreen.
they are still on your site. This leads hours that you would otherwise have
to more qualified and rent-ready had to spend scheduling appoint-
prospects when they get to your ments, responding to text messages,
leasing agents. and posting vacancies every week.
Recovering missed opportunities Implementation considerations
Never lose a lease because someone When adding self-service function-
forgot to follow up or, worse, didn’t ality to your website, getting started
answer the phone. Marketing automa- with chatbots and automating cus-
tion provides a high level of customer tomer relationship management can
service at all hours of the day with sound like a lot—and it is. The good
automated follow-up via text or email news is that you don’t have to do it all
and automated call routing to a call at once. The key is to be smart about
center when you’re away. the process and choose a provider
that makes it easy to add on to your
Keeping data accurate automation stack as you feel ready.
Image: iStock.com/Prostock-Studio
At its most basic level, automation Get started, evaluate, and then build
eliminates human error and keeps upon your success.
data clean by updating changes to data
across your database. One of the best- The bottom line
known forms of real estate marketing Property marketers must constantly
innovate to keep pace
with consumer trends
and demands. Market-
Marketing automation is technology Today’s prospects and
The next that more efficiently manages marketing processes and renters don’t want to be
ing automation is one
way that busy marketing
generation of campaigns across multiple channels automatically. It
streamlines repetitive tasks, follows user behavior, and
limited by office hours teams, even smaller ones,
can make a big impact.
applications for delivers targeted content to get customers into your and physical locations. Customers will appreci-
leasing pipeline. They expect automated, ate the convenience and
real estate Although marketing automation has been a buzzword in the self-service tools that
around-the-clock access
to information and assis-
By Esther Bonardi
real estate industry for a while now, there’s nothing stale new smart technology tance. Leasing agents
about it. The technology continues to evolve to help market- will appreciate the
ers save time and convert leads in a shifting environment. and websites can offer, increase in efficiency
including self-scheduled and the opportunity to Esther Bonardi is the vice president of
Let’s take a closer look at the applications of marketing focus on high-value activ- marketing for Yardi Systems, Inc. She is
automation in property management, then explore imple-
and self-guided tours. ities with well-informed also the head of Yardi’s RENT Café Reach
mentation best practices and successful outcomes. prospects. business unit.
20 | ®
| Jan.Feb 2021 irem.org/jpm | | 21committee central
On solid financial ground
The duration of the account may vary since unforeseen maintains accountability, confirms decision-making, and
events sometimes require usage of the funds. However, the ensures compliance with the Institute’s investment policies.
duration is typically considered as intermediate, or between
The work of IREM’s Audit and Investments Committee five and seven years. Annual audit
Another committee purpose is to oversee IREM’s annual
By Renee M. Savage, CPM, CCIM Special Reserve Fund external audit. The annual audit evaluates IREM’s operating
The Special Reserve account’s purpose is strictly limited to and investment accounts as well as financial controls. The
periods of substantial income decline or unfavorable eco- committee reviews and operationalizes findings and recom-
nomic conditions. In such conditions, this account allows mendations from the auditing firm.
IREM to maintain near-normal business operations for a
Image: iStock.com/wutwhanfoto
limited period of time. The committee also participates in selection of the auditing
firm. A key goal here is to maintain efficiency while fol-
Executive Committee approval and Governing Council lowing leading best practices on auditor rotation. Periodic
notification are required to use the account, along with a change in the auditor introduces a fresh perspective and
five-year plan for rebuilding the account’s asset base. Invest- guards against complacency. Either the firm management
ments are considered long-term. team assigned to IREM’s audit or the firm itself changes
A
s property managers, we know what it means to • John Gallagher, CPM periodically, and the Audit and Investments Committee
be good stewards of other people’s money. We’re • Dee Headley, CPM, IREM Foundation representative Reserve Fund guides that decision-making and firm selection process.
entrusted with funds flowing in and out of our • Cher Zucker-Maltese, CPM The 2020 Audit and Investments Committee passed a
properties. We must make sure every cent is accounted motion, subsequently passed by the Executive Committee Annual tax filings
for, delivered in a timely manner, and put to its best use Staff liaisons include: and Governing Council, to change the Statement of Policies IREM is a 501 (c)(6), a type of nonprofit organization as
in pursuit of the owner’s goals for the asset. • Christopher Migala, CPA, IREM CFO to better define the Intermediate Investment Fund and defined by the IRS. The Institute files an annual Form 990,
• Donald Ross, CPA, IREM Comptroller Special Reserve Fund as IREM’s Reserve Fund. Return of Organization Exempt from Income Tax. On a
The Audit and Investments Committee’s work serves a sim- schedule dictated by the annual U.S. tax filing deadline, the
ilar purpose for your association. The main objective of the Along with our HQ partners, my fellow committee mem- The committee felt it was important to continue with the Audit and Investments Committee reviews and approves
committee is to oversee IREM’s internal accounting controls, bers and I are dedicated to maintaining IREM’s position two separate funds (Intermediate Investment Fund and IREM’s Form 990 as prepared and presented by the asso-
managed investments, annual external audit, and tax filings. as a solid and trusted partner in an ever-shifting business Special Reserve Fund) rather than consolidate them because ciation’s tax accounting firm. Once the form is accurate,
landscape. Foundational to this effort is the committee’s each fund has a different investment horizon, which can be finalized, and approved by the committee, it is filed with the
Committee members oversight of the Institute’s financial position and policies. beneficial in preserving the Reserve Fund’s balance. IRS, and the Executive Committee and Governing Council
The composition of the committee is specified in the Insti- are notified.
tute’s Statement of Policies. Generally, committee members Investment funds Oversight of investments
must have broad business and financial experience and IREM maintains three separate investment funds, defined In its stewardship of these investment funds, the Audit The Audit and Investments Committee plays an important part
knowledge of the Institute’s operations. by the Institute’s investment policies. Two of these funds and Investments Committee gets regular updates from in IREM governance. Accountability to the Executive Com-
The committee comprises: are defined as IREM’s Reserve Fund. The Audit and Invest- IREM’s investment advisor on the valuation of funds. mittee and Governing Council are key to this role. Committee
1. The IREM secretary/treasurer as chair ments Committee is responsible for the investment funds’ Regular consultation with the investment advisor allows members take seriously our responsibility to ensure the Insti-
2. A representative from the IREM Foundation safekeeping and general administration. Let’s take a look at us to make informed decisions on the portfolio and tute’s ongoing stability, success, and long-term viability.
3. A past IREM national president each of these funds. its composition.
4. The incoming IREM secretary/treasurer IREM members expect nothing less. Our association
5. A member with a strong financial background who is Short-Term Operating Fund The committee periodically reviews IREM’s investment must remain financially positioned to produce the educa-
employed by a large real estate management firm The Short-Term Operating account’s purpose is to adequately policies so that those policies reflect current best practices tion, advocacy, and resources we turn to in managing
6. Up to two additional members, neither of whom is on the fund IREM’s annual operating needs. Therefore, the invest- for associations. Sometimes these reviews result in policy our properties. A firm, consistent eye on the Institute’s
Executive Committee ment strategy of this account is to emphasize preservation. revisions, like the review in 2020 that led to a better defi- investments, financial controls, and tax filings makes
The duration of the account is considered less than one year. nition of IREM’s Reserve Fund. To conduct these reviews, that possible.
As 2021 Secretary/Treasurer, I serve as this year’s chair committee members and our staff partners review leading
of the Audit and Investments Committee, continuing the Intermediate Investment Fund best practices in investment policies for associations from Renee M. Savage, CPM, CCIM, is the
important work of my predecessors in keeping IREM safe, The Intermediate Investment account’s purpose is to organizations such as the American Institute of Certified secretary/treasurer for IREM and president
strong, and solvent for the long haul. adequately fund the upcoming capital needs of IREM. Public Accountants (AICPA). of CFI-Capital Growth, Inc., AMO, in San
Other committee members include: The investment strategy of the Intermediate Investment Diego, which is a boutique multifamily
• John Koss, CPM, vice chair account is to emphasize total return, or the aggregate The IREM headquarters finance team also submits for company. Renee also serves as an asset
• Mark Boehnlein, CPM return from both capital appreciation and dividend and committee review recommendations to move funds manager in an affiliate, CFI, a commercial
• Libby Ekre, CPM interest income. between accounts. This oversight is a financial control that management company.
22 | ®
| Jan.Feb 2021 irem.org/jpm | | 23You can also read
