Source: Appfolio
By Rachel Jefferson

Property managers are proud members of the customer service industry. Whether it’s speaking to a prospective resident, discussing market analysis with a home owner, or improving business relationships with a fellow property management professional, having great customer service skills is a must. In the competitive marketplace it is no longer enough to say “please and thank you.” You must go above and beyond the call of duty to meet the demands of every renter, owner, and guest who walks into your property management office.

The most professional and successful property managers will have the following traits in common.

Attentive. You need to pay attention to what a client is actually saying. Truly listen to each and every word, without letting your focus waver. You must be willing to pay attention to the details. I can’t emphasize enough that you should notcheck your email or text messages mid conversation (even though your guest might do it). It’s also important to be on time for appointments and alert clients of cancellations in a timely manner. A real customer service agent must be attentive to the unspoken needs of both residents and homeowners, as well.

Positive. Remaining upbeat and using positive language when presented with the most challenging or frustrating of situations is critical. In simple terms, “keep your cool.” As a property manager you will meet confrontation head on and often without warning. You never know who will walk into your office and for what reason so approaching every situation with a smile and a good attitude will help you resolve issues quickly and effectively. But there is a fine line between positivity and sounding disingenuous or sarcastic, so just be aware of how you’re coming across.

Personable. As a property manager, you need to relate to tenants, owners, and other employees. You must be able to put yourself in another person’s shoes so that you can better understand and respond to unique situations. Everyone is from a different background; however, customer service agents must be able to relate to each person on a one-to-one basis. Most likely you’ve rented in the past or are currently renting—think about how you would like to be treated by your own property manager.

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Source: Entrepreneur
By Barbara Corcoran

Entrepreneurs always underestimate the role that real estate plays in the success or failure of their small business. I’ve learned a lot over the years as a real estate entrepreneur that applies to any business owner. Here are my tips for entrepreneurs looking to rent an office, retail space, or even a restaurant.

1. Rent on the right side of the street. There’s always a right and a wrong side of every street, and before you rent your retail space, stand out front and count how many people walk by the door. Every main street in America has double the foot traffic on one side over the other, which translates to more customers walking in your door and making a purchase. Always rent the space on the right side of the street.

2. Opt for a longer lease. For a young business, renting space for two whole years sounds like a heck of a long time but it goes by too quickly. If instead you’re brave enough to sign a longer lease for four to six years, your largest overhead cost is locked in, and that puts your business on a secure foundation. It even pays to give your landlord pre-set incremental rent increases within the terms of the lease because it costs you less in the long run. If you think you might want to unload the space later, ask the landlord for the right to sublet. Most landlords readily give that option if you’re willing to sign a longer lease.

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Source: Appfolio
By Sydney Daly-Weber

Being a property manager is very demanding. Owners, tenants, maintenance technicians, coworkers … someone is always trying to get a hold of you. You also need to possess many different skills to balance your everyday tasks and responsibilities. But being a property manager can also be very rewarding if you don’t let the stress consume you.

Tip #1: Know Your Properties Inside and Out

It’s important to be knowledgeable about each specific property you manage in order to answer any questions potential renters may ask.

Get to know the property to learn about any unique qualities or quirks it has. This helps you provide more information to renters, shows you have actually set foot on the premises, and saves you time by not having to look it up each time.

Knowing about the general area is helpful, as well. This allows you to provide prospective clients with information such as nearby freeway access, shopping centers, restaurants, etc., which in return helps them decide if it’s somewhere they would like to live. Try to avoid more sensitive subjects such as crime rates, school districts, churches, and racial population in the area. Providing information on these topics would be considered illegal steering.

People interested in renting in the area need to do their own research in order to make the best decision for themselves. But knowledge is power and the more knowledge you have in regards to each specific property, the more success you will have when it comes to renting the property and therefore maintaining a good relationship with the owner and/or renter.

Tip #2: Be Dependable and Available

Being a dependable person is extremely beneficial to being a successful property manager.

It’s important to respond to phone calls and e-mails in a timely manner. If you are managing numerous properties you will be very busy, but being available when owners and/or tenants need to speak with you is essential. This builds trust within your business relationship and makes your client feel confident that they can rely on you.

You certainly have a life outside of work. There is no need to give out your personal cell phone number. As long as they have your e-mail address and you try to keep yourself available as much as possible during regular business hours, that is enough.

Time management and organization are also a huge part of being dependable. Don’t spread yourself too thin. Make sure you schedule meetings accordingly in order to meet your clients’ needs.

Lastly, a great quality to possess is people skills. You will be working with numerous people and it’s your job to keep them satisfied. Inevitably, you will encounter some unhappy folks. Try your best to give them a positive customer service experience.

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By Grant Cardone

Source: Entrepreneur

Inflation is defined as, “a general increase in prices and fall in the purchasing value of money.” Your money doesn’t go as far — simple. The $30k you made at your job 10 years ago and lived comfortably with barely gets you by now. You can’t control inflation (the Federal Reserve does that) and the government has doubled their debt since 2008. It’s now at $18.3 trillion and grows every day.

The government cannot save you or your family, or ensure your financial freedom. Set your mind right about earning money. More cash = more freedom! Money itself won’t make you happy, but it will give you the ability to provide a better life for yourself and your loved ones. You must invest with income streams that give you positive cash flow, learn to leverage your debt, learn to handle inflation and take control of your physical assets.

Do you currently have commercial real estate assets in your investment portfolio? Are you scared to have your money in the stock market (like I am) but also fed up with almost no return on investment with your money at the bank? Do you instinctively like the idea of being invested in income producing real estate with results you can see?

Here are eight reasons why investing income producing real estate is an excellent choice for protecting and growing your wealth:

1. Positive cash flow

One of the biggest benefits to income producing real estate investments is that leases generally secure the assets. This provides a regular income stream that is significantly higher than the typical stock dividend yields.

2. Using leverage to multiply asset value

Another important characteristic of commercial real estate investing is the ability to place debt on the asset, which is several times the original equity. This allows you to buy more assets with less money and significantly multiply asset value and increase equity as the loans are paid down.

3. Low-cost debt leveraged to multiply cash flow

Placing “positive leverage” on an asset allows for investors to effectively increase positive cash flow from operations by borrowing money at a lower cost than the property pays out. For example, if a property generating a 6 prcent cash-on-cash return were to have debt placed on it at 4 percent, the investors would be paid 6 percent on the equity portion and approximately 2 percent on the money borrowed, thereby leveraging debt.

4. Hedge on inflation

For each dollar that is created, there is a corresponding liability. Real estate investments have historically shown the highest correlation to inflation when compared to other asset classes, such as the S&P 500, 10-year Treasury notes and corporate bonds.

As countries around the world continue to print money to spur economic growth, it is important to recognize the benefits of owning income producing real estate as a hedge against inflation. Generally speaking, when inflation occurs, the price of real estate, particularly multi-tenant assets that have a high ratio of labor and replacement costs, will also rise.

5. Capitalize on the physical assets

Income-producing real estate is one of the few investment classes that, as a hard asset, has meaningful value. The property’s land has value, as does the structure itself, and the income it produces has value to future investors. Income producing real estate investments do not have red and green days, as does the stock market.

6. Maximizing tax benefits

The US Tax Code benefits real estate owners in a number of ways, including unlimited mortgage interest deductions and depreciation accelerations that can shield a portion of the positive cash flow generated and paid out to investors. At the time of sale, IRS allows investors a 1031 provision, allowing investors to exchange into a like-kind instrument and defer all taxable gains into the future. (See your tax advisor for full explanation.)

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By Rick Grossmann

Source: Entrepreneur

Recently, I have had several clients ask for some real estate tips and strategies, so I joined forces with my Franchise Bible co-author, Michael Katz, to develop a series of helpful articles. Katz is a franchise, business and real estate attorney and has been working with landlords and tenants for over three decades. This article covers the basics of square footage and triple net.

If you want to open a brick-and-mortar location, negotiating a real estate lease will be an integral part of your startup checklist. Like so many contracts, there are no “form” or “standard” leases, and a landlord can fashion any contract that it wishes. All of the leases, however, contain legal terms that are incomprehensible to the entrepreneur. The definition of a square foot is just one such term.

A square foot

Easy, right? A square foot (often shortened to “sf”) is a unit of measurement that describes a square that is 12 inches on each of its four sides. So, when is a square foot not a square foot? When it is a “Rentable Square Foot” or a “Usable Square Foot”. The Building Owners and Managers Association International (BOMA) is a recognized leader in all things having to do with building measurements and provides us with insight. Thus, a tenant’s Usable Square Footage is the actual amount of square footage of the premises leased. In turn, this is measured from wall to wall and includes closets, bathrooms located exclusively within the space, columns and other support structures (even though you cannot use such square footage), storage space and the like.

The Rentable Square Footage of the tenant’s premises is defined as the Usable Square Footage plus a portion of the common area. That portion of the common area associated with the premises is calculated by multiplying such Usable Square Footage by a fraction the numerator of which is the usable square footage of the premises and the denominator of which is the total usable square footage of all of the spaces available for lease. For instance, if the usable square footage of the common area is 300 sf (consisting of, for instance, a common hallway and waiting area) while the tenant’s premises is 300 sf and the total project is 1,200 sf of Usable Square Footage, the tenant’s obligation is determined by the following calculation: Tenant’s proportionate share of the common area = 300 x 300/1200 or 75 sf. That means that the tenant’s Rentable Square Footage (sometimes identified as “rsf”) will be 375. Thus, the commercial lease may require the tenant to pay rent on 375 sf instead of just 300 sf.

‘Triple net’ or ‘NNN’ leases

While some landlords use the Rentable Square Foot method as the measurement of choice for calculating the tenant’s rent, other leases use the Usable Square Footage of the space as the basis for calculating the “base rent” and then assess “additional rent” based upon the landlord’s costs to operate the entire project. These costs are often segregated into 3 categories (the “Triple” in Triple Net and the identity of each “N” in NNN):

1. Taxes assessed on the entire project
2. Insurance purchased by the landlord to protect the entire project (exclusive, however, of the interior spaces of each space, which is separately insured by each tenant)
3. Expenses to maintain the entire project (usually called out as “common area maintenance” or “CAM” expense).

A tenant’s share of the NNN costs, expressed as a percentage, is determined using the same formula as was used to figure out the Tenant’s Rentable Square Footage. Using the example from the previous paragraph: The tenant’s proportionate share of all of the NNN costs = 300/1200 or 25 percent; then, if the landlord’s yearly real estate taxes are $500, if insurance premiums are $250 per year and if the yearly cost to maintain the common area is $400, the tenant’s additional rent will be: 25 percent x ($500 + $250 + 400) or $287.50 which figure is added to the base rent.

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By Christine Bright

Source: Property Management Industry

A budget is your vision of an asset and a forecast of potential earnings. While creating a portfolio or property budget, our deniable need to put everything under the microscope to review and analyze blurs the view. As we try to ensure that values tick and tie, we can miss the big picture.

So where do we go wrong in the process? The answer can often be found in the budget review process. A successful budget is more than just plugging in numbers that look right.

In the battle of the budget review process, there are three main culprits for bad analysis:

• Failing to define and set goals for the asset. How can you review a target that is not clearly defined?
• Not accurately projecting end-of-year numbers. Inaccurate forecasting for the end of the year will hinder growth measurement for the next year. An explorer must always know where he is before deciding on the right path
• Ignoring the details. Reading between the lines is essential when reviewing budgets

First: Define the property or portfolio goal

Not properly defining an asset’s goals can impact the review process. Simply stating a desire to grow income by 5 percent and hold expenses is not goal-setting. Sure, they are measurable numbers, but how are you going to get there? If you drive from New York to California without accurately mapping a plan, you can bet your travel expenses will be more and the trip will take longer. Let’s face it, an internet map doesn’t always take the most direct routes. Do a little homework and make the right plan.

By not knowing the what, how, how much it’s going to take to get that 5 percent income growth and having a direct plan for maintaining expenses, you are just looking at numbers in the review process. Dig deeper. You may want to keep your budgeted expense the same, but the likelihood that your vendors feel the same way is doubtful. They just might be planning to raise rates because of increased materials cost, labor, etc.

Knowing the goals for an asset and the details in the review process allows you to evaluate if the budget makes sense and if changes need to be made to reach these goals.

Second: Year-end forecast should be on the money

If your revenue numbers are off at the beginning of the new year, chances are they won’t be accurate for the rest of the year.

Accurately forecasting for the end of the year is critical in determining where your budget begins, in addition to any increases and decreases in revenue and expenses. This is especially true for rental revenue. Before reviewing next year’s budget, evaluate forecasted values for the current year. Determine if there are any current expenses that will or will not be required next year.

By paying attention to present performance and trends, you can better determine if growth is accurate or inflated in the review process.

Third: Analyze details and compare values

It is said that the devil is in the details, and this expression cannot be more true or the budget review process.

If your review process only looks at the summary details and variances year over year, you are most likely going to miss something. Even with a quick review, you must look across and down. In other words, you need to compare monthly values and then summary values. Assuming someone else has done this for you is a big mistake.

Analyzing details and comparing values will help identify timing issues, budgeted values that have seasonal impact and are averaged, or line items that are budgeted just because they have always been done that way. If you were to only look at summary values, you will find yourself explaining variances to your owners month after month.

Remember what Benjamin Franklin said: “Beware of little expenses, a small leak can sink a big ship.” The same is true for budgets; ignoring the details will likely cause huge variances down the road.

The budget review process can be tedious and full of hazards, but avoiding the three most common mistakes will help you ensure budgets are as accurate as possible and that you do not have to spend next year writing detailed variance explanations to your owners.

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By Lori Lysobey

Source: Property Management Insider

In order to be competitive in today’s marketplace, small to mid-sized properties need robust reporting capabilities that offer customized, accurate, detailed reports for each and every stakeholder. There are affordable, competitive solutions available for commercial property management.

You can expect these seven features to come with RealPage Commercial Property Management, all at a reasonable price:

1. On-demand analytics: On-demand analytics provide transparency into key metrics that can support decisions that help drive your business forward. Accounting departments weren’t meant to supply asset management data that is ideal for critical business decision making. Real-time analytics solve for the needs of property owners, asset managers, and property executives, more efficiently and expeditiously than accounting departments.

2. Integrated configurable dashboard: A dashboard that is immediately functional and capable of providing in-depth reports. The dashboard is integrated with your property management system and provides a single location for all data. This helps you save time and makes the product easy to use.

3. Seamless Excel integration: The system integrates seamlessly with Excel; no importing and exporting of data or spreadsheets. The system pulls data and drops it directly into Excel, allowing you to drill down to underlying data.

4. Built-in financial report writer: A user-friendly interface and built-in financial report writer that knows the structure of your data and provides various types of required financial reports in minutes. This allows the accounting team to access the right report for the right information quickly and easily.

5. Filterable standard reports. Reports can be filtered and sorted using the most basic grouping criteria—saving it for future searches—and giving everyone the right report at the right moment. This saves time that can be devoted to growing the business.

6. Grids and queries: Quering data online for configurable data views at a moment’s notice changes the speed of your business, for the better. Grids and queries can be filtered, sorted, viewed and saved in order to isolate pertinent information quickly and efficiently.

7. Budget variance analysis: Budgets are a critical part of managing a commercial property. Monthly (and quarterly) budget analysis can be time consuming, resource draining and inefficient if the right software isn’t being used. Why not automate the process and save time and money? A superior property management solution can easily automate your budget variance analysis process.

Next-generation reporting will keep your business on stable ground. Avoid expensive add-ons and customizations to expand your reporting capabilities.

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By Seth Williams

Source: REtipster

One of the primary objectives of my real estate business is to acquire income-producing rental properties that ROCK.

What makes a rental property “rock” you might ask?

It doesn’t necessarily need to pump millions into my bank account each month, and it doesn’t need to be a “no money down” deal either (although either of these things would certainly sweeten the pot).

To put it simply, a great rental property is one that makes every one of my invested dollars work hard. I want every penny to work overtime, producing as much revenue as possible while simultaneously paying off any debt associated with the property. When you buy properties with this goal in mind, there is basically no limit (mathematically speaking) to how far you can grow your net worth and personal income.

The Problem

When I first got started as an investor, I spent a lot of time trying to find these types of properties. I remember spending hours upon hours scanning my local MLS listings, desperately trying to find a deal that would make financial sense.

After running the numbers on dozens of properties, I was shocked at how difficult it was to find just one single property that would justify my investment.

At the time, it was 2005 and housing prices were through the roof – which made this a very difficult task (especially when I limited myself to ONLY the properties that were “listed”, with a realtor sign in the front yard). Needless to say, it was an extremely discouraging time in my journey.

I eventually realized I was dealing with two fundamental problems:

1. I didn’t have an effective way to find motivated sellers and get them calling me. I was relying ONLY on unmotivated sellers who were holding out for top dollar. This was a losing strategy that wasn’t going to cut it.
2. I didn’t have an effective way to analyze properties or determine their potential profitability. I needed a basic, but highly reliable method so I could calculate exactly what I was getting into.

After a lot of research and learning, I was able to find some very effective ways to solve BOTH of these problems.

Both issues are equally important to deal with but for obvious reasons, problem #2 cannot be addressed until problem #1 has been dealt with. In other words, you can’t start working on your analysis until you have something to analyze. This may seem obvious, but it’s important to reiterate this so you can prioritize correctly and deal with first things first.

The Reasons for this Case Study

The purpose of this guide is to show you exactly how I handle Problem #2 (above).

I often find myself evaluating rental properties and consulting with other investors on how to find, evaluate and buy their own deals – so the purpose of this blog post is to explain exactly how I do this. This article is intended to provide a brief education, where I will show you the entire process that I go through when buying a rental property.

If you’re reading this, you may very well fall into one of these categories:

• You don’t know how to find a legitimate, profitable rental property.
• You understand the theory, but have never actually purchased a rental property before.
• You don’t understand how to analyze and evaluate a rental property the right way.
• You need a better understanding of how the entire process works, from start to finish.
• You don’t have a proper set of expectations about what a rental property should produce, and why investors buy them in the first place.

This blog post is intended to show you exactly what steps I go through, what my expectations are, and how I ensure my (or my client’s) return on investment is something they can be proud of.

I’m a pretty big fan of “on-the-job training”, so I figured the most practical way to show you this process would be to use a real life example I dealt with just a few short years ago.

First Contact with the Seller

In early December, I received a voicemail in response to one of my direct mail campaigns for this particular mail campaign.

This mailing was actually sent out the previous summer (over a year earlier) – this guy had simply held onto my postcard and called me about 16 months later (gotta love the residual benefits of direct mail).

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Technology is transforming the investment sales process.

Ten-X Commercial Division Managing Director Yan Khamish said though technology can never replace brokers in the investment sales process, it can cast a wider net and help investment brokers, buyers and sellers close more deals faster.

“Technology is a tool that can benefit you to do more business, embrace it. It is the future at the end of the day and it’s not going away. Figure out how to use tech to drive your business forward, [and] don’t look at it like a replacement to you, because that’s never going to happen,” Khamish, who is speaking at NAIOP’s Office Evolution conference Nov. 9 and 10, said.

One of the major tech offerings transforming commercial real estate is the use of cloud-based technology. By using the cloudto exchange information, players can streamline and share documents with multiple parties, eliminating the need to send countless emails and evaluate numerous spreadsheets to keep track of pertinent information.

“[If] the seller, buyer or broker is involved in the process of documentation, they’re wasting their time,” Khamish said. “You don’t need to send 200 emails with the same information to different people, they should be able to go into a vault and look at it. You don’t need to run around town all day and get 10 signatures, people should be able to go on through Ten-X or Docusign and sign that document.”

Ten-X is an online transaction marketplace with a database of 250,000 vetted buyers, which sellers can use to offload assets quickly and efficiently. The company recently partnered with financier Money360 to pre-arrange loans for qualifying properties for sale through its platform. This allows buyers using the virtual auction platform to know ahead of time whether the properties they are interested in bidding on qualify for financing.

Khadish said there are four major components that every investment broker, seller and buyer is involved in when it comes to property trades: customer engagement, advisement, documentation and review. Technology can accelerate the final three, leaving brokers more time to handle customer engagement in person.

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Ripe for disruption, the property market has long needed a shake-up, and an injection of investment and technology to drag it into the modern day. Spotting this opportunity, Proptech players (or Real Estate Technology if you prefer) are cropping up with a regularity that is enough to make even the most discerning of individuals take note. Put simply, PropTech refers to businesses using technology to disrupt and improve the way we buy, rent, sell, design, construct and manage residential and commercial property. So why is it an area to watch, and one to get excited about?

Approximately US $6 billion in venture capital has been invested globally in Proptech since 2011, and about 70 percent was in the last two years [CB Insights]. The volume of Proptech financing globally has been on a steady increase, rising 36% year on year, and projected to reach US$3 billion by the end of 2017. Last year alone saw the emergence of four Proptech unicorns: Compass, Homelink, SMS Assist, and OpenDoor Labs, all who reached the coveted $1 billion mark. With the largest commercial real estate market in the world, New York is currently the worldwide Proptech hub. But in Europe, the UK is leading the way although eyes are looking beyond these areas for the future of Proptech.

2018 is looming, what Proptech startups will you be hearing about?

1) No Agent / DISRUPTION POTENTIAL : ●●●●●●●●● [/10]

No Agent was set up to overhaul the traditional letting agent model, and in the process, make lettings easier and cheaper for both landlords and ‘generation rent’. Its end-to-end digital property management platform automates the marketing and administration of rental properties. But No Agent acknowledges that when it comes to renting, human contact cannot be replaced, so it fuses technology with customer service provided by property experts. The platform gives landlords more control and visibility, automates reminders and is working on employing artificial intelligence to book viewings, triage repairs and prepare properties to let. Founded in 2016 by serial young entrepreneur Calum Brannan, No Agent has so far raised £1.5 million in crowdfunding and from private investors and is gearing up towards a Series A round in 2018.

2) Clixfix / DP: ●●●●●

Clixifix is making life easier for housebuilders and commercial contractors, allowing them to manage their customer care operations, and also tracks defects and repairs in new houses and commercial buildings. The SaaS platform allows house builders to assign repairs to contractors and communicate with clients and occupants through an online portal. Contractors can then provide instant updates as they carry out the work required.Founded in 2012 and based out of Spennymoor in the North East, the startup raised an undisclosed six-figure sum in 2016, of which £260,000 has come from the Finance for Business North East Accelerator Fund and the rest from an angel investor.

3) Reposit / DP: ●●●●●●

Reposit provides tenants with a more affordable alternative to the average six-week tenancy deposit needed to move property in the UK. Currently, tenants must pay into one of three tenancy deposit schemes in the UK, which holds the funds until the end of their agreement. With Reposit, tenants pay a non-refundable fee of one week’s rent. Reposit’s service provides six weeks worth of cover to the landlord for damages, unpaid rent, cleaning costs and any other charges normally associated with deductions from a security deposit. Currently, there is £3.5 billion worth of capital in the tenancy deposit system which could be freed using the Reposit scheme. Founded in 2014, Reposit raised a seed investment of £400,000in 2016 from a range of angel investors and VC’s.

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In many instances, our commercial real estate market has progressed to the point of absurdity.

Some examples:

Six full-priced offers on a new listing with an asking price that eclipses recent comps by 15 percent.

Or, sellers who are “dug-in” and not willing to listen to reason and therefore are unwilling to budge on their expectations.

Finally, an occasional tear in the fabric which defies logic — a well located, improperly exposed building sells for 20 percent less than it is worth because the seller experienced a transition and couldn’t wait for the normal marketing process to unfold.

During these crazy times, we often encounter “gimmicks,” which this column will hopefully diffuse and provide a warning to unwary buyers.

I’ll just guarantee the rents

Occasionally we encounter a building with remnants of the last downturn: The occupants signed up during the recession and consequently are paying a rent less than the current market will bear.

The economic value of an income property is dependent on the rent. More rent, more value.

Enter rent guarantees. The owner — hopeful to get maximum value —  will supplement the difference between market and the amount his tenants pay. Good in theory. Bad in practice. Any savvy investor will ask what happens when the guarantee ends? Now, I am stuck with an under-market rent on a building for which I overpaid.

Below market asking price

This suggests one of two scenarios. Either the building has a latent issue — a partnership squabble, a non-prepayable loan, environmental contamination, a long-term lease at an under market rent, imminent city action for re-development, or the like. Or, the listing broker has underpriced the building to attract multiple offers, create a bidding war and generate activity above the market rate.

If you are a buyer caught in this vortex, the pain never stops until someone says uncle!

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Losses on commercial real estate loans pose a more immediate risk to Australia’s banks than developments in the housing market, where regulators are putting the brakes on riskier lending, Fitch Ratings says.

However, foreign banks are more likely than the local lenders to feel the pain if there is a sharp increase in buyers who cannot settle their off-the-plan purchases.

After a recent surge in apartment building, the credit ratings agency on Tuesday highlighted losses on loans to property developers as a more pressing concern than residential mortgages, which dominate banks’ loan books.

Tim Roche, head of Australia and New Zealand financial institutions at Fitch, told the ratings agency’s conference in Sydney that foreign bank exposure to Australian commercial property had roughly doubled since 2013.

While the Commonwealth Bank, Westpac, National Australia Bank and ANZ Bank have been more cautious and kept their commercial loan portfolios essentially flat in recent years, they remain the dominant lenders to this part of the market. It’s estimated about a quarter of the big four’s commercial property exposure is to developers, a lower percentage than during the global financial crisis.

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Hashtags and buzzwords like “CRE Tech,” “proptech” and “CRE industry cloud” are the latest terms to circulate in the commercial real estate industry and are used to describe the software and other technologies that are increasingly powering the workplace. While there may appear to be little significance in coining new terms, it is essential to establish a common language and taxonomy for commercial real estate professionals to communicate effectively about these powerful developments and initiatives.

Today, there are many frustrations to solve and opportunities to best leverage software for improved processes and business outcomes, but it seems like nobody knows exactly what to call them, how to express their interests, needs and pains, or where to look for answers. A shared understanding of the landscape and terminology is critical for market participants to create and protect enterprise value.

It’s exciting to see thoughtful work from smart research firms helping to frame the landscape in terms of funding, and analysts at Forrester and Gartner are learning more about the burgeoning sector. Furthermore, investment banks are releasing point-of-views from their vantage point for the benefit of clients and stakeholders. There are also a fast increasing number of savvy technology investment firms that are applying the lens of institutional capital interests.

So you’re ready to launch a carefully scheduled project plan. You’ve planned backwards and mapped out each stage of the work and who will be responsible for what, and your project plan is a thing of beauty. What could go wrong?

Plenty, it turns out. Here are five of the things most likely to disrupt your project plan if you don’t factor them in from the beginning.

1. Not finding out from the start who needs to be consulted or bought in. While you’re the one who’s overseeing and perhaps doing the work, there may be others in your organization (or even outside of it) who need to be consulted along the way. Don’t assume that you’ll be told this information proactively, either. It’s often the kind of thing that comes up when a project is halfway through or (worse) near the end. So make a point of explicitly inquiring at the start of the project whether there are specific people who need to have input or be on board with how you plan to proceed.

2. Not confirming each part of the schedule with others who are involved. If you’re relying on others to play a role in the work – whether it’s actually doing pieces of it or simply signing off on work – make sure that you’ve confirmed with them that your schedule works on their side. Otherwise, you risk finding out at a crucial point in the project that the person you were counting on to sign off by the end of the week is out of the country on vacation and unreachable.

3. Not getting buy-in from leadership above you to prioritize the work. The important thing to note here isn’t just that your leadership needs to think the work is a good idea and worth doing; it’s that they need to be willing to prioritize it over other uses of time and resources. “Sounds like a good idea – see if you can make it happen” is a different thing than “let’s commit to getting it done by January and here’s a budget to use.” If you’re planning to allocate significant amounts of energy to a project, make sure that the management above you is aligned with you about when it should happen and what that will mean for other demands on your time that might arise.

4. Not being clear with others about the roles you need them to play. Especially when you’re relying on a peer to complete a piece of a project, it’s easy to inadvertently miscommunicate what you’d like that person’s role to be. For example, your coworker might assume that you’re only seeking ideas from her, or that her participation is optional, when in fact you need her to actually complete a piece of work by a specific deadline. Be sure to clarify exactly what roles you’ll need people to play from the start – and don’t hide the message. Saying “It would be great if you were able to put something together by the end of the month” conveys a different message than “I will need final copy from you by October 29 in order to make our printer deadline.”

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A rapidly changing healthcare market is impacting how health systems deliver care to patient populations, as well as development strategies for new buildings and facilities.

The impact of long-term capital allocation for on- and off-campus facilities is prompting leadership of many health systems to carefully consider either owning real estate outright or leasing space from a third-party developer on a build-to-suit basis.

Each approach has advantages and disadvantages that will impact long-term strategies for efficient delivery of care and the growth of an organization. The following is an overview of some considerations to be aware of with each approach.

Build-To-Suit and Lease

When a health system is seeking to partner with a third-party developer through a partnership agreement, it needs to conduct due diligence on developers in the market and their expertise in developing healthcare properties. There must also be a competitive bidding process to get the best value under a fair compensation model for all work performed.

One of the keys to finding success with these agreements is working with an experienced healthcare developer that understands how to structure strategic control and use of the asset for the health system partner.

Additional advantages of partnering with a developer that has proven experience and success working on healthcare projects is that the team can provide market knowledge, access to industry resources, general knowledge and expertise. A quality developer also provides “project momentum” to achieve speed to market on behalf of the healthcare partner.

Under such partnership agreements, the developer serves as property “owner” and initiates a site search, places targeted property under legal contract, acquires the land and develops the building. This includes all due diligence, engineering, design, government entitlements and construction, as well as management of leasing the project back to the health system and its allied partners. This developer/owner/operator can also further support the health system goals through full-service management over the course of the lease term.

Additionally, developers take on risk as the property owner, making them financially motivated to complete the project within budget and on time. Once the building is operational, they can manage the property over the long term and focus on stabilizing the investment, adding measurable value to achieve market competitive returns.

Some may question why a health system may wish to use capital of a third-party in lieu of its own relatively low-cost capital. The answer is that most high-performing health systems are expanding and competing in their market, which makes third-party capital a legitimate option for assets that can be leased such as outpatient facilities. As a result, the health system can preserve capital for assets that cannot be leased such as recruiting/retaining physicians, maintaining a primary hospital campus in addition to purchasing and maintaining IT and other equipment and furnishings.

Most importantly, the developer must be committed to the health system’s goals for the project. A partnership approach such as this ensures a successful project outcome reflecting the health system’s interests.

Fee Development Approach

When a health system chooses to own the real estate it is developing, this approach calls for engaging a real estate developer or project manager that is responsible for all phases of development, including land acquisition, due diligence, engineering, design, government entitlements and construction.

The developer can also assist in drafting a lease between the health system and a subsidiary of the health system as well as its allied partners, and, when appropriate, solicit prospective purchasers of the development.

One advantage of this approach is that the health system can realize direct cost savings and a development fee during the development process. It can also result in the lowest rent possible through a competitive sale/leaseback transaction on the open market.

Another consideration is that a real estate developer is hired to serve as the project manager, which is tantamount to hiring a consultant that will provide industry expertise, but may be less likely to push the project schedule, completion date and cost savings because they are being compensated less than what they would be as a developer/owner/operator.

Additionally, some would argue there is a “value risk” under such an arrangement as the developer hired as project manager may not take into consideration all the variables that a developer/owner/operator would when analyzing the property purchase and related due diligence tasks.

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Real estate is an attractive investment for a variety of reasons, but managing a real estate asset brings a number of challenges for which an average investor isn’t ready.

A typical real estate purchase is a safe and secure investment. It is a predictable place to put money and generate consistent annual returns. But there is no “typical” real estate investor. Look no further than your own street to find one property owned by a single landlord with a modest one-property portfolio, next to another owned by a real estate investment trust (REIT) like Blackstone with tens of billions in holdings. Everyone wants a piece of the pie and more often than not, much (or all) of the processes and software used to manage these properties have lagged behind the wave of Silicon Valley technology that has inundated the rest of our lives.

Finding the perfect property is one thing, but effectively managing residential real estate requires an entirely different set of skills. A landlord has to excel at marketing their property, determining rent prices, screening and processing tenant applications, collecting rent payments, performing maintenance and understanding all the legal aspects of landlording that govern tenant-landlord relationships. Additionally, they must always be available for the tenant phone calls that come in at all hours, day and night.

Neglecting just one of these functions could lead to a catastrophic loss that negates all recent earnings for an investment. It’s no wonder many landlords choose to hire a professional property manager.

There are an estimated 34,000-plus property management companies in the United States, and all of them require an office, a team of employees, a network of service providers and contractors, and well-defined processes for all the aforementioned tasks. This can all be very expensive to create as a business owner or to contract as a landlord. In a competitive marketplace, managers are always looking to reduce their costs. Technology offers ways to accomplish this without sacrificing a high quality of service.

How Technology Narrows The Gap

Technology is underused in property management but has the potential to drastically reduce expenses while improving the quality of service. Every tedious process should be streamlined or automated.

To start, leasing is a time-consuming process. Posting advertisements, responding to leads, handling showings, collecting and processing applications, and eventually preparing a lease, all require lots of manpower. This process would benefit from automation, but where do you draw the line between automation and human-centric customer service?

The trick is to automate as many processes as possible, while always providing a personal touchpoint. You still need leasing agents, but every part of the process aside from phone calls and showings can be automated: things like 3D virtual tours, self-serve scheduling of showings, automated tenant notifications, online applications and background checks, online lease signing and payment collection. All of this can now be either automated or heavily optimized with off-the-shelf software, a bit of non-technical customization and some defined processes.

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What’s so scary about Amazon? It makes every business it competes with efficient, squeezing waste out of the supply chain and compressing margins for the entire industry. Now, Whole Foods’ 450 stores in 42 states will form the start of a nationwide distribution center for groceries that will build upon the Amazon Fresh grocery delivery unit, founded in 2007.

All Whole Foods’ stores won’t close, but they will change. Yes, customers will always want a neighborhood store for the touch, smell and feel of certain things — to pick up steaks for a dinner party, for fresh pastries and crisp lettuce. However, Amazon won’t stock high-priced downtown real estate with excessive amounts of paper towels and floor cleaning products, or even dry goods such as pasta or canned beans. The mass of these items will instead be stored and distributed from regional warehouse facilities, perhaps automatically shipped directly to customers using predictive models. As a result, the average size of a typical Whole Foods store most likely will shrink, as will the average grocery store across America.

Some supermarkets will stay the same, for people who don’t like shopping online or prefer a trip to the store. Most competitors, however, will adapt to the Amazon model, shrinking their footprint and bolstering online capabilities to become more efficient and automated. Large grocers must now change their business model or go the way of the dinosaur.

This will create significant disruption in commercial real estate as countless supermarkets go out of business, others remodel to occupy a smaller footprint, and some move to new premises. We saw similar disruption after the 2008 financial crisis when thousands of car dealers across America went bankrupt as credit dried up and countless supermarkets closed as property prices crashed. A repeat of that dynamic in the grocery sector will be a significant opportunity for investors in distressed assets. At Northstar Commercial Partners, for example, after the crisis we bought five vacated Albertsons stores in Colorado for less than 10 percent of their replacement value. Each of these were repositioned into alternative uses at attractive prices.

Investing in such properties, when they become available, requires a creative approach to what could work in the space, whether it’s a single business or remodeling the space to create a series of smaller units. In the case of those Albertsons stores, for example, one is now occupied by an antique dealer, another by a college that wanted a neighborhood presence.

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Amazon plans to open its first New York distribution center on the west shore of Staten Island, with the company set to take 975,000 square feet at a warehouse in the borough.

Sources told the New York Post that the Jeff Bezos-owned company will open a “fulfillment center” at Matrix Development Group’s Matrix Global Logistics Park in Bloomfield on Staten Island’s west shore. The warehouse will be open by the end of summer, according to the New York Post.

The New Jersey-based developer is building a commercial hub that will eventually span 3.5 million square feet, according to a report from New York York YIMBY. Last month, the firm filed plans for a 2.3 million-square-foot building at the park. The 671-acre site had been previously earmarked for a 82,500-seat NASCAR racetrack.

Amazon’s center is expected to be the first of four warehouses on the site, according to the Post. “We think the sites could bring in 3,000 employees,” Steve Grillo, first vice president of the Staten Island Economic Development Corporation, told the newspaper. “Matrix has been very secretive about the tenants, but the chatter is that Amazon is coming in.”

A representative for the Matrix declined to comment. The notoriously press-shy Amazon said the proposed distribution center on Staten Island are “rumors and speculation.”

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As if one negotiation is not enough, we in the commercial real estate profession insist on three separate negotiations for every deal. Why, may you ask? Let me spend a moment and give you my take.

Negotiation one: The proposal

Once upon a time and not too long ago, a buyer’s expression of interest to buy a property took the form of a binding offer: the deposit receipt and escrow instructions.

Outlined in the offer were the price, escrow period, loan amounts, representations and warranties requested of the seller and a period for due diligence and closing. The buyer signed the offer, deposited a good faith deposit with the broker and hoped his representative could convince the seller to make a deal under acceptable terms and conditions.

All sorts of problems were created within this deal structure. Few buyers took the time to review the documents they were signing. Misunderstandings occurred. Buyers changed their minds. Sellers decided not to sell. The impact of the sale wasn’t properly vetted. Buyers made commitments to move, which backfired when the deals were not closed. Litigation ensued. Quite a mess.

What evolved was the non-binding letter of intent. Most negotiations now originate with such a letter.

Negotiation Two: The purchase and sale agreement

Because the first negotiation is via a non-binding letter, the agreed upon terms and conditions – such as the price –  must be placed in a document that will commit the parties to accomplish certain things, such as opening an escrow, notarizing grant deeds, delivering clear title to the property, representing the seller is authorized to sell, etc.

Ample time is given to the buyer and seller to comment on the specific language of the agreement and request changes, or another negotiation. Once the binding purchase and sale agreement is signed by the buyer and seller, a period of buyer due diligence commences.

During this period of time, the buyer arranges financing, checks out the physical aspects of the building – roof, fire suppression system, plumbing, electrical, heating and air conditioning — reviews the title to make sure no matters are looming, checks the condition of the soil for potential environmental contamination, and visits with the city to insure the buyer’s proposed use for the building is allowed.

That’s quite a bit to accomplish in a 30-45 day period.