Commercial real estate owners are looking for something more from their property managers these days – solid financial expertise.
Take a good look at today’s job listings for senior property managers in the commercial real estate sector. You’ll find that most leading owners and investors have some rather high expectations about what the individual in this role must be able to deliver, especially as commercial real estate portfolios become larger and more diverse. Of course, at the basic level, owners want someone who can adeptly handle typical, but vital, responsibilities of property management, from operations, capital improvements, support of the leasing process, and, most importantly, managing tenant issues. But many organizations are looking for something more – a well-rounded professional, who can bring strategic, financial expertise to the table and help the company drive the “economics.”
To underscore the expectations property owners have today for senior commercial property managers, and how they have an obvious desire for these professionals to take a very high-level and financial-oriented approach to their duties, read the following examples of key job responsibilities for this type of position. These descriptions are inspired by recent job listings created by some leading real estate owners (but are not verbatim):
- Provide evaluation and analysis of major lease transactions to insure that they are in line with short- and long-term corporate goals
- Identify and implement strategies that will add or preserve value for individual properties, as well as the entire real estate portfolio
- Review and analyze annual property appraisals to determine where and how improvements can be made to better drive performance
- Assess project and partnership risk factors, and work with senior management to develop an action plan for mitigating those risks
What’s driving the trend?
Obviously, the above responsibilities require the real estate professional to have a strong financial background. But, what’s behind this growing demand for property managers who have financial expertise and the ability to see the “big picture,” and who can clearly communicate and act on those observations? First, the real estate business, in general, is becoming increasingly sophisticated, and to stay competitive, property owners must do what they can to ensure their real estate assets remain relevant and desirable to tenants and/or investors. Also, the global business environment and the recent spate of merger and acquisition activity in several industries – including real estate – has many companies rethinking their real estate strategies and reorganizing their portfolios to meet the needs of a changing workforce as well as changing business dynamics.
Without a doubt, today’s senior commercial property managers must be able to react to change quickly, but more importantly, they must have a knack for anticipating change. Therefore, it is imperative for these professionals to not only keep properties operating optimally, but also, to always be thinking about how they can continue adding value, cost-effectively, to these assets in the event there is a sudden shift in the owner’s objectives. If properties must be sold, or somehow repurposed or improved, it must be done in a way that creates the most financial benefit for the company – always.
Commercial property managers must play their part in helping property owners to increase revenues and squeeze value out of the property, which, of course, is a primary objective for any organization, as well as an understood expectation – from the members of the board to individual shareholders. And, due to the current and increasingly stringent regulatory environment, not just in the United States, but globally, key stakeholders have other expectations for senior commercial property managers, as well. This is simply because real estate is, by nature, a heavily financial business operation that typically requires the involvement of many players, from tenants to contractors to suppliers of goods and services.
With so much money involved, and so many relationships to monitor, real estate can be a high-risk area for companies, in terms of regulatory compliance. For leading real estate companies – of which many are public or in institutional hands – the trend toward hiring senior commercial property managers with deep and broad financial expertise is influenced by the Sarbanes-Oxley Act as well as other heavily regulated areas such as environmental, health, and the like. It’s not that a senior commercial property manager has to worry about nitty-gritty financial reporting details from a compliance standpoint, necessarily – although, likely, many today are held accountable for monitoring certain financial “internal controls.” But the chief financial officer (CFO) does worry about all aspects of financial operations, and, therefore, is paying much closer attention than ever before to what’s happening at all levels throughout the organization – including how real estate assets are being managed, from how security personnel are compensated, to how tenant rent is collected (and also, accounted for).
Also, today’s senior commercial property managers should be prepared to offer suggestions on what can be done to improve cost-efficiency for a property, and what types of improvements or changes can and should be made to add value to not only an individual asset, but also, the organization’s entire real estate portfolio. This can include advising senior management on the long-term benefits of going “green” or investing in a certain type of wireless technology that will be highly attractive to current and prospective tenants in major markets. Again, this is why senior commercial property managers, ideally, will have a high level of financial savvy – as well as the courage to provide a level of insight which is, to be cliche, “out of the box.”
Property manager or asset manager? Both.
Senior property managers reading this article may be thinking, “Now, wait a minute here. Aren’t you describing an asset manager?” After all, those who serve in that role are usually the ones supplying that kind of high-level advice to the upper ranks. That is exactly the point. The lines are blurring between the property and asset management roles, and vice versa. Today’s senior property managers are expected to act like asset managers. In fact, in many job listings for senior commercial property managers, you’ll find that – in addition to the strong desire for an MBA, which translates to a certain level of business acumen – property owners are specifically seeking candidates with senior-level asset management experience. In some cases – depending on the size, type and geographic diversity of the real estate portfolio – they want a decade or more of such professional experience.
Meanwhile, asset managers should not think they are off the hook. Property owners are expecting them to have a very good understanding of what it takes to manage a building – right down to the costs of air-conditioning during peak months to how the paper towels are supplied. This is for two reasons: First, senior asset managers also must talk to the CFO – more frequently – and are responsible for even more financial duties, including generating analysis, financial statements and reports. Second, to create these vital documents accurately, completely, and thoughtfully, senior asset managers must understand what is going on with the properties they are analyzing and reporting on, at the property level.
To get the best of both worlds, some companies ideally will employ both a senior property manager and a senior asset manager, but certainly, there is an expectation today that even if both individuals exist in one company, they will be communicating with each other on a regular basis. For companies that do not have the luxury of hiring both types of professionals, you can be sure they will be looking to hire someone who can deliver the same level of expertise in one package.
Therefore, for senior property managers who want to stay relevant in the 21st century real estate industry, it is an imperative to brush up on your business education. Several organizations, including BOMA, offer courses to help you learn how to identify opportunities, create efficiencies and enhance the value of a property. Taking a course in asset valuation, such as from the Appraisal Institute, could also be beneficial.
In addition, asset managers at all levels should be proactive about learning the ins and outs of operating a property. This may require them to simply become more engaged with the day-to-day operations within the company’s real estate portfolio, which might include conducting property walkthroughs, learning details about vendor and tenant relationships, procurement, and, of course, talking with the senior property manager. In short, avoid sitting in the analytical silo.
Whether you are a senior property manager or a senior asset manager, strengthening your financial – and operational – knowledge will help you to gain a deeper perspective on exactly how real estate assets really are performing. More importantly, you can confidently provide educated advice on how to make assets perform better and more cost-effectively in the future, and drive revenues, with the right guidance and improvements. Enhancing such high-level business skills will enable you to set yourself apart from the pack, and ultimately, will increase your value to the property owner.
Anthony LoPinto is managing director & CEO with Equinox Partners/Select Leaders in New York City. He can be reached at alopinto@equinoxsearch.com. Anthony J. LoPinto is one the featured educational speakers at the BOMA Congress, July 21-24, in New York City; his session is entitled, “Recruit, Reward, Retain: Strategies for Professional and Executive Compensation,” and it looks at current compensation trends in commercial real estate, market dynamics and the future financials of human capital management.
