Chapter 8 Flashcards

1
Q

What are common challenges an asset manager must consider when determining which management firm to hire?

A
location
leasing
redevelopment
tenant relations
performance
holding period
condition of the property
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2
Q

Describe the three tiers of management firms and how they are different.

A

Top Tier-National

  • advantages in standardized policies/personnel depth
  • centralized accounting leads to better expense controls and timely reports

Mid-Tier-More Limited Geographical Area
* partner with similar firms in other geographical markets to serve clients outside of their own markets

Specialty Firms

  • smaller-operate in a particular market
  • more risk due to limited size but they are good at specific properties
  • more personal
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3
Q

What are the seven basic elements of a proposal that an asset manager should request from all perspective property management companies?

A

personnel-training, background, certifications, etc.

Systems and Procedures-accounting and management firms/software

Operations and Construction-staffer skills and knowledge and should state who does it

contract terms
references
conflicts of interest
confidence

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4
Q

What are the key issues negotiated in a property management contract?

A
indemnification
liability limits
termination
delegated authority
employees
in house services
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5
Q

What is the purpose of incentive clauses, and what kinds of incentive clauses can asset managers use?

A

Incentive clauses are targeted to a specific problem of the property and may be tied to increase occupancy or net income.

They can use cancellation fees, construction management, reimbursable costs and training costs.

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6
Q

What is the purpose of a monthly reporting package, and what types of comprehensive reports are typically provided to an asset manager?

A

Update asset manager on financial results of the property.

They should review actual to budget variances, receivable and manager’s comments and summaries.

examples-statement of cash receipts, disbursements, current rent roll, aged receivables, monthly bank statement and reconciliation, transfer of excess funds, and misc. accounting reports.

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7
Q

What is the goal or property management transitions?

A

to ensure the transition is smooth and has minimal impact on property operations.

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8
Q

Identify the kinds of incentive clauses that asset managers can use. Discuss the purpose of each incentive clause.

A

cancellation fees-used to recover management company’s set up costs

construction management-compensate management for extra effort to oversee construction projects.

reimbursable costs-costs for manager’s office and staff which are added to the operating expenses

training expenses-training costs for property specific systems

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9
Q

What types of comprehensive reports are typically provided to an asset manager? Explain the purpose of each type.

A

statement of cash receipts/disbursements-compares actual to budget

current rent roll

aged receivables-past due payments

bank statement/reconciliation-reconciliation performed by someone not writing check or making deposits.

transfer of excess funds-cash flow statement; all cash received and paid and the reserve amount

misc accounting reports

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10
Q

What are some of the main items to examine when making property management transitions?

A

1) property communication-formal introduction to tenants, vendors, suppliers, etc.
2) rent roll
3) accounting
4) property operational efficiency-deferred maintenance and needed capital improvements
5) environmental issues
6) service contracts-last bid dates, expiration dates, COIs
7) tax/utility bills
8) tenant relations
9) common area maintenance reconciliations
10) budget

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