Property Management System/ REM 6211

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The Management Plan

Module 6 : THE MANAGEMENT PLAN

Course Learning Outcomes:
1. Familiarize the Management Plan.
2. Understand the Niches Property Management.
3. Determine the different types of Lease.

Management Plan

A comprehensive plan for the program that clearly specifies intended

objectives of the proposed project, including clearly defined responsibilities,
timelines, and milestones for accomplishing project tasks.
Niche Markets are specialized Property Management opportunities which
may supplement or replace traditional / basic management property
operations, i.e. Residential Properties, in a management company. Knowing
some of the basic elements associated with the various niches may provide
the opportunity to establish a secondary or alternative property
management operation with less competition and potentially increased
income.
We will identify the most prominent niches and the specialized features and
characteristics which are usually associated with those niches which may be
a factor in acquiring an interest in initiating a specific niche management
operation. We do not refer to Single Family Residences, (SFR’s), Condos, or
Multi-family housing (Apartments) as niches.

Overview - The Niches

Non-Residential / Commercial

Retail
Office
Medical
office Mixed
Use
Industrial
Mini Storage
Marinas
 Private Airports Parks

Residential / Other
Homeowner Association
Management Short Term Rentals
School Housing
Military Housing
Government “Affordable”
Housing Mobile Home Parks
Home Owner Associations
Parks – Camp Grounds
Private Air Park
Communities

Niche Management opportunities are often presented as a result of the

contacts, both business and social that come about with people in real estate.
It may be a client with a mixed property portfolio or a contact in a trade or
service organization in which you are a member. The contact may be aware
of your property management operations and may be looking for
management help.
It may be an inherited property of an associate, family member or friend. It
is r possible some other contact or activity may provide an opportunity to
begin a niche management operation. It is quite possible the property
management software your company already uses may be more then capable
of satisfying the requirements of the niche. At the minimum many of the
operations already in place provide a good start for most niche management
implementation efforts.
A shopping center or apartment community developer new to a community
may be quite inclined to initiate management with a well established high
exposure management company with minimal experience in shopping
centers or apartments, especially if they if the management company is
already in the shopping center or very near the apartment property. It is
likely that finalizing a contract would require some hard negotiations, but
“breaking the ice” on a high exposure niche could be a major management
cous.
Obviously many of the niches identified require a local presence of the
property type associated with the niche. Student Housing requires the
nearness of a college or university with either campus dormitories or other
student housing or potential housing nearby. Short term rentals requires
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The Management Plan

travelers / vacationers requiring short term accommodations and the

properties in which they can reside.. Many short term rental operations are
associated with regional attractions, i.e. beaches, mountains, or major
entertainment attractions.
Note: It is very likely that the short term property will have some level of
government requirements which may include length of stay, number of
participants and of course taxation.
An awareness of the associated elements allows a property management
company to focus more effectively on the best and most viable niches to
consider. Southern California in general and San Diego County specifically
offers a robust set of niche management opportunities.

Other Considerations –
 Accounting & Record Keeping Requirements –

Niche management operations may differ greatly in re: to accounting and

record keeping requirements based on Federal, State and local regulations
and tax obligations. Niche operations tend to involve business taxes and tax
agencies to a greater degree than traditional residential management
operations. Those requirements may minimize the effectiveness of the
current accounting system or negate its use completely substantially
reducing the potential profit obtained from establishing a second
management entity.
Record keeping and communications requirements may also significantly
increase administration efforts and may constrain the time and efforts
required for the basic management operations. Short term rentals require
extensive communications and record keeping prior to the tenancy and an
intensity of operations that often require seasonal staff to assist with the
increase in operations. A significant number of the short term niches tend to
be seasonal requiring seasonal hiring and a major increase in the intensity of
operations.
Government Regulations & Control -
Niche management operations may differ greatly in re: to the level of
Government Regulations & Control. Taxation is of special concern. We identify
the sales taxes on traditional rental operations that are in place in a few states
and cities in Chapter 14.
Special Management Operations Requirements –

Commercial management operations usually require some capabilities

associated with the use of CAM’s (Common Area Maintenance charges).See
additional information below.

Management and Staff -

A wide range of special backgrounds and experience may be beneficial in the

development of some niches. An example would be the experience, knowledge
and special skills beneficial in the operations of:
Short Term Rentals ( hospitality training/ experience ) –
Marina, (an experienced boat owner) -
Air Park, (commercial aviator) or private licensed pilot -.

As indicated above additional niche opportunities may be increased based on

the diversity of geographic, business and educational demographics.

Non-Residential
Retail Shopping Centers

 Super Regional - The largest centers are usually associated with large
population centers. These centers are generally 800,000 SF GLA plus
(Gross Leasable Area). In California the Westfield Shopping Centers are
a prime example of Super Regional Shopping Centers. A standalone
parking structure, a large movie theater complex and / or some other
major entertainment facility would often have a long time lease in
addition to multiple anchors. An anchor is usually a national or major
regional retailer.
 Regional 400,000 + GLA based on the area served. A regional would have
multiple anchors and up to 100 or more commercial tenants.
 Community 125,000 GLA to 400,000 - A somewhat smaller center usually
with about 1 to 3 anchors.
 Neighborhood 30,000 GLA to 125,000 – Usually consists of a chain food
store and perhaps 20 or so other commercial tenants.
 Strip - Less than 30,000 GLA – A strip could be of general products and
services or of a specific category of products and services. A strip would
usually consists of a small footprint, minimal parking and 6 to 10 tenants.
Stores are arranged in a row or strip, with a sidewalk in front. Strip malls
are typically developed as a unit and have parking spaces in the front of
the strip.

 Standalone - Gas stations, fast food, and single story retail and service
companies appear to make up the majority of standalone commercial
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The Management Plan

properties today. They usually involve long term leases and often may
may entail a “brand” i.e. franchise or company owned business. Examples
are ARCO, KFC, McDonalds, auto repair , etc. Generally, some l special
waste and hazmat issues are attributed to these businesses.
 Mixed Use – Once again becoming popular. Commercial space on the
ground floor while residential or office units occupy the upper floors
which generate additional income to compensate for the higher costs of
land in some areas. Locally we see a wide diversity in the size of mixed
use commercial. In older portions of the city we will see the original
mixed use commercial which originally entailed a family owned business
who lived in or above their shop/ business. Many cities also have
commercial streets where both small commercial and multi-unit
residential are present. The street level portion of the property will
generally be devoted to small business commercial.
 Note: It is a benefit for the property management system to be able to
differentiate between retail tenants and office/ residential tenants in the
mixed use property. This “status/ type“ function is also of value for
identifying homeowners and tenants in Homeowner Associations.
 Outlet Centers - A relatively new concept which entails multiple stores
outlets t for major retailers offering their products for less than retail
prices. It is generally thought that outlets provide major discounts over
regular retailers and tends to be a key element in Outlet advertising.
Generally equal to a community center in size, but often located in remote
rural areas where land costs are significantly less urban areas.

Commercial Property Key Terminology includes:

CAM – An acronym for Common Area Maintenance. Generally it pertains to
commercial properties with the most use in retail commercial leases. CAMS
are a means to charge commercial tenants for property expenses that are
common to all or most of the tenants, i.e. property taxes. parking lot
maintenance, utilities, etc. The total cost of the CAM expense is then divided
among the tenants on some basis usually involving the size / square footage
of the tenant’s space. CAM’s and the additional increase in size and
complexity of the commercial lease are the basis of the major differences in
managing commercial properties.
CAM charges can include 20 or more and can be quite complicated in their
calculation and their reconciliation. Property management systems
specifically for commercial properties will include the CAM routines and
reconciliation. General property management systems may offer the CAM
routines and reconciliation as a module or add on routine.
Actual versus Estimated CAM charges - Actual CAM charges are calculated
after actual costs are presented / invoiced and received by center
management. Estimated are charges based on past costs and expected
increases for some period, usually a year. Estimated CAMs are usually
present in smaller commercial retail, and smaller office properties. Larger
commercial properties are managed generally by large commercial
brokerages using 60 page leases and defining 10 to 20 plus CAMS.
CAM Reconciliation – The process of reconciling actual CAM costs versus the
estimated charges actually paid for some period, usually a year.
Leases – Commercial tenancies are initiated with a commercial lease. They
may end with a Month to Month arrangement but almost universally begin
with a commercial lease. Commercial leases may be relatively simple for
smaller commercial properties, but generally are significantly more complex
and detailed then residential leases and normally ate multiple year
agreements. Base rent increases are identified with details on all of the
CAMs and other factors
affecting the actual charges that apply. Anchor tenants, ( large tenants that
generate traffic for their business and potential traffic for other smaller
stores and businesses ) may have additional lease clauses including sales
activity to justify their anchor status.
Leases are generally offered and negotiated by the commercial management
or property owner or commercial management brokers who may advertise
the property on the owners/ or management company’s behalf. Locally we
have observed the relatively recent origin of companies that only represent
tenant lessees. The management of the properties may be managed by the
owner of the land lease, the developer or a management company.
Lease Rate - The East coast and San Francisco uses a yearly lease cost per
square foot calculation. It would appear as $60/SF – $5.00 X 12 - Generally
urban office space -
Western states use a monthly lease cost per square foot calculation in the
leases and in advertising. The lease rate above would appear as $ $5.00 SF
(Monthly ) - Generally Retail and Industrial -.
Land Lease – A land lease is an agreement, (usually long term) in urban
areas and generally associated with commercial properties. Initially they may
exist in a rural area, but in the path of development. The local citizens may
not be aware of their existence since there are no signs identifying that the
shopping center, office buildings, hospitals and / or research facilities were
built on land leased land.
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The Management Plan

Recently a large 50 year large land lease in East San Diego County ended. The
properties were being managed by an out of state company and leased by a
local commercial broker. The family that owned the land lease and the land
has announced they are going to develop further some of the properties.
Currently the properties include a Super Regional shopping center, a number
of hospital buildings, and some medical office buildings. The family that owns
the land moved to San Diego County approximately 150 years ago and
currently is a well established wealthy family.
They acquired the property prior to any significant degree of development
and promoted the commercial development. Generally the development cost
is less
and the leases theoretically may be less since the land is not purchased. Land
leases are fairly common in Southern California.
Lease Analysis – Is a process that defines and analyzes leases from details
associated with the schedule of and the amount of lease payments. Lease
analysis also creates / calculates the present value of the lease payments
expected as defined in addition to all of the special parameters identified in
the lease. A number of software programs are available to provide the
analysis.
NNN Lease – A lease agreement that designates the lessee (the tenant) as
being solely responsible for all of the costs relating to the asset being leased in
addition to the rent fee applied under the lease. The structure of this type of
lease requires the lessee to pay for net real estate taxes on the leased asset,
net building insurance and net common area maintenance. The lessee has to
pay the net amount of three types of costs, which how this term got its name.
The actual charge amounts for the three categories are usually defined by
the % of the tenants leased space compared to the total leased space of the
property. Additional elements may be considered based on the special
requirements of the lessee, i.e additional utility usage, parking, security, etc.
Actual CAMS charged will most likely be a significantly greater number then
the NNN designation suggests.
Overage – A circumstance when a commercial tenant has been charged and
made payments on an estimated CAM that were greater then the actual. This
situation would normally be resolved during the CAM reconciliation process
unless the overage was substantially above the norm.
Sales CAM - A CAM established based on monthly sales of the commercial
tenant. It is designed to account for both a dramatic increase or decrease in
sales activity. It does require monthly reporting and substantial
administration when minimums or maximums are encountered. Seasonal
 sales activity tends to complicate the tracking and application of minimums
and maximums.
Minimum – Maximums – The qualifiers associated with the Sales CAM. The
minimums/ maximums relate to sales dollar volume. The use of this CAM
calculation is usually only found in the largest retail centers.

Office Facilities –
Multi Story Business – The traditional “skyscrapers” associated with the
downtown business district. Originally established as land costs increased but the
developing infrastructure deemed multi story office development feasible. In
recent years multi story office has become more common in the suburbs and former
farmlands. Good examples of that circumstance are in the University City in San
Diego and Orange County North of the I-5 and I- 405 split. Portions of those areas
went from grasslands to 12 -16 floor buildings.
Office Parks – Usually a larger footprint of single and two story office spaces. Newer
facilities are now being built with elevators based on the introduction of ADA (
American Disability Act).
Mixed Use – See mixed use above. Mixed use involving office space would most often
be above the retail space at ground level. In some cases the same tenant may be
using both retail and office space in the same property.

Note: CAMS are less often an element in office leases. They may be present in
regards to the common areas associated with the building.

Medical Office -
Generally – Same Basic Structural Facilities as Office with the following additional
issues –
Special Considerations -
Security based on presence of drugs and expensive Equipment - Specialized
Services - Hazardous Waste Handling -
Higher % of Handicapped and Disabled – Special considerations and infrastructure
-
Pharmacy - Medical Supplies facilities are often included in the larger properties –
Proximity to Hospital - Not a requirement, but very common as a convenience for
patients and for medical professionals and staff –
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The Management Plan

Research Facilities -

Generally – Same Basic Structural Facilities as Office with the following additional
issues –
Special Considerations -
Security is likely more of an issue - Pharmaceutical and medical equipment R&D
often entails millions in specific projects and is a major target for corporate piracy.
Additional infrastructure often required based on the potential dangers of lab
research, i.e. virus’s, bacteria, radiation, toxic materials, etc.
Research facilities tend to have a significantly larger footprint then many medical
office properties and often will be leased by a single research entity.
Research facilities do not share the same general population visiting their facilities
as medical buildings. Note: See Security above - Therefore they do not have the
additional Handicapped Disabilities infrastructure, pharmacy medical supplies
services or hospital proximity that usually exist in or near medical buildings -

Industrial –

Industrial Parks – Leases tend to be longer based on space accommodations are

more customized for the business. Industrial leases space is split between
warehouse manufacturing and office operations.
Standalones – tend to be larger spaces based on zoning and characteristics of
industrial tenants. Metal buildings are common.
Multi-Unit-Industrial / Parks - Properties may include large parcels and ten plus
individual units and some assigned parking spaces.
Special Issues / Elements – Dock
operations are common –
OSHA Issues – Hazmat Operations potential – Extended
Hours – Multiple shifts –
Security – Less of an issue with multi-unit properties based on increased
traffic, and less potential losses due to theft/ burglary.
Security fencing and services are often in place with single use facilities involving
high tech design and manufacturing,
Short to Long Term Use / Agreements –
Vehicle Access to all Units in multi-unit properties -.

Note: The above categories of commercial properties may involve leases created and
negotiated by agents employed by the management company or by commercial
leasing agents associated with a commercial brokerage, i.e Coldwell Banker, Grubb &
Ellis, etc. A common site at both shopping centers and office buildings is that of signs
identifying the management company and of leasing agents of commercial brokerage
firms advertising available space at the reinforcement.
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The Management Plan

References and Supplementary Materials

Books and Journals
1. DICK JONILONIS; PROPERTY MANAGEMENT SYSTEMS From A to Z; 2016;United
States of America;
2. MERRIAM DICTIONARY
3. WWW.GOOGLE.COM
4. WWW.WIKIPEDIA.COM

Course Module