ABPL 30012 PROPERTY MANAGEMENT

Sara Bell
Unit: ABPL 30012 Property Management
Tutorial: Investment or Asset Management

ANSWERS

INTRODUCTION
This weeks tutorial is really about the type of work an Investment Manager does in his day
to day job. Peter James is an Investment Manager for ISPT. The work he is involved in falls
into 13 categories and its purpose is to grow the value of their assets as well as maximize the
income received from assets.
You will be given 3 or 4 different categories to discuss with the other people in your group.
Imagine that you have been asked to explain these categories of an investment managers role
to a lay person. Therefore, you need to put yourself in the place of a lay person and ask
yourself what they would need to know to help them understand what the investment
manager must do to carry out his role under these categories.
You will then report on these to the rest of the class. Refer to the lecture on Investment
Management by Peter James.
QUESTION FOR EVERYONE
What is ISPT and what is their Core Fund Strategy?
ISPT = Industry Superannuation Property Trust
This property investment vehicle for all Industry Superannuation Funds
Core Fund Strategy As depicted on slide 3 of the lecture slides

WORK CATEGORIES TO DISCUSS

Group 1
Asset Plans
Tenants
Leasing

Group 2
Lease Administration
Risk Management
CAPEX

Group 3
Sustainability
Operations
Financial
Valuations

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Sara Bell

Group 1
Asset Plans
Competitor & SWOT Analysis
Know about the surrounding buildings or any new ones coming on stream and what they
offer.
If any of your tenants leases are coming up for expiry, are they likely to move? Youll only
know this if you are in constant communication.

Financial Modeling
Model aspects such as: rental growth; capital growth; valuations; lease expiry; cap rates;
PV of CAPEX for 29 years.
Use computer software such as COUGAR
Asset Positioning
Think about the types of tenants you want to attract and make the appropriate building
changes as needed.
Lease Expiry Profile
The shorter the WALE (weighted average lease expiry) the more risk you have b/c if tenants
dont renew the LL will have to spend money attracting new tenants.

Risks

Market Analysis
Know what is presently happening in the market place. Eg. Are T looking to move, or if rents
have recently fallen, will I need to offer a large incentive to secure new T?
Hold/Sell Recommendation
If the asset can grow in value then its worth keeping, otherwise sell.

Tenants
Ts are your most valuable asset and retention is cheaper than replacement

Tenant Retention Plans

Its vital to have strategies in place to retain Ts, eg .Ensuring the property is well
maintained so that Ts want to remain. Providing incentives, marketing costs and CAPEX
are major costs associated with losing Ts
Establish High Level Relationships
Its important for the PM to be speaking to people from the tenancy who are empowered to
make decisions, not just the office manager.

Satisfaction Surveys

ABPL 30012 PROPERTY MANAGEMENT

Sara Bell
These tell the PMs what is working well and what isnt. These surveys include subjective Q
such as: I think or feel as well as Q on measurable data . There is a clear link
to T retention with the use of these.
T Management requires regular contact. Be fair and reasonable
Its ok to be firm and say no to unreasonable requests.

Leasing
Agent Selection and Structure
The right leasing agent is someone who is proactive.
Perhaps are conjunctional appointment is better than a sole one b/c competition b/w
agents could be to LLs advantage.
Remember that the term and fees are negotiable.
Document the agreement to your requirements, you dont have to agree to the agents
standard one.

Marketing Campaign
Think about the way you want to proceed including: Asset Positioning including
Branding & Logo; the Building Signage youll use if any and whether to use Brochures &
Mail Outs, Media or Website advertising.
Lease Proposal Document
This is given to the T BEFORE they agree to lease. Its an extremely important document
but often poorly done. It should include:
*Photos
*Executive Summary- at the beginning summing up the deal
These 2 things are vital b/c you need to catch the attention of the decision maker or
he/she may read no further.
*Building Strengths
*Key Terms such as leasing space, term, rent reviews, car parking etc.
*Benefits to the decision maker
The more info contained in the lease proposal document the less arguments arise when
the lease is written b/c most things have already been spelt out.

Negotiations

Realize the leasing process is not complete until the lease is signed

Manage the Leasing Process

Saves time and money to use a standard lease. Ensure someone is instructing and
reviewing changes. Ensure the Ts side is moving along time wise. ISPT includes a clause
to say if the lease isnt signed by T within 1 month of the draft lease being given then offer
lapses. This allows them not to waste too much time with one T and find another one.
ISPT also caps their costs by allowing the T to request 1-2 rounds of changes at the LLs
expense but after that the T is responsible for the LLs legal expenses.

ABPL 30012 PROPERTY MANAGEMENT

Sara Bell
Be aware of Retail Tenancies Legislation
This is different in every state of Australia.

Also be aware of Legal Precedents which may affect you

Group 2
Lease Administration
Lease Status Reports
Receiving these each month lets you know how the leasing process is progressing and
whether any intervention on your side is needed.

Bank Guarantees
Need to ensure that there is money set aside that you can draw down in the event of certain
circumstances such as rent default or T damage to premises.
Insurance
This needs to make reference to the lease so that the LL can claim if necessary.
Lease Registration
This process is different in all states.
Retaining Documents
Should be in a safe

Executed Lease Copies should be Accessible

Summary of Relevant Transaction Documents

1. Heads of Agreement this is the accepted offer of the lease
2. Agreement for Lease - this is used when a lease is intended for a property
still under construction
3. Lease should include Building Rules, Condition Report, Menu for food
retailers etc
4. Disclosure Statement includes info that The T would reasonably want to
know before entering into the lease eg rates and other outgoings payable.
5. Licences - for any car parking, storage etc. A licence unlike a lease
doesnt give the right to exclusive possession

Risk Management
Duty of Care on Owners and Managers is high and growing
Need regular inspections of property and premises to ensure compliance, eg.
Essential Safety Measures
Asbestos management
Emergency Procedures for things such as :fire; bomb threats; medical emergencies
etc

ABPL 30012 PROPERTY MANAGEMENT

Sara Bell

Managing External Contractors for things such as: risk assessments; inductions;
service failure proceduresetc.
Doing Environmental Audits
Doing Site Specific Audits for example ascertaining how to manage a terrorist
threat.
Disability and Discrimination Act Reviews
Do the tenants have a Business Continuity Plan?

Capital Expenditure
Important to spend money on Asset Presentation and the Performance of Services b/c
this helps to retain and attract tenants.
Possible Redevelopmen or Refurbishment to generate revenue from previously unused
space eg foyer area may be suitable for coffee shop
Use Lifecycle Reports from engineers re services to ascertain whether more
economical to maintain existing or replace.
Try to Link Refurbishment to Lease Expiry.
Take care to consider approving CAPEX. If its for INCOME GENERATION;
SAFETY; ENVIRONMENTAL REASONS or for CODE COMPLIANCE or
STATUTORY REASONS then the money must be spent, but when the spending is
discretionary, youll need to weigh that up for yourself.

Group 3
Sustainability
Ascertain why it may be important for your asset
If so, which Accreditation Scheme will you use: NABERS, GREENSTAR or both?
From July 2010 all owners of buildings with more than 2000sqm need to disclose the
NABERS rating before leasing or selling.
Federal, State and Local Government have funds available for implementing Green
Initiatives
Do building owners make their building GREEN at all costs or must the costs and
returns be weighed up?
Types of Sustainability Aspects to be considered include the use of: ENERGY;
WATER; WASTE; A GREEN LEASE and an ENVIRONMENT MANAGEMENT PLAN
that can be imposed on tenants
All government tenants require a minimum of 4.5 star NABERS Rating before
occupying space, so if you wish to attract Government tenants this is an important
consideration.
Operations

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Sara Bell

PM must understand how the building functions. This includes aspects such as: Air
Conditioning; the Building Management System used to switch on the lights and
alarm etc
Understanding the technical aspects with respect to the Mechanical Systems(HVAC);
Electrical Systems; Fire & Safety; Transport such as elevators and Security
Understanding the Non Technical aspects such as: Cleaning; Landscaping;
Importance of having Scope of Works and KPIs expected in contracts to propect
owners
The Tendering Process for Contracts
Manner in which Tenant Fitouts are carried out including: having a Principal
Contractor in Place who is responsible for checking that other contractors complete
works to the required standard.
Ensuring the building is properly maintained

Financial
Asset Managers need to do lots of financial analysis and tracking.
Checking Tenancy Schedules to ensure the PM has the billings are correct and that
rent reviews happen in the designated times otherwise you may miss out on an
increase in rent. This will reflect not only income but also the property value.
Keeping a check on Rental Arrears
Forecasting budgetsand Re-forecasting these when there has been a change
Tracking Outgoings both Recoverable and Non-Recoverable ones
Financial Modeling of Returns

Valuation
APRA requires annual valuation for all property assets. Even though external Valuers are
used, Investment Managers arm themselves with market knowledge so that they can
challenge Valuers assumptions when need be on issues such as Capitalization Rates; CAPEX
data; Market Rents etc They do this when they believe a Valuer might have been too
conservative. To do this Investment Managers must:
Receive regular briefings from Analysts
Receive regular u dates from Agencies on Sale Transactions
Meet with Agents to talk about the Property Marketplace

ABPL 30012 PROPERTY MANAGEMENT

Sara Bell
Investment Managers also often challenge Statutory Valuations on which Rates and Land
Tax are assessed