As published on GlobeSt.com, June 20, 2018
The retail industry has changed tremendously, and property managers have become integral to the success of an asset. Retail property manager Coreland Cos. emphasizes that property owners should work with property management to strategize, execute a business plan and maximize value at a property. Specifically, the firm says that it is important for owners to communicate the end goal and so the property manager can guide the strategy appropriately. We sat down with Cheryl Todd, EVP at Coreland Cos., to talk about why owners should communicate their exit strategy and to find out how they are maximizing value at retail properties.
GlobeSt.com: Why is it important that property owners communicate their exit or business strategy with their property management team?
If a property manager knows how long the owner is going to hold the property, that really plays into a lot of the implementation of your management plan, from new leasing and capital improvements to tenant renewals. If an owner, for example, is going to implement a value-add strategy, then the property management focus is going to be on the tenant mix, securing long-term leases and maximizing rental rates for value creation. You wouldn’t renew an under-market tenant if you are trying to create value. Someone that wants to hold a property for the long term will look more at the tenant relation’s side. That might mean renewing a tenant that has been critical to the center for many years but maybe isn’t paying top rent.
GlobeSt.com: Is this an education process with property owners?
We interact with our clients. Some are more open than others, but we like to be a part of their ownership plan. Having those discussions with our clients when we come on board is key to our success as well. We do like to have that interaction and know what their plans are so that we can best help them create a strategy.
GlobeSt.com: What are some ways that property owners can make a property more attractive to potential buyers?
The curb appeal is key as well as securing a stable rent roll. You want a stable rent roll with long-term leases and fixed increases. You also want to stay away from month-to-month leases because they have no value for a buyer. You also want to look at opportunities. Maybe you have something coming up in the next three-to-four years that could help you create more value. For example, maybe there is a pad that could have a better and higher use than its current configuration. That is something that a buyer is going to see. We take an asset management approach, and a good property manager will have those conversations with their clients.
GlobeSt.com: What are some things that could potentially hurt the sale of a property?
One of the biggest things that we see is an owner not executing a plan. For example, owners that have not renewed tenants and are letting them stay on month-to-month, or owners that have deferred maintenance and haven’t implemented capital improvements. Often times, this is driven by cash flow and there may be a reason, but if an owner is not focused on what the property can become, it will ultimately hurt the property’s value.
GlobeSt.com: How early should owners strategize with property managers about the exit strategy?
You need to have a plan. We have a lot clients in play right now for disposition. Many owners are trying to guard against rising interest rates or capture investors that might be trying to place money due to 1031 exchanges. People are looking at the market very closely, but you have to know what you can invest in and where you are going to place the money that you take out of the property.
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