Reconciling Common Area Maintenance (CAM) in Commercial Property

Common Area Maintenance (CAM) charges are a standard component of most commercial retail leases. Typical expenses – including landscaping, snow removal, utilities, sanitation, maintenance, repairs, etc.  – are added to the base rent as additional rent (much the same as taxes and insurance). These costs are negotiated at the beginning of a lease but can often become a point of contention if both the tenant and landlord don’t communicate openly.

Here are a few things to keep in mind when it’s time to reconcile CAM charges:

  • Make sure all charges that could be considered CAM costs are presented to the landlord or owner by the submission deadline for review.
  • Determine the amounts per tenant based on their Gross Leasable Area.
  • Determine if the charges benefited one tenant or all tenants.
  • Have tenants been credited or refunded for over paying CAM estimates?
  • Were notices of deadlines for reconciliation clearly provided to tenants?
  • Make sure to follow the terms of each lease as they may vary (i.e. Base Year CAM or Cap on CAM rates).
  • Landlords should also provide CAM estimates for the current year and give adequate notice to the tenant.

Agreeing to terms and understanding charges as they arise is an easy way to avoid frustration at the end of the year. CAM reconciliation shouldn’t add aggravation to the already tedious budget process as long as the landlord and tenant keep accurate records and an open line of communication.

 

 

Winter Storm Preparedness for Property Managers

Groundhog General Beauregard Lee did not see his shadow which predicts an early spring; however, we know all too well that a final Arctic blast can wreak havoc on homes and businesses if not properly prepared. Our property management team suggests the following tips to ensure your commercial property is protected should a severe cold storm strike.

Extreme Cold

  • Set thermostats to 55 degrees or warmer
  • Water heaters and HVAC systems have to work harder during extreme temperatures. Ensure these systems are cleaned and serviced regularly.
  • Cover exposed pipes with insulation sleeves or heat tape
  • Leave faucets dripping to relieve pressure that could develop in pipes
  • Ensure hoses are removed from exterior faucets and leave water dripping

Snow and Ice

  • Identify pavement deficiencies that may become covered by snow and difficult for pedestrians to see.
  • Ensure roof water runoff is directed away from the building structure and clear of walkways where it could freeze.
  • Clear areas around vents and exhaust pipes.
  • When snow melts, make sure it does not drain onto pedestrian areas where it can freeze later.
  • Clear snow from roofs to prevent excess drainage and weight.
  • Instruct maintenance staff to clear sidewalks using salt, chemical pellets, and sand as appropriate.

Once the cold has gone for good, take time to assess how well your property weathered the cold and make note of any items or tasks that could be done better next winter.

Fall Maintenance Tips for Commercial Property Owners

Even though temperatures are still well into the 90’s, property managers should be thinking about fall maintenance. The structural and mechanical systems of commercial properties will continue operating efficiently for longer if maintenance is performed regularly and deterioration or problems are caught early.

Here are a few things you can do now in preparation for fall:

  • Check gutters and downspouts: Remove dirt and debris to ensure proper drainage of water away from the building to prevent damage. Also, ensure gutters and downspouts are securely attached to the building for proper function.
  • Inspect HVAC system: It’s best to make sure the heating system is in working order before the first cold snap. Utilizing a professional will ensure filters are cleaned, supply registers are adjusted and thermostats are calibrated for optimal performance – further decreasing your risk of malfunction or costly repairs.
  • Check water pipes: Exposed water pipes should be checked regularly for leaks, but fall is also a good time to make sure the insulation is prepared for colder weather to prevent frozen and burst pipes in the winter.
  • Assess landscape needs: Fall is a good time to inspect the landscape for dead trees or shrubs and also limbs that could be a fall hazard. Proper removal will prevent any property damage or safety concerns and also give you a head start on planning your spring planting requirements. A fresh layer of pine straw or mulch will spruce up your property and help insulate the plants for winter.

Preparing a Commercial Property Budget

Fall marks the start of football season, the anticipation of upcoming holidays and, for property managers, the daunting duty of preparing a commercial property budget. While the task can take weeks or months, an annual budget is essential to organizing a property’s value and performance. What’s more, the process helps discover trends in expenses which help realistically predict future performance of the property.

Use these steps as a guide to creating a thorough commercial property budget:

  • Determine the gross potential rental income of the property by adding together all income from rental fees and available spaces.
  • Take note of any reimbursements or recoveries associated with the property if tenants are responsible for any operating costs or taxes.
  • Account for any loss of income due to vacancy.
  • Identify the facility’s operating expenses such as utilities, repairs, maintenance, insurance and other management fees.
  • Examine the debt service and cash flow to understand the owner’s return on investment. This is particularly important if a property is for sale because it shows potential investors if the site is worth purchasing.
  • Identify and account for all capital expenditures, escrow accounts and reserves. These include one-time expenses and funds set aside for emergency expenses or large maintenance projects in the future.

While creating a budget can be tedious, it’s best to take the time to make sure it’s thorough and accurate. It’s also important to keep detailed reports and records for future use. By doing so, you’ll have an easier time identifying items for future budgets and have a better understanding of when income or expenses need to be adjusted.

McWhirter Realty Partners manages properties throughout the southeast including office, medical office, industrial, retail and self-storage. If you have a real estate investment and are considering a property management company to maximize the return on your investment, contact McWhirter Realty Partners today.

 

Real Estate Focus: Dekalb County

Dekalb County is consistently ranked as one of the top ten counties to live in Georgia[1] based on factors such as cost of living, public schools, amenities and job opportunities. What’s more, since 2014, the county has made a significant effort to make it an even better place to do business with the creation of the Economic Development Strategic Plan.

The Plan recommended creating an incentive policy to help entice and expand business in six target industries: Advanced Manufacturing, Construction and Support Trades, Life Sciences, Logistics, Professional and Business Services and Tourism. In March of this year, an Economic Development Incentives Policy was approved.

Objectives of the Incentives Policy include: expanding economic development activity, enhancing the tax base, job creation and retention and encouraging private sector reinvestment in vital areas. For businesses within the target industries this means the potential for reduced fees for development permits and business licenses, matching funds for water and sewer infrastructure improvements and possible acceleration of the development review process.

Dekalb County’s positive accolades and business incentives will continue to attract real estate investors and developers. McWhirter Realty Partners has extensive knowledge of the county and the surrounding area with current opportunities including:

  • 5830 E. Ponce De Leon: 26,572 SF flex, office/warehouse building and a 6,650 SF service building, and is located within Stone Mountain Industrial Park.
  • 6121 Memorial Drive: 40,000 SF former automobile dealership on 6.2 acres

If you have questions about real estate in Dekalb County or the metro Atlanta area, contact us today.

 

 

 

[1] local.niche.com/rankings/counties/best-counties/s/georgia/

Summer Pest Control Tips for Commercial Properties

While pest control needs to be prevented year-round, there are certain times when business owners and tenants see a “surge” in activity that requires extra attention. During the hot summer months, pests such as ants, flies, roaches and bees are more active and seek respite from the heat inside cool, shaded office buildings and parking garages.  

Here’s a list of actions to keep summer pests out:

Do:

  • Keep landscaping trimmed away from building exteriors
  • Eliminate areas of standing water
  • Replace weather-stripping around windows and doors
  • Ensure the building foundation is properly sealed
  • Make sure attics, crawl spaces and basements are well ventilated and dry
  • Have an annual termite inspection

Don’t:

  • Install pine straw closer than ½ – 1 foot away from the foundation
  • Allow garbage dumpsters to overflow
  • Store building construction materials against the building
  • Let irrigation systems spray directly toward the foundation
  • Leave food or dirty dishes in break rooms or kitchens
  • Allow open air parking garages to retain excess moisture or puddles

These tips should help keep pest activity at bay during the summer months. However, if you do suspect a pest infestation, make sure you work with a trained professional to safely and effectively remove the problem to best ensure it doesn’t return.

Severe Weather Safety for Commercial Properties

Summer in the South is filled with pop-up thunderstorms that often bring a
welcome relief to high temperatures but can also cause significant property damage in a short period of time. If you own or manage commercial property it’s important to stay informed and be prepared to respond in the case of significant weather.

Here are four tips to protecting your building and occupants:

  1. Research – Guidelines are available to provide an overview of what typelightning-storm-night-firebird-56614 of weather to expect in your geographic area. Following trusted resources such as the National Oceanic and Atmospheric Administration and the National Weather Service will not only provide information about threatening weather but also resources for emergency situations.
  1. Evaluate the Property – Before storm season begins, take extra time to assess the property and identify any maintenance that can be performed to further reduce the risk of damage in the case of a storm. This includes items such as:
  • ensuring trees are trimmed away from the building
  • weather proofing windows and doors
  • verifying emergency signage and lightening is clearly displayed and in good working order.
  1. Test Generators – Backup generators are an effective alternative power source in the case of an outage – especially medical facilities where lifesaving machines and medications needing refrigeration are prominent. Make sure all are in working order with appropriate run time to support the facility’s needs.
  1. Plan and Communicate – Work with tenants to develop a plan for severe weather and ensure all employees and occupants are aware of how to respond in the case of an emergency. Prepare supply kits to be kept in central locations throughout the building. Train and practice the plan regularly to reduce the risk of being caught off guard in an emergency.

Severe weather is a serious threat and one that can often happen with little warning. It’s important to be thorough and proactive to ensure your business is protected. McWhirter Realty Partners has a skilled property management team with experience preparing and recovering from weather related events.

 

Commercial Property: Spring Maintenance Checklist

Being proactive is key to preventing further damage – and saving time and money – when it comes to your commercial property maintenance. Spring is an important time to assess any damage your property incurred during harsh winter conditions and properly prepare it for summer.

At McWhirter Realty Partners, our expert team of property managers are diligent in monitoring and maintaining our properties by following seasonal guides to ensure no system or area is overlooked. Here’s a suggested guide for spring maintenance:

Spring Maintenance Checklist

  1. Roof and Exterior

Strong winds and extreme cold temperatures can increase wear and tear on a building causing chipped paint, loose roof tiles or siding, clogged gutters and cracks in the foundation. After a thorough inspection, it’s important to assess the severity of damage and prioritize repairs. It’s also a good idea to document and photograph damage for proper reporting.

  1. Landscaping & Irrigation

Spring is the perfect time to clean up and freshen up your property’slandscape photo landscaping. Start by removing any dead plants or trees and cleaning up debris such as downed limbs and excess leaves. Then identify where new shrubs or plants are needed and select the types of flowers to add “seasonal color.”

This is also a good time to check the irrigation system to ensure it was properly drained before winter and is in good operating order for spring.

  1. Drainage

Increased rainfall is common in spring and property managers should take note of any standing water to determine drainage issues. Clogged gutters and in-ground drain systems should be repaired immediately to prevent damage to the foundation, planting areas and basement.

  1. Mechanical Systems

A thorough inspection of all HVAC units to proper working condition before the summer temperatures heat up is a crucial component of preventative maintenance. Air filters should also be cleaned or replaced to ensure proper indoor air quality. This is also a good time to check the sprinkler/fire system and carbon monoxide or smoke detectors.

 

Turn-key Real Estate Services Results in Profitable Sale for Owner

 

McWhirter Realty Partners’ leasing and management team made numerous recommendations which proved effective in resolving the challenges that ultimately positioned the asset to sell at a price I was very pleased with. I would highly recommend their team for other projects and listings in this market.

  • Cal Franklin, Garrison Hill Partners, LLC

Case Study: Garrison Hill Village, Roswell, GA

The Property

Garrison Hill Village is a two-story, 21,337 SF shopping center in Roswell, Georgia. The property was originally zoned for office on the upper level and retail on the lower level. McWhirter Realty Partners assumed all leasing and property management responsibility in late 2007 with just one existing tenant.

What We Did

McWhirter Realty Partners assessed immediate challenges resulting from initial zoning, poor construction and decreased rates and leasing interest due to the recession. Maintenance and construction issues were corrected and the upper level was renovated into an open loft-style which differentiated it from other available space in the area and yielded immediate results. Once the economy started to improve, McWhirter Realty Partners targeted strong, long term tenants for 8-10 year leases to better position the property for a sale

The Result

In 2016, with 94 percent of the shopping center leased, McWhirter Realty Partners represented the owners in the sale of the building for $140 per square foot at a 9 percent cap rate.

Maintaining a Property Management Budget

A necessary – albeit laborious – task for anyone who owns commercial property is the creation of an annual property or asset management plan. The budget provides a comprehensive understanding of each category of income and expense ffront groundor your property and also sets realistic, measurable expectations for the performance of the property. Once created, it serves as a roadmap to avoid lost revenue and help react to unexpected expenditures.

Here are some tips to maintaining your property management budget:

  • Complete scheduled maintenance during the month it is included in the budget. If HVAC service is in the budget for April and October, then work with vendors to ensure that service is completed and the invoice is paid during those set months. This not only ensures your building systems are consistently maintained but minimizes variances or shortages in cash flow.
  • There will be unexpected expenses. Even the most seasoned property manager can’t prepare for every scenario, but steps can be taken to help cushion the unforeseen expense. Big ticket expenses typically come from major building systems like HVAC, sprinkler systems or water tanks. As a rule of thumb, make sure to be aware of the anticipated life cycle of these systems to help predict repairs or replacements. And it’s a good idea to over budget these areas so an unexpected outlay isn’t such a huge hit.
  • Make sure invoices are coded to match the line items in the budget. As time goes by and work increases, it’s easy to forgo double checking where something was originally allocated – especially if the property manager didn’t create the original budget. A simple slip in coding a plumbing repair under ‘routine maintenance’ instead of ‘plumbing repair’ can easily throw the budget off track.

A competent, trustworthy property management company can help ensure a property management budget is thoroughly prepared and properly maintained for your commercial property. If you have a real estate investment in the metro Atlanta area and are considering a property management company to maximize the return on your investment, contact McWhirter Realty Partners today.