Property management has become an important profit generator for real estate brokerages in today’s troubled economy. Midwest Real Estate News recently spoke to Ellen Darling, executive vice president and chief operating officer of Kansas City, Mo.-based Zimmer Real Estate Companies, about the importance of property management.
Midwest Real Estate News: Demand seems to be increasing for property management services as more banks and financial institutions have to take over ownership of properties. Are you seeing this at Zimmer? Ellen Darling: We are seeing it. We are seeing more and more banks foreclosing on properties or taking a deed-in-lieu of foreclosure, which is thrusting them into the ownership and operation of real estate overnight. We have taken over three buildings since the first of the year from three different banks. In every one of these instances, there is some animosity there. The prior owner is not cooperative. These owners have been limping along for however long it has taken them to get to the point of foreclosure. The previous owners probably have some resentment toward the banks. They probably think the banks have been too difficult. They might be asking why the banks didn’t give them a little longer to pull through.
MWREN: It sounds like it can be an awfully tense situation in many of these cases. Darling: Before the banks call us in, they’ve reached the last straw. They can’t take it anymore. They’ve had enough. There may be a lot of deferred maintenance with these buildings. There might not necessarily have been the best practices in terms of rental collections and bill payments. The tenants know what is going on, too, during this periods. It can be very unsettling for them.
MWREN: It’s important for companies like yours, then, to come in quickly and get things back in order at these buildings. Darling: For us, it’s immediate triage. We put our team together and establish relationships with the tenants. The leases are oftentimes not good leases. If the building is coming to the end of its lease terms, we have to get in and renew the tenants. So it’s all about triage with tenants, triage with the vendors. Often bills have not been paid, so vendors are testy. They’re not providing services anymore. We have to come in and reassure the vendors. They are always glad to see someone come in and take over.
MWREN: How bad do things get at these buildings before you take over? Darling: There isn’t a lot of money coming into these buildings, so there is a lot of deferred maintenance. One building stopped janitorial services and pest control. You can imagine what a disaster that was. All of these buildings that we took over in the winter no longer had snow-removal services. That was a serious liability issue. It’s all about triage. We get our accounting folks, property management staff and leasing staff all working together to get their arms around these properties as best we can as quickly as possible. We want to reassure the banks that we are doing what needs to be done. We have a good track record of this, so the banks do have a lot of confidence in our ability to do this.
MWREN: What steps do you take to make sure this all proceeds as smoothly as possible? Darling: We have really good systems and procedures in place. Whether it is a property under fire that the bank no longer can handle or if we are going out and soliciting new business, you need to have the systems and procedures in place. Our people know how to get systems set up. They know how to bill for rent. Property managers have detailed check lists. They have a very deep pool of vendors we rely on. We have a lot of expertise. That’s how we run our business.
MWREN: You must seen some unusual contracts when you take over some of these under-fire buildings. Darling: We’ve learned that a lot of people shouldn’t have been in the real estate business in the first place. Some of the lease forms that have been used are amazing. There is so much that has not been addressed in some of these lease forms. They don’t talk about what services the landlord will provide to the tenant. We know we have to provide pest control, snow removal and janitorial services, but nowhere in the lease does it say the landlord has to do that. If you have a building with 15 or 16 tenants in it, though, you have to provide those services. Otherwise your building is going to be in poor condition. You’re going to have problems.
