Family trusts, individuals and organisations seeking totally passive investments that require little attention and which don't 'intrude' on their personal time, should not invest in commercial property, says Stephen Sampson, head of asset manager for Barfoot & Thompson Commercial.
"Retail, industrial and office properties are all long term assets that are in a continuous state of flux and need constant attention," Sampson says. "For example, leases have lifecycles that begin and end, so do interior fit-outs and so do the buildings themselves. In order to maximise returns on investment from commercial properties they must be regularly monitored and maintained."
Sampson heads up Barfoot & Thompson's Commercial's property management division based in Morgan St, Newmarket, which oversees a portfolio of commercial, retail and industrial properties worth $1.2 billion. Within these properties are around 900 commercial tenancies managed for an extensive client base of large institutions, private wealthy investors, local authorities, church and family trusts, development companies, medical centre operators, commercial body corporates and overseas based owners.
Sampson, with 44 years of industry backing him, is a qualified and registered property valuer and Fellow of the New Zealand Property Institute. He is also a member of the institute's Professional Practices Committee which deals wih industry complaints and is a mentor to young professionals in the industry - frequently presenting study papers in his specialist fields of management.
Sampson founded Commercial Property Managers, a specialist, independent property management company about 26 years ago and worked closely together for some years, with Barfoot & Thompson Commercial before agreeing to a merger in October 2013.
At that time Commercial Property Managers had 75 properties under management and Sampson has seen this portfolio grow to 95 properties within the past 18 months - requiring a 20 per cent increase in employees to handle the additional workload
"We manage a large retail investment portfolio throughout the Auckland region ranging from neighbourhood shopping centres like Meadowbank Mall, the Rialto Centre on Broadway, Newmarket and Royal Oak Mall; to a variety of standalone stores like Richmond Rd Countdown and specialist buildings in the medical and retail sectors," Sampson says.
Auckland office buildings under management include the four-level Aurecon House at 139 Carlton Gore Road and the historic Dilworth Building on the corner of Queen St and Custom St which was constructed between 1925 and 1927. Sampson has a personal affinity for the heritage Dilworth building personally overseeing several refurbishments over the past 28 years and having been actively involved in long term conservation plans for the landmark building.
"We act for a number of large commercial body corporates, private investors and institutional investors, offering a wide range of services depending on the client's requirements. Some of the larger developer and investor groups regularly seek our advice when they are either embarking on a new development project or are involved in a due diligence exercise investigating a purchase opportunity," Sampson says.
Like family owned Barfoot & Thompson, Sampson places an emphasis on client relationship honesty and trust. "We will sometimes advise clients of the risk against entering into agreements or projects that we perceive to be unethical or dubious. If, despite our advice, a client decides to proceed, we won't take the job on," he says.
Some of the multiple tasks undertaken on behalf of owners by the property management division include:
• advising on tenant selection, tenancy mixes and undertaking due diligence on tenants;
• undertaking lease negotiations, conducting rent reviews and lease renewals;
• collecting rents and outgoings, managing tenancy issues and debtors;
• preparing independent pre-purchase due diligence investigations and reports;
• employing dedicated asset managers who reporting directly to owners;
• conducting property inspections and overseeing repairs and maintenance;
• organising property warrants of fitness, statutory and building compliances;
• advising clients on changes in local body laws and parliamentary legislation affecting commercial property;
• providing strategic advice on opportunities to add value to properties;
• offering consistent and quality commercial property facilities management services;
• regularly communicating with clients through meaningful and understandable accounting and management reports;
• providing skilled advice and specialised service to commercial body corporates.
providing operating expense reconciliations, property budgeting and client GST returns.
"We don't have a 'one box fits all' approach but offer tailored solutions to meet individual property requirements and the needs of clients," says Sampson. "For example we have Cantonese speaking managers on our team.
"Essentially our job is to assist both landlords and tenants through efficient management processes and to enable the owners to maximise their returns on properties through good strategic planning."
"This could include advising a client that their property might have peaked in its current format and needs a change of use or even that it should be disposed of and the money invested elsewhere. However, while strategic planning and management procedures are in place, the basics must not be overlooked."
Multi-tenanted CBD office or retail centre properties under management by Sampson and his team are subject to a policy of daily inspections by building supervisors from Monday to Friday, with arrangements in place for weekends and after-hours. The inspections ensure the overnight cleaning has been satisfactorily completed, all building services are fully operational and any maintenance issues are dealt with promptly and proactively. Statutory records and health and safety issues are also dealt with during these inspections.
"For commercial and industrial buildings, we have scheduled maintenance and tenancy liaison programmes," Sampson says. "Our facilities managers are often able to diagnose issues themselves, reducing downtime and the cost of employing tradespeople."
The division has a Preferred Trades Register that has been built up over a long-standing association with quality tradespeople with good reputations in their industries and who work to agreed scheduled rates with economies of scale passed on to clients and tenants.
Similarly the division can obtain bulk discounted rates that are otherwise unobtainable on a single property basis with cost savings again passed on to clients and tenants.
"When it comes to leasing, any vacant premises are summarised in a simple format and circulated to our 80 salespeople, with regular follow-ups," Sampson says. "By leveraging this extensive industry network we are able ensure leasing opportunities for properties owned by our clients are maximised."
Sampson says his division works closely with other professionals employed by clients like accountants, auditors, lawyers and insurers to achieve the best results for each property.
Barfoot & Thompson Commercial's division uses software specially developed for the property management industry. "It is flexible, functional and easy to use and it automates many of the accounting processes that would be repetitive otherwise. The software allows us to store and maintain a comprehensive spectrum of data relating to properties, tenancies and their management. Through robust billing and easy recovery of expenses using recharge templates, all bank balances and transactions are transparent and visible on our network at any time.
"This top of the range software ensures we are able to provide clients with accounting and management reports that cover all practical aspects of the management of their properties."
Sampson says the property management division takes "a formal systematic approach" to record keeping, paying accounts, recording income and expenditure, keeping leases and documentation current and maintaining insurances and building warrants of fitness.
"Our accounting and reporting is also designed to amalgamate smoothly with our clients GST returns, auditing documentation and formal records for annual accounting purposes."
Legal requirements relating to property and buildings are subject to frequent amendment by both local bodies and central government and clients need up to date advice about the latest changes in legislation, town planning and statutory requirements in order for them to make the right decisions.
Sampson says many lessons were learned for the Christchurch earthquakes. "For example some Canterbury property owners had their buildings and contents insured but they couldn't access their buildings for many months and resume business. That is why we recommend our clients take out loss of rent and income insurance."
A sensitive area of the business is working with auditors and mortgagers disposing of properties that are in receivership in order to obtain the maximum price.
"Happily in most cases we are able to offer recovery work services for mortgagees that are in trouble through a strategic recovery plan," says Sampson.
"Sometimes hands-on property owners aren't that keen on accepting our help, even though this has been recommended by a receiver or auditor, but after several months, when a recovery operation proves successful, they will hand all their properties over to us to manage."