Dealing with Property Manager

[Tek Kim]

Hi all,

I wanted to thank you all first reading my post and would appreciate any constructive advice I can get.

Our family own a commercial property in downtown Atlanta and hired a property managing company around the time when we acquired the property.

As many of you might have experienced, their work is not just meeting our expectation and we feel like they are only doing a bare minimum while charging maximum fees. I do not want to go into too much detail and let’s say the most noticeable work they did was collecting rents. Recently, we got a $6,000 bill from them which is supposed to be a service fee writing a new lease for one of our tenants. However, I remember it was our lawyer who re-wrote the contract and this bill made me really wonder what they are charging us for. In another instance, they failed to relay a mail from ex-tenant and it costed us around 10k.

I hope this gives you guys a sense of who and what we’re dealing with. I would love to hear from you how you dealt with a difficult property manager and what the best course of action we should take.

Thanks

[Joel Owens]

Sungtaek,

You mention commercial property but not what type. I am born and raised in GA 44 years. Certain downtown parts of Atlanta are rougher areas. What your PM is allowed to do and not do should have  a formal outline in the property management agreement. Is this PM a specialist in that particular asset class and building size? I know some companies for instance that do great managing the larger 400,000 sq ft buildings but when they take on smaller 20,000 sq ft buildings in the area those do not get the attention they deserve. Conversely I know of another company that specializes for retail in the 20,000 sq ft and under box size so they tend to do much better at managing it.

Contrary to popular belief property management on commercial is the lowest return on time. I don't focus on that or leasing commissions as money is too small. For instance a retail center at 4% management fee at 300,000 income is only 12,000 a year. That is 1,000 a month for dealing with everything a retail center entails. If the property manager works for a larger company and not on their own then the company gets a big cut of the fees. So if it was 50% percent now the manager is making a whopping 500 bucks a month before paying taxes on income etc. This is like working at a fast food place per hour or worse.

With the leases for commissions at least some decent money could be made such as a Starbucks lease signed for 10 years with a value of 70,000 over 10 years so at 3% tenant rep broker fee 21,000 could be made. Again if they work for a company they might only get half of that. That is why I focus on clients buying property where I am the broker and also as a syndicator where I am the sponsor. I get the best return for my time focusing on those 2 types of business. Now there are some really good tenant rep brokers and landlord leasing brokers out there but they are few and far between. There are some that love property management but that is more rare. Many start there because they are newer to the space and have to and not because they want to.

Without knowing more specifics about your property it is hard to comment further.