Commercial Property: Building Reserves

At the time that we were hired to manage this office building, there was no cash flow at all for the owner. This was caused by the lapse of leases into vacancy and no presence in the brokerage community.

In our initial investigation of the property, we found deferred maintenance issues, general cosmetic problems, and neglected common areas. Our first step was to hire an active broker specializing in this location. Under our close supervision, a sizable tenant was promptly secured.

With the cash flow from this new tenant, we implemented a rigorous maintenance plan and upgraded the building’s appearance. In order to expedite the leasing process, the increase in cash flow was used to improve the common areas first. Then the reserves were used towards deferred maintenance items. We also began to stockpile a reserve that could be used to secure future deals by offering more competitive tenant improvement packages.

By working closely with our new broker, and by emphasizing the upscale look of the building, we negotiated tenant renewals with significant rate increases. The owner no longer needs to fund the building's tax and insurance bills, and the property generates a steady surplus cash flow.

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