The Role of an Asset Manager

In the Commercial Real Estate industry, an Asset Manager is the equivalent of a CEO in other types of businesses. Here's a review of the what that role entails, how it differs from Property Management, and what it takes to this successfully.

In the Commercial Real Estate industry, an Asset Manager is the equivalent of a CEO in other types of businesses. Asset Managers work on behalf of property owners to maximize the owner's return on investment. They monitor the financial performance of the property as an investment and make decisions that directly impact that performance in order to meet the owner's objectives.

In most cases, the Asset Manager is responsible for building the team around the investment with the primary member of that team being a third-party Property Management Company.

The Property Manager's role is to focus on the day-to-day operations of a property. Many investors make the mistake of expecting their Property Manager to fill the shoes of an Asset Manager. Some can but, most don't.

Property Managers will make sure that vacant units are filled, maintenance requests are fulfilled, rents are received, and expenses are paid. They'll also report income and expenses to owners on a monthly basis. They'll keep business going as usual but it's not their job to proactively look for ways to improve it.

An Asset Manager will take a higher level look at the operation of a property an ask the tough questions such as:

  • Are all of our rents at market levels? - If current rents are below market levels, the owners could be missing out on potential income. If nearby properties have certain amenities that are helping them achieve higher rents, it may be worthwhile to implement the same on this property.
  • How can we cut expenses while maintaining a quality experience for our residents? Perhaps property taxes can be reduced by protesting the assessed value. Savings can also be found by renegotiating vendor contracts such as trash removal or snow removal. An Asset Manager should be examine every single line item.
  • Should we repair or replace? Perhaps we're better off replacing the old boiler instead of paying for consistent repairs or risking the possibility of a costly emergency repair. Instead of replacing the old carpet with new carpet, it may be better to use vinyl plank.
  • Is it time to refinance? Time to sell? - These are decisions that the owners will likely vote on. However, the Asset Manager should be aware of the available financing options in the market and the macroeconomic factors that may affect such decisions. They should be able to advise owners on when it makes sense to pull cash out and when it’s a good time to sell and realize the capital gain that the Asset Manager has worked to create. When either of these decisions are reached it's the Asset Manager's responsibility to work with lenders or brokers to facilitate the process.

An Asset Manager's interests should be directly aligned with the owner's interests. No one cares more about a property than its owners so, the best way to make sure these interests are aligned is to have the Asset Manager invest along with owners. Also known as having "skin in the game".

The complex role of an Asset Manager spans the entire life-cycle of an investment from acquisition to disposition. This person must have the drive to think proactively, the education and experience to plan sound strategies, the financial acumen to understand and report performance in a concise manner, and most important of all, high integrity.

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