1. Foundations of Real Estate Management BOMA International ® Module 1: Real Estate Administration Tenant Relations and Tenant Retention ®

2. Foundations of Real Estate Management Module 1: Real Estate Administration 2 ® Objectives  Demonstrate why retaining tenants benefits a building owner more than replacing tenants  Describe at least five tactics to improve tenant satisfaction in his building

3. Foundations of Real Estate Management Module 1: Real Estate Administration 3 ® Remember: You work for the owner, But you serve the tenants.

4. Foundations of Real Estate Management Module 1: Real Estate Administration 4 ® Tenant Satisfaction Satisfaction = needs are met What about exceeding tenant expectations?

5. Foundations of Real Estate Management Module 1: Real Estate Administration 5 ® Creating Raving Tenants Would your tenants go this far to show their appreciation for your company’s service?

6. Foundations of Real Estate Management Module 1: Real Estate Administration 6 ® Satisfaction Your definition of satisfaction is not as important as your tenant’s definition

7. Foundations of Real Estate Management Module 1: Real Estate Administration 7 ® Listen to Your Tenants That which is not measured cannot be managed. Conduct annual tenant satisfaction survey!

8. Foundations of Real Estate Management Module 1: Real Estate Administration 8 ® Performance Measurement Tenant satisfaction benchmarks  Prior scores for the building  Other buildings managed by the PM company  Other buildings surveyed this year

9. Foundations of Real Estate Management Module 1: Real Estate Administration 9 ® Performance Measurement The goal: No matter how good (or bad) your survey results are… Continuous Improvement

10. Foundations of Real Estate Management Module 1: Real Estate Administration 10 ® Performance Measurement Frequent, memorable connections yield Higher levels of tenant satisfaction yield Tenant renewals

11. Foundations of Real Estate Management Module 1: Real Estate Administration 11 ® Yet… Year after year, 20% of tenants report they never heard from their property manager in the past year

12. Foundations of Real Estate Management Module 1: Real Estate Administration 12 ® Goal None of your tenants should respond that you did not have proactive communication with them in an entire year.

13. Foundations of Real Estate Management Module 1: Real Estate Administration 13 ® Building Relationships Relationships with your tenants are important…throughout the lease…not just the month before the renewal

14. Foundations of Real Estate Management Module 1: Real Estate Administration 14 ® Tenant Meetings Why are tenant meetings hard to schedule?

15. Foundations of Real Estate Management Module 1: Real Estate Administration 15 ® Tenant Meetings Don’t go to them! Bring them to you!

16. Foundations of Real Estate Management Module 1: Real Estate Administration 16 ® Tenant Council  Comprised of tenants, vendors, property management team, and chief engineer  Three-way communication  To/from tenants  To/from vendors  To/from PM staff  Purpose: communication, problem solving, joint decision making

17. Foundations of Real Estate Management Module 1: Real Estate Administration 17 ® Tenant Council  Meets monthly for no more than 1 hour  Invite all tenants  Send an agenda ahead of time  Send meeting minutes afterwards  Hold everyone (vendors, tenants, and PM employees) accountable  No one wants to come back to the next meeting without resolving this issue

18. Foundations of Real Estate Management Module 1: Real Estate Administration 18 ® Typical Tenant Council Meeting  Review capital and major projects  Feedback about vendors, service levels, and building operations  Review items on the agenda  Invite dialogue from participants  Obtain “success stories”  When team members and vendors have exceeded expectations

19. Foundations of Real Estate Management Module 1: Real Estate Administration 19 ® Typical Tenant Council Meeting  Vendor reps usually area managers or supervisors who can implement changes/manage issues that are brought up  Janitorial vendor attends every meeting  Security vendor attends every meeting (when there is an on-site security)  Other vendors added as needed

20. Foundations of Real Estate Management Module 1: Real Estate Administration 20 ® Typical Tenant Council Meeting Tenant Can Even Choose Vendors  Provide an “ownership” stake for tenants  Typically for larger bids at a property (janitorial, landscaping, security, etc.)  PM bids to competent vendors  Invite “short list” of vendors to present to PM and Tenant Council  Tenant Council and PM choose vendor

21. Foundations of Real Estate Management Module 1: Real Estate Administration 21 ® Improving Tenant Service Levels  Walk around and look for problems  Answer phone  Return calls promptly  Provide your mobile and pager number for emergencies  Call your own number and/or answering service number after hours - what happens?  Are you treated well?  Can you get the help you need after hours?

22. Foundations of Real Estate Management Module 1: Real Estate Administration 22 ® Improving Tenant Service Levels  Track work orders  Fix problems once so they do not recur  Make sure your team members are  Friendly, helpful  Service oriented  Be “easy to do business with”  Over-communicate.  Do what you say you will do – when you say you will do it

23. Foundations of Real Estate Management Module 1: Real Estate Administration 23 ® Improving Tenant Service Levels  Over-deliver  Recognize and reward team members   Never stop learning. Never stop teaching. Never stop improving.  Combination of email, personal visits, flyers, and telephone calls to communicate with tenants

24. Foundations of Real Estate Management Module 1: Real Estate Administration 24 ® Improving Tenant Service Levels  Two biggest tenant complaints are  Janitorial  HVAC  Use Tenant Council and a proactive approach to eliminate these problems leading to  Service call volume reduced by 50-60%  Better use of engineers’ time Manage Strategically!

25. Foundations of Real Estate Management Module 1: Real Estate Administration 25 ® Putting It Into Practice What Best Practices can you employ to make your tenants Raving Tenants?

26. Foundations of Real Estate Management Module 1: Real Estate Administration 26 ® Putting It Into Practice Think outside of the box – what are some AMAZING things you can do to deliver exceptional customer service to your tenants?

27. Foundations of Real Estate Management Module 1: Real Estate Administration 27 ® What About the Picnic?  The picnic is once a year – neither “frequent” nor “meaningful”  Decision makers typically don’t attend  Time compression makes interaction “meaningless” for many tenants  Who is paying for this?  Often the tenants – and they know it!

28. Foundations of Real Estate Management Module 1: Real Estate Administration 28 ® Tenant Picnic Face it: The annual tenant appreciation picnic is a great party, but it does little to improve tenant satisfaction.

29. Foundations of Real Estate Management Module 1: Real Estate Administration 29 ® It’s All About Tenant Renewals Frequent, memorable connections yield Higher levels of tenant satisfaction yield Tenant renewals

30. Foundations of Real Estate Management Module 1: Real Estate Administration 30 ® Renewals v. Re-tenanting Owner Perspective  Reduced commissions  Reduced TI costs  No lost revenue from downtime  Renewal rental rates (while lower) often mean higher profits

31. Foundations of Real Estate Management Module 1: Real Estate Administration 31 ® Renewals v. Re-tenanting Tenant Perspective  No moving costs  No disruption of business  Able to stay in a well-managed building  Renewal rental rates can be lower

32. Foundations of Real Estate Management Module 1: Real Estate Administration 32 ® Renewals v. Re-tenanting Even moderate-sized tenants who renew can save an owner $$$,$$$

33. Foundations of Real Estate Management Module 1: Real Estate Administration 33 ® Renewals v. Re-tenanting In a 300,000 sf office building, a 20,000 sf tenant has the option to renew (or not). Assume:  $27 rental rate (new) v. $25 (renewal)  5 year lease term  $20 TI allowance (new) v. $5 (renewal)  4% leasing commission (new) v. 2% (renewal)  12 months marketing time for vacancy  $0.02 per square foot for marketing costs Source: Kingsley Associates

34. Foundations of Real Estate Management Module 1: Real Estate Administration 34 ® Cost of Keeping or Losing a Tenant 1.8 years0.3 years2.1 yearsPayback $44.60$7.50$52.10Cost (PSF) $892,067$150,000$1,042,067Total Costs $400$0$400Marketing Costs $91,667$50,000$141,667Commission $300,000$100,000$400,000TI $500,000$0$500,000Lost Rent Property Savings Tenant Retained Tenant Lost

35. Foundations of Real Estate Management Module 1: Real Estate Administration 35 ® Tenant Still May Move......Even if you do everything right  Decision made by “corporate”  Decision purely economic  Not able to accommodate tenant’s expansion or contraction or other business changes

36. Foundations of Real Estate Management Module 1: Real Estate Administration 36 ® Tenant Still May Move But, it’s a game of odds…  Raving tenants tend to renew leases  Mediocre or average performances may mean lost leases