Role of the property manager must be split into two functions

Posted On Monday, 30 July 2001 02:00 Published by eProp Commercial Property News
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Total control of receipts and expenditure can be a problem

Property-Housing-ResidentialThe property management industry should be redefined to allow it to focus either on asset management or facilities management, says Hugo Stroud, CEO of Planet Facilities Management.

He says property managers should define their roles clearly, as they cannot be all things to all people.

'They cannot perform both roles as efficiently as a specialist company. That is the way I see the industry going in SA, following the trend in the US, Europe and Australia.'

Stroud says the JSE Securities Exchange SA should regulate property management companies to ensure that the dual roles they perform are split into specialist disciplines, which, he says, will give property investors better returns and provide greater transparency.

'The majority of listed property unit trusts and variable loanstock companies have an agreement that allows property management companies to be involved in both the income and expenses sides for their principals.

'In other words, they collect the rentals, settle the operating and maintenance costs, pay themselves their fees, and what is left is transferred to the property unit trust and variable loan-stock companies,' Stroud says.

'Fees are based not on performance but are mainly a percentage of rentals collected.'

Stroud says property management companies can manage the interests of rival landlords, allowing conflict of interests to occur.

'This happens when the property management company accommodates tenants of an office or shopping complex of one landlord in that of another.'

The property management company's total control of receipts and expenditure can cause unsatisfactory results.

Cases of litigation by a property fund have been brought against property management companies for failure to perform.

Stroud says he would like to see the functions carried out by the property management company split into two, the income side being managed by an asset management company and the expenditure by a dedicated facilities management company.

In addition, the asset manager must look after the welfare of tenants and the tenant mix, see that the rental is market related and take portfolio decisions on buying or selling assets.

'It is in the controlling and handling of the expenditure side that the facilities manager has a definite role to play,' Stroud says.

'All remuneration of asset and facilities managers must be performance based.'

Stroud says the facilities manager is able to improve the performance of the portfolio by focusing on this area.

His job is to control and reduce expenses as much as possible without reducing maintenance costs below acceptable levels.

Last modified on Thursday, 22 May 2014 15:47

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