Optimizing Portfolio Performance Through Asset

Management

NCSHANashville, September 28, 2015

Optimizing for whom?

• Lender?• Investor?• Owner/sponsor?• Community/taxpayers?

Long term sustainability and affordability is the goal

Budgets• Are you budgeting to ‘get by’?• Or, to get to recapitalization event?• Or to support organization?

Goals

1. Management companies set minimum goals!!

2. Owners set optimum goals.1. Asset management fees2. Developer fees3. Support for resident services4. Successful re-fi and exit strategies

Property management is only the means to get you there!

So, how good is your asset management??

Optimization is a function of asset management

Good? Compared to what?Sample goal statements

1. Cash flow: $1000 per unit/year2. Cut expenses 10%3. All properties sustainable to exit

1. Pass all REACs: 95% of prior year2. Delinquent rents charged off

monthly3. 3% improvement in cash flow

Incentive bonus plan

Section B Bonus Calculation  

   

Income To Budget 8

10% better than budget = 10, 0% to 9.99% better than budget = 8,  

Up to 10 % worse than budget = 4, More than 10% = 0  

   

Operating Expenses to Budget 4

10% better than budget = 10, 0% to 9.99% better than budget = 8,  

Up to 10 % worse than budget = 4, More than 10% = 0  

   

Capital Expenses to Budget  

Over budget = 0, Not over budget and all budgeted capital items completed = 10 0

   

Vacancy Loss Score 4

Less than 1% = 10, 1% to 2.5% = 8, 2.6% to 5% = 4, Greater than 5% = 0  

   

Collection Rate Score 8

Greater than 99.9% = 10, 97.0% to 99.9% = 8, 93.0% to 96.9% = 4, Less than 93.0% = 0  

   

Turnover Score 10

Less than 10% = 10, 10% to 20% = 7, 21% to 50% = 4, greater than 50% = 0  

   

Average Days Vacant Score 10

Less than 10 = 10, 10 to 20 = 6, 21 to 30 = 2, greater than 30 = 0  

Key tools 1: asset management plan

1.Narrative2.Internal Watch list3.Asset plan by property4.Cash flows by property – to/from parent5.Debt schedule for portfolio6.CNA’s –reserve management7.Deal books – cash waterfalls and exits

Managing that plan

• Does narrative set portfolio goals?• Are asset plans consistent with narrative

strategy? • Is watch list consistent with cash flows?• Are major capital needs reflected in asset

plans?• Are asset plans consistent with investment

cliffs?

Key tools 2: Organizational Cash Flow

• Link portfolio results to organizational audit• Line of business profitability

interventions

Culture failure

• Business strengthening clinic: balance sheet building. ED/CFO /Board

• Board oversight training– Whole board

Real estate failure

• Portfolio strengthening clinic and grants

ED/ Asset Mgr/Board

• Systems – Software– Portfolio Mgmt. clinic– CHAM classes