It Starts Out Broken
For over 20 years, I have been managing lease information and accounting for everything; from radio towers to retail strip centers, medical office buildings to Class A office leases. Repeatedly, the common theme has been a tendency by management to discount the importance of the role this lease plays in the financial and strategic landscape in which it lives. Given our industry’s fascination with “the deal,” too little attention is given to the resulting 3-5-10 year cycle and the nooks, crannies, and important details after that deal is done. Broken lease administration systems can usually be traced back to this short-sightedness, with weaknesses in how the system is staffed and how processes are communicated adding further problems down the line.
Overworked Staff & Magic Software
We are often asked the question: “How many leases can someone manage?” It’s a valid question, on some levels, but frequently the answer is: “It depends on what is meant by “manage”.” Since the administering and accounting for an up-and-running lease obligation is considered a bottom-line expense, paying as little as possible to manage it is often the goal. The problem is that the implication of this goal includes an expectation that too few people or undertrained staff should see/address the complicated nuances of the job, or that the hope is that one person can manage an entire portfolio on an Excel spreadsheet, while also managing other work.
To gain efficiency with limited staff, software can be like the next logical place to look. However, the latest software product that caught your attention at an industry conference, because it had slick dashboards and simple looking features, can turn out to be “fool’s gold” and not the panacea it appeared to be. Staffing and technology are indeed parts of the answer, but they need more careful consideration to be turned from patchwork to a true value contributor. One must consider not only how many leases there are, but where they fit into the thought cycles of Own versus Lease, Renew versus Move, Pay versus Audit, etc. The key questions are: Where do “How Many?” meet “How Well?” and “To What Extent?”.
All Too Often
Rarely do we get a call from someone that says, “Hey, our portfolio is starting to build and we’re wondering what’s out there to help us keep this function in line before it gets out of control”. Instead, we typically get the call after tragedy strikes, or it is about to. The portfolio has already grown to an unruly size; it’s on one or more spreadsheets that do not capture all the important data, and nobody is quite sure if the information has been updated and correct. The files may have been abstracted once upon a time and are now managed by a transaction-oriented team or another department focused on an area tangential to real estate. In this scenario, overpayments, missed dates or other problems stemming from the lack of data are starting to creep into daily life. It takes a change agent to call us, tell us these stories and ask how we can help build better practices.
Getting It Right
The good news is that this is not rocket science, and it is not that hard to get right. In fact, just like you already know that getting into shape is going to require discipline in your diet and some exercise, you probably also understand that getting the portfolio into shape will require the same two things: discipline and exercise. Keeping the metaphor alive, write down this motivational slogan and post it somewhere that you can see daily: “People, Process, Technology!” When we started in 1999, that was our tag line and it’s still true today. This is the order of priority for establishing a lasting lease administration program that is proactive, progressive and adds value to the resulting processes it touches.
Keys to Getting Started
- People are at the heart of the decision process of paying invoices, managing key dates etc.
- Processes ensure that routines are followed, protocols have been considered and the right decision makers are involved BEFORE an event.
- Technology can help people keep processes managed efficiently but not if it is implemented without consideration of the other two elements above