NeighborWorks AMERICA
NATIONAL REAL ESTATE PROGRAMS
PORTFOLIO STRENGTHENING CLINIC
Asset managing your portfolio:
Assessing and Analyzing PORTFOLIO PERFORMANCE
Presented by: David Fromm
Ways to Create Portfolios
 By Activity
 By Use
 Residential
 Family
 Elderly/Disabled
 SRO
 Special Needs
 Office
 Retail
 Industrial





By Location
By Size
By Ownership
Self-Managed/Third Party
Those With Cliffs/Debt
Maturities
PSC-I : 2012
 In development
 Stabilized
 Troubled
1
Ways to Analyze Portfolios
• Trends
•
•
•
•
Operating Indicators
Scattergram
Benchmarks
Comparables
• Balance Sheets
•
•
•
•
Ratios
Reserves
Cash balances
Accounts receivable and
payable
PSC-I : 2012
• Identify trouble or potential
trouble
2
• It is a portfolio of
properties that are
under scrutiny based
on their performance
in one or more
identifiable indicators
• Different
stakeholders are
likely to focus on
different indicators
• Being on a watch list
can trigger events or
consequences that
pose difficulties for a
property or an
organization
PSC-I : 2012
What is a Watch List?
3
Gathering the Data
• Location
• Age
• Bedroom mix
Key Indicators
 This Morning:
Other Performance
PSC-I : 2012
Key Determinants
 Financial
 Occupancy
 This Afternoon:
 Other Performance
4
Gathering Data
• Location
• Age
• Bedroom mix
Key Indicators
 This Morning:
Financial
Occupancy
• Other Indicators
• CNAs
• Stakeholder Report
Cards
• Risk Management
• Staff Performance
• Resident Satisfaction
• Board/Owner
Involvement
PSC-I : 2012
Key Determinants
5
Key Determinant of Cost #1:
Location, Location, Location
 What It Is
Census tract in which
the project is located.
• Operating costs are
influenced by their
location in the country,
state, city, neighborhood.
• The higher the rate of
poverty in the census
tract, the higher the
operating costs relative to
nearby neighborhoods.
• Poorer neighborhoods
tend to have higher rates
of vandalism, crime,
turnover – all of which
contribute to higher
operating costs.
PSC-I : 2012
• What It Tells Us
6
Key Determinant of Cost #2:
Age of the Property
• What It Is
• Date project was built/
first occupied, OR
• Date project was fully
renovated
• The older the property
and its systems, the
more it costs to
maintain. Thus
operating costs are often
higher in older projects.
PSC-I : 2012
• What It Tells Us
7
Key Determinant of Cost #3:
Average Bedroom Size (Unit Density)
 What It Is
• What It Tells Us
• Higher the average bedroom
size, higher the anticipated
operating expenses
• Average BR size over 1.5 =
family property
• Some SROs with low average
BR size may be costly to
operate
• Often very difficult/costly to
operate properties with
bedroom density over 2.0
PSC-I : 2012
Formula:
Total Number of BRs
Total Number of Units
8
Other Performance Indicator #1:
Capital Needs Assessment (CNA)
Long range forecast of
physical needs of a
property
Prepared
comprehensively
periodically (every 5
years)
Updated annually
Often required by lender
• What It Tells Us
Identifies capital items
that will need to be
replaced based on their
anticipated useful life
Quantifies anticipated
costs of non-routine
replacements
Helps owners size
replacement accounts
PSC-I : 2012
• What It Is
9
Other Performance Indicator #2:
Stakeholder Report Card
• What It Is
• What It Tells Us
How a property is
performing
How an owner and/or
manager is performing
How imminent a
stakeholder action is
PSC-I : 2012
Formal or informal rating of
performance of a property in
one or several areas
Examples: REAC physical
inspection; HFA property
management review; LIHTC
compliance monitoring audit;
meeting established Owner
goals; MFI Portfolio Report;
local health department
inspection; insurance company
review of safety status
10
Other Performance Indicator #3:
Risk Management Program
• What It Is
• What It Tells Us
How we evaluate and
prioritize risks
How well prepared we are
to address unknown events
PSC-I : 2012
Identification of risks
involved in owning and/or
managing real estate
Description of how to
manage risks (e.g. types and
levels of insurance
coverage; plans for
emergencies;
contingencies)
Trends in schedule of debt –
debt recourse – mix of
hard/soft debt
11
• What It Is
• What It Tells Us
Objective measure of
Helps identify training
staff’s contribution to a
needs
property or portfolio
Helps determine if staff
meeting its stated goals
are part of the problem
(e.g. turnover time is
or part of the solution
reduced from 15 to 7 days;
collections are reduced
from 3% of GPR to 1% of
GPR - both require staff
involvement to meet goals)
PSC-I : 2012
Other Performance Indicator #4:
Staff Performance Evaluation
12
Other Performance Indicator #5:
Resident Satisfaction
• Measure of satisfaction
residents report in key
factors effecting their
residency
• Examples:
• Timeliness and quality of work
order completion
• Responsiveness of staff to
inquiries, problem solving
• Availability of amenities,
resources – on site, nearby
• Neighborhood
• What It Tells Us
• How well we are
delivering
management services
• Likelihood of retention
PSC-I : 2012
• What It Is
13
Other Performance Indicator #6:
Board/Owner Involvement
Level at which the
Board/Owner is engaged
in establishing property,
portfolio and
organizational goals and
routinely measuring
performance against
those goals
• What It Tells Us
Likelihood that problems
will/will not be addressed
timely and strategically
PSC-I : 2012
• What It Is
14
Stakeholder Watch Lists
•
•
•
•
•
•
•
Board of Directors
Lender
Investor
Regulator
Board of Directors
Property Manager
Residents
PSC-I : 2012
What measurements are likely
to be on these stakeholders’
watch lists?
15
NeighborWorks America has
initiated a Green Organization
Program for its NWOs. It provides
guidance to NWOs committed to
implementing and sustaining
“green” practices. It encourages
the establishment of a Green
Asset Management Plan that
measures performance in:
 Healthy Indoor
Environments
 Recycling and Waste
Reduction
 Accessibility and Walkability
 Environmentally Friendly
Landscapes
 Sustainable Materials and
Products
 Durability
 Lifecycle Approach
PSC-I : 2012
How Do We Monitor
 Energy Efficiency
Sustainability?
 Water Conservation
16
How Do We Monitor the Impact of
Resident Services?
 Studies* are beginning
to confirm these
observations in specific
areas:
Vacancy Loss
Bad Debt
Legal Fees (eviction
prevention)
PSC-I : 2012
• Anecdotal evidence
has suggested for years
that resident services
in affordable family
housing helps reduce
operating costs.
 Rent loss (vacancies
plus bad debt) is a
common performance
measure.
* NW and Community Housing
Partners study
17
The Asset Manager’s Watch List
• Be certain they tie back
to the Board’s goals for
the properties
• Secondly, establish the
criteria you will use to
evaluate each indicator
• Lastly, decide on a
ranking system
• Make the criteria SMART
•
•
•
•
•
Specific
Measurable
Attainable
Realistic
Timely
PSC-I : 2012
• First, identify the key
indicators for your
portfolio
18
Watch List Example
CRITERIA: Rent Loss
INDICATOR: May be one
discrete indicator, such as
vacancies,
or
a combination of one or
more (rent loss which
equals vacancies plus
uncollected rent)
0=
1=
2=
3=
4=
> 7%
5% - 7%
3% - 4.99%
1% - 2.99%
< 1%
RANKING:
0
1
2
3
4
Troubled, Watch List
Watch List
Watch List
Performing
Performing
19
PSC-I : 2012
Sample NASLEF Guidelines for Watch List Criteria:
Development
• Construction delays
• Construction cost overruns
• Leasing delays – qualified
occupancy
• Leasing delays – all units
• Mechanics liens
• Sources/Uses of Funds
• Change in qualifying units
• Other litigation
• GUIDELINE
• Over 3 months behind schedule
• Exceeds 15% of original
contract and contingency spent
• Over 3 months behind schedule
• Over 4 months behind schedule
• Filed lien not covered by
indemnity & not cured in 3 mos
• Uses exceed 3% of TDC of
$100,00, whichever is less
• Any change
• Any action
PSC-I : 2012
• CATEGORY
20
Evaluating a Watch List
• Your materials include • Critique these report as
follows:
• Four Watch List
• Avesta (6 pages)
• Foundation
Communities (1 page)
• Homeport (4 pages)
• Sample (2 pages)
• All “rank” or “rate”
properties
• Evaluate the indicators
• What do you like
• What’s missing
• Evaluate the criteria
• Are they SMART?
• What would you change?
• Can you determine the
Board’s asset management
objectives from what they
measure?
PSC-I : 2012
Examples
21
From the Field: Identifying
Opportunities
•So many times, our focus is on our high watch list – We spend
our time, money and resources trying to keep problem properties
afloat.
•Often, more focus on our good properties can generate more
money than our bad properties are losing.
PSC-I : 2012
Jeffrey Reed, CFO for Community Housing Partners of
Christianburg, Virginia and a CHAMpion offers:
Lets look at Sea Haven Apartments:
22






26 unit family property with some Section 8 Vouchers
No restrictions on distributions
Flowing $50K per year (over $2K per unit), no debt
4 blocks from the beach, C quality Apartments
Brick Construction, high energy costs, high maintenance costs
Low watch property
We should not spend time on this property and focus on high watch
properties, Right?
Wrong!
 We applied for Weatherization funds which provided new heat pumps,
roofs and energy efficient appliances
 We invested an additional $5K/unit ($130K)to upgrade the kitchens,
baths, flooring and exteriors which brought the property up to a B
quality
 Now, two years later with rent increases and reduced maintenance
costs, we are flowing $143K per year ($5.5K/unit)
PSC-I : 2012
Sea Haven Apartments,
Virginia Beach
23
• Community Housing Partners has 11 properties in its High Watch
List
• One is Lynnhaven Landing and it cash flowed $165K through
September 2011
• One is The Crossings of Leesburg and it lost $235K.
• The other 9 properties on the high watch list had negative cash
flow of $114K through September.
• Where should I focus my time?
• How about Lynnhaven?
PSC-I : 2012
CHP’s High Watch List
24
Year
2005
2006
2007
2008
2009
2010
2011
Cash Flow
280,000
595,938
483,000
700,000
593,000
601,651
475,000
Occupancy
98%
97%
95%
93%
93%
92%
88%
Maintenance Costs
503,737
407,458
388,587
405,989
404,182
353,572
416,421
• What do you see here? Good cash flow…sporadic maintenance costs…
and decreasing occupancy
• What story could this be telling?
Actually… Our occupancy was slipping because our asset was aging and
our marketing was not as strong as it could have been, and…
• Property management was trying to defer maintenance to give me the
cash flow I said I wanted
PSC-I : 2012
Lynnhaven Landing
25
• We did a market survey –concluded rents were
good for this age product but we could get
$100/unit/month more for an updated unit
• We shopped our leasing agents and found our
leasing office was closed during key times
• We did a ‘CNA and it identified immediate and
long term capital needs
• We brought in our Architecture and Construction
departments to recommend upgrades needed
PSC-I : 2012
What happened?
26
• Began a $1 million rehab focusing on upgrading 110 of the
total 252 units. So far, 50 units have been completed (and
rented) and they are, in fact, bringing $100 more
• We improved our leasing techniques and changed our
office hours
• We have almost achieved our budgeted vacancy of 93%,
up from 88% which will, alone, net a $135K cash flow
improvement….
PSC-I : 2012
Lynnhaven Outcome
Eclipsing the $114K loss at the other 9 high
watch properties!
27
PSC-I : 2012
Creating Your Watchlist
28
Most Common Problems In Affordable
Housing
• The Management
Not
Competitive
• The Financing
• Overleveraged
• Subsidy and/or
other restrictions
Unresponsive
• Combative
• Not skilled
enough
•
• Physical Condition
Functionally
obsolete
• Hazardous
• Deferred
maintenance
PSC-I : 2012
• The Market
•
29
EXERCISE
NO
ISSUES
A
X
B
MARKET
X
C
TOTALS
FINANCIAL
STRUCTURE
1
1
MGMT
PHYS
COND
OTHER
X
X
X
X
X
1
2
AMT
DUE
PARENT
$200K
$ 76K
1
1
$276k
PSC-I : 2012
Property
Name
•
•
•
•
Draw above matrix on flip chart
List your properties (up to 10)
Place “X” in appropriate box(es) for each property;
BE PREPARED TO DISCUSS INDICATORS THAT LED TO THIS
DECISION
• Enter total payables to parent for each property (related party)
• Total each column
• Prepare presentation to group
30
CLINIC OBJECTIVES
PORTFOLIO STRENGTHENING
CLINIC I
• Identify the strengths and challenges of your current rental portfolio by
gaining an understanding of well-established key performance
indicators/benchmarks
• Understand the impact the portfolio has on your organization;
• Identify the type of problem(s) for each property in your portfolio
• Develop a (preliminary) watchlist for your portfolio
• Articulate specific steps to be taken to improve the portfolio’s operating
performance
31
PORTFOLIO STRENGTHENING CLINIC I
PORTFOLIO STRENGTHENING
CLINIC I
NREP
What is portfolio management & Why is it
important?
32
Different Types of Real Estate Management
• Day-to-day, one at a time
• Achieve owner/stakeholder
goals
• Asset Management
• Acquisition to disposition: long  Portfolio Management
term, one at a time

Properties combined
• Achieve owner/stakeholder

Link owner/stakeholder
goals
goals with organizational
goals;
PORTFOLIO STRENGTHENING
CLINIC I
• Property Management
33
Most Common Problems In Affordable
Housing
• The Management
Not
Competitive
• The Financing
• Overleveraged
• Subsidy and/or
other restrictions
Unresponsive
• Combative
• Not skilled
enough
•
• Physical Condition
Functionally
obsolete
• Hazardous
• Deferred
maintenance
•
PORTFOLIO STRENGTHENING
CLINIC I
• The Market
34
AND - there’s a 5th Problem
• mix of mission vs financial
performance
• building portfolios one
property vs several
properties at a time
• Portfolio feeding the
organization vs
organization feeding the
portfolio
PORTFOLIO STRENGTHENING
CLINIC I
• Portfolio Structure
35
TRUMPING PROBLEMS
•
•
•
•
•
Good management trumps bad markets
Excessive debt trumps good management
Inadequate rehabilitation trumps debt
Expense controls alone can’t fix structural problems
If debt really is the problem, why not aggressively attempt
to fix it.
• Always review both
• Pay Attention!
property and portfolio • Each property’s A/P to
organization may be modest;
results in total dollar
as a portfolio the total may be
and pupy amounts
significant
• Excellent way to build
• Portfolio vacancy rate may be
internal “comps”
very good, but one property
may have a poor vacancy rate
PORTFOLIO STRENGTHENING
CLINIC I
Reviewing Property vs. Portfolio Results
37
• Are quantifiable measurements that are
critical to the success of a business.
• These indicators vary between organizations
and industries .
• If implemented and monitored correctly, help
a business define and measure progress
toward both short-term and long-term
organizational goals.
PORTFOLIO STRENGTHENING
CLINIC I
KEY PERFORMANCE
INDICATORS:
38
AFFORDABLE HOUSING KPI’S
• NREP ‘Quick Reports’
•
•
•
•
•
•
NOI/NCF
DCR
Collection Rate
Turnover Rate
Collection Rate
Average Days Vacant
• Balance Sheet
• Income Statements
•
•
•
•
•
•
CNAs
Stakeholder Reports
Risk Management
Staff Performance
Resident Satisfaction
Board/Owner Involvement
PORTFOLIO STRENGTHENING
CLINIC I
OTHER
FINANCIAL & OCCUPANCY
39
PORTFOLIO STRENGTHENING CLINIC I
PORTFOLIO STRENGTHENING
CLINIC I
NREP
NREP QUICK REPORTS
40
Property Key Performance Indicators (KPI's)
Organization name:
0
Person completing:
0
Property 1
Property 2
Property Name:
0
0
# Units →
# BRs →
0
0
0
0
Avg BR/Unit =
Year Ending
#DIV/0!
1/0/1900
0
Source Document
#DIV/0!
1/0/1900
0
TOTAL
-
PORTFOLIO
AVERAGE
PER
PROPERTY
AVERAGE
PER UNIT
-
#DIV/0!
#DIV/0!
#DIV/0!
-
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
FINANCIAL KEY PERFORMANCE INDICATORS
$
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
$
$
$
#DIV/0!
#DIV/0!
$
#DIV/0!
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
$
$
$
#DIV/0!
#DIV/0!
-
OCCUPANCY KEY PERFORMANCE INDICATORS
OCCUPANCY RATE
TURNOVER RATE
AVERAGE DAYS VACANT
AVERAGE MAKE READY DAYS
COLLECTION RATE
AVERAGE WORK ORDER TIME
% WORK ORDERS COMPLETE
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
PORTFOLIO STRENGTHENING
CLINIC I
NOI
NOI PUPA
NCF
NCF AS % OF EGI
DEBT SERVICE COVERAGE
DEBT SERVICE AS % OF EGI
OPERATING EXPENSES PUPA
OPERATING EXPENSES AS % GPR
VACANCY AS % OF GPR
TOTAL FEES PUPA
TOTAL PAYROLL PUPA
TOTAL OPERATING CASH BALANCE
TOTAL A/R
TOTAL TRADE A/P
TOTAL A/P DUE TO PARENT
TOTAL RESERVES - PER UNIT
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
41
SAMPLE NEIGHBORWORKS ORGANIZATION
JAN-MAR 2009 DATA SUBMISSION
Status: SUBMITTED
NUMBER OF UNITS:
100
No. Months Reported:
3
Resident Services Expenses
Operating Reserve Deposits
Capital Expenditures
Asset Management Fee
Other (Exp)
Hard Debt Service
$ 160,000.00
$
2,000.00
$
$
575.00
$
2,500.00
$ 125,000.00
$ 14,000.00
$
$
$
$
$
$
3,000.00
15,000.00
GPR/PUM:
533.33
Collection Rate:
Vacancy as % of GPR:
Estimated Vac. Loss:
97%
1.6%
0.2%
Op Ex as % of GPR-Debt
Service:
86%
NOI:
$ 33,925.00
Total Non-Operating Exp:
$ 17,000.00
Approx. DSC:
NCF:
NCF as % of GPI:
Uncollected Current Rent (<30 Days) $
$
PORTFOLIO STRENGTHENING
CLINIC I
Gross Potential Rent
Other Income
Concessions/Loss to Lease
Collection Loss
Vacancy Loss
Total Operating Expenses
Replacement Reserve Deposits
$
$
2.26
1,925.00
1.21%
1,200.00
Move-outs
1
Turnover Annualized:
4.00 42
Average Days Vacant
15
Turnover, Percentage:
4%
• What It Is
• What It Tells Us
Portfolio Profile Indicator #1A:
NET OPERATING INCOME (NOI)
Gross Potential Income
– Vacancy and Collection Loss
+ Miscellaneous Income
=Effective Gross Income
– Operating Expenses
= Net Operating Income
• Hard Debt
• Reserves
• Other Cash Flow
Distributions
• Essential for
determining:
• DSCR
• Property Value (with
Cap Rate)
• Operating pro formas
PORTFOLIO STRENGTHENING
CLINIC I
• How much is available to
cover:
43
JAN-MAR 2009 DATA SUBMISSION
Status: SUBMITTED
NUMBER OF UNITS:
100
No. Months Reported:
3
$
$
$
$
$
$
160,000.00
2,000.00
575.00
2,500.00
125,000.00
Replacement Reserve Deposits $
14,000.00
Resident Services Expenses $
Operating Reserve Deposits $
Capital Expenditures
Asset Management Fee
Other (Exp)
Hard Debt Service
$
$
$
$
$
$
$
Uncollected Current Rent (<30 Days) $
$
Move-outs
Average Days Vacant
3,000.00
15,000.00
1,200.00
1
15
GPR/PUM:
533.33
Collection Rate:
Vacancy as % of GPR:
Estimated Vac. Loss:
97%
1.6%
0.2%
Op Ex as % of GPR-Debt
Service:
86%
NOI:
$ 33,925.00
Total Non-Operating Exp:
$
Approx. DSC:
NCF:
NCF as % of GPI:
$
$
Turnover Annualized:
Turnover, Percentage:
NET OPERATING INCOME COMPUTATION
GROSS POTENTIAL RENT (GPR) $
160,000.00
PLUS: OTHER INCOME $
2,000.00
LESS: CONCESSIONS/LOSS TO LEASE $
LESS: COLLECTION LOSS $
(575.00)
LESS: VACANCY LOSS $
(2,500.00)
LESS: TOTAL OPERATING EXPENSES $ (125,000.00)
NET OPERATING INCOME $ 33,925.00
$
PORTFOLIO STRENGTHENING
CLINIC I
Gross Potential Rent
Other Income
Concessions/Loss to Lease
Collection Loss
Vacancy Loss
Total Operating Expenses
17,000.00
2.26
1,925.00
1.21%
4.00
4%
44
Quick Report Operating Indicator #1:
Net Cash Flow (NCF)
• What It Is
Formula:
Net Operating Income
- Total Non-Op Expenditures
- Total Hard Debt
= Net Cash Flow
It does not include “soft” debt.
Resources available,
usually on an accrual
basis, once all property
expenses have been
counted, including all
“below the line” items
such as reserves.
PORTFOLIO STRENGTHENING
CLINIC I
• What It Tells Us
45
SAMPLE NEIGHBORWORKS ORGANIZATION
JAN-MAR 2009 DATA SUBMISSION
Status: SUBMITTED
NUMBER OF UNITS:
100
No. Months Reported:
3
Resident Services Expenses
Operating Reserve Deposits
Capital Expenditures
Asset Management Fee
Other (Exp)
$
$
$
$
$
$
$
160,000.00
2,000.00
575.00
2,500.00
125,000.00
14,000.00
$
$
$
$
$
3,000.00
-
Hard Debt Service $
15,000.00
GPR/PUM:
97%
1.6%
0.2%
Op Ex as % of GPR-Debt
Service:
86%
NOI:
$
33,925.00
Total Non-Operating Exp:
$
17,000.00
Approx. DSC:
$
2.26
NCF:
1,200.00
Move-outs
1
Turnover Annualized:
15
Turnover, Percentage:
Average Days Vacant
NET CASH FLOW(NCF) COMPUTATION
NOI $
33,925.00
LESS: TOTAL NON-OPERATING
EXPEND. $
(17,000.00)
LESS: HARD DEBT SERVICE $
(15,000.00)
NET CASH FLOW(NCF) $
1,925.00
533.33
Collection Rate:
Vacancy as % of GPR:
Estimated Vac. Loss:
NCF as % of GPI:
Uncollected Current Rent (<30 Days) $
$
PORTFOLIO STRENGTHENING
CLINIC I
Gross Potential Rent
Other Income
Concessions/Loss to Lease
Collection Loss
Vacancy Loss
Total Operating Expenses
Replacement Reserve Deposits
$ 1,925.00
1.21%
4.00
4%
46
Quick Report Operating Indicator #2:
Debt Service Coverage Ratio (DSCR)
Formula:
Net Operating Income
Annual Hard Debt Service
Usually does not include soft
or deferred debt
• What It Tells Us
• How well a property can meet
its current debt requirements
• Underwriting standards
typically look for a DSCR of 1.2
or better
PORTFOLIO STRENGTHENING
CLINIC I
• What It Is
47
JAN-MAR 2009 DATA SUBMISSION
Status: SUBMITTED
NUMBER OF UNITS:
100
No. Months Reported:
3
$
$
$
$
$
$
$
160,000.00
2,000.00
575.00
2,500.00
125,000.00
14,000.00
Resident Services Expenses
Operating Reserve Deposits
Capital Expenditures
Asset Management Fee
Other (Exp)
$
$
$
$
$
3,000.00
-
GPR/PUM:
$
533.33
Collection Rate:
Vacancy as % of GPR:
Estimated Vac. Loss:
97%
1.6%
0.2%
Op Ex as % of GPR-Debt
Service:
86%
NOI:
Total Non-Operating Exp:
$ 33,925.00
$
PORTFOLIO STRENGTHENING
CLINIC I
Gross Potential Rent
Other Income
Concessions/Loss to Lease
Collection Loss
Vacancy Loss
Total Operating Expenses
Replacement Reserve Deposits
17,000.00
Hard Debt Service $ 15,000.00
Approx. DSC:
Uncollected Current Rent (<30 Days) $
$
2.26
NCF:
NCF as % of GPI:
$ 1,925.00
1
Turnover Annualized:
4.00
15
Turnover, Percentage:
1.21%
1,200.00
Move-outs
Average Days Vacant
4%
DEBT COVERAGE RATIO COMPUTATION
NOI $ 33,925.00
DIVIDED BY: HARD DEBT SERVICE $ 15,000.00
=
2.26
DCR
48
Quick Report Operating Indicator #3:
Operating Expenses (OpEx)
• Total operating expenses (admin,
mgmt fees, utilities, maintenance,
taxes, insurance). Does NOT
include: replacement reserve
contributions, financial expenses
(mortgage, mortgage insurance),
capital expenses, developer fees
or other owner payments, or
oversight or asset management
fees.
• Includes social services expenses
only if paid from Operating
Expenses, not cash flow or some
other source.
• What It Tells Us
• Widely used in industry and
allows comparison of costs
across different properties
when done on a per unit per
year (pupy) or per unit per
month (pum) basis.
• Regional differences are
significant as are types of
housing (elderly vs family).
PORTFOLIO STRENGTHENING
CLINIC I
• What It Is
49
Gross Potential Rent
Other Income
Concessions/Loss to Lease
Collection Loss
Vacancy Loss
$
$
$
$
$
100
3
160,000.00
2,000.00
575.00
2,500.00
GPR/PUM:
Total Operating Expenses $ 125,000.00
Replacement Reserve Deposits $
14,000.00
Resident Services Expenses
Operating Reserve Deposits
Capital Expenditures
Asset Management Fee
Other (Exp)
Hard Debt Service
3,000.00
15,000.00
$
$
$
$
$
$
Uncollected Current Rent (<30 Days) $
$
533.33
Collection Rate:
Vacancy as % of GPR:
Estimated Vac. Loss:
97%
1.6%
0.2%
Op Ex as % of GPR-Debt
Service:
86%
NOI:
$
33,925.00
Total Non-Operating Exp:
$
17,000.00
Approx. DSC:
NCF:
NCF as % of GPI:
$
$
2.26
1,925.00
1.21%
1,200.00
Move-outs
1
Turnover Annualized:
Average Days Vacant
15
Turnover, Percentage:
OPERATING EXPENSE COMPUTATIONS
NUMBER OF UNITS
100
NUMBER OF MONTHS REPORTED
3
TOTAL OPERATING EXPENSES $ 125,000.00
FORMULAS
TOTAL OPERATING EXPENSES ANNUALIZED $ 500,000.00
PER UNIT PER YEAR (PUPY)ANNUALIZED $
5,000.00
PER UNIT PER MONTH (PUPM) ANNUALIZED $
416.67
PORTFOLIO STRENGTHENING
CLINIC I
NUMBER OF UNITS:
No. Months Reported:
4.00
4%
((TOT. OP EXP./# OF MONTHS REPORTED)*12)
TOTAL ANNNUALIZED OP EXP/# OF UNITS
PUPY/12
50
Quick Report Operating Indicator #4:
Vacancy Loss (VL)
• What It Tells Us
• When divided by GPR, the
vacancy loss percentage gives a
measure of a property’s
performance towards revenue
potential.
• Vacancy loss in underwriting is
typically 5%. However, other
elements of rent loss are often
not budgeted.
PORTFOLIO STRENGTHENING
CLINIC I
• What It Is
• Gross Potential Rent
(GPR) of units that
are vacant
51
NUMBER OF UNITS:
No. Months Reported:
100
3
Gross Potential Rent $ 160,000.00
GPR/PUM:
$
533.33
Other Income $
Concessions/Loss to Lease $
Collection Loss $
2,000.00
575.00
Collection Rate:
97%
Vacancy Loss $
2,500.00
Vacancy as % of GPR:
1.6%
Total Operating Expenses $
Replacement Reserve Deposits $
125,000.00
14,000.00
Estimated Vac. Loss:
0.2%
$
$
$
$
$
$
Uncollected Current Rent (<30 Days) $
3,000.00
15,000.00
86%
NOI:
$
33,925.00
Total Non-Operating Exp:
$
17,000.00
Approx. DSC:
NCF:
NCF as % of GPI:
$
$
1,200.00
Move-outs
1
Turnover Annualized:
Average Days Vacant
15
Turnover, Percentage:
PORTFOLIO STRENGTHENING
CLINIC I
Resident Services Expenses
Operating Reserve Deposits
Capital Expenditures
Asset Management Fee
Other (Exp)
Hard Debt Service
Op Ex as % of GPR-Debt
Service:
2.26
1,925.00
1.21%
4.00
4%
VACANCY LOSS COMPUTATION
VACANCY LOSS: $
2,500.00
DIVIDED BY: GPR $ 160,000.00
=
52
1.6%
VACANCY AS
% OF GPR
Quick Report Operating Indicator #5:
Collection Rate (CR)
What It Is
Formula:
Total Amount Collected for Period - Previous Periods’ Arrears
What It Tells Us
Accurate status of period’s
collection rate
Helps highlight current
arrearages
PORTFOLIO STRENGTHENING
CLINIC I
Amount Billed for Period
53
160,000.00
Other Income $
2,000.00
Concessions/Loss to Lease $
Collection Loss $
Vacancy Loss $
575.00
2,500.00
Total Operating Expenses $
Replacement Reserve Deposits $
125,000.00
14,000.00
Resident Services Expenses
Operating Reserve Deposits
Capital Expenditures
Asset Management Fee
Other (Exp)
Hard Debt Service
$
$
$
$
$
$
Uncollected Current Rent (<30 Days) $
GPR/PUM:
3,000.00
15,000.00
$
533.33
Collection Rate:
97%
Vacancy as % of GPR:
Estimated Vac. Loss:
1.6%
0.2%
Op Ex as % of GPR-Debt
Service:
86%
NOI:
$
33,925.00
Total Non-Operating Exp:
$
17,000.00
Approx. DSC:
NCF:
NCF as % of GPI:
$
$
1,200.00
Move-outs
1
Turnover Annualized:
Average Days Vacant
15
Turnover, Percentage:
4.00
4%
COLLECTION RATE COMPUTATION
GROSS POTENTIAL RENT (GPR) $
160,000.00
LESS: CONCESSIONS/LOSS TO LEASE $
LESS: COLLECTION LOSS $
(575.00)
LESS: VACANCY LOSS $
(2,500.00)
LESS: UNCOLLECTED CURRENT RENT* $
(1,200.00)
*From rent ledget or balance sheet
ADJUSTED GROSS INCOME $
155,725.00
ADJUSTED GROSS INCOME $
DIVIDED BY: GPR $
155,725.00
160,000.00
=
97%
2.26
1,925.00
1.21%
PORTFOLIO STRENGTHENING
CLINIC I
Gross Potential Rent $
54
COLLECT'N
RATE
Quick Report Operating Indicator #6:
Turnover Rate (TO)
Formula (annualized)
a. Turnovers =
Move Outs/ # Months x 12
b. Turnover Rate =
Annualized Turnovers/
# Units
What It Tells Us
Can be an indicator of
resident satisfaction
Can help explain high
marketing, decorating and
other vacancy costs
PORTFOLIO STRENGTHENING
CLINIC I
What It Is
55
Gross Potential Rent
Other Income
Concessions/Loss to Lease
Collection Loss
Vacancy Loss
Total Operating Expenses
Replacement Reserve Deposits
Resident Services Expenses
Operating Reserve Deposits
Capital Expenditures
Asset Management Fee
Other (Exp)
Hard Debt Service
$
$
$
$
$
$
$
$
$
$
$
$
$
Uncollected Current Rent (<30 Days) $
100
3
160,000.00
2,000.00
575.00
2,500.00
125,000.00
14,000.00
GPR/PUM:
3,000.00
15,000.00
1
97%
1.6%
0.2%
Op Ex as % of GPR-Debt
Service:
86%
NOI:
$
33,925.00
Total Non-Operating Exp:
$
17,000.00
Approx. DSC:
NCF:
NCF as % of GPI:
$
$
Turnover Annualized:
15
Turnover, Percentage:
TURNOVER RATE COMPUTATION
TURNOVER ANNUALIZED
Average Days Vacant
NUMBER OF MOVE-OUTS
DIVIDED BY: # OF MOS. REPORTED
1
3
=
0.33
MULTIPLIED TIMES 12 =
TURNOVER RATE (PERCENTAGE)
TURNOVER ANNUALIZED
DIVIDED BY: # OF UNITS
4
100
=
533.33
Collection Rate:
Vacancy as % of GPR:
Estimated Vac. Loss:
1,200.00
Move-outs
$
2.26
1,925.00
1.21%
PORTFOLIO STRENGTHENING
CLINIC I
NUMBER OF UNITS:
No. Months Reported:
4.00
4%
T/O ANNL'D
4.00
56
4%
T/O RATE
Quick Report Operating Indicator #7:
Average Days Vacant (ADV)
Formula (for the period):
The total days all units are vacant*
Total number of move-outs
Unit vacancy = the number of
days between when a unit is
vacated and it is reoccupied
What It Tells Us
• Average time units are
vacant
• Does not explain why
the unit is vacant - just
how long. Investigate
maintenance turn
time, administrative
turn time, market
situation.
• ADV > 15 - 20 days
problematic
PORTFOLIO STRENGTHENING
CLINIC I
What It Is
57
Resident Services Expenses
Operating Reserve Deposits
Capital Expenditures
Asset Management Fee
Other (Exp)
Hard Debt Service
$ 160,000.00
$
2,000.00
$
$
575.00
$
2,500.00
$ 125,000.00
$
14,000.00
$
$
$
$
$
$
Uncollected Current Rent (<30 Days) $
GPR/PUM:
3,000.00
15,000.00
1
97%
1.6%
0.2%
Op Ex as % of GPR-Debt
Service:
86%
NOI:
$
33,925.00
Total Non-Operating Exp:
$
17,000.00
Approx. DSC:
NCF:
NCF as % of GPI:
$
$
Turnover Annualized:
Average Days Vacant
15
Turnover, Percentage:
AVERAGE DAYS VACANT COMPUTATION
TOTAL DAYS ALL UNITS ARE VACANT*
X
TOTAL NUMBER OF MOVEOUTS
1
* From rent ledger/Occupancy Report
Note: Use calculator in data entry form
=
533.33
Collection Rate:
Vacancy as % of GPR:
Estimated Vac. Loss:
1,200.00
Move-outs
$
AVERAGE DAYS VACANT
2.26
1,925.00
1.21%
PORTFOLIO STRENGTHENING
CLINIC I
Gross Potential Rent
Other Income
Concessions/Loss to Lease
Collection Loss
Vacancy Loss
Total Operating Expenses
Replacement Reserve Deposits
4.00
4%
58
EXERCISE 1
REVIEW YOUR KPI’S WITH YOUR COACH
• Collections
• Occupancy
• Achieving NOI and DCR Objectives
• Portfolio’s Impact on the Organization
• KEY
• STRONG
• MARGINAL
• TROUBLED
PORTFOLIO STRENGTHENING
CLINIC I
• RATE THE HEALTH OF FOLLOWING FOR YOUR PORTFOLIO:
59
INTROS/PORTFOLIO HEALTH
S/M- 3RD
PARTY
COLLEC
OCCU.
NOI/DCR
ORG IMPACT
PORTFOLIO STRENGTHENING
CLINIC I
NWO
60
• Creating, Overseeing,
Monitoring Tickler file of AM
Responsibilities
•
•
•
•
•
Key dates
Reporting
Operating & Capital Budgets
Audits
Capital Needs & Reserve Fund
Management
• Real Estate agreements & Taxes
• Year-15 Issues
• Creating deal books
 Overseeing Management
Agent
 Monitoring Economic &
Operating Performance of
all Properties
 Monitoring Owner Fees
 Internal & External
Stakeholder Relationships
 Regulators
 Investors
MHP PORTFOLIO
STRENGTHENING CLINIC
Asset Management Takes The
Lead:
 Board of Directors
 Property Work-Outs,
Disposition
61
EXERCISE 2
Your Organization’s Asset Management Matrix
• Who is currently responsible for the function?
• Who should be performing the function?
• Note any gaps in skills that need to be addressed
• Report back to the group
• What works well?
• What would you change?
• Where are the gaps?
MHP PORTFOLIO
STRENGTHENING CLINIC
• For each item on the Matrix Identify:
62