The critical role of construction in property management

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By Ruben Walker | CAM Construction

Construction is more important than you think

If you own a commercial building or complex, you are either managing it yourself or have a property manager. So you know there are many responsibilities and tasks associated with managing your property. But you may have never thought about the role of construction in property management. This post takes a look and gets you up to speed on what you need to know about this important aspect of the job.

Definition of property management

According to Wikipedia, it is:

the operation, control, and oversight of real estate as used in its most broad terms. Management indicates a need to be cared for, monitored and be held accountable for its useful life and condition.

Property management involves the processes, systems and manpower required to manage the life cycle of all acquired property as defined above including acquisition, control, accountability, responsibility, maintenance, utilization, and disposition.”

How does construction fit into property management?

Construction has several roles to play.

Repairs

Repairs are mostly self-evident. They involve fixing things that are broken through misuse. A window broken by a baseball is a good example. Simple repairs may be carried out by an onsite employee. But more extensive ones may be handled by a third-party. Say if someone drives a car through your front entrance.

Maintenance

Many times an onsite employee will provide maintenance. But it can be more efficient and less costly to contract it out in other circumstances.

Routine maintenance involves the day to day upkeep of your property to keep it functional. Replacing loose fasteners on railings, fencing, steps, or deck planks are examples. Recaulking older windows is another.

Preventive maintenance is a proactive service to avoid unnecessary repairs. Regular inspections and service prolong the useful life of your assets. It is also an important part of maintaining the safety of your property.

Capital Improvements

Capital improvements are a different thing altogether. They are almost always carried out by a third-party. According to Investopedia they are:

“the addition of a permanent structural improvement or the restoration of some aspect of a property that will either enhance the property’s overall value or increases its useful life. Although the scale of the capital improvement can vary, capital improvements can be made by both individual homeowners and large-scale property owners.”

They also have very different tax implications.

The components of your property eventually wear out and have to be replaced. Replacement is necessary even if they have been properly maintained. Technology also changes and requires upgrading or installation of new systems and components. New regulations from government also require additions to or adaptations of your property and its constituent parts. You might even have to carry out upgrades just to stay competitive.

Replacing old windows with new energy-conserving ones is an example of a capital improvement.

Experience counts

You know that you can’t be an expert in every area of responsibility that is involved with property management. That’s why it is important to have partners you can trust and that have the experience you need for third-party services.

When it comes to construction in property management, a financially-sound contractor with experience in capital improvements is a smart option. This role is more complicated and challenging than repairs or maintenance. It also requires outstanding project management and communication skills from your partner.

You need one who can work hand-in-glove with you, your architect, designer, and local regulatory officials. You want a teammate that can help you implement your management plan and advise you on it.

Conclusion

As you can see the role of construction in property management is vital to the success and profitability of your property.

The key is having the right general contractor to partner with for this crucial aspect of the job. It is important to have someone who can understand you, your business or property, and its mission and culture. You need someone you can count on to provide quality, safety, and avoidance of future problems.

5 Reasons to Hire a Real Estate Professional When Buying or Selling!

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

Shared content from Keeping Current Matters

Whether you are buying or selling a home it can be quite an adventurous journey, which is why you need an experienced real estate professional to guide you on the path to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.

The 5 reasons you NEED a real estate professional in your corner haven’t changed, but have rather been strengthened by the projections of higher mortgage interest rates & home prices as the market continues to pick up steam.

1. What do you do with all this paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true real estate professional is an expert in his or her market and can guide you through the stacks of paperworknecessary to make your dream a reality.

2. Ok, so you found your dream house, now what?

There are over 180 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to make sure that you achieve your dream?

3. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home. After looking at the list of parties that you will need to be prepared to negotiate with, you’ll soon realize the value in selecting a real estate professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people who you will need to be knowledgeable of, and answer to, during the process.

4. What is the home you’re buying/selling really worth?

It is important for your home to be priced correctly from the start to attract the right buyers and shorten the amount of time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $185,000 compared to $245,000 among agent-assisted home sales.”

Get the most out of your transaction by hiring a professional.

5. Do you know what’s really going on in the market?

There is so much information out there on the news and the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively, and correctly, price your home at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?

Dave Ramsey, the financial guru, advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring an agent who has his or her finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line

You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of the most important financial decisions of your life without hiring a real estate professional?

About The KCM Crew

We at The KCM Crew believe every family should feel confident when buying & selling a home. KCM helps real estate professionals reach these families & enables the agent to simply & effectively explain a complex housing market.

ENERGY STAR Benchmarking and Certification for High Performance Buildings

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

by Corey Lee Wilson | IFMA Inland Empire Chapter President

ENERGY STAR’s Portfolio Manager can assist in evaluating and tracking a facility’s energy consumption, help identify underperforming facilities, generate an ENERGY STAR score, track energy savings from implementation of energy efficient measures, and evaluate potential energy saving measures for a facility. With the assistance of ENERGY STAR Measurement and Tracking Tool: Portfolio Manager, facility owners and managers can make more informed decisions on topics and matters that are based on the energy performance of their facility.

By entering basic information about a facility and its energy consumption data, the tool calculates annual energy consumption, which can be compared to other similar facilities using the International Facility Management Association’s (IFMA) benchmarking data. Some facilities that meet certain criteria can take this further and use the tool to benchmark energy usage against facilities across the nation and determine the building’s ENERGY STAR score.

Setting Up a Facility for an ENERGY STAR Score

After registering as a Portfolio Manager user, the next step is to create a facility in Portfolio Manager and populate the necessary data with the following:

•        Essential building information such as year built, building type, floor area, number of occupants, etc.

•        Break out space uses that are fundamentally different from the defined core building space.

•        Twelve (12) months of monthly energy consumption data.

Facilities can be grouped in Portfolio Manager to show how certain groups of facilities may be performing against an entire portfolio or within the group. For example, if the portfolio consists of retail buildings and distribution centers, these different types of buildings can be grouped together, thus allowing comparison of a facility’s performance against its specific group. ENERGY STAR scores are only available for individual buildings.

This rating system is based on statistically representative models that compare the energy consumption of a building to similar buildings from a national survey conducted by the United States Department of Energy every four years called the Commercial Building Energy Consumption Survey (CBECS). This survey collects data, such as building characteristics and energy usage, from buildings located across the United States. A building’s peer group for comparison are those buildings in the CBECS survey that have similar building and operating characteristics. Essential information from this survey can highlight facility performance criteria such as:

•        Environmental – Shows rating, EUI, change from baseline energy use, and change from GHG emissions.

•        Financial – Shows annual cost of energy, water, and cost/SF of energy and water.

•        GHG Emissions – Shows EUI, current GHG emissions, baseline GHG emissions, and change from baseline.

•        Water Use – Shows water use, water cost, wastewater use, and wastewater cost.

•        Energy Use – Shows rating, EUI, source EUI and change from baseline.

A score of 50 indicates that the building, from an energy consumption standpoint, performs better than 50% of all similar buildings nationwide, while a score of 75 indicates that the building performs better than 75% of all similar buildings nationwide. Ultimately, EPA expresses the rating on a 1-100 scale where 1 point on the scale represents 1 percentile of the commercial building market.

Similar to tracking energy consumption, Portfolio Manager allows for tracking of water use on a meter by meter basis. Portfolio Manager allows water consumption data monitoring from any meter on the property. Indoor usage, outdoor usage and sewer meters can be monitored. Units of measurement include cubic feet and gallons and there is also a place to input the cost associated with the water monitored by the meter. By using this tool, water consumption can be tracked over time and can illustrate water and cost savings associated with any water efficiency projects.

10 Great Reasons for ENERGY STAR Certification

Generating an ENERGY STAR score is the first step in the ENERGY STAR building certification process. To be eligible for the ENERGY STAR certification, a building must first receive a score of 75 or higher. For the building to achieve the ENERGY STAR certification, the statement of energy performance must be validated by a licensed professional who is familiar with building systems. Generating a score is also one of the primary ways to demonstrate compliance with the requirements of the U.S. Green Building Council’s (USGBC) Leadership in Energy and Environmental Design for Existing Buildings (EBOM).

ENERGY STAR certified buildings are good for the environment too and good for the bottom line by offering 10 compelling reasons why your organization should pursue America’s most trusted symbol of energy efficiency for your properties.

1.     Lower operating costs, on average 35% less energy than similar buildings nationwide, with office buildings costing $0.50 less per square foot to operate than their peers. In 2014, ENERGY STAR certified buildings saved $1.4 billion, or an average of nearly $200,000 per building.

2.     More marketable making your buildings all the more attractive to potential buyers and lessees who want guaranteed savings.

3.     Reduced greenhouse gas emissions prove you’re joining the front lines in the fight against climate change.

4.     Lease to federal tenants because Executive Order 13514 mandates that Federal Agencies may only lease space in ENERGY STAR certified buildings.

5.     Higher rental rates by $2.40 per square foot than similar buildings, plus occupancy rates are 3.6% higher when compared to similar buildings.

6.     Increased asset value makes it more likely that the higher net operating income from energy cost savings will be recognized through higher building valuation.

7.     Manage risk when developing properties by mitigating risks to profitability by validating assumptions made during the development appraisal, such as operating costs, rents, asset value, and occupancy.

8.     Hedge against future mandates by being in a better position to respond to any future laws or mandates that come your way like AB 1103 and AB 758.

9.     No cost to minimal set-up costs for using all of EPA’s tools and resources, including Portfolio Manager and third party implementation and certifications.

10.  It’s just the right thing to do as 68% of adults like to do business with companies that are environmentally responsible.

ENERGY STAR Building Categories

Based on the information found in Commercial Building Energy Consumption Survey (CBECS), Portfolio Manager will compare a facility to others with similar operating characteristics. If the operating characteristics of the facility cannot be properly compared to similar types of facilities across the nation, then a score cannot be determined and assigned. However, for those buildings that are not currently eligible to receive a score, most can receive a national average for comparison. By meeting the criteria set forth by the EPA, Portfolio Manager can accurately model and compare a facility to others.

As of 2015, the types of ENERGY STAR building categories are as follows, however, EPA is always working to develop scoring criteria for additional segments of the commercial building market.

•        Bank branch

•        Barracks

•        Courthouse

•        Data center

•        Distribution center

•        Financial office

•        Hospital (general medical & surgical)

•        Hotel

•        K-12 school

•        Medical office

•        Multifamily housing

•        Non-refrigerated warehouse

•        Office

•        Refrigerated warehouse

•        Residence hall/ dormitory

•        Retail store

•        Senior care community

•        Supermarket/grocery store

•        Wastewater treatment plant

•        Wholesale club/supercenter

•        Worship facility

The final criteria category that must be met is the energy data. To receive a score, the utility meter readings for all energy types consumed by the facility must be input. Utility meters must be in place to monitor the facility’s total consumption. If a building’s energy consumption is monitored by a meter that supplies more than one building and there is no sub-meter, the building is not eligible for a rating. Additionally, at least twelve (12) months of utility consumption data is required for each meter and no individual electrical meter reading can span more than 65 days.

Understanding the Facility’s Performance

The statement of energy performance summarizes the facility’s energy performance rating over a selected twelve (12) month period, total energy consumption, site and source energy use intensity (EUI), emissions, greenhouse gas emissions and a national average comparison.

Because Portfolio Manager makes it possible to view the many aspects of the performance of a facility, it allows facility managers to pick and choose performance targets. Based on the facility’s score, performance targets will fall into one of three categories.

•        The first category is for facilities that are performing below average and typically receive an energy performance score between 1 and 49. If the facility receives a score within this range, it should be seen as a wake-up call, especially for facilities that have assumed they were performing well. These facilities are underperforming, and the steps to improvement may be more costly, likely requiring investment in energy-efficient equipment and implementing best practices for the maintenance and operation of the equipment. However, these facilities have the greatest potential for energy and greenhouse gas reductions.

•        The second category is for facilities that are performing at average or above average levels, but not at the level necessary to receive the ENERGY STAR. These facilities typically receive an energy performance score between 50 and 74. The steps for improvement in this category may not be as intensive as the first and the goal is to tighten up the operation of the facility in order to optimize the performance of the building’s equipment to reduce energy consumption. In addition, some equipment upgrades may be necessary to further improve a facility’s performance.

•        The third category is for facilities performing significantly better than their peers, and buildings in this category are eligible to receive the ENERGY STAR certification. These facilities typically receive an energy performance score between 75 and 100. A facility that receives a score within this category boasts current operations and equipment that has allowed it to reduce energy consumption and improve operating efficiency. From here, success can be built upon by using Portfolio Manager to track the facility to help further improve its efficiency and also discover problems that may occur with its operations.

Setting and Interpreting Energy Performance Goals

The next step is to set goals and targets for improving energy efficiency. Portfolio Manager has features that allow the user to set energy performance goals and estimate how much energy will need to be saved to meet those goals. This feature allows reasonable goals and targets to be set for the facility and provides an estimate of how much energy must be saved to achieve the goals.

Energy savings can be tracked as energy conservation measures are implemented. The impact of past energy-saving measures as a whole across the entire facility can also be estimated. Once energy performance improvements have been implemented, one would want to be able to evaluate how much energy these improvements have saved. If energy performance improvements have been implemented in the past, Portfolio Manager can also help in evaluating the savings received from these improvements as a whole or over a period of time.

By using the tracking tools, continuously collecting information about the facility and setting new energy performance targets, sustainability goals can be achieved. Consultants with industry expertise and relevant training such as the LEED AP Operations & Maintenance, Facility Management Professional (FMP), and the Certified Construction Manager (CCM) credentials can provide ENERGYSTAR Portfolio Manager set-up, monitoring, and benchmarking services.

For more information on how to make this happen, please contact Corey Lee Wilson at CLW Enterprises at (951) 415-3002, CLWEnterprises@att.net or follow the link to www.CLW-Enterprises.com. Information used for this article was borrowed from the 2011 IFMA Foundation Sustainability Guide – EPA’S ENERGY STAR Measurement and Tracking Tool: Portfolio Manager.

Performance in Top Apartment REIT Submarkets: Supply Affecting Rent Growth

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

by Axiometrics

Conversations in the apartment industry have focused on new supply for some time now, and rightfully so, considering the 372,000 units expected for 2017 delivery is the highest total since Axiometrics started tracking the industry in 1996. Apartment REITs are a big part of the equation.

With new supply, it is important to consider not only the overall amount, but also where it is being delivered at a hyperlocal level.

Consider this – if you are an operator and new properties enter your neighborhood, this increases competition in your area. As new properties tend to offer concessions to further entice potential residents, this will likely affect rent growth performance at your property (for example, your stabilized property may have to offer concessions to compete with new product).

Apartment REITs have been seeing this recently. While performance can vastly differ on a property-to-property basis, the general trend is that REIT performance has been affected. To help highlight this impact, Axiometrics has provided an analysis on a few major REIT apartment markets and the impact of new apartment supply in a few select submarkets.

Dallas

More than 3,000 new units were delivered to the Oaklawn submarket in 2016 resulting in an impressive annual inventory growth of 12.0%, according to Axiometrics’ apartment market data. This large of an increase in such a short time helps illustrate why the submarket has experienced negative annual rent growth early in 2017. As of April, annual rent growth is -0.63% in the Oaklawn submarket

The Oaklawn submarket has a heavy concentration of REIT properties, with more than 4,000 REIT units. This wave of new supply has caused performance among REIT-owned properties to slip to -0.29% as of April 2017.

Fortunately for the greater Dallas area, job growth has continued to be phenomenal (annual growth of 4.1% in 1Q17). This strong, sustained job growth likely means that although annual rent growth in the Oaklawn submarket is currently negative due to elevated supply levels, the outlook beyond 2017 is positive.


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San Francisco Bay Area

The San Francisco Bay Area has been brought up time and time again because of its apartment market’s slowing rent growth which is the byproduct of decelerating job growth, new supply and unaffordability. The San Francisco Bay Area is notorious for its sensitivity to changes in job growth as highlighted by the following example.

In 2016, roughly 1,500 units were delivered in the Northeast San Jose submarket, compared to 2,500 units in 2015. Conventional thinking would suggest that, all things equal, such a large drop in new units would result in improved performance.

But even as supply significantly pulled back in the Northeast San Jose submarket, the market-wide slowdown in annual job growth from 3.9% in 2015 to 2.7% in 2016 resulted in an incredible 900 bps drop in annual rent growth in 2016, the apartment data shows.

Supply in the Northeast San Jose submarket has been swollen for some time now however, so the impact of new supply on an area should not be discounted. Annual job growth of 2.7% in 2016 was still an admirable 150 bps above its long-term average, so the continuously high level of new supply in the metro is partially to blame for slowing rent growth.

The good news is the San Jose market has improved in early 2017, up to 1.48% in April 2017 – an improvement of 380 bps from December 2016. REIT-owned properties in the Northeast San Jose submarket have shown improving performance as well, achieving annual rent growth of 2.02% as of April 2017.


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Atlanta

A barrage of new supply doesn’t always spell disaster when it comes to performance. As long as a metro is able to maintain steady job growth, the impact of new supply on apartment market performance can be mitigated.

Atlanta has been somewhat of a poster child for that sentiment, as rent growth has been relatively steady considering the amount of new supply in the metro.

More than 10,200 units were delivered to the Atlanta/Fulton submarket, which includes Downtown, Buckhead and Midtown, in 2015 and 2016, more than any other submarket in the nation. These two years combined results in an inventory growth of 11.7% in the submarket, according to apartment market data.

The good news for apartment REIT properties in the submarket is that fundamentals in Atlanta are still good, although rent growth among REIT properties in the market is considerably below the market average. Annual rent growth among REIT properties in the Atlanta market was 0.0% as of April 2017. REIT performance should improve in the future once this swell of new supply is absorbed, as Atlanta continues to be a metro with strong job growth.


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Los Angeles

No other area in the nation has as many REIT apartments as the combined Los Angeles and Anaheim metros, with almost 60,000 REIT-owned units. In fact, the Marina Del Rey/Venice submarket has more REIT-owned units than any other submarket.

New supply in Los Angeles has been less of a factor than in the San Francisco Bay Area, but some submarkets were certainly subject to increasing supply numbers in 2015 and 2016. Marina Del Rey/Venice (4,118 new units, or 12.3% inventory growth) and Westlake/Downtown (3,848 new units, 6.7% inventory growth) both received ample amounts of new supply in 2015 and 2016.

The Marina Del Rey/Venice submarket slowed in 2016 from the previous year, but has experienced strengthening rent growth in early 2017. The Westlake/Downtown submarket has continued to slow in 2015 and 2016, but is still above the national average.

For a submarket with ample new supply, REIT-owned properties in the Marina Del Rey/Venice submarket have performed extremely well recently, with annual rent growth of 4.95% in April 2017. The Westlake/Downtown submarket has seen somewhat softer performance over that same time period, with annual rent growth of 2.3%, apartment data shows.


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Retail Job Growth Suffering, Threatens Apartment Market Demand Online stores cutting into employment

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

by Axiometrics

Despite many bright spots in the latest employment survey from the BLS, one sector of the economy continues to deteriorate: retail employment. But not all retailers are feeling the same pinch, and the differential job growth (or losses) across retail categories paint a complicated picture of the strength of the single-family and apartment markets.

The recent demise of several well-known retailers, including Payless and The Limited — to say nothing of struggling brands like Lululemon and Urban Outfitters — might seem odd in the face of strong retail sales in general.

But while retail sales are growing, much of this gain is driven by online retailers, including Amazon, at the expense of more traditional retailers based in shopping centers or malls. Whereas all retail sales increased by 5.5% in March (compared to March 2016), non-store retail sales increased by 11.9% compared to the year prior.


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With the change in consumer spending behaviors, bankruptcies and store closings are growing. Nearly 98 million square feet of retail space was vacated due to store closings in 2016, according to JLL — the highest level since 2008. Furthermore, nine retailers have announced bankruptcies thus far in 2017 — the same number as all of 2016.


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Changes in the retail job market reflect the diverging fortunes of retail sales.


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Retail jobs grew by only 0.5% on an annualized basis in April, compared to 1.3% in January and 1.6% in April 2016. But April’s job growth numbers look rosy compared to specific retail categories like electronics and appliance stores, department stores and general merchandise stores — each of which has been losing a significant number of jobs.


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However, there is one particular retail category currently seeing excellent job growth: furniture and home furnishing stores.


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While all retail establishments increased employment levels by only 0.5% in April (compared to April 2016), furniture and home furnishing stores have increased employment levels by 3.1%.

This tells us something interesting about the state of the economy and the housing market in particular. For one, it suggests a strong single-family housing market, which means people are spending more on home-related items. So, while retail sales and employment levels are growing at a relatively slow pace, this is not indicative of a broader slowdown in the economy — or a recession.

For the apartment market, a strengthening single-family market is good news, as it points to a stronger economy in general. But the incredible numbers of jobs lost in specific retail categories threaten to depress apartment demand — particularly class B and C apartments which cater to service-sector employees.

In short, the story of retail employment in 2017 is more complicated than it initially appears. Retail sales are still growing, but most of the growth is concentrated among non-traditional retailers, such as Amazon. As a result, traditional retailers are shedding jobs (or increasing them at a slower pace), just as non-traditional retailers are adding them at a robust pace. The differential job gains across retail categories (particularly for home furnishing retailers) points to a strong economy, which should boost the apartment market. But, at the same time, fewer jobs mean less demand for apartments.

For a case study of the impact of new technologies on employment, look no further than the retail market. The consequences for apartments should become evident in the not-so-distant future.

On-Going Commissioning – Leveraging Technology to Ensure Efficient Operations

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

by John Rimer | FM360Consulting.com

The two key resources that facilities seemingly always need are money and people.  However, those are often the two that are continually being stretched, as facility departments are instructed to do more with less.  This strain is growing with the exodus of the baby boomers and the consequential skilled labor shortage.  Thus, it is imperative that the facility industry leverage the inherent technology in today’s buildings to increase building efficiency and effectiveness of facility staff.

A primary tool for accomplishing such is on-going commissioning (Cx365 or OCx), which is presented along with commissioning and retro-commissioning in the related FMJ article titled “Commissioning & Retro-Commissioning – a Cost-Effective Way to Lower Utility Costs and Increase Facility Performance”.  Below are some OCx recommendations for using a building management system (BMS) to reduce energy costs.

Comparing MAT/SAT/RAT/OAT

No this is not an introductory reading course where “Mat sat on the rat…”  Rather, these abbreviations commonly refer to temperatures within an air handler that we can use to verify that sensors, dampers, and the overall air handler unit (AHU) are functioning correctly.  The return air temperature (RAT) is the air returning from the conditioned space, which should typically be in the mid to upper 70s (F).  The supply air temperature (SAT) is the desired temperature of the air leaving the air handler to satisfy the conditioned space’s demand.  Building code requires a minimum amount of outside air, measured in CFM (cubic feet per minute), be provided to a building (see ASHRAE Standard 62); thus the incoming outside air temperature (OAT) significantly impacts a building’s efficiency and is a key parameter to monitor.  The mixed air temperature (MAT) measures the resultant air temperature of combining return air with outside air; this air is then sent through the cooling coil and/or possibly heating coil (depending upon design) to create the desired SAT.  The relative differences between these various air temperatures can tell us a lot about the function of the AHU.

Virtual points can be established to compare these temperatures and alert us when the numbers do not make sense indicating a possible sensor error, damper malfunction, or other issues.  (A virtual point is a calculated point in a BMS, not a physical metered point with a sensor, which can be used to calculate and compare real or other virtual data points.)  For example, if the RAT is 77F, the OAT is 95F, and the MAT is 89F, then we are likely pulling in too much outside air, which could indicate that dampers are not opening or closing correctly.  A virtual point could be used to alert us when the MAT exceeds RAT by a specified degree or percentage; conversely, we should monitor if it is considerably lower during the heating season.

Economizer Mode

Most rooftop package units (RTU) and air handlers (AHU) are equipped with economizer dampers that allow for outside air to be used to efficiently cool a building when the OAT is lower than the desired SAT, during cooling season.  However, studies have found that over half of the economizers surveyed were not functioning correctly, with one-third of them not working at all.  Economizers can provide substantial savings when properly functioning – or they can cost us a lot of money when they are not.  Virtual points can be used to compare OAT, MAT, SAT setpoint, damper positions, and percent (or stage of) cooling.  For example, if the SAT setpoint is 65F and the OAT is 60F, the outside air dampers should be at or near 100% open.  A small amount of the return air should mix with the cooler outside air to temper it, providing a MAT of 65F.  If MAT is providing the desired SAT, then there should be no mechanical cooling occurring.  (Note, this scenario does not address dehumidification.)  Conversely, if the OAT exceeds the SAT setpoint, the outside air damper position should close to a minimum position as prescribed per ASHRAE 62.

Simultaneous Heating & Cooling

Many of our HVAC systems are designed to simultaneously heat and cool – our objective is to minimize the amount it occurs.  For example on a AHU/VAV (variable air volume) system, the SAT is set to satisfy the space that is calling for cooling, while the other zones may be reheating to satisfy their respective demand.  A virtual point can be used to compare percent/stage of cooling and percent/stage of heating or number of spaces requiring reheat versus total number of zones served by that AHU/RTU.  For example, if we see that 90% of the zones are reheating, while 10% are satisfied or in cooling mode, then the 10% is dictating the cooling demand and subsequently causing simultaneous heating in the remainder of the building.  This could indicate airflow issues or sensor error; either way, situations such as this should be explored further for performance issues and energy saving opportunities.

Lockouts

Depending upon outside conditions and the desired SAT (and other design requirements), systems should be turned off or “locked out” to ensure that we are not cooling and heating simultaneously or running equipment and wasting energy unnecessarily.  For example, if the OAT is a percentage or certain degree above the SAT setpoint, then the boiler(s) should be disabled, unless the boilers are required for process purposes.  The lock-out can be verified by evaluating the hot water supply temperature.  Additionally the hot water pumps should be off.  Lockout of the chiller and chilled water system could be setup and monitored in a similar fashion.

Schedules and Setbacks

In retro-commissioning, it is quite common to find incorrectly set or malfunctioning schedules and setbacks.  Thus schedules and the corresponding setback (occupied, unoccupied, non-business hours) setpoints should be manually verified on a periodic basis.  The BMS can then be used to verify that the systems are not running when they supposed to be off.  For example, monitoring space temperatures, boiler and chiller operations, water flow, etc. to verify that these systems are functioning correctly in the unoccupied mode.

Many building management systems have a smart start capability where the BMS learns when to turn the building systems on so that the space is at the desired temperature by the specified occupied time.  For example, based upon outside air temperature, space temperatures, and occupied setpoint, the BMS will determine the optimum time to start up the boiler(s) so that it does not fire up too early or too late.  This can significantly reduce energy use and equipment run-time.

The occupancy sensors used in a building’s lighting system can be tied into the BMS, so that rooms can switch from unoccupied to occupied temperature settings when someone enters the room.  This can be especially useful during business hours for rooms that are not constantly occupied, such as meeting rooms and auditoriums.  Depending upon the space, you may want to allow for a delay to ensure the person(s) is staying in the room and not just passing by.

Coasting

Often building’s will run their heating and cooling systems until the unoccupied setback time is reached, which is typically a few hours beyond actual business hours; for example, nighttime setback is 7PM for an 8AM to 5PM office building, resulting in unnecessarily operating building systems to maintain space temperature.  Instead of running the boiler(s) and chiller(s) until 7PM, as in the example, turn them off earlier in the day, say 2PM or 3PM, and let the building “coast” through the remainder of the occupied hours.  Buildings have thermal mass, which will help them maintain space temperatures for the waning hours of the day.  Additionally, for those buildings with chilled water and hot water systems, there is a lot of chilled/hot water running through the pipes that can often satisfy demand while coasting.

You can see this coasting period by reviewing space temperature trends; the building temperature does not typically change drastically once the heating/cooling systems are turned off, rather, they gradually drift toward the unoccupied setpoint.  Similar to the aforementioned “Smart Start”, the BMS can be used to provide a “Smart Stop” based upon outside conditions.  Note, you will need to leave the fans running during occupied hours so that the building does not feel stuffy and to meet minimum outside air requirements.

Coasting could significantly reduce energy costs, especially during peak utility hours; for example, chillers are turned off at 3PM reducing electricity costs during what is typically the highest cost per KWH (kilowatt-hour).  Additionally, during the shoulder seasons of Spring and Fall, equipment run-time can be minimized, such as firing the boiler(s) to bring the building up to temperature in the morning and then turning it off, relying on the hot water stored in the pipes to satisfy heating demand for the remainder of the day.

Delta T

Monitoring temperature differences (the delta T) between various parameters, including the ones previously discussed, can provide a lot of information regarding system performance and energy saving opportunities.  Other examples include using a virtual point(s) to compare the temperatures of adjacent spaces as deviations greater than a certain percentage or degree could indicate airflow or sensor problems, among other issues.  Monitoring the delta T between chilled water supply and return could indicate potential energy savings if the temperature difference is below a certain threshold; the same is true for heating/hot water supply and return.

Additional Tips

Successful employment of the above strategies requires that the necessary data points be in-place; thus, such points should be specified during design/installation and do not let them be value engineered out, as points are usually the first thing to get cut to reduce project costs – short-term gain, long-term loss.

Second, placement of the sensors is very important, especially for key data points, such as the outside air temperature sensor.  In fact, you may want to consider installing multiple OAT sensors, then operate off of the average.

Ensuring that the sensors are measuring and operating correctly is crucial.  You will want to make sure they are inspected and calibrated on a periodic basis.  The typical recommendation is annually, however, that frequency can be unrealistic for larger facilities with thousands of data points.  Thus you may want to consider testing and calibrating a percentage of them each year, such that all are inspected every handful of years – note, this includes sensors at the terminal units, such as VAV boxes.

Lastly, good commissioning and retro-commissioning coupled with periodic test, adjust, balance (TAB) will further ensure proper performance of building systems, occupant comfort, and efficient operations.  Click here to learn more about commissioning and retro-commissioning.

Conclusion

Most buildings have building management systems which should allow the discussed OCx strategies to be employed.  Leveraging these “smart” systems will equip facility departments to better utilize staff, extend equipment life, and lower utility costs.  Let’s work smarter…

Why are so many 1031 investors choosing to 1031 exchange into Delaware Statutory Trust (DST) properties?

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By Dwight Kay | Kay Properties & Investments

KPI Blog header

From eliminating the struggles of property management to owning investment grade real estate, the potential benefits of opting to 1031 exchange into DST properties are many. At Kay Properties and Investments, we’re specialists in the DST 1031 exchange marketplace, and provide our clients with superior, knowledgeable advice to help them make informed decisions about their investments. We also are careful to help our investors understand the risks and disadvantages of real estate and DST properties.

Understanding Delaware Statutory Trust Real Estate

Real Estate investors all over the country are choosing 1031 exchanges into DST offerings as a way to defer their capital gains tax, diversify their real estate portfolio, increase the possibility of increasing their cash flow and much more. But what is a DST 1031 Property exactly? With a minimum investment of $100,000, DST 1031 properties give investors more leeway to spread their proceeds into multiple properties. Some call this similar to 1031 exchanging into a REIT however, a REIT is not like kind for a 1031 exchange and yet a DST is. With the DST we are able to create a broadly diversified portfolio of between 1-50 properties for our investors. Understanding the current DST properties for sale and how to construct a quality portfolio for our clients is what we do best. Contact us today to learn how we can help you with a free consultation. (www.kpi1031.com or info@kpi1031.com)

Types of DST Listings

The types of DST 1031 properties available can vary greatly, with the common properties being triple net (NNN) leased single tenant retail, apartment communities, medical properties, office properties and all-cash/debt-free properties. With a NNN leased property, tenants are typically responsible for taxes, maintenance and insurance, potentially leaving the investor with less responsibility in terms of property management and costs and a “net” amount of rent each month.

At Kay Properties we typically have access to 15-30 different DST listings from many of the DST sponsor companies in the industry as well as our own proprietary Kay Properties client exclusive DSTs just for our clients. If you’re interested in learning more about how 1031 exchanging into Delaware Statutory Trust properties could potentially work for you, give us a call today! 1(855) 466-5927

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This website contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment. Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for details regarding your situation. Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado. Kay Properties & Investments, LLC, is registered to sell securities in all 50 states. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

BEWARE. Fed Rate Hike Could Burst Bubbles

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By Kathy Fettke | RealWealthNetwork.com

FedRateHike

The Federal Reserve followed through on its latest promise to raise interest rates. Fed Chief Janet Yellen announced a quarter point hike in the federal funds rate Wednesday. But the increase has little to do with the ripple effect on mortgages and consumer loans, and more to do with a message from the Fed about the economy.

This is the first rate hike of 2017 and the third since December of 2015 when the cycle of monetary tightening began after the Great Recession. The first rate hike brought the overnight lending rate a quarter percent off zero. The second rate hike three months ago, raised it another quarter point. The latest increase brought it to a range of 0.75% to 1%, which is still quite low historically.

Consumer loans may notch up a bit because of the rate hike but economists say with so much talk about the increase, many lenders have already priced it in. And some economists say the hike has more to do with Yellen’s desire to portray the economy as “healthy” than it does with monetary policy.

She said during a press briefing: “We have confidence in the robustness of the economy and its resilience to shocks.” And that: “It’s performed well over the past several years. We’ve created, since the trough in employment after the financial crisis, around 16 million jobs.”

Raising the Fed Fund rate is supposed to correspond with a robust economy. Increases are meant to keep inflation in check. If economic growth and inflation are rising too quickly, a rate hike helps slow them down as it tightens the money supply.

Core inflation is about 1.9% right now. Up slightly from the previous forecast and right in the 2% range that the Federal Reserve has been targeting.

But there are big questions about U.S. economic growth.

If you focus on the stock market, you might think the economy has been advancing rapidly. Wall Street has been on a bull run since President Trump was elected with the Dow hitting over 21,000 for the first time ever.

There’s also been a steady increase in jobs with unemployment dropping from the double digits during the recession to under 4.7% right now. That’s giving consumers confidence about the economy, despite flat wages. The February report on consumer confidence says it hit a 15-year-high of 114.8.

But what some economists are pointing out is the troubling lack of economic growth. Chief investment strategist at Clarity Financial, Lance Roberts, wrote in a blog, that: “Outside of inflated asset prices, there is little evidence of real economic growth.” And that’s one thing that Janet Yellen said a rate hike would be tied to — economic growth.

The gross domestic product, or GDP, is our economic report card. And the Atlanta Fed just downgraded the first-quarter GDP to just .8%. That’s well off the 2% that Janet Yellen said is needed for a rate hike, leaving some economists wondering why the central bank went ahead and approved the increase.

Just weeks ago, the GDP was closer to the central banks rate hike comfort zone, at 2.3%. It also increased to 3.4% briefly last month after positive news about manufacturing and construction spending. But when disappointing data on retail sales and consumer prices came out a few days ago, the Atlanta Fed lowered its estimate to the .8% level.

Roberts says that charts show a rate hike at a time like this could actually push us into another recession. He told Market Watch that raising interest rates from ultra low levels at a time of slow economic growth could impact spending and that charts show this type of situation has lead to recessions in the past within three to nine months.

Nobel Prize-winning economist Robert Schiller is also warning people that Wall Street exuberance has gone overboard. He told Bloomberg that traders are captivated by President Trump’s bold plans to slash regulations, cut taxes, and “turbo-charge” the economy with an infrastructure building-boom.

He warns that when situations like this have happened in the past, it hasn’t ended well for the investors. Think dot-com bust and housing meltdown. Both experienced sharp drops in the stock market.

Schiller says investors are shoveling money into the market with the hope that President Trump will make good on his campaign promises. But they are also ignoring the enormous amount of uncertainty associated with getting those new policies through Congress and the legal system.

The Trump Administration is proposing some extreme budget cuts that may not sit well with some of his own constituents. A preliminary budget was introduced that slashes $54 billion from most federal agencies including the EPA, HUD, and Health & Human Services. That money will then be spent on defense. There’s also the affect of the Obamacare repeal. Depending on how many people lost their healthcare coverage, there could be a lot of unhappy voters. And if this political turmoil jostles the stock market, we could see a reversal that could happen quickly, and without mercy.

There has never been a slow letting out of air from a bubble. It usually bursts.

Kendrick Wakeman, the CEO of financial technology and investment analytics firm FinMason, told CNBC that investors are in for a rude awakening. He says no one knows when the stock market correction is coming. But, he says on average, the stock market crashes every eight to 10 years. And when it does, the average loss is about 42%.

He told CNBC that stock market investors need to ask themselves: “Would you hang yourself in the closet if the market crashed and you lost 35 percent?”

I have been warning investors for over a year now that a recession is coming. I’m sure some people think I’m crazy since the stock market has made significant gains since I gave this warning.

But remember, the same thing happened before the Great Recession and the Great Depression. In January of 2008, Ben Bernanke, the Chairman of the Fed said, “The Federal Reserve is not currently forecasting a recession.” 9 months laterin September of 2008, Lehman Brothers collapsed and the financial markets worldwide came tumbling down.

The Federal Reserve is supposed to be in charge of regulating the economy. It’s terrifying that they couldn’t see that recession coming… and even more frightening that they may have seen it coming, but didn’t warn us.

Be extremely defensive in your investing strategies today. Make financial decisions as if it were 2006. People who were prepared fared very well during the subsequent recession.

Rising interest rates can be the exact prick needed to pop the stock market bubble. That may be the very reason the Fed is raising rates – to slow down the irrational exuberance that taking the bubble to new heights.

A slowdown could turn into a meltdown, depending on how big that bubble has become.

How would a slow down in stocks affect real estate?

1. Cities that are more dependent on stock market fluctuations would be more affected by a stock market crash (SF, NY, Seattle).

2. Mortgage interest rates would decline if there were a correction in the stock market as more investors flock to the safety of bonds – which are more tied to the 10 year Treasury bond market.

3. Commercial real estate would get hammered while landlords could fare well as more people are forced to rent, driving rents up.

Now would be a very good time to “cash out” and sell your high priced assets while the market is hot. You can exchange those properties for low-priced, high cash flow properties in recession-proof markets.

If you have concerns about your portfolio or would like to speak with one of our investment counselors about how to find out which markets are best for investing today, visit www.RealWealthNetwork.com.

Kathy is an active real estate investor, licensed Realtor, certified coach, and former mortgage broker. She specializes in helping people build multi-million dollar real estate portfolios through creative finance and planning. With a passion for researching and sharing the most important facts on real estate and economics, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR, CBS MarketWatch and the Wall Street Journal. She is the author of the #1 best seller, Retire Rich with Rentals, and is host of The Real Wealth Show – which is a featured podcast on iTunes with listeners in 27 different countries.

L.A. Soft Story Ordinance and Implications for Condominium/Apartment Owners

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By: Dilip Khatri, PhD, SE | Principal Khatri International Inc.

earthquake property

Los Angeles is on the “Ring of Fire”.  The Ring of Fire circles the perimeter of the Pacific Ocean refers to areas of the high seismic activity because of multiple tectonic plates that have been moving/grinding against each other for millions of years.  It’s no surprise that we are in the center of seismic activity with total unpredictability.  The Earthquake risk element affects every aspect of life in Southern California, most notably our buildings where we live, work, and entertain, because it poses a threat to our very existence.

The Soft Story Ordinance, passed by the City of Los Angeles in 2016, encompasses residential and commercial buildings (4 or more units) that have a weak story line which leads to potential catastrophic circumstances:  The entire upper level may collapse on the weak first story.  In order to minimize this structural calamity, the Soft Story Ordinance requires building owners to upgrade/fix/enhance their buildings to reduce this risk.

Khatri_Figure1

Figure 1

Figure 1 demonstrates this principle and shows the collapse mechanism.  It’s no different from having a heavy object on “stilts”.  A lateral force applied to the upper floors will cause the structure to tip over.  The objective of the Ordinance is not to save the building/property.  Rather, the prime and single goal is to save the People inside the building.  Many property owners don’t realize this objective, and its important to be clear that the Ordinance is not trying to save property values, it’s main object is Life Safety.

The L.A. Ordinance officially affects approximately 14,000 buildings but that number is changing because new buildings are being added to the list, and other Cities in Los Angeles County are decidedly passing similar Ordinances.

Khatri_Figure2

Figure 2

There are several engineering options available to resolve this dangerous condition.  At least five repair options are to be considered:

  • New Steel Moment Frames
  • Strengthening existing Steel Moment Frames
  • Strengthening existing Wood Shear Walls
  • New Wood Shear Walls
  • New Steel Flagpole Columns

Figures 2 and 3 show a few schematics of a Steel Moment Frame and Wood Shear Wall.
My advice to owners is to look at each of these options and evaluate the “best choice” from an economic feasibility standpoint.

Khatri_Figure3

Figure 3

Each property is unique and requires personal attention of a structural engineer and contractor. It’s definitely not a “one size fits all” scenario.  Look around, shop around, and do some diligence before you commit to a specific solution/vendor approach.  The time lines for compliance are 7 Years from the date of notice, 2 Years for plans and permits.  If you are interested to learn more about the Soft Story Ordinance, this author has produced an online video for your reference: https://vimeo.com/194302379

Dr. Khatri has 31 years of civil engineering experience involving land development, subdivision, commercial, residential, multi-family, industrial, and educational facilities. Design, construction, and overall management of major infrastructure improvements comprising sewer, water, storm drain, flood control, and grading design.

INCOME PROPERTY EXPO IN PASADENA HOSTS HOWARD JARVIS TAXPAYERS AND REAL ESTATE EXPERTS TUESDAY, MARCH 14TH

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

INCOME PROPERTY EXPO IN PASADENA HOSTS HOWARD JARVIS TAXPAYERS AND REAL ESTATE EXPERTS TUESDAY, MARCH 14TH  

Surviving California’s Hostile Business Environment, The Soft Story Ordinance,
Property Taxes, Legal Issues & Other Seminars – Admission is Free

ExpoPhotos_PressReleasePASADENA (March 3) — Commercial and residential property owners, managers and investors can learn what’s new in financing, strategies and products at the 5th Annual Income Property Expo at Pasadena Convention Center, 300 E. Green Street, Pasadena, CA 91101 on March 14, from 9:00 a.m. to 4:00 p.m. Admission is free.

“This event offers experts, resources and strategies for cost-effective management and maintenance of rental, multifamily and commercial properties,” said Paul Smith, producer. Howard Jarvis Taxpayers Assoc. president Jon Coupal will discuss surviving the hostile business environment, plus experts seminars on the seismic retrofit ordinance, market analysis, rent control, landlord/tenant and property law and more will be held including:

  • Kathy Fettke, Real Wealth Network
  • Jon Coupal, Howard Jarvis Taxpayers Association
  • Dilip Khatri, PhD, P.E., S.E., Khatri International Structural & Civil Engineers
  • Robert “Rusty” Tweed, Tweed Financial Services
  • Tony Watson, Robert Hall & Associates
  • Elizabeth Harris, Exeter 1031 Exchange Services, LLC
  • Dennis P. Block, Law Firm of Dennis P. Block & Associates
  • Gene Guarino, Residential Assisted Living Academy
  • Steven Duringer, Duringer Law Firm
  • Brian Gordon & Vince Medina, Lotus Property Services, Inc.
  • Mike Brennan, Brennan Law Firm

Nearly 100 vendors will showcase the latest in building products, services, materials, energy systems and maintenance. The expo also features all-day networking with industry professionals and sponsors including Apartment Management Magazine, Real Wealth Network, Chase Bank, Robert Hall & Associates, Exeter 1031 Exchange, Duringer Law Group, Tweed Financial Services, Khatri Structural and Civil Engineers, Provident Bank, HD Supply, CIC Tenant Screening, and The Howard Jarvis Taxpayers Association.

Admission is free. Seminar seating is limited. For information, please contact Jordan Smith at (800) 931-6666
or email RSVP@IPMEXPO.com. Pre-register at www.incomepropertyexpo.com.