Sleeper Cells - Breaking New Ground in Support of Property Management Jack Geary Charles Foster Bridging the GAAP • Sometimes it seems like my accountants and my property managers are on different planets! • An exasperated CDC Director from the Midwest. Cash (Flow) is King Even on an Accrual Basis • Audit formats are governed by GAAP, but sometimes the format does not meet the needs of property managers. • How can we go beyond audits and GAAP to have financial statements that provide a valuable management analysis tool for asset managers? What we have here is a failure to communicate ! • Audit formats lead to an info disconnect between finance and property mgmt. • Accounting Professionals: Depreciation, accrued interest – It’s about GAAP net income. • Property Managers: Show Me The Cash Flow! The Bilingual CEO Speaking “Property Management” Gross Potential Rent (GPR) - Vacancy + Other Income = Effective Gross Income (EGI) - Operating Costs = Net Operating Income (NOI) - Hard Debt (must-pay debt) - Reserve Contributions = Cash Flow Operating Costs • Admin (Admin Salaries, audit, Mgt Fee, Office Costs) • Utilities • Maintenance & Operating • Real Estate Tax & Property Insurance • Operating Costs DO NOT include: – Mortgage Interest – Depreciation and Amortization “Hard” Debt • Debt Service that must be paid – amortizing debt. • Includes principal, interest and related fees. • DOES NOT include accrued interest that is not paid, depreciation and amortization. The Mission Should you choose to accept it… • Is to calculate cash flow for Charlestown Senior Housing LP…. – Review the audit excerpts (Pages 5-7) & fill out the grid on Page 8. – Use Property Management Accounting Concepts (PMAC). – Suspend reality on GAAP depreciation and soft debt accrual. – Why is GAAP different? The Case File This Message Will Self Destruct… • Charlestown Senior Housing LP – 190 Unit elderly property – Low Income Housing Tax Credits – Conventional (HFA) Debt – Soft Debt The Super Secret Decoder Ring GAAP to Property Cash Flow • Depreciation • Soft Debt – Cash Flow Debt: Pay only if cash flow permits. – Deferred Debt: Accrue interest, due at a late date in balloon payment. What Impacts Cash Flow? • Rent Levels • Vacancy Management • Retention and Marketing • Cost Controls Rent Levels • Is the manager increasing the rent – Subsidy paperwork – Benchmarking to the market – Keeping up with the proforma? Vacancy Management • The Elements – Marketing – Waiting list management – Effective screening – Get out ahead – Make Ready Retention and Marketing • Turnover Rate – It’s always easier (and more cost effective) to retain an existing resident than to find, screen and house a new resident. • Good Marketing – It’s better to turn people away than to go wanting for applicants. Jack Geary CPM Jack Geary Consulting 501 Commerce Drive #1-313 Braintree, MA 02184 617-201-1967 JackGeary@aol.com Charles Foster, CEO Abyssinian CDC 4 West 125th St. New York, NY 646-442-6589 firstname.lastname@example.org
"Property Management Breaking - PDF"