With careful planning, commercial real estate professionals can make sure investors, tenants, and properties are prepared to weather the worst.
By: Dan Weil (National Association of REALTORS®)
There are some situations managers and owners of commercial buildings hope will never happen on their property: natural disaster, large-scale theft, sexual assault, or even a terrorist attack. But all these things can happen, and real estate professionals have to be ready for them.
That point was brought home to Luis Alvarado, executive vice president for property management at Newmark Grubb Knight Frank in Boston, during the Boston Marathon bombing of 2013. His previous company, which he declined to name, was managing the building at 699 Boylston St., in front of which the first bomb was placed.
“Thank God we had plans in place, including how to evacuate,” Alvarado says, adding that their manual for unexpected disasters runs near 100 pages long. His company cooperated with the investigations of Homeland Security, Boston police, Massachusetts police, and the FBI. The building was shut down for almost two weeks. “You need to establish communication with every tenant and have three contacts for every tenant.”
So how should you prepare for such emergencies? “It’s important to have a written policy manual covering all those foreseeable events, so that standards of practice can be adhered to,” says Neil Merin, chairman of NAI Merin Hunter Codman, a commercial real estate services firm in West Palm Beach, Fla. “There has to be a reasonable approach that mitigates the problem but doesn’t inconvenience tenants excessively.”
The range of crises that could arise stretches long and wide, which necessitates thorough preparation. Jesse Holland, president of Albany, N.Y.–based Sunrise Management and Consulting, has virtually seen it all: “a bomb squad, a hurricane, fires.” He’s happy to note they haven’t had any reported cases of sexual assault, but have had to deal with “sexual offenders who didn’t belong on the property.”
Holland says there are four crucial steps in preparing for crises, and the first step is compiling pertinent information. “Where are the locations of the water shut-offs and gas mains? Who needs to be contacted in case of emergency and what are their phone numbers?” Holland says.
Being prepared can also help you deal with smaller emergencies. For example, when the computer system Holland’s company relies upon crashed, they were saved by the fact that part of their disaster plan is to print out the rent roll for apartment complexes each month. “All the information was there to rebuild our records,” he says.
The second major issue for Holland is relationships. “All emergency situations involve a lot of other agencies and stakeholders,” he says. For example, if there’s an active shooter on your property, you’re interacting with the police department. “That’s a lot easier if you already have a relationship with the police.”
When Sunrise puts up a new building, it invites the fire department during construction so officials can see where things are and how they are put together. “We have relationships with town officials and assessors too,” Holland adds.
Don’t forget to build relationships internally, too. Brian Davis, cofounder of Baltimore-based rental education site SparkRental.com, cautions property managers against drafting emergency plans with only lead staff members in mind. “They need to make sure that every staff member knows and understands the plans,” he says.
Then there is the task of gathering trusted vendors. When Hurricane Irene hit the Northeast in 2011, Sunrise had a 192-unit apartment complex that was underwater and had to stand vacant for three days. “We had contracts lined up so the minute we were given clearance, we had eight dumpsters arrive on site,” he says. It might sound like a minor detail, but Holland notes that their efforts to do this massive cleanup right away made the area feel less like a disaster zone. “Food and everything else that was in flooded units had to go. If there hadn’t been a place to put it, it would have been everywhere.”
They also made sure there were specialists to deal with the electric and the pump station. Holland says some who saw the complex thought the place hadn’t been damaged by flood at all but was merely being renovated.
The third important factor Holland cites is security. “How are you going to control the site and deal with tenants? If you have an active shooter, the whole place is a crime scene.”
Owners and property managers have to make sure parking lots and common areas are safe, Merin says, suggesting they bring in a security firm to look over the property and point out vulnerabilities and necessary updates. In one of the buildings his firm manages, thieves were stealing laptop computers, gaining access to floors through fire escape stairwells, so they decided to make security improvements that targeted that structural vulnerability.
Technology can also assist in tightening security. “You have a lot more access to video monitoring now,” Merin says, noting that this can help eliminate common problems with relying on staff and locks only. “You can catch your own security guards stealing on videotape.”
And finally, you need to be prepared to deal with the aftermath. “For example, after a fire in cold weather, you have to winterize the pipes or they will freeze,” Holland says. “You’re dealing with insurance and relocating tenants. What needs to be rebuilt?”
Insurance is a big part of the aftermath, too, and a must-have for property managers and building owners. “Property managers should have insurance to cover their own liability, and they should aggressively push building owners to have comprehensive insurance that includes strong liability coverage,” Davis says. Managers should keep copies of the owner’s insurance policies, in addition to their own, in a secure location.
Finally, keeping a detailed account during the crisis will make your job easier in the long run. “That’s the first rule of property crises. Property managers should document every detail as early and as thoroughly as possible,” Davis says. “That could mean photographs; it could mean voice or video recordings; it could mean taking recorded statements from tenants or specialists.” Lawyers and insurance officials will eventually look at every detail, so thorough it’s vital you have evidence to prove every staff member behaved appropriately.
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