How OPEX CRE Managament's ‘Ownership Mentality’ Improves Operational Efficiency, Increases ROI

Property management involves handling tenant challenges, managing vendors, collecting rent and financial reporting, among other duties. But while a building’s needs and services may vary across asset classes, the need for reliable property managers remains constant regardless of asset type and market conditions. 

OPEX CRE Management, a New Jersey-based commercial property management company, recognized the market’s need for a dependable management service that possesses an “ownership mentality,” or going above and beyond the typical duties of a property manager. 

“We want to do what's best for the property and business plan, so we've taken the ownership mentality approach to CRE property management,” said Brenton Hutchinson, CEO at OPEX Management. “We think of management as a hybrid between a property manager and an asset manager. We're not looking to simply add management to our existing portfolio and move on to the next assignment.”

OPEX Management has experience working across 22 states in the property, construction, facilities and asset management sectors, with more than 19M SF and 1,000 tenants managed. Ranging from shopping centers and office buildings to industrial and life sciences spaces, the firm’s experience includes a portfolio once valued at more than $5B.

Hutchinson said many large property management firms are compensated on their portfolio’s revenue and square footage. But this strategy may lead to becoming inattentive or indifferent to finding cost-saving solutions for a property owner that will drive more revenue to their portfolio. 

OPEX Management looks at property management from a bottom-line perspective, he said. The firm tries to maximize revenue and decrease operating expenses — which ultimately increases a property’s bottom line and helps with any type of exit or refinance in the future.

“Every building, every location and every tenant is different,” he said. “It all comes down to taking a common-sense approach to solving any issues that may arise within a specific property or portfolio."

Hutchinson said that when OPEX Management is brought in as a building’s manager, the first step the company takes is to understand what personnel, services and contracts are in place, why they are in place and whether they are the right fit for the business plan. 

“We want to understand your debt service, we want to understand the reserves and the money set aside for certain projects,” he said "We want to understand your loan requirements and the debt-service coverage ratio threshold requirements. We prefer to be an operating partner, not just another management company.”  

An office property in Philadelphia that Hutchinson’s team took over management on several years ago had a cost-plus janitorial contract in place. However, the building was starting to lose its tenants, eventually dropping 20% in occupancy.

Although the incumbent management team gave a strong objection to a change in bidding strategy, a new approach was used: pricing based on square footage with a vacancy credit.

“What was lost in the day-to-day was that there was no incentive for the vendor to cut hours as vacancy dropped”, Hutchinson said.

By shifting the strategy, the owner saved close to $500K during the first year of Hutchinson’s team managing the property. The restructuring of the annual janitorial expenses created a 32% average annual savings, or $1.4M over the next three years. 

“Operational cost savings, particularly in today’s CRE market, can make or break the success of a property,” he said.

In this market, Hutchinson also wants to be a resource for receivers, lenders and servicers. These groups are the busiest they have been in several years due to unstable market conditions.

During the period between when the lenders are taking back the keys to the property and when it is sold, they are trying to recoup their original investment. Instead of taking the typical approach where management will continue with normal day-to-day operations, OPEX Management will work to create value for the property while the stakeholders try to find the best solution for the specific asset.

“Creating efficiencies, making sure the building is staffed properly, thinking outside the box and presenting solutions rather than problems will result in a reduction of expenses that will ultimately increase the net operating income,” Hutchinson said. “By the end of the relationship, we’ve hopefully created a bit more value so that the lender can recoup close to what they had on their original investment.”

He said that as CRE continues to experience uncertainty, the market will witness more properties not performing the way they were originally underwritten, calling for a change in business strategy. Building owners and lenders will need assistance in re-evaluating such strategies to get their properties back on the right path. 

“We understand the challenges of managing a portfolio with distressed assets,” Hutchinson said. “We have been on the front line for years and have an abundance of knowledge to assist in today’s evolving market.”

This article was produced in collaboration between OPEX CRE Management and Studio B. Bisnow news staff was not involved in the production of this content.

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