Case Study #2 – Vienna, Virginia

Collection of Rental Arrearage & Improved Tenant Relations

Project Location: Vienna, Virginia
Project Description(Including # of units & Square Footage:

  • 75,699 Square Feet shopping center
  • Ground floor retail; 2nd floor professional offices
  • 37 total units

Issue: Monetary default and non-performance of court –ordered payment
Project Roles & Responsibilities:Property Management
Period of Performance: 2009 – current
Objective: CAM Expense Containment
Vendor Service/Trade: Full Service Restaurant
Date of Case Study: December 2009 – June 2010
Underlying Problem: Upon taking over management responsibility of the center, eleven (11) of the 37 tenants had a rental arrearage in excess of $150,000, including three (3) tenants that had court judgments – and one tenant (restaurant) that had two (2) judgments against him for a total balance due of $48,000.    This had the effect of destabilizing the property in terms of tenancy and cash flow and significantly limiting the landlord underlying value of the asset.

Action Steps: On behalf of the landlord, the property manager met with every tenant at the subject property individually with the objective of accomplishing the following:

  • Establish improved communication between LL and Tenants
  • Understand the underlying reason(s) for tenant absence of payments;
  • Collect all the rental arrearage
  • Maintain tenant occupancy
    • Property manager met with every tenant, the former property manager and the leasing agent to gain an understanding of where potential miscommunication occurred.
    • Property manager reviewed lease file(s) to review Letters of Intent (LOI’s), lease negotiation notes and the executed lease agreements to understand the intent of the business terms of the deal, track negotiated changes and compare with the final lease transaction.

Outcome: Due to property manager’s

  • Extensive time commitment to re-trace the procedural steps of the lease transaction;
  • Ability to explain the business terms of the lease to the tenants in a manner they understood;
  • Skill as a mediator to present said findings to the Landlord in a concise format with a workout plan that was fair to both stakeholders (LL and Tenant), property manager accomplished the following:
    • Collect 100% of the rental arrearage with zero ($0) written off to bad debt
      • Achieve full collection in 7 months
      • Dismissal of all court proceedings
    •  Successfully establish improved communication with the Tenants
      • Successfully renewed most of the tenants to long-term extensions (one tenant retired)
      • Renewed the restaurant tenant to a new 5 year lease at a base rent 5% higher.

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