Issues that cannot be ignored when it comes to vacant property.
Following is Retail Facility Business’ interview with Marc Insul, president and COO of Commercial Asset Preservation (CAP), leaders in the vacant commercial property business.
RFB: How did you get into the vacant commercial property business?
Insul: In the early 1990s I started in the distressed real estate business. I joined a business owned by my father handling the nationwide inspection and maintenance of delinquent residential properties. My initial role with that company was to build a commercial property inspection business focused on conducting annual inspections of multifamily, retail, office and industrial properties. Ultimately, I developed the commercial inspection division, but we ended up selling it off because our residential inspection and maintenance division was growing so rapidly. The residential business growth I am speaking of was occurring many years before the residential foreclosure crisis. My father and I sold the residential inspection/maintenance company to Chicago Title and I went on to run it for another 8 years, departing in early 2006. Shortly thereafter I decided that I wanted to get back into the distressed real estate business. This time I focused on commercial properties because I felt that this was a historically neglected side of the real estate industry. Having daily street level exposure to vacant real estate in the economically depressed Midwest gave me the unique opportunity to think about how to solve the issues of blight and help rejuvenate our neighborhoods. This lead to the creation of CAP.
RFB: What are the most common issues that you have encountered when visiting a vacant building?
Insul: Vandalism, copper theft, vagrants, citations (for issues such as: tall grass, weeds, graffiti, life-safety hazards), and property security concerns.
RFB: What can property owners do to prepare themselves for the day that their property goes vacant?
Insul: Compile a list of go-to steps. This should include: identifying goals for your property (Do you want to sell it, re-brand it, lease it, adapt and reuse it, hold it in inventory, or demolish it?); notifying your insurance provider that the building is vacant; having forced place insurance in effect for this eventually; notifying the local fire and police departments of the vacant building and advising these authorities of how they might access the property during an emergency (either via key or using a lockbox); retaining an accurate and accessible key holder list, recording mobile, pager and home phone numbers for those assigned to your key holder list so you know who is in charge of the property and its upkeep — even at 2 a.m., consider arranging to use outside companies to handle these calls directly without involving your company personnel so that you can rest easier at night; retaining the services of a tax attorney if you do not have one on staff; and contacting the municipal planning authority to advise who will be handling oversight of the building. Additionally, you need to make sure the mail, especially utility invoices, from the property is forwarded to the appropriate party. After the last tenant has exited the building you should cancel non-essential telephone service (unless it is necessary for an alarm system). It is also recommended that you terminate other non-essential service contracts such as: extermination service, trash removal, window washing, janitorial services, laundry/uniform service (restaurant facilities), and MUZAK.
RFB: What are the most costly issues when a vacant property is ignored?
Insul: Dealing with citations; vandalism; the inability to remove unwanted trespassers, either due to these individuals constantly returning to the site or because municipal code forbids their removal; declining property value; damage to the reputation of the landowner; and finally, demolition.
RFB: How frequently should inspections of a vacant building be conducted?
Insul: This really depends upon the neighborhood as well as the history of vandalism at the property. Also, you need to factor in how aggressive the city is in citing landowners for vacant property issues and how harsh those penalties can be. Inspections could be conducted anywhere from daily to semi-annually. In all instances, initial recommendations should be made to clients based upon experience, as well as street level insight from a local contractor, as to the frequency by which this property should be inspected. As a rule of thumb, we recommend the frequency be no less than every other week.
RFB: What does being “a good neighbor” mean for owners of vacant property?
Insul: Being a good neighbor means eliminating complaints from neighboring tenants about the upkeep and condition of your building. A good neighbor makes a concerted effort to comply with local municipal property codes. It means keeping the property looking just the same as other/occupied properties do in the neighborhood. Finally, it can mean keeping your property name, and perhaps the branded name on your former tenant’s signage, out of the media for a failure to properly maintain your vacant building. From our standpoint, we are not in the property beautification business. We are in the business of helping our clients minimize their costs on a non-revenue generating property while staying in the good graces of the code enforcement authorities. We aim to make sure that the properties that we handle look no different from others in that area. As a vacant property, it is unlikely to ever look the best of all of the properties in the neighborhood, but it also should never be the ugliest property on the street.
RFB: What can owners do to control vacant property expenditures?
Insul: Perform recurring services (such as lawn care or snow removal) along with scheduled oversight of the property. Just having a watchful eye on the property along with routine yard maintenance can keep you in the good graces of the code enforcement authorities. These steps are a whole lot less expensive than discovering a problem that you did not know about which has been allowed to worsen. Many landowners take the stance that they should invest little or no dollars into a vacant property and just hope that no further deterioration occurs since they “will” sell the property in 2 to 3 months. In nearly 100% of these “hope for the best” instances, we have found that the property sells in a considerably longer timeframe than originally projected.
When the sale takes longer than expected, these landowners run very high costs because they did not address known issues earlier — issues which have only worsened over time. Neglected, vacant buildings attract: vandals, copper thieves, gangs, drug usage, animals, graffiti, water damage, dumping and much more. Regardless of whether the property is in an urban, suburban or rural location, we have seen these issues occur with similar frequency. We do not advocate putting a large sum of money into a vacant building. Rather, we recommend securing/protecting the property and addressing any life-safety or citation issues from the onset of the vacancy. Then, we recommend keeping an eye on the property through recurring inspections and maintenance, such as lawn care and snow removal. Such oversight is the best way to manage costs at a vacant building. Ignoring the building or thinking that the issues of the building will pass to the new owner will almost certainly lead to higher costs, a longer time on the market, or a lower sales price.
RFB: Do owners really want to let municipal officials know their property is vacant?
Insul: Since the local code enforcement department typically has so little information about who to contact in regard to a vacant property, being proactive and notifying them is actually viewed by the local officials as you being a concerned citizen and partner. There has been a tremendous amount of emphasis in recent years by code enforcement officials to encourage the parties responsible for vacant properties to provide contact information. Many cities have implemented building registry requirements to ensure that the city has proper contact information on file as to the party responsible for the vacant structure. A failure to properly notify the local code enforcement agency may ultimately lead to harsher penalties placed upon the building owner if it is not maintained. Giving access information to the police and fire departments is critically important if you want to help prevent vandalism or a fire. It is certainly preferable to getting a phone call at 2 a.m. or having the fire department damage your doors or windows to gain access.
— Marc Insul is president and COO of Commercial Asset Preservation, LLC in Beachwood, Ohio. He may be reached at [email protected].