1
00:00:00,000 --> 00:00:05,310
Issue Analysis for asset
managers is probably my favorite

2
00:00:05,310 --> 00:00:09,150
topic of this series of four.
It's the last series, but it's

3
00:00:09,150 --> 00:00:13,500
really the main heart of it
about what we do as asset

4
00:00:13,500 --> 00:00:17,220
managers when we're wearing that
hat in order to make those best

5
00:00:17,220 --> 00:00:21,090
decisions, not only taking in
those different issues that are

6
00:00:21,090 --> 00:00:25,080
come up from the other analysis,
like the analysis that we did,

7
00:00:25,080 --> 00:00:29,460
in part one of the series, the
video on property analysis, or

8
00:00:29,460 --> 00:00:33,390
part two about financial
analysis, or part three, on

9
00:00:33,390 --> 00:00:38,340
market analysis. Now we take all
that data in, and we apply it to

10
00:00:38,340 --> 00:00:41,850
the issues at hand, in order to
prioritize what projects we're

11
00:00:41,850 --> 00:00:44,850
going to do in order to make
sure that our budget is being

12
00:00:44,880 --> 00:00:49,350
allocated properly, again, so
that we can be more successful

13
00:00:49,470 --> 00:00:53,100
as in our syndication in our
investment fund, so that our

14
00:00:53,100 --> 00:00:57,360
investors are happier and better
treated and get better results,

15
00:00:57,540 --> 00:01:01,290
which is at the end of the day,
the benchmark for our success.

16
00:01:01,620 --> 00:01:05,070
So I know you're going to find
this video helpful.

17
00:01:16,260 --> 00:01:20,910
We're talking about operations
and custody. And in this video,

18
00:01:20,910 --> 00:01:25,350
we're going through Issue
Analysis. So the point of Issue

19
00:01:25,350 --> 00:01:28,380
Analysis is, at the end, when
you're doing your property

20
00:01:28,380 --> 00:01:32,580
management plan or your your
custody plan, what we're trying

21
00:01:32,580 --> 00:01:37,800
to do is come up with a list of
all of the issues that are out

22
00:01:37,800 --> 00:01:42,600
there, develop a plan of what
the priorities are, and

23
00:01:42,600 --> 00:01:45,270
determine if there are things we
want to take care of sooner

24
00:01:45,270 --> 00:01:48,930
rather than later. Now, this
obviously is an evolving thing

25
00:01:48,930 --> 00:01:53,490
is well, it's just like the rest
of our plan. And so what we're

26
00:01:53,490 --> 00:01:57,690
trying to do is we're trying to
set down a something in stone

27
00:01:57,690 --> 00:02:00,810
that says this is where we're at
today, this is what we're

28
00:02:00,810 --> 00:02:04,020
seeing. So you can make plans
for the future about what you're

29
00:02:04,020 --> 00:02:07,710
going to tackle next. And then
you also have the ability to

30
00:02:07,710 --> 00:02:11,940
measure how good you were at
estimating the the improvements

31
00:02:11,940 --> 00:02:17,820
that you made. So after you've
gone through your certainly your

32
00:02:17,820 --> 00:02:21,810
Property Assessment and your
financial assessment, that's

33
00:02:21,810 --> 00:02:25,080
probably the right time maybe
the market assessment as well,

34
00:02:25,080 --> 00:02:29,340
that's probably the right time
to start doing the initial issue

35
00:02:29,340 --> 00:02:35,010
analysis, or the for the whole
your whole custody plan. So

36
00:02:35,010 --> 00:02:41,460
basically, what we're doing here
is we're developing an action

37
00:02:41,460 --> 00:02:41,910
plan.

38
00:02:47,790 --> 00:02:53,130
So the best way to do this, I
have found is to again, use a

39
00:02:53,130 --> 00:02:58,200
table, now the table I would
start with is I would basically

40
00:02:58,200 --> 00:03:04,110
start ranking everything in
priority. So you'll probably do

41
00:03:04,110 --> 00:03:08,490
this in Excel or some
spreadsheet, I would talk about

42
00:03:08,490 --> 00:03:12,930
the priority of them, I would
then define what the issue is.

43
00:03:14,340 --> 00:03:18,600
And I would would not include
solutions. In the definition of

44
00:03:18,600 --> 00:03:23,880
that issue, I would just talk
about the issue itself, the air

45
00:03:23,880 --> 00:03:28,830
conditioning system is breaking
every once a month, every 12

46
00:03:28,830 --> 00:03:37,950
months or whatever. So I would
then go through the cost that I

47
00:03:37,950 --> 00:03:43,680
think it would cost in order to
that I'm having as a result of

48
00:03:43,680 --> 00:03:48,300
this problem. So if it's air
conditioner, a track system, it

49
00:03:48,300 --> 00:03:52,650
may be that my cost is I need to
pay a service or service

50
00:03:52,650 --> 00:03:59,670
contract is going up or whatever
is useful. And then I have the

51
00:04:00,720 --> 00:04:08,070
why. Now, it may seem self
evident as why this is an issue.

52
00:04:08,280 --> 00:04:12,690
But it's still useful to put
down on paper why this is an

53
00:04:12,690 --> 00:04:17,850
issue. That way you have a solid
plan and you have something to

54
00:04:17,850 --> 00:04:21,240
really make sure that you're
checking your priorities against

55
00:04:21,240 --> 00:04:25,410
you may find something may seem
like very high priority. But if

56
00:04:25,410 --> 00:04:29,040
when you get to your why you
realize it's not or you may have

57
00:04:29,040 --> 00:04:32,370
something that you thought was a
very low priority, but because

58
00:04:32,370 --> 00:04:36,720
of its impact, it is actually a
very high priority and you want

59
00:04:36,720 --> 00:04:44,850
to make you want to change it.
Then we talk about the as is

60
00:04:47,160 --> 00:04:48,690
versus alternatives.

61
00:04:56,460 --> 00:05:00,510
Here I want to just quickly
define what the Situ ration

62
00:05:00,720 --> 00:05:03,930
would look like now versus what
the different alternatives that

63
00:05:03,930 --> 00:05:09,120
I have are. And we're going to
talk more about like fleshing

64
00:05:09,120 --> 00:05:12,720
out those alternatives in a
minute. But I still wanted to

65
00:05:12,720 --> 00:05:16,980
make some sort of reference to
it here. I want to know what

66
00:05:17,730 --> 00:05:19,950
improvement costs there are
going to be.

67
00:05:26,160 --> 00:05:29,820
Typically, these are these costs
money, if they don't cost money,

68
00:05:29,820 --> 00:05:32,880
then great, then it's, it seems
like it might be something

69
00:05:32,880 --> 00:05:37,110
simple to do with it unless it
takes too much of your time. And

70
00:05:37,110 --> 00:05:42,600
then what is the source of the
funds? Is it your reserves? Is

71
00:05:42,600 --> 00:05:45,990
it the tenants paying, you know,
where what is the source of

72
00:05:45,990 --> 00:05:52,860
that? So what you'll do is
you'll take your spreadsheet

73
00:05:52,860 --> 00:05:56,520
like this, and you'll just go
down the list, you know, one,

74
00:05:58,890 --> 00:06:02,670
whatever those things are, you
could have the each fact we

75
00:06:02,670 --> 00:06:09,150
discussed, maybe there is the
parking lot, we'll need new, new

76
00:06:09,150 --> 00:06:16,410
striping. Up, look what I said,
I just told you don't put

77
00:06:16,410 --> 00:06:20,610
solutions in here I went and put
a solution. Parking Lot,

78
00:06:21,120 --> 00:06:30,210
parking, lines fading. And
there's a good reason why we

79
00:06:30,210 --> 00:06:35,910
also don't put our alternatives
in here, because it may be the

80
00:06:35,910 --> 00:06:39,990
restriping. But maybe you what
you really identify is, you

81
00:06:39,990 --> 00:06:42,840
know, as you're writing or why
it may say something like the

82
00:06:42,840 --> 00:06:46,380
parking lot lines are fading,
making it difficult for people

83
00:06:46,380 --> 00:06:49,290
to know where to park, we've
always had a problem parking

84
00:06:49,290 --> 00:06:53,610
this anyway, G and as you write
this, you're starting to realize

85
00:06:53,790 --> 00:06:58,380
that maybe you need to revisit
your parking plan as well. And

86
00:06:58,380 --> 00:07:05,490
so you may want to change your
mark, your parking plan, etc. So

87
00:07:05,490 --> 00:07:09,360
you put those all down. So now
you've got a list of actions and

88
00:07:09,360 --> 00:07:12,540
you've got them prioritized in
terms of where you want to take

89
00:07:12,540 --> 00:07:18,180
them and what the source is. Now
for the alternatives. Your

90
00:07:18,180 --> 00:07:19,620
alternatives plan.

91
00:07:27,000 --> 00:07:31,620
Here's what I would want to
know. I would want to know what

92
00:07:31,650 --> 00:07:42,510
is your pro forma today, so
before you did this action, what

93
00:07:42,510 --> 00:07:54,240
is your pro forma? I want to
know if there is any. Any change

94
00:07:56,940 --> 00:08:07,410
in your escalations. Percentage
I want to know what effect that

95
00:08:07,410 --> 00:08:17,160
has on noi. And what that dollar
amount is? Because ultimately,

96
00:08:17,160 --> 00:08:21,990
what I'm trying to find out is I
want to know, certainly the

97
00:08:21,990 --> 00:08:27,270
cost, you know, how much is this
going to cost? But I want to

98
00:08:27,270 --> 00:08:36,090
know what the existing unit
let's say it's an H fac unit?

99
00:08:36,330 --> 00:08:42,960
What's the existing value? So
what I'm trying to find is, Am I

100
00:08:42,960 --> 00:08:47,310
really adding value with this
alternative or not? And then I

101
00:08:47,310 --> 00:08:51,540
want to know, do I have any if
there's dead on on that piece of

102
00:08:51,540 --> 00:09:00,930
equipment or whatever? Is? It is
there any equity in it? And then

103
00:09:00,960 --> 00:09:07,560
I want to know, ultimately for
the entire property. I want to

104
00:09:07,560 --> 00:09:08,100
know

105
00:09:13,200 --> 00:09:21,960
what my I want to know what my
estimate is for my going in. So

106
00:09:21,960 --> 00:09:34,530
before I do this cap rate versus
going out. I ultimately want to

107
00:09:34,530 --> 00:09:38,220
know what that change is going
to be am I adding value to the

108
00:09:38,220 --> 00:09:43,410
property above on the NOI line,
which we're talking about here?

109
00:09:43,680 --> 00:09:49,080
Or am I adding value in the in
how its positioned in the market

110
00:09:49,080 --> 00:09:52,410
so that it is is a better
property and it appreciates

111
00:09:52,410 --> 00:09:55,770
more? I want to know that sort
of thing. And if the answer is

112
00:09:55,770 --> 00:09:58,800
zero, it's fine that it's zero.
If it's negative, it's fine that

113
00:09:58,800 --> 00:10:02,340
it's negative. They Orton thing
is that you're documenting what

114
00:10:02,340 --> 00:10:06,660
these things are. So when you
make a decision, you've got a

115
00:10:06,660 --> 00:10:10,470
track record of that you can
point to and say, Okay, those

116
00:10:10,470 --> 00:10:15,510
were the decisions we made, what
was good and what was bad. And

117
00:10:15,510 --> 00:10:19,320
ultimately, for each
alternative, we're going to do,

118
00:10:20,550 --> 00:10:24,510
and I'm assuming that there's
different alternatives. So for

119
00:10:24,510 --> 00:10:38,280
each we calculate the cash on
cash effect. Or you could do the

120
00:10:38,280 --> 00:10:46,980
ROI that you're estimating, I
want to know what the value

121
00:10:46,980 --> 00:10:52,740
enhancement is. If this is
making a change to the cap rate,

122
00:10:53,130 --> 00:10:57,360
down here, if it's making a
change to that cap rate, it's

123
00:10:57,360 --> 00:10:59,790
going to have an effect on your
overall value. And I want to

124
00:10:59,790 --> 00:11:07,650
know what that is. And I want to
know that in dollars, and then I

125
00:11:07,650 --> 00:11:12,840
want to know what the net
present value is. And I want to

126
00:11:12,840 --> 00:11:17,430
know if they're, what the IRR
is. So I want to know the net

127
00:11:17,430 --> 00:11:19,890
present value. So I can
determine whether this is a

128
00:11:19,890 --> 00:11:24,000
change that's going to pause,
really put money in the pockets

129
00:11:24,000 --> 00:11:28,020
of my investors or negatively, I
want to know what that dollar

130
00:11:28,020 --> 00:11:31,950
amount is, because that will set
a budget price for me. And they

131
00:11:31,950 --> 00:11:34,950
will help me determine that
well, I'm been trying to get my

132
00:11:34,950 --> 00:11:38,970
investors a 10% return, I use
that in my net present present

133
00:11:38,970 --> 00:11:43,560
value calculation. And if I'm,
if I'm seeing that I've got a

134
00:11:43,560 --> 00:11:47,760
negative number there that I'm
getting a negative net present,

135
00:11:47,820 --> 00:11:52,200
or a negative net present value,
maybe that's something I want to

136
00:11:52,200 --> 00:11:57,960
take a look at. And then after
we've done that present value,

137
00:11:57,960 --> 00:12:00,900
so certainly it changes dollars
amount, but I want some more of

138
00:12:00,900 --> 00:12:05,640
more a quantitative idea as well
about, you know, just what

139
00:12:05,640 --> 00:12:10,170
percentage wise what effect that
has over the term. So what's the

140
00:12:10,170 --> 00:12:15,870
IRR of it? So I hope that helps.
This is how we make smart

141
00:12:15,870 --> 00:12:21,180
decisions about how we address
each action that we decide to

142
00:12:21,180 --> 00:12:25,020
make when we're doing the
custody portion of our

143
00:12:25,020 --> 00:12:29,070
operations. So that we make good
decisions that are bounded in

144
00:12:29,070 --> 00:12:33,060
rationality and that our are
very logical. And then at the

145
00:12:33,060 --> 00:12:35,670
end of the day, you can walk
your investors through this and

146
00:12:35,670 --> 00:12:38,550
you've got a really solid case
for really everything you've

147
00:12:38,550 --> 00:12:43,080
done. There's no second guessing
there's no questioning. It's

148
00:12:43,110 --> 00:12:46,440
either you're adding value or
you're not. And that's really

149
00:12:46,440 --> 00:12:49,710
what your investors care about.
This is Tilden, Moschetti

150
00:12:49,740 --> 00:12:53,010
altitudes syndication founders
club and we'll see you in the

151
00:12:53,010 --> 00:12:54,210
next video.

152
00:13:10,650 --> 00:13:14,790
This is the last of this four
part series of videos on asset

153
00:13:14,790 --> 00:13:19,680
management. It was put together
a little while ago for some high

154
00:13:19,710 --> 00:13:23,340
top level real estate
professionals, not only the very

155
00:13:23,340 --> 00:13:26,670
best brokers but also people
from investment funds from REITs

156
00:13:26,880 --> 00:13:30,570
who wanted to take off the hat
of working for somebody and

157
00:13:30,570 --> 00:13:33,510
start doing syndications or
putting together an investment

158
00:13:33,510 --> 00:13:38,220
fund for themselves. My name is
Tilden Moschetti. I am a miss I

159
00:13:38,220 --> 00:13:41,910
am a syndication attorney for
the Moschetti syndication Law

160
00:13:41,910 --> 00:13:45,420
Group. Now if we can help you be
successful, give us a call

161
00:13:45,420 --> 00:13:49,710
today. Not only can we help you
with the legal side of things,

162
00:13:49,860 --> 00:13:53,580
the making sure that you're in
compliance with the SEC rules

163
00:13:53,730 --> 00:13:57,510
and with state regulators, but
also applying our business

164
00:13:57,510 --> 00:14:01,530
expertise and having done this
many many times for ourselves as

165
00:14:01,530 --> 00:14:05,040
well as our clients. Again,
please don't hesitate to give us

166
00:14:05,040 --> 00:14:05,430
a call