Asset and Property Management
Core concepts
Understand the asset manager's role (strategy, hold/sell, capital allocation, performance vs. benchmark) versus the property manager's role (operations, leasing, maintenance, tenant relations). Know the operating budget: revenue (base rent, recoveries, other income) and expenses (operating, taxes, insurance, management fee, reserves). Grasp net leases - single, double, triple net - and CAM/operating expense recoveries, including base-year stops and expense caps. Understand lease abstracts, rent rolls, and variance analysis. Know tenant retention, capital expenditure planning, and the difference between NOI and cash flow after reserves and capital.
Traps
Questions confuse gross, modified gross, and triple net leases and who pays which expense. Watch for CAM reconciliation errors - recoveries are limited to the tenant's pro rata share and exclude capital items (often amortized instead). Don't treat capital reserves as an operating expense when computing NOI in many underwriting standards, but do deduct them for cash flow. Base-year stops require careful comparison of expense growth.
Worked example
A tenant occupies 10,000 of 100,000 sq ft (10% pro rata share). CAM pool is $200,000, so the tenant's share is $20,000. With a $15,000 base-year stop, the tenant pays only $5,000 in recoveries.
Rule of thumb
Recovery = tenant pro rata share × (actual CAM − base-year stop), floored at zero.