How to Earn the BOMA 360 Performance Program Designation

Last year I renewed the BOMA 360 Performance Designation for Pleasanton Corporate Commons.  Unlike the LEED certification we received that recognized our sustainable operations (and superior performance relative to other assets in our market), the BOMA 360 program’s purpose is to “promote standards of operational and management excellence in commercial properties, and to provide a valid and objective evaluation of these properties as a service to the public, namely tenants, and the industry.”

First, some background.

BOMA (Building Owners and Managers Association) is an association of commercial real estate property managers, vendors and owners – although I see very few (to zero) owners at these events. It is one of the larger associations supporting the commercial real estate industry, in particular office properties. The BOMA 360 program is in addition to the long-standing TOBY (The Outstanding Building of the Year) award BOMA bestows on properties annually.  The TOBY awards are a competition among properties in specific categories: corporate facility, earth, government, historic, industrial office, medical, renovated, a few suburban office categories and categories grouped by square foot.  Where the TOBY awards go through a review process and judging at local, regional and international levels, BOMA 360 uses much of the same information, but not on a competitive level.  Any project that meets the requirements is able to receive the BOMA 360 Performance Building designation.

I’ve done work while on a committee in our local BOMA chapter to encourage participation in both the BOMA 360 designation and the TOBY awards process. The TOBY documentation is relatively similar to the data required for the BOMA 360 designation. We developed a simple chart that highlights the similarities and differences:

BOMA 360 vs TOBY

There’s a bit of additional work on the BOMA 360 side of things with regards to the several categories, but the nice thing about the 360 program is the fancy binder, professional photos, binder compilation and property tour are not required.

What BOMA 360 Designation Means…

A BOMA 360 designation demonstrates your expertise in the property management field. It indicates, the group that manages this asset took the time and has the knowledge to write, develop and implement the necessary practices for operational excellence. This subtle message may not be recognized by your tenants, it does make for a nice story about property and the team responsible for the day-to-day operations.

How to Get the Designation:

BOMA 360 feesHopefully it’s clear the designation is a good thing.  If you have a solid management program in place it’s easy to gather the documents required to submit and the costs are minimal.

If you’re interested in exploring further, I created this checklist as a guide to figure out what you need to do. The checklist breaks down each category and the exact requirements. Run through each section, identify the points you already have (via a yes, no and maybe rating) and get an idea for the work required to wrap up your submission and complete the designation. This checklist should make it easy to figure out where you are, what you need and how to move forward to submission.

If you need help, want guidance or you are missing a document, I can help.

Drought Surcharges are Penalizing Efficient Water Users

California Drought

California is in a severe drought and most water districts have enacted mandatory restrictions designed to reduce water consumption and encourage conservation. In the bay area, there are multiple water districts, serving unique areas and utilizing difference reservoirs to supply water. Some of these districts are more advanced, providing gray water (recycled water) for landscaping and non-potable purposes, while others are severely lacking. In Pleasanton, Zone 7 is just starting to implement recycled water for city owned parks and direct access to this water (via the water system) for public use is a long way off.

The lack of investment in the water infrastructure has required Zone 7 customers to cut back water usage more than other water district customers. Contra Costa Water District is requesting (meaning voluntary) a 10% cut back. East Bay MUD (Municipal Utility District) has a required 10% reduction. Zone 7 has a strict 25% reduction requirement and severe penalties for those that don’t meet it.

drought reduction calculationWhile the intent of the mandatory reduction is good and I fully support it, the process in determining each customer’s success is significantly flawed. To determine if a water account has met the required 25% reduction, water usage for the current period is compared to water usage from the same time period one year prior. This may work well for residential households with limited to no fluctuation in occupancy, from a commercial building standpoint, it doesn’t work at all.

First, Pleasanton Corporate Commons has been actively working towards reducing domestic (water use inside the buildings) water consumption since the first LEED certification done in 2007. Second, the property’s occupancy has increased several percentage points since last year. Third, density (the number of people in the buildings) has increased as well. Finally, we’ve done all we can from an engineering perspective to eliminate or reduce water usage.

This arbitrary approach to measuring water reduction fails to consider all of the above items. In fact, it penalizes properties that have been forward thinking and taken action prior to now to conserve water. Perhaps most annoying about this, are the articles in the local weekly paper highlighting large business parks that have reduced water consumption by more than 70%. “Some have done much more, he said, including Koll Center, a business park that has reduced its consumption by 71% over its 2013 usage” (link). I’m sorry, but if you can reduce water consumption by 70% year over year, you’ve clearly been overusing water in years past.

Irrigation usage is much the same. Our conservation efforts from prior years are now being penalized. Pleasanton Corporate Commons has taken many measures to reduce irrigation usage through the removal of plant material, installation of EvapoTranspiration Controllers (ET Controllers) and more efficient sprinkler nozzles.

The water municipality and City should develop an alternative method for measuring water reduction requirements. A more intelligent and advanced approach would be to compare the current case water usage (for domestic water this would be based on occupancy and fixture types, for irrigation it would be water coefficient, plant type and coverage, evapotranspiration rate and irrigation efficiency) against base case usage to determine total percentage of reduction. Granted this method is not as straight forward as simply comparing year over year usage, but it’s much more accurate.

One final thing before I stop ranting about water usage. Actively managing water use is one of the many things good property managers and firms do when overseeing the operation of a property. I can’t help but wonder how much higher operating expenses are in a property that is overusing water by 70%+. That not only makes the cost of occupancy higher for the tenants, but it hurts the valuation of the project during an appraisal or sale. And if water is being mismanaged, what else is?

The Annual Plan – A Property’s Playbook for the Upcoming Year

It’s a bit weird to begin budgeting for the upcoming year without passing the half way mark in the current year. For many Hines buildings, the following year’s budgets are not due to the investors/owners until September or October. Internal reviews begin much earlier and culminate in a detailed package about each project, the operational performance and highlights from the year’s performance. This package functions as the property’s Annual Plan for the coming year. The process, review and resulting product are what make Hines one of the best in class real estate operators in the world.

The Annual Plan development starts with a complete review of the property’s current performance – marketing, finances, operations and construction – and how that relates to the current year’s budget. The projections that are compiled help forecast what the activity will look like for the remainder of the current year. The projections function as a good gut check on the status of the current year against the goals established for the year during last year’s Annual Plan process.

With the current year projections complete, it’s time to begin developing the Annual Plan for the upcoming year.

Property Condition Assessment

Projects that have traded recently can leverage the third-party Property Condition Assessment (PCA) report for potential items to include in the budget. In many cases the PCA can serve as a reference when developing a capital improvement plan for the immediate years following the report’s creation.

In the instances where a recent PCA is not available, Property Managers are tasked with developing the 15 year capital plan and necessary operating expenses to maintain or improve the property’s appearance, performance, marketability, etc. This process creates the foundation for the development of the property’s Annual Plan.

What makes up the Annual Plan?

Aside from the financials, there are a number of other components that make up a property’s Annual Plan.

  • Executive Summary – essentially an overview of the project, ownership, size, debt and other key facts about the project that aid in summarizing the asset.
  • Org Chart – highlights the roles of the onsite team, but also covers the details of those that support the onsite team or provide guidance, contract approval and other keys roles for the asset.
  • Vision – perhaps unique to Hines; each year we define the vision we have for the project and how we plan to operate the asset in upcoming year. In 2014, the vision we set for Pleasanton Corporate Commons was: To Maintain High Water Mark Rental Rates and Enhance the Property’s Profile With Leading, Innovative, Sustainable Programs and Amenities
  • Stacking Plan – A visual aid showing the tenant mix, expiration dates and current lease rates.
  • Lease Related Information – Over several pages we review the tenant mix, lease expiration dates, revenue projections, debt coverage and other key financials important to fiscal and operational health of the asset.
  • Team Triumphs – The teams big wins for the past year.
  • Best Practices – With over 270 operational and engineering best practices developed, this takes a look at how well we’re doing implementing those practices at the property.
  • Three Way Comparison – A detailed financial breakdown showing the current year’s budget numbers vs. current year’s projected numbers vs. upcoming year’s budget numbers. Significant variances are analyzed and explained.
  • Value Creation – How world class operational platform impacts the overall value of an asset.
  • Market Comparables – On a dollar per square foot basis, how are we performing against similar assets in the market? This is important because operating expense make up a portion of the tenant’s rent (in some leases) and it confirms spending in each category is appropriate in line.
  • Annual Plan Slide – A look at what was accomplished in the past year and the defined goals that will be accomplished in the upcoming year.

While the time spent creating the budgets, annual plan and other supporting documents is immense, the package that results in the end is extremely valuable. I am a big fan of the entire goal creation and management process. Writing goals down is a practice very few people do, but has been shown to be a big driver in creating results. Adopting this concept at the building level makes a ton of sense and provides a good guide for the onsite team in the upcoming year.

Are there items you include in your budget preparations that I’ve left off this list?