Developers as Property Managers

5 Replies

Is it customary for the developer to also be the property manager? 

Recently closed on a commercial property (part of a larger shopping center development) and the developer of the property is also the property manager. Based on the CCR's, it appears that they manage the entire shopping center and then bill each parcel owner their separate piece of CAM charges and property tax. Also based on the CCR's, it seems like we don't have the option of electing to choose another property manager or manage the property ourselves.

I was just wondering it is this common in these large developments.

Account Closed most large developers who are vertically integrated have a PM arm.  That allows them to fully control the property and give them the ability to charge for property management services.

I have never heard of a developer selling an out parcel or a part of their center and requiring that they remain the property manager. That is a question for a real estate attorney, or ask the listing broker to clarify if the CCR's state that and if there is any way around that (sale, bankruptcy, etc...).

I recently consulted for a client on a property in a similar situation (shadow building of a larger center) and was able to bring in  3rd party management, was a new center and they gave us the option to have them manage or bring in our own management. I would be very cautious if they don't allow you to bring in your management.

@Jonathan Orr Thank you for the answer! 

I may have misread the CCR's, although in one section it states that "the Declarant (the developer/PM) shall exclusively operate, maintain, and repair the Common Area within the Shopping center."

There's 34 pages to the CCR, however, so I'm sure there is a section that specifies a change in management should a parcel owner choose to opt out that.

Definitely a question for a real estate attorney, I just like coming on here and getting feedback from BP folks.

Originally posted by Account Closed Thank you for the answer! 

I may have misread the CCR's, although in one section it states that "the Declarant (the developer/PM) shall exclusively operate, maintain, and repair the Common Area within the Shopping center."

There's 34 pages to the CCR, however, so I'm sure there is a section that specifies a change in management should a parcel owner choose to opt out that.

Definitely a question for a real estate attorney, I just like coming on here and getting feedback from BP folks.

Most CCR's are lengthy to go into great detail with regard to restrictions of tenants and uses. Always a joy to read ;).

You should have had your commercial retail attorney clarify and answer ANY CCC and R questions before due diligence ending on the property.

Developers will often do these big projects and sell off some of the STNL pieces. Sometimes in CCR's they will have tenant lease language that pushes lots of costs onto that particular parcel owner ( example maintaining a detention pond) and if your tenant has some caps then the landlord can be eating that cost ( CAM leakage ) which can reduce expected NOI. Also have to look at language for any special assessments and when they will be levied. The larger share property owner is typically the controlling declarant. Is this part of a condo association? If not but CCR's did you get estoppel sign off from controlling declarant? What rights does your parcel have for monument signage?

No legal advice given   

All CAM charges are reimbursed by the tenant which is indicated in the lease and CCR's. We are the largest parcel owner within the property and the property is not part of a condo association, it's a NNN retail property. Will have to check the monument signage rights, we did get estoppel signed off.