Commercial property has traditionally been one of the best long term investments you can make . But what can do you when the economy goes south and as a property owner, you find yourself facing higher vacancies and shrinking revenues?

What if your investment partners or bank start suggesting -–strongly—that you sell your commercial property asset before you’re quite ready to do so ?

At that point, unfortunately, you’re probably already in deep trouble . When the market starts to crumble, prices of good property crumble  with it. So it may not be in your best interests to sell the property at what may be a substantial loss . Additionally, if you’re in trouble, competing properties are no doubt also in trouble. That means the market may be already clogged with panic sellers. With increasing supply and shrinking demand, this is no time to throw your property into the mix with all the others .

Here are some strategic steps that we at Financial Management Group  share with our commercial property management clients on successfully holding their properties (where circumstances merit it) and riding out the slump. If you can do this soon enough and strategically enough , you stand to save many thousands of dollars. This is not a time for paralyzing fear, but for bold and positive actions .

Step 1: Let your investors know what’s going on Make full disclosures to each of your investors. reassure them  that you have the expertise—either your own or those of your professional property managers—to manage your next steps wisely and effectively. Keep your investors in the loop at all times, communicate frequently and fully, and they will give you the support you need.

Step 2:  Dialog with your lenders
Sit down with your lenders and  demonstrate how you plan to proceed in the critical months ahead  . Be non-confrontational, and honestly and openly consider their feedback. Show how you plan to face each contingency, and demonstrate why you have faith that your plan of action will work. Promise – and deliver — full transparency with zero surprises.

Step 3:  Protect and preserve your cash
Find ways to increase your cash reserves by such steps as reducing or eliminating dividends and distributions (which is always easier if you’ve done Step 1 correctly). You may want to postpone any discretionary capital improvement projects, and closely micromanage  operating expenses wherever you can.

Step 4:  Create a realistic business plan
Take the time to lay out cash flows under both optimal and negative conditions going forward. Plan what you can do should your capital  dry up entirely. Will you need more money from partners? Can your bank help out with a contingency or bridge loan? Do you have liquid capital elsewhere that can prop you up should you need it?

Be unrelentingly honest with yourself, using conservative estimates of future cash flows based on current conditions, not conditions prior to these more challenging times.

 Rely on skills and counsel  from your property management company. If it’s not strong enough or experienced enough to give you what you need, find a better qualified firm .

 In the end, should you decide that you absolutely have to sell , be sure you have strong negotiators on your property management and real estate investment teams who can assist you in making that happen to your advantage. An even better situation is one where you  work with a single firm providing both property management and real estate investments. If that firm offered business management services, as well,  your chances of success get even better .

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