The Importance of a Long-Term Capital Plan

Having a long-term capital plan and budget is necessary for successful management of a property, says Ira Meister, President and CEO, Matthew Adam Properties, Inc., a leading New York property management firm.

“Many buildings have a five-year capital program which identifies areas that need work and also sets up a funding plan.  By carefully spreading out the work based on need, the building can better manage its cash flow and identify how much it would need to raise for the projects,” Meister says.

Five year capital programs help avoid pitfalls in today’s strict lending environment

This type of organized planning helps avoid the pitfall of needing several major projects in one year, which put a burden on the property’s finances and the shareholders or unit-owners.  Often the failure to provide a funding plan results in special assessments, especially in today’s strict lending environment.

In preparing the long-term capital budget, a property manager should gather information about the structural condition of the building and its systems.  This, along with the repairs or upgrades required to comply with various government requirements such as Local Law 11, forms the basis of the capital plan.  Included should be estimates of costs, Meister advises.

Gathering information of the building’s condition is needed to prepare a capital budget

“Once all the information is gathered, the asset manager can set priorities and a timeframe for the work based on the information he has obtained,” Meister says.

Another area to consider is available tax incentives and rebate programs.  Some of these have deadlines and others are available on a first-come basis.  Knowledge of these can help in setting the priorities of work.

“By having all the information, the manager can get a big picture view of what is required and bundle similar projects based on the systems or work involved,” Meister says.  One example would be having work that requires scaffolding done in sequence avoiding the need to have the scaffolding put up several times at a much greater expense.

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