The Asset Manager's Role in Capital Expenditure Planning

Use these helpful guidelines that outline how the asset manager can effectively facilitate the CapEx planning and budgeting process.

Capital expenditures can be a source of friction between owners and managers. Asset managers need to be aware of the sources of this friction.

The owner's principal frustrations with capital expenditures are twofold. First, owners often believe the manager takes too much control of the CapEx process and invests in items that enhance the brand or operator to the detriment of the owner. Second, owners fear that the manager will lose control of the process and come in over budget.

The manager's principal frustrations with capital expenditures are threefold. First, managers find that owners often have an inconsistent vision of the plan. Asset managers change, and a new asset manager often means a new long-term plan. Second, managers find that the owners do not communicate their CapEx vision effectively. Finally, managers contend that owners do not properly fund CapEx, to the detriment of the property. This is especially important if the property is not doing well and the CapEx is consistently deferred.

Clearly, a good asset manager needs to be aware of both the owner and the manager positions during the CapEx budgeting process.

Use this helpful summary to develop a better understanding of the asset manager's role in CapEx budgeting.