Annual Board Meetings That Boost CRE ROI

Want commercial real estate that pays predictably instead of surprising you at tax time? We open up our annual board-day process—fifteen-minute meetings for every property in the portfolio—to show how a simple, repeatable system turns maintenance into strategy and strategy into cash flow you can count on. From eight-year P&L trends to rent roll quality, we explain how to read the numbers that matter and translate them into clear next steps for stronger net operating income.

We dig into capital expenditure planning where value is won or lost. Roofs and HVAC rarely fail on your schedule, so we press vendors for realistic life estimates, track recurring service calls as early signals, and size reserves before we think about distributions. That choice—pay today or plan for tomorrow—keeps tenants comfortable and balance sheets calm. We also run a property-by-property SWOT analysis to align leasing strategy with market reality: strengths like prime corridors and upgrades, weaknesses like dated finishes, threats from new competition, and opportunities created by submarket growth.

Debt is a tool, not a drag. We walk through purchase price, current value, and principal paydown to spotlight the “trifecta” of appreciation, amortization, and cash in your pocket. Then we face the classic decision: hold or sell. Our bias is to hold for durable cash flow, but when a standout lease resets value or market shifts open better opportunities, we run the numbers and stay flexible. Along the way, we treat lenders as partners—sharing performance, touring assets, and building trust so credit committees understand how we operate and why our assets stay stable.

If you want cleaner operations, fewer surprises, and steadier checks, this playbook is yours to copy. Subscribe for more practical CRE asset management tactics, share this episode with a partner who handles budgets, and tell us: what belongs on every owner’s annual review?

Learn more about Blue Commercial Properties on our website.

Transcript

Blue Dirt Mission And Focus

Michael Carro 0:00

Welcome to Blue Dirt, the podcast that digs deep into the foundation of commercial real estate investing. Unlike most real estate shows that focus on deal making and market trends, Blue Dirt gets into the nuts and bolts of what truly builds long-term value, the building itself. We break down how to spot deferred maintenance before it costs you, why a solid preventative maintenance program is a game changer, and how triple net leases can maximize your investment returns. We'll also explore the importance of strong landlord-tenant relationships and how they drive stability and growth in your portfolio. Whether you're a seasoned investor or just getting started, Blue Dirt gives you the practical knowledge to make smarter, more profitable decisions in commercial real estate. It's time to get your hands dirty and build value from the ground up. Let's dig in. Welcome to this episode of the Blue Dirt Podcast, where even idiots can make a killing in commercial real estate. I'm Michael Kierrow with SVN Southland Commercial, joined by Don Redhead with Blue Commercial Properties. And so at the end of each year, I actually get kind of excited because one of the things that Don and I do in February is we go through every property and put together our annual board meeting. And so that's coming up next weekend, uh next Friday, actually. And so I thought, you know, it might be fun to talk about what we do, why we do it. Um, number one, you're supposed to have an annual board meeting anyways with your investors. And if you're a sole practitioner, then have it with yourself. Um but but we we find it it's very important, but it really challenges us as well. And so we thought that it might be good for you to have at least what we do in our example. So I'll tell you the format, and um, and it doesn't have to be elaborate. We go through a lot of information, but you can do it rather quickly. And so we pick an entire day where we start off at 7 a.m. And basically every 15 minutes, we have a different board meeting for a different asset. Because each of our assets are in individual LLCs. Now, some assets, some LLCs may have multiple assets if they have the same owners with the same ownership percentages. So, so we have them throughout the entire day uh from 7 a.m. to 5 p.m. And then that evening, we have an investor dinner. So we host an investor dinner, we have it catered, we have a really nice setup. We probably spend, I would say on average,$150 to$200 per person. We have about uh we we always factor about 30 people. So it's about$6,000. It's not cheap, but when you, you know, divide it amongst all the all the companies, it's not a big deal. But more importantly, it's it's our way of celebrating the past year because we get really excited. I know I do, I get really excited to share the results because this is what we Donnie and I work on this every single day. And so we we really want to share this with the investors, and and the hope is that it went in the right direction. And the other hope is that we're handing out distribution checks. And so everybody kind of looks forward to these, or at least we do. We hope that they do. But at the very least, they're gonna get information about something that they invested in. And so uh, you want to just kind of dive in and talk about the format? Yeah. All right, we can talk about the layout. All right, so they come in, we uh put it up on the on the screen, we're running it from our computer, and it's really a I'll call it a PowerPoint, but now the new PowerPoint slides with Google, right? So, you know, we go through we go through the profit and loss statement both annually and monthly. Annually, we go back as far as the reporting goes for that asset. And so right now it's actually about eight years. So if we bought a property 12 years ago, we're only gonna go through the last eight years. If we bought a property four years ago, then of course we'll hit all four years. So that helps everybody see the trend analysis for that particular asset. Uh, we go through the profit and loss, we go through, and then we, of course, we go through the balance sheet at the end of the year. Um, we go through uh the rent, um the rent role, you know, how we're looking on our tenancy, uh, vacancy, occupancy. We go through all that. Again, we don't spend a lot of time on this because it's just more of a it's a data set. And then we talk about let's talk about the slides that you work on.

CapEx Planning And Stability

Don Redhead 4:46

Yeah, ours typically we we've tried to monitor this presentation really as far back as as kind of end of third quarter. Um, we'll start looking at the presentation and preparation. Yeah, hey, what have we accomplished? And and we probably need to actually do it from our side of things quarterly. Hey, you know, we had this proposed during the last meeting. It's really a planning out of of the cap X is a big percentage of what we're doing. So if we decided that, you know, a couple of years ago, you know, first year we're gonna do the roof.

Michael Carro 5:22

Cap X is capital expenditures, money that you're spending on on typically uh equipment and systems that are greater than a thousand dollars and last longer than a year. Is that about right?

Don Redhead 5:33

Yeah, that's fair. Um so we're we're just reviewing that, seeing, hey, are we we suggested replacing this? Is it lasting longer than we thought? So we're we're monitoring those expenses. What we're also doing is documenting um probably future ones, um, things that we're seeing there's an issue with that we really need to start planning for. So it's as you're sitting down, you're you're getting to look at the data and then you're also getting to look at the plan and kind of overlay it because what you don't want is hey, big distribution, big distribution, and then nothing, nothing, nothing. Because you know, we'd rather allocate some funds today, pay for this, you know, organize this over here. That way, as we're looking at the future, we know we're planning for this replacement, we're planning for the HVAC, we're planning for these things. It just becomes a much more stable asset uh for the owner and more enjoyable versus these kind of ebbs and flows.

Distributions Versus Reserves

Michael Carro 6:31

Right. Um well, well, on that, I think that's a that's a great point. When you have so before you make a distribution, right, you need to know what your expected capital expenditures are going to be. Now, there's always there can always be an unexpected one, right? Um, if something just absolutely catches you by surprise, this air conditioning appeared to be in great condition, but now it has to be replaced. You know, that's can be unexpected. Now, of course, it it you have the property management solutions already in place and preventative maintenance contracts in place, but it doesn't mean that it just won't totally crap out and and you need to now dump dump you know a lot of money. Um, but when you can plan this, so let's just if you happen to have a balance sheet total at the end of the year that has$150,000 in it, and really the right amount maybe is$50, well, you have a choice. You can distribute the$100,000 to get you back down to the$50,000. Of course, the the owners love that. But before you distribute the$100,000, is there anything that Don mentioned that you think is likely going to have to get replaced in the next year or the next month? Um, we do not like deferred maintenance in our buildings. And so managing that is really, really an important task. So we would rather distribute$70,000 and then reserve that extra$30,000 for this blank. Maybe it's a new air conditioning unit or a portion of the roof or something else. Yeah. Yeah. So but that's what that's what he goes through is he evaluates, and some things that are on the projected capital expense list may be on their three years because it it it withstood the test of time.

Don Redhead 8:25

There's we were looking at a report the other day, and it was some kind of roof, right? That we we suggested replacing three years ago. Right. I think we could probably get another year or two out of it. It's not causing any issues. If it was leaking, if it was actively causing a problem today, then we'd be proposing a replacement.

Michael Carro 8:44

It just is at the age to where we know it's gonna fail. We've got the money set aside, but we don't need to spend it until it has to be spent. So it's not deferred maintenance in the as in the sense that there it's causing additional problems or tenant issues today. But we know based on the age, we've got to allocate the money. And so we just won't, we have chosen not to distribute that because the moment we distribute it, when that money hits an owner's pocket, they never want to give it up again. So it's better not to give it to them. And then by the way, when I say them, that's a lot of these are me as well. I don't want it in my pocket because once it hits me, I don't want to open my checkbook back up and give it back. So, and most of our owners feel the same way. Now, by the way, it's their money, they can choose to do whatever they wish to do, but but our guidance is what it is, and whoever the boss is, they can overrule anything, and that's okay because as long as we give them the proper information.

Vendor Input And Maintenance Signals

Property SWOT Walkthrough

Don Redhead 9:44

Yeah. The other part, kind of to to that point, is if you stick your head in the sand, you will not know what's going on. And those expenses will pop up because you're just not paying attention. So anytime we have, and I'll say it's more HVAC is the one, electrical is pretty stable, plumbing is pretty stable. If you start getting recurring issues, that's telling you something's going wrong. But so many times, um roof and HVAC primarily, if something's going on and they're going out, the vendor is going to that property, we're asking them what do you think about that unit? Yeah, you've been out there two times this this you know six months. Could be too random, could be two random, you know, repairs. Unrelated, right? Unrelated. But I I'll tell you so many times I'm I'm drilling on those guys. What do you mean, like, what do you think the condition is? How much longer do I have? And sometimes you gotta you gotta beat it out of them because they don't well, it could last 10 more years, it could last two years. You know, you really have to trust your vendor, and then also I sometimes give ex you know extreme examples. Well, I'll say, is it is it 15 years or is it a year? Usually that type of wide-ranging kind of uh extreme examples brings them back to reality where they'll actually share an answer with you. Yeah, uh you could probably get three years out of it. That's all I need. I'm not I'm not holding you to it if this thing dies in a year and a half. Right. You're not gonna be held financially responsible, but I need to know so I can put on my reports, put in our planning, uh, what budget are important for us. Yeah. Yeah. So it's it's don't stick your head in the sand. That's that's about it.

Michael Carro 11:35

Another thing we focus on is the SWOT analysis, strengths, weaknesses, opportunities, and threats. And so each property goes through that evaluation where Don and I talk about hey, we talk about those four categories on a property. And um, and then why don't you go through some of your ideas on on the SWOT analysis?

Don Redhead 11:57

Yeah, each each property obviously is is different. Um you know, some of the strengths we have that uh maybe it's in a strong corridor. Um that great traffic count, the occupancy in that area is is is already very low, the occupancy is. Um it's recently been renovated, right? It's got all the all things have been upgraded, so it's a good strong property. Um, you know, but that can go on the opposite side, right? Weaknesses could be, hey, this is a a low quality asset in a grade area, right? So now from a tenant occupying standpoint, we're gonna say, hey, that is a weakness, right, for the property that it it's not gonna command the rents that maybe the the property next door or me is desirable. Um, threats, yeah. Maybe there is you have a retail center with some some fine tenants, but you have a public retail center opening down the street with brand new retail going in. That could be sometimes viewed as a threat. Um other threats could be, yeah, hey, maybe it's in a low-lying coastal area. Yeah, we're very susceptible to to hurricanes, right? Um, opportunities could even actually be the same thing. I just said as as a as a uh as a threat, as a public center opening, maybe the growth in that area is so strong. And now you're gonna be able to get some tenants in there that that don't want to pay the full rate of a public retail center that can come in. So it's you really need to, each one is so case by case.

Lending, Paydown, And Cash Flow

Michael Carro 13:33

It's all case by case, but we we want to share that with our investors, we want to share that with our ownership because it's important that they understand what they've invested in. Um so we also go through uh um our lending, you know, and one of the things that we we do is, you know, there's three ways that that uh that I talk about on how to make money in commercial real estate. Two of them you can make in in residential. Um so there's the property appreciations, so you buy it low and it appreciates each year. That's what we all hope for. There is principal paydown. So you as you pay your debt service, so much of that goes towards principal every month, every year. And then the third thing, which I don't think happens as frequently in residential, at least from our standpoint, is positive cash flow. So I want to make three ways of money, money three different ways. It and two of them are essentially balance sheet or personal financial statement items. But the third one, the cash flow year in and year out, is what I focus on. And so, so we go through a lending analysis hey, here's where where our loan is. Here's here's what we bought the property for, here's what it's worth today, here's what the uh the loan was at the end of three years ago, two years ago, last year, right? Here's how much principal was paid down on each of those, and here's the current loan balance. And and so the value minus your debt service equals asset value. Pretty simple and straightforward. And then they're and so that may go on your personal financial statement, but I like to show my investors, hey, listen, we paid$53,000 down on our debt service. And by the way, the property value increased, you know, 2%. So, so not only did their net worth go up, and by the way, we made a$50,000 distribution. That's a that's a beautiful trifecta year in and year out on some of these properties, right? And so asset value goes up, debt service goes down, and cash in the pocket. Cash in the pocket. That's what that's that's that's what we live for, right?

Don Redhead 15:51

That's uh uh and I guess what lasts is kind of a hold versus sell right analysis. Yeah.

Hold Versus Sell Strategy

Michael Carro 15:57

So we really, you know, again, for the most part, as you've heard us say, we're we're we're hold. You know, we're big, we buy and hold, we're not big flippers. We've we've been very fortunate and blessed to have flipped a couple properties unexpectedly. You know, we're all we're always willing to sell, it's just not our priority. You know, we are more long-term hold cash flow investors. And so most of the time we are going to have in our hold versus sell discussion, we are gonna hold, hold, hold. That's what we want. On occasion, um, if if we get some MacDaddy lease that somehow made the property value go up significantly, uh, that it just makes sense to sell, we absolutely would consider that. Um, if we see a shift in in a market condition or we see an opportunity somewhere else, that if we sold this, we could then buy that, you know, that could be an opportunity as well. Um, but very rarely are we in a sell position. Um, we are primarily in a hold position. But, you know, things can change. You know, real estate is not very liquid. Um, but boy, oh boy, when you get the positive cash flow, that that liquidity is what we like.

Don Redhead 17:09

Yes. So usually hold, hold, hold.

Michael Carro 17:12

Usually hold, hold, hold. But you know, again, that's our strategy. But you know, a lot of our our our good friends who are developers, they don't hold anything. They simply flip it, make the big uh uptick in cash, and and keep rolling it into bigger and better projects. And and that's a great strategy for them, but but I really don't consider myself a developer. I mean, I guess other people may, but I really do what we call redevelop. We just yeah. Yeah, we redevelop a lot of old properties. I think that I can call myself. I can call myself a redeveloper.

Don Redhead 17:46

Says it on the website. Is it does it the website says it? Maybe. I don't know. Okay. We'll we'll check with Adam.

Partnering With Lenders And Closing

Michael Carro 17:51

All right. So apparently we are your redevelopment team. Um and then we just celebrate. One thing that we also do uh at the end of each year is I'll invite in our lenders to uh for this a different meeting where we go over the assets that they have given us money on, go through a similar but more abbreviated scenario, and then I take them through the properties. Um, we are really proud of the work that we've done. And we also recognize that lenders are our partners. We don't, we don't discount them in any way, shape, or form. They are so important to our livelihood. We need them. Of course, they need us, but this whole ecosystem relies on everybody. And I get really excited to share with them. And that also, when there's um, I consider myself a high-risk uh investor, and and and so do banks. It does, and so they need to understand how we work, how we operate, how we succeed. So when they're going to their uh uh approval committee, they can speak intimately about who we are and what we do and what we've accomplished. That's really important to me. Obviously, we've got a balance sheet to support, you know, everything that we say and do. But the reality of it is is I want them to own, you know, uh own, uh have ownership in the assets that we have bought and that they have loaned against because they are a true partner. So don't discount your lender and the lending community as to how important they are to your success. That's a wrap for this episode of Blue Dirt. We're here to help you build smarter, invest wiser, and create long-term value in commercial real estate. One solid foundation at a time. If you found today's insights useful, be sure to subscribe so you never miss an episode. And if you know somebody who could benefit from these discussions, share Blue Dirt with them. Got questions or topics you'd like us to cover? Reach out. We'd love to hear from you. Until next time, keep digging deep. Stay sharp, and remember real value is built from the ground up. See you on the next episode.