Capital Planning Checklist: Secrets to Success

Engaging in capital planning? Follow this capital planning checklist which outlines all important steps involved in the process. This capital planning checklist was created with the goal of simplifying the often-complex task of capital planning and providing you with a clear roadmap to follow. It takes into account various factors that can impact a building’s physical condition and long-term value, such as changes in market demand, regulatory requirements, economic conditions, and tenant needs. By following this capital planning checklist, building owners and facility managers can gain a better understanding of their capital planning needs and prioritize necessary repairs and upgrades to ensure the continued success of their properties. Let’s get started:

Capital Planning Checklist Step 1: Do Your Research

Taking chances with capital planning is not an option. That is why it is critical to conduct research and become acquainted with the various aspects and assessments associated with capital planning. Capital planning is about being proactive and making the right decisions for a more sustainable future, not just budgeting for repairs. To properly prepare and develop a capital plan for your commercial portfolio collaboration with a third-party expert, such as AEI, is a must. They can help you navigate the complicated process, so you can confidently develop a plan that meets your needs while also complying with regulatory requirements.

Establishing Goals:

To get started with capital planning building owners and stakeholders should discuss their overall goals and objectives. These goals could include anything from reducing energy consumption to enhancing the building’s aesthetics or increasing occupancy rates. By establishing clear goals, you and your organization can ensure that your capital plan is aligned with top priorities and resources are allocated effectively. Questions to consider when determining goals and objectives include:

What are our top priorities for the building?
Are there any specific pain points that need to be addressed?
What is our timeline for completing these goals?
Can we improve our building’s energy efficiency?
Should we implement modernizing technology systems?
What can be done about upgrading our building aesthetics?
What are ways to increase occupancy rates?

Use the questions above to help guide your property’s goals. Forming goals in advance will help drive the development of the capital plan and ensure that resources are allocated effectively.

Kick-off Meeting

After discussing goals with your internal capital planning team, it’s time for a kickoff meeting with AEI, or your 3rd party capital planning expert. The purpose of this meeting is to go over your goals and objectives and learn how AEI will be assisting you along the way. This is a good time for you to bring up any concerns you may have as well as share any important information regarding the health of your building. Reviewing prior documentation will help your 3rd party expert understand your current building conditions. This meeting is also an opportunity to discuss any potential roadblocks or challenges that may arise and set proper expectations in place.

Capital Planning Checklist Step 2: Assessing Your Property

Once the kick-off meeting is over and all members involved in the capital plan understand how to proceed, the real fun can begin. This includes your third-party expert conducting a Facility Condition Assessment, necessary site visits, or other potential reports required for the specific type of project. Expect regular meetings to ensure the success of the project.

Conducting a Facility Condition Assessment (FCA)

The first step that helps launch a successful capital plan is conducting a comprehensive Facility Condition Assessment (FCA). This process involves a detailed evaluation of the building’s physical condition, including its structural, mechanical, and electrical systems. The FCA provides key information of the building’s current condition and identifies any issues that need to be addressed, prioritizes repairs, or upgrades, and provides recommendations for future maintenance.
During an FCA, a third-party contractor will conduct a thorough inspection of the building’s physical assets, including its HVAC systems, plumbing, electrical, roofing, walls, and flooring. They will also evaluate the condition of the building’s exterior, including its foundation, façade, and landscaping.

The FCA report should include the following:

A detailed description of the building’s systems and their current condition.
An identification of any potential issues or deficiencies that need to be addressed.
A prioritized list of repairs or upgrades based on their urgency, cost, and impact on the building’s overall condition.
A timeline for completing necessary repairs or upgrades.
Estimated costs for completing each project.

The FCA report can provide valuable insights into the building’s current condition and help inform capital planning decisions. It can also help identify potential issues before they become major problems, potentially saving owners significant costs in the long run.

Other Potential Assessments:

Depending on the type and size of project other potential assessments may be required including but not limited to:

Reviewing FCA Report Findings:

After the FCA is completed, it’s essential to review the findings. FCAs are customizable, but a typical report should provide a detailed breakdown of the building’s systems and their current condition. It should also include recommendations for any necessary repairs or upgrades. Some common repairs identified include pavement repairs, HVAC upgrades/replacements, and roof repairs/replacements.
When reviewing the report pay close attention to the Facility Condition Index (FCI) rating system.

The FCI rating system measures a building’s overall condition, taking into account its age, condition, and required repairs. The rating system ranges from 0-100%, with 0% being a new building with no issues and 100% being a building that requires extensive repairs or replacement. For example, if a building has an FCI rating of 20%, it means that the building is in good condition overall, with only minor repairs needed. On the other hand, if the building has an FCI rating of 80%, it means that the building is in poor condition, with significant repairs or even replacement necessary.

The FCA report can also contain estimated costs for completing each projects, as well as a prioritized list of repairs or upgrades to guide informed decision making. By reviewing the report carefully and prioritizing repairs and upgrades based on their urgency and impact you can ensure that your buildings remain safe, functional, and in good condition for the long term.

Capital Planning Checklist Step 3: Budgeting and Prioritization

Next, we have the budgeting and prioritization aspect of capital planning. With the findings of the FCA you’ll be able to develop a budget and prioritize projects you feel comfortable with.

Prioritizing Projects

Based on the FCA report findings, it’s essential to develop a capital plan that outlines the necessary repairs and upgrades over a specified time period. It’s recommended that projects are prioritized based on their urgency, cost, and impact on the building’s overall condition. Completing repairs for regulatory compliance should be the most prioritized to avoid penalties and ensure compliance. Capital plans should also prioritize projects based on their impact on the building’s overall condition. When making investment decisions, it’s important to pay attention to the following:

Cost-benefit analysis: Assess the costs associated with the necessary repairs and upgrades and compare them to the potential benefits.
Life-cycle costs: Consider the life-cycle costs of each project, including maintenance and operating costs, to ensure that the investment is sustainable in the long term.
Regulatory compliance: Prioritize repairs and upgrades that are necessary for regulatory compliance to mitigate any potential legal and financial risks.
Energy efficiency: Consider investments in energy-efficient systems and equipment to reduce operating costs and improve the building’s environmental impact.

Consider Sustainability Goals:

When prioritizing projects, it’s essential to consider the building’s sustainability goals. Incorporating energy-efficient systems or renewable energy sources can be an effective way to achieve those goals, but it may require additional upfront costs. It’s important to conduct a life-cycle cost analysis when considering sustainability upgrades. This analysis should take into account the initial cost of the upgrade, as well as the operating and maintenance costs over the lifespan of the equipment or system. By evaluating the long-term costs and benefits of sustainability upgrades, building owners can make informed investment decisions that support their sustainability goals and provide long-term cost savings.

For example, upgrading to energy-efficient HVAC systems can result in significant savings on utility bills while reducing the building’s carbon footprint. Additionally, investing in solar panels or other renewable energy sources can provide long-term savings while reducing the building’s reliance on non-renewable energy sources.

Assessing Your Risk Tolerance

Understanding your risk tolerance, can help you make informed decisions about which projects to pursue and how to allocate resources to ensure the longevity and success of your commercial property. When assessing risk consider the level of risk associated with each project, the potential return on investment, and the overall financial health of the business. Evaluate your past investment performance and experiences to identify patterns and determine your comfort level with different types of risk. Here are some strategies for assessing risk:

Identify your goals and objectives: Before making any investment decision, it is important to identify your goals and objectives. Are you looking for short-term gains or long-term stability?
Assess your financial situation: Your financial situation will play a significant role in your risk tolerance. If you have a high net worth and a stable income, you may be more willing to take on higher risks. Conversely, if you have limited resources or a low income, you may be more risk-averse.
Consider your investment timeline: Your investment timeline can also impact your risk tolerance. If you have a longer investment horizon, you may be more willing to take on higher risks for the potential of greater returns. Conversely, if you need to access your funds in the near future, you may be more risk-averse.

Establishing a Budget:

Once project prioritizations are established it’s important to develop a budget for the necessary repairs and upgrades. Before doing so, we highly recommend property owners to take the time to analyze their current financial situation and set financial goals and objectives. Once the current financial situation is analyzed, the building owner should determine how much to allocate towards capital expenditures and how much to reserve for future investments or emergencies.

To establish a budget, the building owner should consider the following steps:

Review the prioritized projects in the capital plan and estimate the cost of each project. This can be done by obtaining quotes from contractors or vendors.
Determine the available resources for funding the repairs and upgrades. This may include setting aside a portion of the operating budget for capital expenditures, seeking external funding sources, or leveraging financing options.
Consider the urgency of each project and the impact on the building’s overall condition when prioritizing the budget. For example, repairs that are necessary for compliance or to prevent further damage should be prioritized over less urgent upgrades.
Monitor the budget throughout the implementation of the capital plan to ensure that projects are completed within budget and on time.

When developing a budget for necessary repairs and upgrades, a building owner should consider the long-term benefits of investing in the building’s infrastructure, such as increased energy efficiency, improved occupant comfort, and reduced maintenance costs. By taking a strategic and proactive approach to capital planning and budgeting, building owners can ensure that their buildings remain safe, functional, and sustainable for the long term.

Capital Planning Checklist Step #4: Tracking and Results

The final step in capital planning is the tracking and results portion. Asset tracking plays a critical role in capital planning as it provides valuable insights into the condition and performance of your building’s assets. By tracking assets, you can identify which assets require maintenance or replacement and prioritize your capital planning accordingly. This approach allows them to be more proactive in their capital planning and reduce the likelihood of unexpected breakdowns or emergencies.

Asset tracking can also be used to identify opportunities for energy savings and sustainability initiatives. By monitoring asset performance and energy consumption, building owners can identify areas where improvements can be made to reduce energy usage and costs. This information can then be used to develop and prioritize capital projects aimed at improving building sustainability. Overall, by implementing asset management solutions and using data-driven insights, building owners can optimize their capital planning and ensure the long-term viability and sustainability of their buildings.

Outcomes of a Successful Plan:

A well-executed capital plan involves prioritizing necessary repairs and upgrades, allocating resources to fund them, and taking a proactive approach to building maintenance. The outcomes of a successful capital plan are numerous and include but not limited to:

Increased Asset Value: Properly maintained and upgraded buildings can increase in value over time, resulting in greater returns on investment for building owners.
Improved Tenant Satisfaction: A building that is well-maintained and equipped with modern amenities and technology can attract and retain high-quality tenants, resulting in increased occupancy rates and rental income.
Reduced Operating Costs: Energy-efficient upgrades and sustainable practices can result in reduced operating costs over time, including lower utility bills and maintenance costs.
Long-term Cost Savings: By taking a proactive approach to capital planning, building owners can avoid costly emergency repairs and extended downtime, resulting in long-term cost savings.
Environmental Responsibility: Incorporating sustainable practices and energy-efficient upgrades into a capital plan can reduce a building’s environmental impact and promote social responsibility.

Capital Planning Checklist Wrap-up:

Capital planning is a critical process in the commercial real estate space. It involves a comprehensive evaluation of the building’s physical condition, the development of a long-term plan, and the allocation of resources to fund necessary repairs and upgrades. By prioritizing necessary repairs and upgrades, you can mitigate risks and maintain compliance with regulations, while also incorporating sustainability goals to promote environmental responsibility. With AEI’s Capital Planning experts on your side, you can be confident in your investment decisions and keep track of the overall health of your commercial real estate portfolio. Reach out to speak with one of our consultants today.

Services Offered by AEI Capital Planning:

Deferred Maintenance and Capital Planning Studies and Reports
Capital Reserve Analysis
Building and Component System Remaining Useful Life Studies
Facility Condition Assessments
Baseline Property Condition Assessments
Limited Facility Condition Assessments
Asset Bar Coding
Pre-Lease Assessments, Lease Renewals and Lease Exit Strategies
Dilapidation Assessments
Building Envelope Assessments
Roof Assessments (Thermography, Inductance Testing, Roof coring, and Assembly Installation Oversight)
Computerized Maintenance Management Systems (CMMS) data collection and population
ADA Assessments
BOMA Area Measurements
Building Commissioning or Retro-commissioning Services
Energy Audits and Building Sustainability
Climate Risk & Resilience Consulting

Reach out to speak with one of our consultants today.

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