BOMA Financial Management & Reporting Flashcards

What is a 'variance report' in property management financial reporting?

Answer: A report showing differences between budgeted and actual financial performance

A variance report compares budgeted figures to actual results, highlighting positive or negative differences that require management attention or explanation.

What is a 'capital expenditure' (CapEx) as distinguished from an operating expense in building management?

Answer: An investment in a long-lived asset that extends useful life or adds value, capitalized and depreciated over time

CapEx refers to spending on assets that extend a building's useful life, improve functionality, or add value (like roof replacement or HVAC systems), which are capitalized on the balance sheet and depreciated over time.

What financial statement shows a property's assets, liabilities, and equity at a specific point in time?

Answer: Balance sheet

The balance sheet (or statement of financial position) provides a snapshot of a property's or company's financial position at a specific date, listing all assets, liabilities, and owner's equity.

In property management, what does 'economic occupancy' measure compared to 'physical occupancy'?

Answer: Economic occupancy measures rent actually collected as a percentage of potential rent while physical occupancy measures percentage of space that is leased

Physical occupancy is the percentage of total space that is leased, while economic occupancy measures actual rent collected as a percentage of potential gross rent, accounting for concessions and delinquencies.

What is the purpose of a 'replacement reserve' in a property's operating budget?

Answer: Funds set aside to cover future major capital expenditures like roof replacement or HVAC systems

A replacement reserve is money set aside annually to fund future major capital replacements, ensuring sufficient funds are available when major building systems or components reach end of life.

What does 'gross potential rent' (GPR) represent in a property's financial analysis?

Answer: The total rental income a property would generate if 100% leased at current market rates with no vacancies

Gross potential rent is the maximum rental income a property could generate if every unit or space were leased at current market rates with full occupancy and no concessions.