The 8 Key Ingredients of a Turnaround Action Plan that Will Entice Your Banker or Investor to Become a Believer
Your property has been suffering over time creating cash problems and you need financial help from others.
These eight key ingredients will help you put together and very
convincing story on how it would be in your bankers or investors best
interest to work with you.
Your story will include information about what happened to cause the
financial problems, what's happening now, and what's going to happen as a
result of your new strategy plan.
1. Summary of the Financial Requirements: This
section of the action plan is normally a brief statement what the
property is seeking based on its internal capabilities. The statement
would qualify the amount, timing, and type of funding desired.
The types of funding could include equity, long term debt, short term
debt, or a line of credit. A brief discussion would then follow,
explaining how the new injection of funds would be utilized to put the
property on solid footing.
2. Discussion of the Property: The property
discussion section of the plan normally tells the reader how long the
property has been owned and provides historical and financial data
showing, at a minimum, an income statement.
Its purpose is to demonstrate that the business was well managed
prior to the crisis. A discussion of the property particulars including
capital improvements generally follows.
3. Management and Ownership: This section of the plan should include detailed information about the ownership, and the management company.
Particular emphasis should be given to experience and success in
dealing with this type of property. Keep in mind that potential
investors are concerned about the ability of management to effectively
utilize the new funding they will be providing.
4. Causes and Nature of the Financial Difficulties – What Happened:
This is a difficult section of the action plan to write because it will
demonstrate how well you, as management, understand why you got into
Are you problems due only to outside forces in the economy? Did
management inadequacies play a great part in creating the financial
problems? The cause of your losses must not only be identified but be
The potential equity or debt investors must believe that the causes
of your losses were “one-time” occurrences and that the root of the
problem has been corrected.
Unfortunately, if your property has had poor accounting and
management reporting system, it will have great difficulty developing
the information needed for this section of the plan.
The first step is to identify the external causes of the problem. The external problems could include:
A slow down in the economy
Soft rental market
City construction in front of your property
- Shift in the local market demographics
The second step is to identify the internal causes of the problem. The internal problems could be:
Poor financial controls
- Heavy resident turnover
The list is endless, but it is important to clearly identify in your
plan the significant causes of the loss in order to take the next step.
Don't be shy; put all the good and bad into your plan so that potential
investors can feel comfortable that you've at least found the problems.
5. Industry Outlook: This section of the action plan
is designed to give external support to your analysis and conclusions
regarding external causes of the problems; discussed in an earlier
section of the plan.
Include detailed charts of the supply and demand of apartment units
in your regional as well as local trade area. Also, include information
on new construction developments planned in the coming year.
Properly written, this section of the plan can reassure potential
investors that someone besides the management agrees with the industry
6. Competitive Market Analysis: A detailed market
survey of all the apartment buildings that are competitors is the focus
in this section. Communicate your understanding of the local market and
how your property competes in the market in this section. Pay special
attention to pricing, marketing, concessions, and occupancy in your
comments on the survey.
7. Current Financial Situation – What's Happening Now:
In this section of the plan include a detailed cash flow statement and
income statement showing how the property currently is performing. Your
cash flow statement should show the financial problems with which the
business must deal. Also, include a detailed summary of all the capital
improvements that have been done to the property in the last 12 months.
8. Strategy to Solve the Problem – What's Going to Happen:
Many fine books have been written about this subject. Potential
investors now understand the nature of the property, how you are
organized, what created the financial problems, where the property
currently stands, and what the overall industry outlook appears to be.
This section of the plan will tell them your strategy to fix the
All strategies outlined in your plan should focus on generating cash
flow. Your property is struggling and cash flow should be the focus if
you want to generate interest from potential lenders and investors.
12-month Property Cash Flow Forecast
Since cash flow is the result of the strategies you will implement in
your plan, a detailed 12 month cash flow forecast should be included.
Also, include any other forecast and assumptions that support your
Putting these eight key ingredients into your plan will help you gain
the upper hand in dealing with your lender. You will be proactive with
your information and it will come across as if you have a good handle of
the problems and how to solve them.