exporeal.net - INVESTMENT

Strategic approach and market-based entry

The Topic at EXPO REAL 2007
Wednesday, 10 October 2007
EXPO REAL FORUM
Hall B3
10.00 am – 10.50 am

Asset Management?
What is it actually?

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Real estate asset management deals with this. Different than the facility manager who ensures the building is working properly, and the property manager who takes care of the tenants (both functions can overlap), the asset manager (as an organisational unit) looks beyond the individual object. He also includes time and the environment in his considerations. His perspective of the real estate is a strategic one. He has to decide what a building can earn in the long term. He must include the current and future market situation in his analyses. He does not just want to know how to maintain the property, operate the building, and how satisfied its tenants are. He also wants to know whether there are tenants, and are they willing – today and in the future – to rent space in the building at a price that will earn profit for the investment. The asset manager’s view of the respective building is mainly a market-oriented one. The basis of his decisions includes competitor analyses, tax, and legal requirements, the development of the investment market and rent volumes, financing terms, as well as technical developments in the property market. The consideration of aesthetic components, administrative and operating costs, and assessing a building’s marketability are all part of his responsibilities.

This strategic element of real estate asset management goes far beyond pure “administration” of the real estate asset, and expands the scope of task also to selection, purchase, and – if no suitable products are on the market – development. The question of whether and when an object should be sold again is also important. In other words, the real estate asset manager not only deals with the building in operation, but also is involved in the entire value creation chain.

It is obvious he should be involved in product selection, purchase, and development. After all, he is the one who is between a rock and a hard place, between the investor’s demand for returns and the needs of the (potential) tenants of a building. Only a property that is completely leased, whose tenants (can) pay the desired rent, and do not move out shortly after will bring in the desired returns to the investor. On the other hand, tenants have certain requirements in a building – that goes from efficiency of space and the lowest possible operating costs, to a functioning technical oufitting and satisfactory tenant relations and service, to representative and/or aesthetic aspects. If these needs are not met, it will be difficult to lease a building in the long term. Therefore, the asset manager plays a mediating role between the investor and the tenant, and must fulfil the needs of both.