”Asset managers know that their success is tied to our success. ” -Drew Genova, CBRE
IREM recently pulled the curtain back on its latest White Paper, exploring the changing relationship between property and asset management. A Shifting Dynamic: Asset vs Properly Management is a combination of practitioner interviews, the recent IREM job Analysis and other previously published intelligence, and it forms the foundation for ongoing research on the topic the Institute will explore in future weeks and months
In a discussion after the release of the White Paper, the initiative’s major contributors had the opportunity to reflect on its major takeaways . So what was the major headline emanating from the \’\’hire Paper? The three practitioners, from three different disciplines, offered three disparate perspectives.
“The major headline is that it’s not business as usual, and asset managers need our help as property managers more than ever before,” offered Andrew Genova, executive man aging director at CBRE in Washington , DC. “The pressures that arc put on them from the sheer number of properties they handle these days, which can be upwards of 30 or 40, means they have to look to us to help them maximize value.” For Craig Cardwell, CPM, owner of Island Investments in Memphis, it’s a question of skill sets: “There arc very distinct skill sets for which there isn’t much crossover. But that doesn’t mean that property managers cannot be more asset manager-like, and it doesn’t mean that asset managers can’t learn to do property manager things. But have you ever seen an asset manager try to get out of a paper bag trying to do property management? It’s not as easy as it looks.”
Bill Whitlow is a partner in San Francisco-based Terra Search Partners, and he saw a three-fold header for the White Paper. First, “There’s absolutely a strategic partner ship between asset and property management,”he said, “and that’s the place where most of the value is created in real estate. Second, the White Paper discusses the so-called blu r ring of lines between asset and property management and points out that ultimately there is no such blurring of lines, except perhaps from the property management perspective .” Finally, he referred to the discussion raised in the work about the possibility of career advancement from one discipline to the other: “It’s not that you can’t, bur chances are you won’t.
Diving deeper into each of those headlines, thc increased sophistication of the property management industry is an evolutionary development, said Genova, a result of greater pressure being applied by asset managers as well as the in creased technology and educational opportunities that exist today. This, he noted has in turn created more of a strategic partnership between the two disciplines.
“Our relationship with asset managers has changed, and needed to change so we could perform at a higher level for them,” he said, “so in turn they can function at the higher level they need to. ,Ve have to align ourselves with them. \<Ve have to know what their goals arc, know their expectations. And with the increase in technology and infrastructure, they’re looking to us to guide them in best practices.
“We’ve all heard clients say, ‘l wish you would think like an owner,'” he continued. “What they’re saying is ‘We want you to look out for my interests and be my eyes and ears on the property)’· Give me solutions.’ That strategy will help them advance further and clearly help us advance our roles as senior property managers.”
v\lith the increased sophistication and more strategic alignment with asset management, benchmarking has be come “critically important,”said V\lhitlow. “Everybody talks about performance metrics. What is that really? It’s literally setting out the things that arc important from a performance standpoint, measuring everyone in the organization against each other in that regard and measuring every property in the portfolio.”
Whitlow’s focus has been mostly on the multifamily side, so he asked if this benchmark ing trend has become equally engrained on the commercial side. Genova answered:
“It’s improving. We’ve taken it upon ourselves to support continuing education and training. In today’s management business, the rubber meets the road when you look at your metrics and can say I am driving revenue as much as I am con trolling expenses.That’s the sea change for us as managers.”
The White Paper dealt thoroughly with the question of lines being blurred between the two disciplines as a result of this growing sophist ication. It was a question that actually arose as a result of the earlier IREMJob Analysis conducted earlier in 2015.
Some respondents, checking off the box that they were as set managers, proceeded to list job responsibilities that were clearly in the wheelhouse of the property manager, including such tasks as monitoring preventive and routine maintenance programs and investigating and resolving complaints from residents, tenants and unit owners.The reverse was also true. “One of the things we learned was that we have many more property managers performing asset management tasks,” Cardwell told the crowd. “But just because you per form the task doesn’t mean you’re the asset manager. That’s just tricking yourself: The demands are different and the view of the world is different.” But, he added, despite the apparent myth of blurring lines, “the strategic partnership that exists remains important.”
Despite the increasing closeness of the relationship, arc there things that asset managers fail to “get” about property managers? “They don’t get that it’s a lot of work,” said Card well.
Genova provided a different nuance, believing that it’s not a matter of not “getting” but not seeing.”Property managers have internal pressures of training and education ,” and piles of paperwork, “a whole host of things we just don’t share with our clients. Yet it’s that internal work that adds to the pressure.”
At that point, the discussion turned to the feasibility of property managers moving into asset management positions. Despite the closeness of their working relationships, all three contributors agreed that the move was a tricky one.
“It’s not easy,” said Cardwell. “It’s a different skill set and a different mindset.” (In that regard, the term “DNA”came into play often during the discussion.)
Whitlow added that a transition is easier in a vertically integrated company, where you can get exposure to a variety of different disciplines including asset management. Otherwise, “with all of the asset management education you can get-on net present value, IRR, cap rates – if you aren’t in a place where you get to practice those concepts every clay, you won’t develop them. Without the opportunity to practice, you just won’t get there.”
Certainly, the rewards of such a move are there. The in come differential can be as high as one-and-a-half to two times, according to Genova. Whitlow said it could be as high as 30 percent.
Clearly, the relationship between asset and property man agers is in a state of necessity-driven flux. But. there is one realization that binds the two together, and ultimately, how ever the relationship continues to change, that one reality will remain, and Genova expressed it best: “Asset managers know that their success is tied to our success.”
By: John Salustri (IREM Insider)
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