20 Jun '16
With REITs about to see the light of day, it is highly possible that REITs owners will prefer to have professional asset managers undertake their investment management work, instead of doing it themselves, as it is not only an extremely challenging function but also can be successfully conducted only with experienced asset managers or fund managers with asset management experience.
The current global trend is that of managed accounts wherein, the holder of the assets employs an experienced fund house or similar as an asset manager, in order to utilise their financial acumen and expertise. These fund / asset managers also develop the exit strategy for the investment by carefully positioning it as an attractive investment option. In such cases, apart from the management fees, the asset manager is also entitled to a portion of carry (profit) from sale.
In real estate, essentially the largest asset comes in the form of commercial office buildings or logistics/warehousing properties. While investing in the same, it is but obvious that just a financial participation will not yield the desired results when it comes to valuations for exit. Lots of procedural complexities are involved in such asset management, and a professionally conducted function is a must to deliver on that mandate.
In most cases, the investor or fund house, as the case may be, outsource the job to an external asset manager on a fee basis. By doing so, many critical yet time consuming matters are handled outside the premises of the fund house. But large fund-houses as well as few smaller ones like ours, have chosen to built that expertise within.. in order to maximize control over the investment and, in turn maximise returns.
The asset manager plays an important role in maximise property value and investment returns. A very large role of the asset manager consists of market research, data analysis and revenue forecasting. Leases and rental agreements need to be structured in a way that attracts tenants, provides flexibility, reduces vacancies and limits liability exposure. Resources need to be apportioned strategically; badly managed resources negatively impact portfolio value.
In many cases, the asset manager selects a different property manager. The property managers are meant for the smooth operations of the property and play a vital role in relationship management with the occupants. The asset manager specializes in financial matters, while the property manager specializes in property. This relationship is a crucial portion of real estate investing. This means reducing expenditures where ever possible without compromising on the quality and occupants satisfaction, finding the most consistent and highest sources of revenue, and mitigating liability and risk.
A good asset manager always looks at increasing their revenue through different sources. For e.g. optimal usage of gross leasable area (GLA) that will result in least rental wastage. Sometimes, the asset manager undertakes thorough assessment of the GLA and arrives at re-modelling some areas to increase the leasable space, thus arriving at an increased GLA for the asset. This leads to higher rental income and better valuations on exit. Other opportunities like advertising, branding on the building space or letting out parking space that will result in lowering operating costs with income from such opportunities.
Consulting Engineers, Interior Designers, Approved Valuers
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