The task of optimizing the value of properties

Optimizing Property ValuesMasood Al Awar, Chief Executive Officer, Tasweek

You have acquired a property/properties for investment, but have no idea on how to go about leasing it out, creating the right tenant profile and handling the legal implications while at the same time achieving the ultimate goal of enhancing its/their value, minimizing spends and maximizing returns. Here, Masood Al Awar of Tasweek discusses the nitty-gritty of managing a property portfolio.

Asset management in the real estate sense

I personally think that all asset management roles have the same objectives with some variations. They are to generate an increase in asset value and grow the profits by managing cash flow forecasts in terms of costs, risks and expenses, with growth opportunities that will achieve the overall objectives or the desired values of the stakeholders. With real estate asset management, the role goes beyond the normal asset management responsibility as managers are extremely necessary for future business growth and the positioning or repositioning of asset strategies. This service function predictably dictates portfolio value as success in leasing is not only achieved by applying the best possible leasing strategies for each asset, but also by mapping out a leasing program in line with the overall strategy while trying to maintain good relationships with the tenants.

How it works and what it involves

It works on the principle of optimizing the value of the properties by setting the short, medium and long-term objectives of the stakeholders, and, once these are agreed upon, by identifying superior transaction opportunities and managing the execution with risk-averse returns. The major part of the execution runs around managing the cash flow that guarantees continuity against various business objectives. The ability to achieve the suitable tenant mix, satisfy the leasing strategy that supports the cash flow needed to meet portfolio requirements, and manage both capital and operating expenses can considerably affect the overall portfolio value.

Responsibilities of a real estate asset manager

Real estate portfolio managers conduct asset distribution and asset variety not only by understanding the market dynamics but also by being experts in real estate property fundamentals. They need to have adequate knowledge of the local property market and the property markets in the region, and the different property uses: office, industrial, retail, hotel, residential. To be competitive and come up with appropriate risk-adjusted returns, real estate asset managers need to be updated with the activities and trends in the regional and local property markets, and achieve the correct property mix.

By approving budgets and performing expense management, asset managers increase the asset value by managing the leasing of one or more properties. Although it may seem like an easy affair, leasing is actually complex. It is a highly negotiated process that involves making decisions that are completely in contrast with the needs and the requirements of the tenants in order to optimize the value of the properties.

Asset managers must also get involved in property acquisition, financing, disposition and important decision-making.

We, as an asset manager, have three strategic functions: acquiring strategic assets (long term), financing real estate (short term) and engaging in joint ventures with developers (medium term). All three strategies require strong market due diligence to find the best asset that will grow in value, and risk-averse properties and projects that will protect the cash invested and will give income returns to have a healthy balance sheet; manage short, medium and long-term cash and profitability; ensure the diversity of asset class risk and geographical location; have a wish list of property developer needs from strong cash position, strong asset class, low debt asset ratio to future pipeline of projects; and have strong customer and partner relationships that can sustain healthy future growth. The strongest requirement is our three pillars and company values, i.e. PIA (professionalism, integrity and accountability).

Key functions of an asset manager
Oversee the property portfolio under his care
Create a long-term strategy that will maintain property value and maximize ROI
Handle the negotiation process when a property is being acquired or sold
Perform audits of the property portfolio to identify the properties that are not making profits
Keep abreast of the market trends and map out future plans, expansions and developments

Source: Ellen Joyce Soriano, Special to Freehold


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