AFP

How Strategic Asset Management is Becoming a Necessity rather than a Luxury for Real Estate Asset Owners in a Post-COVID World

As GCC economies begin to re-open and both the government and the private sector assess the economic realities of new market conditions brought on by the COVID crisis, real estate asset owners are facing serious challenges. Owning an income-generating property has historically been a relatively low-risk investment, with steady yields coming from tenant rent rolls that produce monthly cash flow for the owners and reasonable Return on Investment figures. But with tenants across all major asset classes (retail, commercial and residential) impacted by COVID, and the hospitality sector hard-hit by global tourism disruptions, real estate asset owners are seeing a triple-decline in occupancy, achievable rent, and asset valuations.

As Net Operating Income drops, owners are faced with the “Catch-22” of declining investment returns coupled with little prospect of being able to sell the Asset at a reasonable price.  With the option of a “fire-sale” at low valuations unappealing to most owners, the only available route is to increase the asset’s marketability to compete for a dwindling supply of tenants while reducing relative operating cost to stabilize NOI as much as possible.

In these market conditions, Strategic Asset Management is becoming a necessity instead of a luxury.  Engaging a Professional Team to take a “hard look” at a portfolio of income-generating assets (or a single asset) and evaluating this asset from a technical, engineering, commercial and operational perspective, with the end-goal of recommendations to quickly stabilize NOI, is probably the most intelligent investment that an Asset Owner can make in the post-COVID market reality.

Strategic Asset Management
Strategic Asset Management is not just passively “looking after a building”; but rather comprises the joint technical / commercial evaluation of an Asset to arrive at maximum efficiency of operating cost coupled with positioning the Asset with creative “touch points” that also maximize the “draw” of the asset towards prospective tenants.

The skill set required to execute this evaluation and recommendation comprises a combination of technical engineering knowledge, extensive knowledge of maintenance and operation of Major Building Systems, a real estate development analysis of the key building features versus where the market demand is, and market experience on “tips and tricks” that can maximize an Asset’s marketability versus the competition.

AFP

Critical Success Factor for Improving Asset Performance
A professional survey and portfolio evaluation can help Real Estate Asset Owners to quickly identify the “low hanging fruit”’ which would make an immediate positive impact on either cost reduction or asset marketability.  Such an evaluation can also identify more medium-term solutions which improve the asset’s performance over time.  In addition, given depressed market conditions, many building solutions with long-term cost savings and benefits can now be installed for a lower price than in a rising market therefore offering real estate asset owners a “value opportunity” to improve their asset’s long-term prospects and valuations. As a case in point we have identified a number of best practices to serve as an example of improving asset performance through pro-active asset management.

RETAIL
Asset Positioning

• A recent trend is that Malls have increasingly allocated NLA (net leasable area) towards Entertainment product types and unique “customer journeys” to attract visitors and increase footfall. The “customer experience” has thus become a key USP (unique sales proposition) to successful malls instead of just the retail mix.

Technology 

• Responding to changes in the retail industry as a whole, technological innovations in mall management which were previously a luxury are now becoming a necessity:  a fully integrated CAFM system (Computer Aided Facilities Management System), an online CRM program, the usage of Apps and other mobile technologies which integrate customers with the retailers, as well as supplementing the mall’s public areas by technology-based “activity zones.”

MASAR

HOSPITALITY
Staff Accommodation 

• How the Operator chooses to deal with the issue of Staff Accommodation for the hotel employees is a large lump-sum expense and can have a significant effect on bottom-line NOI and should be analyzed by a professional development team.

Technical Oversight

• By assigning a technical team to provide Technical Oversight of the hotel Operator, the Asset Owner can ensure that cost efficiency and quality (QA/QC) is maintained which could lead to significant cost savings in hotel operations especially in areas of maintenance and repair.

COMMERCIAL OFFICE
Technical Building Systems

• Parking is an oft-overlooked building system but represents both the opportunity for additional revenue generation as well as a key limiting factor in potential lease-up and therefore should be monitored closely
• Modern commercial office buildings have embedded IT (Information Technology) systems which are key to the Asset’s “leasability” and property value

Modern BMS (Building Management Systems) with a combination of software and installed sensors/ monitors (hardware) are quickly becoming a necessary item to maintaining marketability and Content reducing operating cost.

TCN GCC and Alexander Mac have an established Strategic Partnership that provides Investment Funds, HNW individuals, Family Offices and other Asset Owners access to professional portfolio asset evaluation services which will identify key risks and opportunities and provide recommendations to stabilize an Asset’s NOI.