The Institute of Real Estate Management's interest in exploring international markets began in September 1994 when it sponsored a study tour in Spain in conjunction with the Consejo General de Colegios de Administradoes de Fincas, the country's primary real estate association. IREM delegates visited the cities of Madrid, Barcelona and Sevilla in order to tour residential and office building projects and exchange information on practices and methods of property management. At that time, the IREM delegates learned that U.S. and Spanish property managers shared some similar concerns. For example, a National Rent Control Law that extended for three generations was drastically modified as the Spanish discovered rent control didn't work.

Joseph DeCarlo, CPM[R], one of the IREM delegates participating in the study tour, discovered that management fees were established differently in Spain than in the United States. He noted that in Spain, management fees were calculated based on a price list detailing which duties the property manager performed.

"For example, if the building has an elevator, that is an up charge," he explains. "Management fees vary according to the area. In addition, large commercial properties are many times managed by employees of the ownership company, which is often a bank or an insurance company."

In Spain, property managers, or "Administradors de Fincas," must belong to the Consejo. Typically, property managers have college degrees and strong backgrounds in engineering, economics or law. Their annual compensation is equivalent to $20,000 to $40,000 in U.S. dollars, considered a good wage by Spanish standards.

With an understanding that it could help Spain meet its educational objectives, IREM signed an agreement with the Consejo association in late 1994. The agreement was developed to establish a cooperative relationship in the field of education, to exchange information and to stimulate professional cooperation between members of IREM and the Spanish organization.

IREM also penned an agreement with the Continuing Education Institute Foundation (IDEC) in Barcelona to organize advanced training courses in real estate management and administration. In 1995, the courses were taught by Jose Gutierrez Esquerdo, real estate administrator of the General Council of the Colleges of Estate Administrators; Luis de Prado Fernandez, president of the Vizcaya College of Estate Administrators and Raymond Baca, CPM, IREM instructor and general manager of the El Paso, Texas-based Monterrey Management, Ltd.

The objectives of Course 301, Marketing and Management of Residential Property, were specifically to:

* provide comprehensive information on the most important aspects of estate administration, from maintenance to the preparation of budgets

* broaden the students' knowledge of lease administration

* teach the students how to manage real estate investments effectively, using specific techniques

* update and explore market analysis in greater depth, using demographic data which can serve to define the profile of potential customers and to define the rents.

In 1995, IREM sponsored three offerings of its Course 301 in Spain. One course was administered by the Consejo in the City of Ovibda, while a second corporate course was conducted for Incesa, a bank subsidiary based in Barcelona. Another course offering will be held in Barcelona in September of this year. IREM's text, "Principles of Real Estate Management" was translated into Spanish for use at these courses.

In addition, IREM plans to offer its Course 303, Management and Leasing of Shopping Centers and Retail Space in Madrid in November of this year and is in the process of translating its text, "Shopping Center Management" by Alan A. Alexander, CPM, and Richard F. Muhlebach, CPM. Presently, the Institute also is translating its Course 400, Managing Real Estate As An Investment, which will be offered in Spain at a future date.

As part of IREM's continued efforts in helping Spain meet its educational objectives in the real estate industry, the Institute translated two publications relating to its innovative SMART Partners[TM] program. The first publication, Guia para Organizar una Guardia IREM SMART Partners[TM], is a guide book Spanish real estate managers can use as a resource in setting up a SMART Partners[TM] community watch at their properties. It contains step-by-step instructions on planning and organizing a series of meetings between residents at which they determine a cooperative way in which to prevent crime at their own multi-family residences.

The second resource, IREM SMART Partners[TM] Vivezas para Residentes e Inquilinos Comerciales, is a set of materials focusing on both residential and commercial concerns. For example, there are information sheets on child safety as well as how to best describe a suspicious person or report a stolen automobile.

IREM Provides Specialized Training

Raymond Baca, CPM, 1996 chairman of the Institute's Faculty Committee, has been teaching IREM courses in Spain for the past two years and has been instrumental in implementing IREM's educational objectives there. He acknowledges that his teaching experiences in Spain have been personally rewarding, in large part, because of the student base.

"Students there are very, very well educated and many hold advanced degrees," Baca explains. "About half of the students are lawyers; there are many laws and conditions relating to management."

Baca says that Spanish property management students are very outspoken and eager to learn and express their opinions. Continued education is a concept that is very important to the Spanish property manager, he says. In fact, each manager attends one to three courses a year in what is referred to as "professional formation."

"Property management is a recognized profession in Spain," Baca says. "You have to be degreed and licensed in order to practice real estate management."

Baca notes that his Spanish students are most interested in learning about marketing and rent level determination. Because rents have been controlled in Spain for the past 40 years, they need to learn how to set profitable rents that are still market competitive.

"Since Spain is just now moving toward a more free market, managers have no experience with marketing or evaluating the relative benefits of Property A to Property B," Baca explains. "They also desperately need to learn about controlling delinquency. With an average of 8 percent to 10 percent in delinquencies each month, property managers in Spain are first learning the concept of pre-screening tenants."

One major difference between property management practices in Spain and those in the United States, according to Baca, is that property management in Spain is not a hands-on activity. Most managers handle the operations of their properties from their office, sometimes without ever seeing the property. Because of this, they tend to manage many more properties per person, although not as intensely as U.S. managers.

Consequently, properties are not always in the best condition. Baca acknowledges, "There's a lot of deferred maintenance on the properties. Economies are tight, rents are controlled and little money is reinvested in properties. In fact, a property can suffer years of neglect without being touched. In this kind of rent-controlled market, rents may go up 2 percent to 3 percent a year and costs may be increased 8 percent to 10 percent, yet the market is accepting of these conditions."

In fact, the whole concept of tenant improvements is foreign in the Spanish real estate market. "You basically are renting four walls," Baca says. "Tenants accept the unit as is and do all of the improvements down to the light fixtures themselves."

However, these conditions will likely change in the near future as rent controls will be phased out in Spain by 1999.

Two areas of the industry with which Spanish managers are especially concerned are condominium association management and shopping center management. Presently, 85 percent of residences in Spain are condo associations. Tenants have minimal involvement in the association except perhaps to make a decision on the selection of a management company which usually manages the property on a long-term basis.

And, while presently Spain has only one major mall and half a dozen strip centers, there is a lot of interest in shopping center management. Because of an influx of interest from foreign investors, an explosion in shopping center development is anticipated within the next few years.

Baca notes that the Institute's expansion into Spain is a beneficial one, both for U.S. and Spanish property managers. IREM is exposed to a potential market of between 10,000 and 15,000 managers in Spain. Spanish property managers, in turn, will benefit from the formalized education and experience that IREM can provide through its instructors and membership.

Baca adds that Spain will offer U.S. managers tremendous business opportunities in the coming years. In fact, Baca says that his own company, Monterrey Management, Ltd., in El Paso, is on the verge of doing some property management business there.

"Spain is taking the lead in real estate and commercial matters in the European community," he explains. "It's a leader in investment education because a lot of developers are taking an interest in Spain, which will likely lead to increased investment activity in the rest of Europe."