Much has been written in this space about the working relationship between asset and property managers. That conversation took major strides recently as the Institute of Real Estate Management hosted its third annual Commercial Summit at the Peninsula Hotel in Manhattan.
That forward movement came in the form of a question: What steps can property and asset
managers take to better understand the challenges and needs each side deals with? The question was posed by Dustin Read, PhD/JD, assistant professor of property management and real estate at Virginia Tech. Read has been working for more than 18 months with IREM on an exploration of the relationship between the two separate but so closely tied disciplines with the goal of establishing better understanding between the two.
There is a catch-22 of sorts that exists not only in commercial real estate, but in business in general. Namely, as a Gallup study recently pointed out, few successful executives are promoted to managerial positions because they excel at management. Rather, they are put in charge of teams of people as a reward for profits raised or margins widened. The management piece is the part they need to make up—for better or worse—on their own.
Happily, the discussion at the Peninsula revealed that property and asset managers alike are acutely aware of the need to listen and communicate. They clearly see these as twin keys to opening the door of improved understanding, which in turn leads to greater efficiencies; higher motivation; and, ultimately, a more effective team. The discussion revealed the importance of communicating, on one side, the goals and expectations of the ownership entity and, on the other side, the need to relay any roadblocks to achieving those goals and satisfying those expectations.
This awareness dovetails nicely with the groundwork previously set by Read and IREM, which to date has produced the first three in a series of books exploring the role of the real estate asset manager.
Such a transparent relationship doesn’t exist in a vacuum, of course, and as Read pointed out, it must be done within a corporate culture that supports dynamic communication. As one third-party property manager told Read in a previous interview, “The most successful firms I have worked with take the interaction between acquisition/brokerage and asset/property management very seriously. They have done a great job of bringing these two key sides of our industry together, and in turn, they have grown tremendously.”
Achieving that level of success takes a specific type of talent. Read’s research identified four separate buckets into which asset managers tend to fit. He acknowledged that these are by nature highly generalized, and each one brings its own issues to the table, and only one stands the best chance of ringing that bell.
One bucket contains those companies in which the “management” part of the phrase “asset management” refers to an “analytical function and managing properties to glean information about asset performance.” But it doesn’t refer to managing people. “While there’s certainly a human resource element to it, these are the spreadsheet people,” he told the audience.
The transactional bucket holds professionals “who may not have the strongest financial acumen, or the best people skills, but they are all about driving revenue growth.”
There is an operations bucket, filled with asset managers who are property-facing and “are very good at managing the property manager.”
The fourth bucket holds what Read called “the unicorn, the comprehensive asset management organization, the professionals with really diverse skill sets, who can perform the high-level financial analysis and motivate and lead a team.”
But now for the issues. Read said the financially-oriented asset manager tends to lack the implementation expertise or the ability to see “what dominoes an asset management recommendation might set off.” The transactional asset manager can drive value, but can lose sight of “the other stuff, like how to manage a property on a day-to-day basis.” Operationally-oriented asset management organizations can get engagement from the team, but they tend to have a property-facing view, and can “lose sight of real estate in the broader context, as an investment vehicle.”
The issue with the comprehensive asset manager is that she or he is as rare as a unicorn. What Read defines as the “hub” of the wheel, they seem to have it all and “can coordinate between property managers, construction people and leasing teams. But they are hard to find . . . and hard to retain.”
But that is also the sweet spot, the point where true asset management and all of the responsibilities and capabilities implied in the name, come together. It is the essence of the organization profiled by the property manager in the above quote.
Communication and motivation are not just altruistic, touchy-feely, kumbaya concepts. Organizations that can embody the full range of the traits described here, that can promote open dialogue, create an atmosphere of mutual respect and encourage an unencumbered exchange of ideas—while manifesting the financial, transactional and operational needs of ownership—optimize the relationship with the property management function.
It is a win/win/win, for the asset manager, the property manager and, ultimately, the bottom line.
Don Wilkerson is 2018/2019 president of the Institute of Real Estate Management. In addition, he serves as president and CEO of Gaston and Wilkerson Management in Reno, Nev.