In your own words, answer ALL parts of each question. Do not “cut and paste” notes from the class lectures.
Define asset management and its function in real estate? How does the role of a Real Estate Asset
Manager differ from other types of asset managers? What is the role of Property Management? Explain
the Asset Manager and Owner/Investor collaboration.
Explain the value cycle. Where and how do the cycles interact? How should an Asset Manager’s strategy
change during a cycle? Explain the real estate demand drivers and the demand driver linkage.
How do major real estate companies impact market conditions and values? Describe the investment
objectives of any 3 major players? What should an Asset Manager know about The Employment
Retirement Income Security Act of 1974 (ERISA)?
How is risk management used in creating a portfolio? How can an Asset Manager manage risk in an
existing real estate portfolio? Why didn’t institutional investors allocate a significant portion of their
portfolio (to real estate) prior to the mid-1980s? What changed their opinion and strategy?
Explain core and non-core real estate investments. What are the characteristics of each, advantages as
well as disadvantages? What type of investor buys core assets? What type of an investor buys non-core
assets? How do core and non-core properties impact risk?
Define the purpose of a Management Plan and Budget. What is the Asset Manager’s role and how should
he/she utilize the Annual Plan and Budget to effectively manage a portfolio? How should an Asset
Manager manage deferred maintenance and capital needs in an aging property?
How are metrics used in Asset Management? What are the respective limitations of the Equity Multiple
and Cash on Cash metric? What metrics should an Asset Manager use to measure a property manager’s
When should an Asset Manager consider asset re-positioning? What are the key elements and steps to
develop a reposition strategy for an existing underperforming property? What is the primary goal of asset
How should an Asset Manager create a leasing culture? How should an Asset Manager effectively use
Property Management in leasing? Define the following SNDA, Co-tenancy, Right of First Refusal and Right
of First Offer.
10. Describe an efficient acquisition process. What is the purpose of a Letter of Intent? Explain the role,
importance and types of due diligence.
• This course examines techniques for increasing the value of real estate assets under management on behalf
of ownership. It reviews the components of asset management that directly affect the cash flow and
underlying value of a single asset or a portfolio of assets. Topics covered include financing and refinancing
opportunities and techniques, designing a tenant mix, creating and implementing repositioning strategies,
planning capital expenditures, budget and management reporting, cost control techniques, management
and operations strategies.
Understand the roles and interaction of the owner, investor, asset/property manager and other
Understand the life cycle of real estate - internal and external influences.
Understand how to create and maintain value in changing market conditions.
Understand strategic planning – target marketing, leasing, re-positioning and portfolio management
"The Asset Management course provides students with the practical, hands-on skill-set to evaluate,
acquire and manage institutional and family owned real estate portfolios. The program teaches the
development of business plans and the evaluation of alternative strategies. Students will learn the
importance of value enhancement, portfolio diversification and due diligence when acquiring properties.
Students will also gain the confidence and tools to re-position, market and lease real estate as well as
Asset Management is the systematic process of deploying, operating, maintaining, upgrading and disposing of
a assets cost effectively. The application of analytical approaches towards managing assets to achieve the
The Role of an Asset Manager
The purpose of asset management, whether with real estate or any other asset, is to cultivate market value so
ownership can increase its returns. Real estate asset managers focus on maximizing a property's value for
investment purposes – not to be confused with real estate property managers, who handle the day-to-day
activities related to a property's operations and physical structure.
Real Estate as an Investment Asset
• Individuals, private companies, corporations and governments sometimes purchase real estate as an
investment strategy. Real property can be bought, improved and resold for profit. Other times, it can be
partitioned and rented or leased out.
• Investing in real estate presents challenges that do not exist in capital markets. Property faces the risk of
damage, tends to deteriorate over time, and often takes a decidedly more complex process to buy and sell.
• Real estate asset management concerns itself with mitigating risks and promoting valuable improvements.
It also navigates the complex legal and tax rules governing investment property in the United States.
Real Estate Portfolios
• Diversification is important in real estate investments just as in traditional capital market investments. Large
investors build portfolios of different types of property and in different markets. To make the case obvious,
you can see why a real estate investor would not want all of his property in New Orleans during hurricane
season, at least not without substantial insurance coverage.
• Portfolio management involves asset allocation and selection informed by experts in property development
and maintenance. However, most of the asset management takes place after the portfolio is chosen.
• Ability to accomplish appropriate tenants mix, execute leasing strategy that aligns cash
flows with portfolio needs, expenses and capital resources will significantly affect overall
• Generally, asset management in a real estate context refers to financial management at
the ownership level of a sizable number of investment properties.
• Asset Managers monitor financial performance, study local markets and compare
individual properties as well as like portfolios against a baseline.
• An AM may not make the final buy/sell decision, however he or she should be integral
to the overall real estate investment process at the ownership level.
• Real Estate Asset Managers (REAMs) differ from equity, bond or mutual fund
managers as they are responsible for managing the execution of the asset strategy.
• Asset Managers help define and execute on property level opportunities – optimizing
the value of properties through superior transaction and management execution.
• AMs as CEO – executing property level strategies for his/her portfolio. Responsible for
allocating constrained resources.
• AMs provide value to clients by ensuring the most efficient use of investor capital and
by keeping clients informed through superior performance measurement and cash flow
• AMs must consider asset selection by understanding market dynamics and real estate
• AM knowledge of local regions and various commercial uses – office, multifamily, retail, hotel,
• AMs ensure diversification and produce adequate risk-adjusted returns.
• Managers bet on local property markets and in the case of multiple asset portfolio, the correct
• Focus on specific regions or property types.
• Organize to competently identify market opportunities, asset selection and asset acquisition.
• The manner in which assets are acquired is one the most significant AM functions – uncover,
create and maintain value.
• AMs are often directly (or indirectly) involved with all investment processes including
acquisitions, financing, dispositions and property level decisions.
• Approve budgets and expense management.
• Manage leasing program that aligns with portfolio strategy while maintaining good
relationships with existing tenants.
• Manage lease terms to take advantage of projected higher (as well as lower ) rental rates.
• Decision, recommendation to suspend leasing for properties for sale
Asset Management differs from Portfolio Management as AM is concerned with the individual
property level. The objective of Asset Management is identifying and exploiting the potential of
each property following a coordinated strategy set by those undertaking portfolio analyses at the
aggregated portfolio level.
Five steps in the asset management process:
1. Inventory analysis for hidden potentials;
2. Forecasting of future (sub)market parameters;
3. Developing a strategy;
4. Implementing the strategy and benchmarking; and
5. Determining the success rate and modifying the strategy if required.
Asset Management Summary
• Development and execution of asset management strategies and directives.
• Asset Management is the accountability and monitoring side of real estate operations – use reporting as an opportunity to
identify problems and solutions.
• Financial models are only as good as the assumptions upon which they are based.
• Successful AMs bring macro and micro level market data together with property–level data.
• Analyze a significant amount of property, market and portfolio-level data to identify trends and opportunities for
o Review financial reports
o Conduct performance audits
o Review established metrics
• Treat Property Managers like partners –property managers to consistently direct their staff, while asset managers remain
focused on property positioning and long-term value creation.
o Assess the performance of property management and leasing teams
o Frequent site visits; evaluate the physical condition of properties, communicate with market participants, interact with
o Ensure legal and regulatory compliance
• Understand market dynamics. Asset Managers (“AM”) must have a strong understanding of their markets and submarkets
to generate accurate quantitative outputs.
• Take advantage of benchmarking, data analytics and new technologies. Invest in robust IT systems that accommodate
infrastructure that provide data to a multiplicity of constituency groups.
/AFN Spring 2020
January 27, 2020
Asset vs. Property Management
• Ten years ago an asset manager would have fewer properties to manage, typically five to eight assets. Today
it could be 10 to 30. They’re being stretched thin, and that’s germane because parts of their work are getting
pushed to the property manager.
• But this isn’t a new development, he says, a need that cropped up as it had in so many other segments of
the industry during the late, Great Recession. “This is part of a phenomenon that’s been going on for 20 or
30 years,” he says. “But increasingly, owners are streamlining what they do, asking more of their ownership
and asset management partners. If they have a $50-million portfolio and they want to make it a $100-million
portfolio, and if they don’t have those partners, they’re going to turn to their property manager to do more,
which allows them to keep their staff size the same.” (Craig Cardwell)
• It is clear that property management today is a different discipline than it was 10 or 20 years ago, when
responsibilities were limited to day-to-day building operations,
• In the past decade, property management as a profession has made significant advancements. This is due in
part to increasing downward pressure from asset managers to do more, available technological tools, and
greater educational opportunities as well as the very nature of this diversified industry.
• There has been a greater alignment of the property and asset management disciplines. In some cases this
alignment has led to discussions of a so-called blurring of lines between the two functions.
Asset vs. Property Management
• “Is the line dividing property managers and asset managers blurring
to nothing more than nomenclature? While the non-standardization
of titles makes drawing the line a relative and shifty proposition to
start, the industry has been seeing more redundancy in their
commonly defined core responsibilities. . . . There is a greater
demand for property managers that display financial sophistication
and comprehension within their circle of influence. Moving forward,
this demand will continue to increase the standards and
professionalism of the industry.” (Terry J. Fields)
Asset vs. Property Management
• The property manager’s role is changing as asset managers—themselves squeezed by ownership entities to
do more—increasingly turn to their onsite team members for more financial analysis.
• The property management function has not only made significant advances in the past decade, but that it
also continues to evolve toward a financial orientation.
• The property management function exists in firms ranging from small private entities to global corporations
and from owner-operated property management to third-party, fee-based management firms.
• Many firms opine that they were in fact asset managers. However the titles or functions change, property
management, despite its growing sophistication and increased responsibilities, is NOT asset management,
and the consensus dictates that the function remains an advisory role to the asset manager.
• In short, there is no blurring of lines of responsibility between the two disciplines. They are two separate and
distinct professions even as they perform more closely than ever as members of the same team.
Influencers at work in the shifting dynamic:
• Asset managers applying downward pressure on property managers to do more
• The growing availability of educational programs specific to property management
• The increase in financial and analytical tools
Asset vs. Property Management
Tasks rated important by asset/portfolio managers and property managers:
• Collaborating with property owner(s) and/or board of directors to develop ownership goals and objectives
• Preparing annual budgets, e.g., operating, capital, marketing
• Presenting annual budgets for approval, e.g., operating, capital, marketing
• Presenting financial and/or operating reports to owners and/or boards, e.g., balance sheets and budget variances
Tasks rated important by asset/portfolio managers but not by property managers:
• Preparing long-term financial models
• Analyzing the property’s financial performance, e.g., cash flow analysis, internal rate of return
• Assessing market value of the property
• Performing due diligence for acquisitions and dispositions
• Analyzing proposed property improvements relative to future value/return on investment
Tasks deemed unimportant by asset/portfolio managers and property managers (Really?)
Approving long-term financial models
Recommending real estate for acquisition or disposition
Identifying funding sources for capital expenditures
Asset vs. Property Management
Tasks that are common to people identifying themselves as asset/portfolio managers and property/regional
• Establishing and managing property operating policies and procedures
• Managing tenant move-in/move-out procedures
• Scheduling maintenance and repair services
• Identifying and approving needed capital improvements and/or replacements
• Establishing and maintaining property recordkeeping system
• Approving the purchase of supplies and materials for the property outside budget parameters
• Developing specifications for and manage contract services (e.g., janitorial, security, landscaping, trash
• Developing specifications for capital improvements/ construction
• Overseeing operation of building systems (e.g., HVAC, sprinklers, elevators, security, access, energy
• Monitoring preventative and routine maintenance programs for the property
• Investigating and resolving complaints from residents/tenants/unit owners
Asset vs. Property Management
• “The only blurring of lines is in the minds of property managers.” “An asset manager would not do those functions,”
agrees an asset manager for a Manhattan-based institutional investor who requested anonymity.
• Any so-called blurring of lines occurs “only because property managers are being asked to do more financial analysis,
which is something that they should be doing anyway. If you spend money on a roof replacement, this is a capital
investment for the ownership. Property managers can make recommendations and justify that recommendation in
terms of financial impact.” “Calling oneself an asset manager does not an asset manager make. “ (Craig Caldwell)
• “At the operational level, asset management comprises a series of tasks ranging from transaction management,
project development and project management to research, marketing and controlling tasks. The focus of these
operations is to maximize the value-added potential of each property according to the targets set at the portfolio
• Asset management interface with property management with which it shares the property-level focus, Despite the
overlap in activities carried out by both asset managers and property managers, the property manager tasks focus
typically more directly on operational requirements such as maintaining contact with tenants and other third-party
agents on behalf of the property owner. Compared to property management, the tasks of the asset manager are
typically more broadly defined, thereby linking strategic management at the portfolio level with the operational tasks
at the individual property level.
Asset vs. Property Management
• “The relationship between asset and property manager is a strategic partnership.” (Drew Genova)
• The budget is produced in partnership with asset managers. The input from the property manager is critical
to producing an effective budget that will run the real estate. Once that budget is produced and approved,
it’s the property manager’s job to execute that budget.
• Property managers are taking on a strategic recommendation role, and they’re being asked to perform more
asset management functions, and functions they haven’t typically done in the past— full life-cycle analysis,
more alternate uses, whole lease evaluations.
• “Is the line dividing property managers and asset managers blurring to nothing more than nomenclature?
While the non-standardization of titles makes drawing the line a relative and shifty proposition to start, the
industry has been seeing more redundancy in their commonly defined core responsibilities. . . . There is a
greater demand for property managers that display financial sophistication and comprehension within their
circle of influence. Moving forward, this demand will continue to increase the standards and professionalism
of the industry.” (Terry J. Fields)
• But ultimately, the answer to the question he posed is “no,” the line dividing the two is not blurring to mere
nomenclature, even as the demand for greater sophistication grows.
• Property managers] don’t get to decide. The concentration of money and power are with the people who
are making the call. Property managers have to hit a budget, but they have not had to understand the return
hurdles of the owner or take on the role of true asset management.
• “It’s absolutely vital that property managers, if they want to play in a bigger, more sophisticated arena, they
have to learn to think like asset manage ...
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