Why is Asset Management So Important? - John Loehr of BlackRock

3,361 views
3,240 views

Published on

0 Comments
3 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
3,361
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
3
Embeds 0
No embeds

No notes for slide

Why is Asset Management So Important? - John Loehr of BlackRock

  1. 1. IREM Asset Management SymposiumWhy Asset Management is ImportantJohn F. LoehrManaging DirectorBlackRock, Inc. March 24, 201124 March 2011
  2. 2. Real Estate Investment Management Functional Roles
  3. 3. Real Estate Investment Management Functional RolesPrincipal Functional Roles• Portfolio Manager• Acquisitions Director• Asset Manager• Property Manager• Leasing Agent• Construction Manager 3
  4. 4. Real Estate Investment Management Functional Roles Portfolio Manager Asset Manager Acquisitions Director 4
  5. 5. Real Estate Investment Management Functional Roles Property Manager Leasing Agent Asset Manager 5
  6. 6. Real Estate Investment Management Functional RolesPortfolio Manager • Develops investment strategies – leads organization to achieve portfolio goals (top-down) • Ensures appropriate risk-adjusted returns and diversification through asset allocation and property selection • Monitors market opportunities and trends – allocate capital to build optimal portfolio • Larger fund managers organize by life cycle, geography and/or property type • Very largest funds may vertically integrate all investment functions • Portfolio Managers involved with all investment processes: Acquisitions / Financing / Dispositions / Property-Level Strategy 6
  7. 7. Real Estate Investment Management Functional Roles Investment Styles Core (lower return / lower risk) Value-Add (higher return / higher risk) Opportunistic (highest return / highest risk) 7
  8. 8. Real Estate Investment Management Functional RolesAcquisitions Director • Acquisition specialists source and execute property transactions • Larger organizations may align staff by fund, by geographic regional, or by asset type • Acquisitions specialists skilled at structuring and negotiating transactions • Value / Opportunity funds may deploy “project managers” to source and stabilize property before transition to Asset Management 8
  9. 9. Real Estate Investment Management Functional RolesAsset Management • Asset Managers maximize property-level value • Define, initiate and capitalize on market and asset opportunities • Skilled in operating, leasing, and executing capital projects • Effective in communicating (reporting) on risk and performance • Partner with third-party property managers, leasing agents and construction managers • Add value by anticipating / responding pro-actively to trends and opportunities • Expertise in regional market fundamentals and in specific property types 9
  10. 10. Real Estate Investment Management Functional RolesReporting Hierarchy: CLIENT / INVESTOR  Quarterly Interface  PORTFOLIO MANAGER  Monthly Interface  ASSET MANAGER  Daily – Weekly Interface  PROPERTY MANAGER & LEASING AGENT 10
  11. 11. Real Estate Investment ManagementThrough Buy / Manage / Sell Cycle
  12. 12. Asset Management Through the Buy / Manage / Sell Cycle • Buy Asset Managers are integrated into the Acquisition process to ensure objectives, structure and exit strategies are realistically defined, before buying • Manage Pro-actively managing assets to minimize risk, maximize return- on-equity and generate long-term value • Sell Conduct systematic sell / hold analyses and apply disciplined sale strategies to realize appreciation 12
  13. 13. Asset ManagementOrganizational Models
  14. 14. Asset Management Organizational Models By Geographic Region 14
  15. 15. Asset Management Organizational Models By Property Type • Apartments • Industrial • Office • Retail 15
  16. 16. Asset Management Organizational Models By Fund • Core / Core Plus • Value – Add • Opportunistic 16
  17. 17. Asset Management Organizational Models By Life-Cycle • Land & Entitlement • Development / Project Management • Renovation / Repositioning • Stabilized 17
  18. 18. Asset Management Organizational Models 18
  19. 19. Asset Management Adding Value
  20. 20. Asset Management Adding ValuePrincipal Organizational Objectives • Apply specialized property-type expertise • Create alignment with Acquisitions Directors and Portfolio Managers • Build market knowledge and visibility • Generate investment conviction • Source investments and relationships 20
  21. 21. Asset Management Adding ValuePrincipal Organizational Objectives• Sustain key partner / operator relationships• Enforce a risk management discipline• Create internal management hierarchies• Ensure career paths and succession• Facilitate training and mentoring• Maintain accountability and continuity 21
  22. 22. Asset Management Adding ValuePrincipal Management Objectives • Strive for consistency, accountability and performance attribution • Dynamic Monthly / Quarterly Business Planning & Budgeting • Apply uniform management discipline across all properties and portfolio • Pro-actively assess, monitor and mitigate financial risk • Integrate property-level strategies to reinforce portfolio objectives 22
  23. 23. Asset Management Adding ValuePrincipal Management Objectives • Monitor property-level financials • Track major capital projects - quality, schedule and cost vigilance • Facilitate performance bench-marking • Expedite meaningful reporting to senior management • Leverage operating synergies across all investment disciplines (Transactions, Accounting, Research, Portfolio Management, etc.) 23
  24. 24. Asset Management – Adding ValueRisk Management & Value Creation Themes • Achieve operating expense efficiencies • Pro-actively manage lease turnover • Cost-effective and timely capital project execution • Ensure alignment - of - interest with joint venture partners • Monitor AUM headcount metrics to ensure balanced staff workloads • Maintain staffing continuity - sustain accountability 24
  25. 25. Asset Management Best Practices
  26. 26. Asset Management Best PracticesProperty Operations • Property lease, operating and compliance audits • Accurate expense escalation pool calculations • National real estate tax monitoring program • Systematic tenant satisfaction interviews • Tenant credit monitoring: track delinquencies, monitor industry exposures • Monitor joint venture partner overhead allocations • Systematically re-bid contracts 26
  27. 27. Asset Management Best PracticesProperty Operations • Consolidate capital projects to achieve pricing economies and ensure CM best practices • Utility & energy management systems • National purchase programs • Rigorously benchmark expenses • Intensive monthly income / expense variance analysis • Code compliance / emergency response • Apartment revenue management systems • Observe insurance risk management best practices (loss control inspections, etc.) 27
  28. 28. Asset Management Best PracticesProperty Leasing • Benchmark your building’s market position and strength, versus competition • Rigorously price to market and sub-market dynamics • Track details of every market and subject lease proposal and comparable • Visit market and asset: look your manager in the eye touch your bricks and mortar • Be forceful with leasing team / maintain a sense of urgency • Hold your property and leasing team accountable; replace your agent if necessary 28
  29. 29. Asset Management Best PracticesLooking Forward • Underwriting support: benchmark and integrate real-time operating and market experiences • Maintain substantive communication with Portfolio Managers on significant asset matters • Get comfortable with operating in an environment where change is constant and rapid decisions are required 29
  30. 30. Asset Management Best Practices Manage Ambiguity 1. Size up the situation 2. Determine black & white (from shades of gray) 3. Realize the potential 4. Seize the opportunity 5. Decide promptly 6. Establish your credibility 7. Build your influence 30
  31. 31. Asset Management Best PracticesIngredients - of - Success* • Be responsive • Take prudent risk • Think critically – Don’t be critical • No whining – No excuses • Be thoroughly honest • Take a clear position • Integrate • Have conviction • Convey a sense of urgency • Be pragmatic • Stay relevant – Differentiate yourself • Manage expectations • Focus on solutions, not problems • Shoot silver bullets • And always have fun! • Be politely persistent * Sorry, I don’t have the recipe, just the ingredients. 31

×