Defining Real Estate Asset Management

By Read, Dustin | Journal of Property Management, May-June 2017 | Go to article overview

Defining Real Estate Asset Management


Read, Dustin, Journal of Property Management


Asset management, definable as both a process and a profession, is critically important to the success of large real estate investors. It is nonetheless poorly understood outside, and to some degree inside, the real estate industry due to the use of inconsistent terminology and differences in the organizational structure of companies specializing in the ownership and oversight of income-producing properties. The confusion is problematic to the extent it prevents talented individuals from pursuing careers in asset management or impinges upon the development of supportive services for those already working in the field. It can also contribute to a lack of understanding between those managing real estate as an investment vehicle and those operating it on a daily basis when the two groups lack a true appreciation for what the other does.

CLARIFYING THE ROLES ASSET MANAGERS PLAY IN DIFFERENT TYPES OF ORGANIZATIONS IS THEREFORE IMPORTANT FOR A NUMBER OF REASONS:

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Defining the unique body of knowledge required for success in real estate asset management can help establish it as a professional service, providing a status that will attract talent to the industry.

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Understanding what is expected of real estate asset managers can help education providers better tailor their offerings to meet evolving industry needs.

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Differentiating real estate asset management from property management in more clear and concrete terms can improve communication and understanding between these two groups.

RESEARCH PROJECT

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To better define the asset manager's place in the real estate industry, IREM commissioned a research project examining the activities of these professionals in different settings throughout the U.S. A total of 257 individuals working in asset management or in conjunction with asset managers were contacted to participate. The list of potential respondents was compiled with the assistance of rankings prepared by trade organizations and trade publications identifying the largest real estate owners and service providers by product type throughout the U.S., as well as executive search firms engaging in real estate placements. Over the course of the data collection process, 92 of these individuals agreed to participate, representing large owner-operators, life insurance companies, private equity funds, publicly traded real estate investment trusts (REITs), direct lenders, tax credit syndicators and real estate service firms. The respondents were selected based on their familiarity with real estate asset management as both a process and a profession.

In the aggregate, the results of the qualitative analysis offer answers to three questions:

What are the roles, responsibilities and requirements of real estate asset managers?

What education, training and skills tend to contribute to long-run success in the industry?

How do real estate investment companies source and develop asset management talent?

The executives participating in the study generally discussed asset management in terms consistent with those found in the existing literature. Many described individuals working in this capacity as the ones responsible for "overseeing financial performance," "creating value through strategic decisions" and "managing the competitive position" of each property in their respective portfolios. It was also common for respondents to frame the roles of asset managers in relation to those of the parties with whom they work, with one noting "asset managers fit neatly between portfolio managers and property managers because they are responsible for implementing property-level strategies reflective of portfolio objectives and the financial engineering used to acquire the assets." A significant number of respondents acknowledged that asset management is sometimes difficult to define as a profession because it "continues to evolve," "crosses a lot of boundaries" and takes on "different forms. …

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