Enhancing value Featured

8:00pm EDT March 26, 2008

Commercial real estate has become a staple in both the private and institutional investment worlds. As such, the day-to-day operations and the long-term positioning of the asset for either hold or disposition resides in large part with the asset manager. In Florida, these teams are particularly important as assets have traditionally garnered profitable upside but are also subject to a variety of factors that can diminish value.

“While the spectrum of ownership has changed, the economic fundamentals and the interactive relationship between ownership, tenants and the service provider remain as important as ever,” says Randy Buddemeyer, Managing Director of Asset Services for CB Richard Ellis statewide. “It can be a very fluid environment that requires the expertise to think strategically and the resources to execute tactfully. Clients’ needs continue to change, and as their partner, we must be able to both react to and anticipate market conditions.”

Smart Business asked Buddemeyer for his insight on this sector that interfaces daily with businesses’ operations and their respective employees.

How has your business changed in the past year?

Two issues come to mind. First, we continue to grow substantially in the amount of properties we manage. In just the last 12 months, we have taken on 80 new property assignments representing an additional 12.5 million square feet throughout the state. Each of these assignments requires a very specific transition phase depending on property type, the personnel we hire and assign, our assumption of accounting and financial responsibility, and the development of a strategic business plan with our clients.

Second, we have seen a much more diverse base of ownership. As such, we have to tailor our services to respond to the large institutional owner who may have well-established policies and procedures that we dial into as well as to private ownership, which may have a much more limited infrastructure and looks to us for more specific guidance and procedures. What both owners do have in common are such issues as tenancy, insurance, regulatory compliance and taxes — issues that need to be addressed and carefully built into planning and budgets so that the asset remains a sound investment.

Where do we stand on challenging issues such as insurance?

Time has a way of helping to solve the problem. Obviously, the unusual hurricane activity of 2004 and 2005 caused a great deal of anxiety and an expected short-term retraction in the market. Since then, we have had virtually no storms that have materially affected the state. As such, time has allowed insurance providers to review their underwriting with a new base of data. For example, structures built to current code have performed remarkably better, mitigating the effects of severe wind and water intrusion. Accordingly, capacity for taking on additional coverage for these properties has improved, and we have seen decline in both rates and wind deductibles from the peak of two years ago. For certain properties that we manage and lease, we have been able to provide savings, through our carrier, of between 40 and 60 percent.

Managing and pricing risk in insurance is similar to what is now occurring in the debt markets. In both cases, it’s simply a matter of time before a point of mutual acceptance is established.

Looking forward, how does the green movement affect your approach?

A big part of our job is to help create and maintain a positive work environment for the tenants in buildings we manage. In addition, we are always seeking ways to make the asset run as efficiently as possible so that we maximize returns to our clients. LEED certification has served to establish a benchmark and a pathway to those goals. It has been established to promote design and construction practices that improve occupant health and well-being, reduce negative environmental impact of buildings and, if done correctly, increase profitability.

Without question, part of good corporate citizenship is a collective and positive approach to protecting our environment. As such, our clients are increasingly more attuned to issues of sustainability, and we have taken a leadership role, both internally and externally, to actively contribute to this betterment.

How would you summarize the role of asset management?

What we do is designed to enhance the value of the asset for our clients. There should be a team of professionals who rally around that common goal. A property management team should maintain the physical and financial operations of properties and work with leasing professionals to make sound near- and long-term decisions and with investment teams to provide the right guidance for either retention or disposition of the asset. All of these services, and more, are part of the asset management role that serves to protect and create value for clients.

RANDY BUDDEMEYER is Managing Director of Asset Services - Florida for CB Richard Ellis. Reach him at (813) 273-8412 or randy.buddemeyer@cbre.com.