Forward Looking Information: A Requirement for Optimizing Performance
Although real estate professionals don’t have a crystal ball for predicting the future, they do have the ability to forecast what lies ahead with a high degree of accuracy and, in turn, improve asset and overall portfolio performance. The key is increasing their focus on “forward-looking information” (FLI).
FLI encompasses a wide range of familiar analytical activities including cash flow forecasting, valuations, hold/sell analysis, scenario modeling, sensitivity analysis and budgeting/reforecasting. Of course, real estate professionals have long engaged in these exercises to some extent. But, to date, most have relied more heavily on backward-looking information to run their businesses.
They have focused and continue to focus their energy and capital on: 1) collecting information about what has already happened, e.g., last year’s financials, last quarter’s leasing activity and last month’s occupancy numbers and; 2) utilizing that data to make decisions about how to manage properties in the months and years ahead.
Moreover, the historical information they use tends to be flawed because most companies unwittingly have inefficient, even incomplete, systems and processes for data management, including but not limited to siloed technology solutions. This creates significant challenges for any organization to develop an accurate view of its real estate holdings – what’s happened in the past as well as what the future may hold.
At the end of the day, though, owners, operators, investment managers and portfolio managers of real estate assets are in the business of performance optimization. This requires them to make informed predictions about future business conditions affecting how investments and assets will perform over time.
In our experience, harnessing FLI significantly helps with these predictions, which in turn, contributes to operational efficiency, leads to markedly improved asset and portfolio performance, lowers risk and enhances investor confidence and interest. A comprehensive FLI initiative can increase real estate returns by 10 basis points while also reducing expenses for portfolio management, asset management and reporting by up to 10 percent. These are compelling results for all stakeholders, especially for investors.
Today’s real estate industry leaders understand this, so they do a few things differently. They put a premium on data management, continually strengthen their analytic capabilities and are rigorous about how FLI work is operationally structured and delivered. They prioritize:
- Collection and access to quality data, based on the conviction that better information leads to shrewder decision-making and stronger business results.
- Continual review and updating of predictive work with detailed variance analysis that examines and refines inputs and processes.
- Use of automation because the complexity and repetition of FLI efforts in real estate require ongoing evaluation and the implementation of emerging technological solutions can improve standardization, speed and efficiency.
- Collaboration and elimination of silos to facilitate teamwork across departments, organizations and geographies as well as adoption of common technologies and data sources.
- Outsourcing services and/or technology platforms to support advanced analytical and forecasting capability so leadership can concentrate on more value-added work.
RealFoundations' believes that a systematic approach – one that assesses weaknesses, identifies opportunities for enhancement and then supports execution – creates the framework for improving an organization's FLI capabilities. A systematic approach considers the following:
- Strategic Direction and Executive Requirements – enterprise strategy and objectives, key forward-looking activities, stakeholder priorities and operating challenges.
- Data – quality, sourcing and governance.
- Process and Controls – FLI activities and processes, level of effort estimate, procedure review and output risk.
- Organizational Alignment – responsibility matrix, resource map and sourcing options.
- Technology Capabilities – core technology solutions, modeling tools and artificial intelligence.
This Week’s Sponsor
RealFoundations is a professional services firm focused on helping companies that develop, own, operate, service, occupy or invest in real estate make smarter, more profitable decisions. From the building itself to the way it’s developed, operated and capitalized, no firm understands the inner workings of the entire real estate ecosystem as well as RealFoundations. We work hard, we tell the truth, and we do what we say. We Make Real Estate Run Better. www.realfoundations.net
UPCOMING REALCOMM WEBINARS
Driving Tenant Engagement – Platforms, Digital Amenities…and Beyond - 8/23/2018
We can hail a car, order food, listen to music, tweet to the world, reserve tickets and buy almost anything from a smartphone – there seems to be an app for everything! The same applies to landlord provided services in an office or multifamily building. Today, building guests & occupants are opting for a digital interface for services, and tenant engagement and experience platforms are rapidly gaining traction. From easy, efficient building access to scheduling a yoga class to scheduling a meeting room to connection socially with others in the building – the possibilities seem endless. This begs the question: What digital amenities do occupants and guests really want? This webinar will examine all aspects of creating digital tenant amenities and explore different engagement platforms. Prioritizing platform features, system integration and cyber requirements are just some of the issues that will be addressed.
Jim Whalen serves as SVP and CIO responsible for the direction and implementation of technology and applications at Boston Properties, a fully integrated real estate investment trust and one of the largest owners and developers of Class-A office properties in the United States. Over a 27-year IT career, Jim has supported real estate operations ranging from residential, construction, public housing, commercial office and retail.
As Head of Global Workplace Engineering, Victor Sanchez manages over 40+ LinkedIn facilities across the globe. He seamlessly blends design and operations of LinkedIn facilities via data-driven decisions across design pre-construction, construction, energy and facilities management. Victor is responsible for the engaging and high-performance workplace that supports the diverse and dynamic LinkedIn teams and culture.
Ilan Zachar is currently Chief Technology Officer at Carr Properties, a privately held REIT known for its portfolio of trophy-quality properties in the Washington D.C. In this role, Ilan leverages vision and foresight to cross-pollinate best practices, processes, systems and resources across corporate operations/affiliates. Under his leadership, this has resulted in improvements in bottom-line costs, top-line business growth/scalability, operational sustainability and high performance and overall, strengthening his company’s role as a market leader. For over 20 years, Ilan has been executive business leader and innovative technology strategist for multinational real-estate and property development companies worldwide.
Laura Acklandiene is the Head of Business Development - Global Expansion at Equiem. She travels between London and New York on a mission to introduce their tenant experience portals and customer engagement services to the landlords and developers in the UK and in the US. Prior to that, she worked with Australia's largest property funds and REITs, as well as retail partners boosting services available to commercial occupiers.