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
Future-proofing BUILDING COMMUNICATIONS – 5G, WIFI, CBRS, Bluetooth, In-building Wireless and More - 5/23/2019
In an ever-increasing wireless world, building owners and operators can no longer ignore the needs of a mobile society. Every day, more applications are added to our phones which include video, immersive media, wayfinding, hailing a ride, ordering food, accessing a building and more. So much of what we do relies on good wireless connectivity, and buildings must deliver the same service as the outdoor world. Over the next few years, 5G and other technologies are going to radically improve wireless connectivity and ultimately impact the communications strategy for buildings. In order to provide tenants with a 21st century experience, buildings must keep pace with this trend. This webinar will cover a wireless strategy that includes both experiential and operational issues.
As part of the IBN Technologies team, Mr. King leads the development of enterprise services definitions and business case propositions for customers and partners. Mr. King is Vice Chair of the Services Working Group in the Small Cell Forum. He came to Corning via the SpiderCloud Wireless acquisition and was formerly a lead in IT architecture and operations for Nike Inc. where he held various global roles over 10 years.
Stuart Walker Strickland is a Distinguished Technologist in the Office of the CTO at Aruba Networks with a focus on strategic planning for Wi-Fi in the context of 5th Generation cellular networks. He has been with Aruba for three years and represents its interests in 3GPP, WFA, IEEE, and WBA on issues relating to spectrum allocation, Wi-Fi/cellular coexistence and integrated network architectures.