Lesson 1 Introduction To Asset Enhancement Strategy PDF

Course : DFM Module : Asset Enhancement Strategy Module Code : BE6818 Topic 1 : Introduction Learning Objectives 1. Asset in facilities management 2. Terms about Facilities Asset 3. Concept of Asset Enhancement Strategy 4....

Course : DFM Module : Asset Enhancement Strategy Module Code : BE6818 Topic 1 : Introduction Learning Objectives 1. Asset in facilities management 2. Terms about Facilities Asset 3. Concept of Asset Enhancement Strategy 4. Concept of Asset Enhancement Initiatives 5. Options of AEI 6. Reasons for carrying out AEI 7. Discuss the considerations for carrying out AEI 8. Case Study ___________________________________________________________________ ASSET IN FACILITIES MANAGEMENT The types of assets differ for every company. Assets in a company general can be classified as: Facility-related assets (HVAC, lighting, water, and plumbing systems, etc) Personnel-related assets (vehicles, uniforms, mobile devices) IT-related assets (copiers, printers, data infrastructure, software licenses) Most assets have the following characteristics: Essential to the company. High value. Depreciating value as they get older. Require proactive management to keep its value. Facilities managers usually manage facility related assets such as the following: Mechanical Services – Firefighting systems, elevators and escalators, HVAC system (heating, ventilation, and air-conditioning systems), Gas supply system (for heating and cooking in residential buildings, or oxygen and nitrogen in hospitals), compressed air systems used in industries. Electrical Services – Power supply, backup power (such as diesel generators), emergency power (such as battery-based uninterrupted power supply) Plumbing systems – Water supply, drainage of wastes, water recycling systems, rainwater harvesting, storm water drainage. The objective of managing these facility assets is to: maximize asset/equipment lifespan. minimize costs. enhance the quality and utilization of assets. increase efficiency and improve safety. TERMS ABOUT FACILITIES ASSETS Asset class: Groups of similar assets, tracked for accounting purposes. Capital improvement: High-dollar cost to preserve a vital building function. Capitalized asset: An asset that has reached its break-even point from investment. Depreciation: The current value of an asset below the initial investment cost. End-of-life date: The planned date of asset retirement based on operable life. Facilities managers to track, manage, and maintain these facilities assets to ensure they continue to function and achieve the company’s objectives. Failing to do so means unscheduled downtime, leading to additional costs that have a major impact on the bottom line of the company. Proper management of assets contributes to your company’s growth, financial success, and promotes sustainability. Reflective Learning 1 The air conditioning roof stack on your building is 13 years old and needs extensive repairs that total $5,000. A comparable new unit is $12,000. Do you repair or replace? ASSET ENHANCEMENT STRATEGY Asset enhancement strategy is a strategy to strengthen the facilities asset portfolio by enhancing the functional and characteristic of a property so that it has a new lease of life. The enhancement of asset can be done while the building remains operational. This can be an important strategy for the developers and building operators to transform their properties into high-yielding real estate while the asset continues to be operational. The asset enhancement strategy should align with the company’s business objectives, support employee productivity, and enhance sustainability. A comprehensive approach should have the following: 1. Asset Current Assets Facilities managers should conduct a thorough inventory and condition audit of all facilities, identifying aging infrastructure, inefficient systems, and areas that needs improvement. It is also necessary to analyse how current spaces are being used so that any underutilised spaces can be identify and improve. 2. Define Objectives and Scope Facilities managers must understand the objective and scope of the company business goals such as expansion, cost reduction, improved employee well-being, sustainability improvement etc. Once this is clearly defined, facilities manager will have a good indication as to which facilities will need to be upgraded, the specific enhancements to be made and the expected outcomes. 3. Market and Feasibility Analysis Conducting a thorough market and feasibility analysis is essential before a company can proceed with asset enhancements. This analysis helps in understanding the viability of the proposed enhancements, the potential return on investment, and the alignment with market demands. Such analysis can include: Market Demand Analysis ▪ Assess the current economic conditions and trends. For example, if the demand for office spaces is increasing due to economic growth, this would support the case for enhancing office facilities. ▪ Examine the current occupancy rates of similar buildings in the area. High occupancy rates indicate strong demand, while low rates suggest a more competitive market. It makes no sense to enhance office spaces if the usage rate is low. ▪ Identify emerging trends such are hybrid working arrangement, flexible space layout, green building practices etc. For example, the increasing popularity of hybrid work arrangements might necessitate creating more collaborative spaces and hot-desking options for the workplace. Competitive Analysis ▪ Compare the company’s facilities with those of competitors in terms of design, amenities, technology, and sustainability. For example, if competitors are offering state-of-art fitness centres and high-speed internet, the company might want to consider similar enhancements. ▪ Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to identify the company’s position in the market and potential areas for improvement. ▪ For example, A real estate firm benchmarks its facilities against a newly developed smart building nearby. The smart building’s advanced HVAC system and high-tech security features are highly rated by tenants. The  firm decides to upgrade its own HVAC system and install a new security system to stay competitive. What other market and feasibility analysis should facilities manager also conduct? Tenant Analysis Tenant Needs and Preferences: Survey current and prospective tenants to understand their needs, preferences, and pain points. For instance, tenants might express a desire for more natural light, improved air quality, or better security features. Lease Terms and Expirations: Analyze lease terms and expirations to identify opportunities for negotiating enhancements. If many leases are up for renewal soon, enhancing facilities might help in retaining tenants. A property management company surveys its tenants and discovers a high demand for improved parking facilities and enhanced security measures. As a result, the company plans to build a new parking structure and upgrade its security systems to meet tenant expectations. Financial Feasibility Cost-Benefit Analysis: Estimate the costs of the proposed enhancements and compare them with the expected benefits, such as increased rental income, higher occupancy rates, and reduced operational costs. For example, installing energy- efficient systems might have high upfront costs but lead to significant savings on utility bills over time. Return on Investment (ROI): Calculate the expected ROI by considering the increase in property value and rental income against the investment costs. A positive ROI indicates financial feasibility. A commercial property developer calculates the costs of installing a green roof and finds that it will reduce heating and cooling costs by 20% annually. Additionally, the enhancement is expected to attract higher-paying tenants, leading to a projected ROI of 15% over five years. Calculate the expected ROI by considering the increase in property value and rental income against the investment costs. A positive ROI indicates financial feasibility. Regulatory and Compliance Review Local Regulations: Review local building codes, zoning laws, and environmental regulations to ensure the proposed enhancements are compliant. For example, if the area has strict green building standards, the company might need to invest in sustainable materials and technologies. Permits and Approvals: Identify the permits and approvals required for the enhancements and assess the feasibility of obtaining them within the project timeline. Sustainability and Environmental Impact Sustainable Practices: Evaluate the feasibility of incorporating sustainable practices such as solar panels, rainwater harvesting, and energy-efficient lighting. For instance, installing solar panels might reduce long-term energy costs and appeal to environmentally conscious tenants. Environmental Impact Assessment: Conduct an environmental impact assessment to understand the potential effects of the enhancements on the local environment and community.  4. Stakeholder Engagement Facilities managers should engage all the stakeholders such as the employees, department heads and management to gather input and ensure alignment with their needs and expectations. Also work with external stakeholders such as suppliers, contractors, and regulatory bodies to ensure compliance and effective implementation. 5. Design and Planning Facilities managers should consider: sustainable design by incorporating green building practices to reduce environmental impacts. Flexible spaces that can adapt to changing business needs such as multi-purpose layout arrangements. Technology integration such as implementing smart technologies for lighting, HVAC, security, and access control to enhance operational efficiency. 6. Budgeting and Financing Effective budgeting and financing are crucial for the successful execution of an asset enhancement strategy. By developing a detailed budget, securing appropriate financing, implementing cost management and control measures, the company can successfully execute an asset enhancement strategy that is financially viable and aligned with its long-term business objectives. 7. Regulatory Compliance Important for facilities manages to ensure all enhancements comply with Singapore’s building codes, safety regulations, and environment standards such as the Building Control Act, BCA Green Mark Scheme, URA’s Development Control, Workplace Safety and Health Act. Facilities managers should also identify the permits and approvals required for the enhancements and access the feasibility of obtaining them within the project timeline. ASSET ENHANCEMENT INITIATIVES (AEI) Asset Enhancement Initiatives is a term usually used when building owners and developers enhance their developments in line with their asset enhancement strategy. Compared to demolishing and redeveloping a new building, the Asset Enhancement Initiative (AEI) is a more sustainable way of giving older buildings a new life. Another opportunity for AEI projects is to use as much of the existing structures as possible. Give it a new lease by having the new look on it. That also means less carbon emissions or footprints that usually comes from energy required from concrete and steel products. AEI helps to keep their properties new, and their tenants satisfied. When the facilities are up to date, it is often easier to get positive rental reversions. Reflective Learning 2 Should companies bother doing AEI if they already achieved full occupancy rate? AEI Options Renovation and refurbishment – this include upgrading the building’s façade, common areas, and amenities to improve the overall appearance and functionality of the property. Retrofitting – this involves improving and modernise M & E services and equipment that consume excessive energy. Conversion or Repositioning – this involves changing the property’s target market by altering its usage such as converting an office building to a residential property. Expansion – this involves adding more leasable space to the property such as constructing additional floors or building extensions. Green initiatives – this involves incorporating sustainable features into the property such as solar panels, green roofs, and energy-efficient appliances. Technology upgrades – this involves incorporating smart technology into the property such as building management systems, security systems, etc. Tenant amenities – tis includes adding facilities that tenants value such as fitness centres, conference rooms and share workplaces. Redevelopment – this involves replacement of existing buildings with new structures that are more intensive in term of size, scale and quality and includes also demolishing and rebuilding. Decisions as to whether to demolish and redevelop or refurbish are complex. Building owners are often challenged with deciding between redevelopment (new build) and refurbishment (AEI) an existing building to achieve their desired outcomes and objectives. This complex decision can impact the overall project budget, schedule, and quality. The choice of asset enhancement initiatives depends on the property’s current condition, market demand and available resources. Property owners should carefully evaluate the potential benefits and costs of each option before deciding on which initiatives to undertake. KEY OBJECTIVES FOR CARRYING OUT AEI Maximising Property Value Objective: One of the primary objectives of an AES is to increase the overall value of the property. This can be achieved through renovations, upgrades, and reconfigurations that make the asset more attractive to potential buyers or tenants. Example: Upgrading the facade, modernizing interiors, or enhancing common areas can significantly boost the property's market value, leading to higher sales prices or increased rental income. Improving Tenant Retention and Attraction Objective: By enhancing the physical attributes and amenities of a property, an AES aims to improve tenant satisfaction, making it easier to retain existing tenants and attract new ones. Example: Adding new amenities such as fitness centers, improved security features, or better parking facilities can increase tenant loyalty and reduce vacancy rates, leading to more stable and predictable income streams. Aligning with Market Trends Objective: AES ensures that the property remains competitive by aligning with current market trends and demands. This could involve incorporating sustainability features, flexible workspace designs, or smart building technologies. Example: In a market where green buildings are becoming increasingly popular, integrating energy-efficient systems and sustainable materials can make the property more attractive to environmentally-conscious tenants and investors. Enhance Operational Efficiency Objective: Improving the efficiency of building operations is another key goal of AES. By upgrading systems such as HVAC, lighting, or plumbing, property managers can reduce operating costs and improve the building’s overall performance. Example: Retrofitting a building with energy-efficient LED lighting or installing smart thermostats can lead to significant cost savings over time, making the property more profitable  Extending Asset Lifespan Objective: AES aims to extend the useful life of the asset by addressing aging infrastructure and outdated systems. This ensures that the property remains functional and relevant for a longer period. Example: Replacing an old, inefficient HVAC system with a modern, energy- efficient one can prevent costly breakdowns and extend the building's operational life, delaying the need for more significant, disruptive renovations. Enhancing Marketability and Branding Objective: By improving the aesthetics and functionality of a property, AES helps enhance the building's marketability and brand image. A well-executed enhancement can reposition the property in the market, attracting a higher caliber of tenants or buyers. Example: Rebranding an older office building as a modern, tech-friendly space through strategic renovations can appeal to startups and tech companies, thereby increasing demand and rental rates. Supporting Sustainability and Corporate Social Responsibility (CSR) Objective: Integrating sustainable practices into AES is increasingly important, as it aligns with global trends toward environmental responsibility and can also attract tenants who prioritize CSR. Example: Implementing green building practices, such as installing solar panels or utilizing recycled materials, not only reduces the building's carbon footprint but also enhances its appeal to eco-conscious tenants. Ensuring Regulatory Compliance Objective: An AES often involves ensuring that the property meets current regulatory requirements, which can change over time. This includes compliance with building codes, safety standards, and environmental regulations. Example: Upgrading fire safety systems or ensuring accessibility for disabled persons may be necessary to meet new regulations and avoid penalties or legal issues. By focusing on these key objectives, asset enhancement initiatives can transform a building into a more valuable, functional, and attractive property that meets the needs of its occupants and stands out in the market. Case Study Examples in Singapore Shaw Plaza: Asset Enhancement The Shaw Plaza underwent a complete Asset Enhancement Initiatives. The AEI helped to reduce 30% of the energy consumption. By rightsizing the chiller plants and proposing the use of a net zero run-around coil for the cinema operations, over cooling is prevented. This has greatly reduced the high energy usage for the cinema halls and the retail mall in general. Other practical solutions include replacement of carpark lighting to energy saving LEDs. Examples 1. Shopping Centre Do a search on a shopping centre project and discuss the type of AEI that was carried out and the benefits it brings. 2. Office Building Do a search on an office building project and discuss the type of AEI that was carried out and the benefits it brings. Prepared by Richard Chang August 2024 Annex 1 Asset Enhancement Transforming properties into high-yielding real estate Mapletree seeks to continually strengthen its portfolio through asset enhancement – transforming properties into high-yielding real estate. At PSA Building, its ageing retail podium was replaced with the vibrant Alexandra Retail Centre (ARC) – a three-storey mall that offers a variety of retail and dining options to the working population of Alexandra Precinct and the nearby residential community. Old buildings such as HarbourFront Centre and St James Power Station likewise underwent asset enhancement. The over 30-year old HarbourFront Centre was fitted with modern eco-friendly features, and was eventually rated Green Mark Platinum by Singapore’s Building and Construction Authority. For St James Power Station, Mapletree revitalised the defunct power station into Singapore’s largest entertainment hub, and conserved its 1927 heritage façade. Mapletree also seeks opportunities to transform its industrial properties to cater to the demand for higher value industrial uses. Mapletree Industrial Trust’s Telok Blangah cluster will be redeveloped into a build-to-suit development for Hewlett-Packard Singapore, and when completed, will feature facilities for manufacturing, product and software development, as well as an ancillary office. Whereas, the Kallang Basin 4 cluster within centrally-located Kallang iPark will see the development of a new 14-storey high specification industrial building, in addition to improvement works at the existing buildings in the cluster. The commitment to enhance the value of Mapletree's assets is also extended overseas. In Japan, Mapletree Logistics Trust started an initiative to install solar panels for its properties. To date, nine properties have solar panels installed, generating an additional income stream, while enabling the tenants to enjoy energy cost savings. http://www.mapletree.com.sg/en/Our-Business/Real-Estate-Management/Asset- Enhancement.aspx Annex 2 Revamped Funan mall to open ahead of schedule by June 2019, use facial recognition technology The new six-storey Funan mall will utilise video analytics to study shopper traffic and crowd density, which will help CapitaLand to adjust tenant mix and placement.PHOTO: LIANHE WANBAO PUBLISHED SEP 28, 2018, 1:28 PM SGT Tiffany Fumiko Tay SINGAPORE - The revamped Funan mall and office complex will open months ahead of schedule by the second quarter of next year and use facial recognition technology to offer shoppers recommendations. The launch of its co-living serviced residence component lyf Funan, managed by The Ascott, will meanwhile be brought forward from 2020 to the fourth quarter of next year. These were announced by owner CapitaLand Mall Trust on Friday (Sept 28) at a ceremony to mark Funan's structural completion. Finance Minister Heng Swee Keat said at the event that the new Funan mall will be Singapore's first "online and offline mall", powered by an ecosystem of sensors, data analytics and facial recognition tools to better understand consumer shopping habits and preferences. Funan mall will be the first here to use technology such as a smart directory that uses facial recognition to provide shoppers with customised recommendations, said CapitaLand. The mall will have a touch screen directory, equipped with a camera, that can scan the faces of shoppers to sort them into general profiles such as young female and senior male, and recommend stores that target that demographic. The facial recognition function of these directories, which will also be rolled out to other CapitaLand malls, does not capture or store personal data, CapitaLand Retail's chief executive Wilson Tan told The Straits Times on Friday. Related Story New Funan to focus on fun and creativity Related Story Wild Rice's new theatre at Funan mall opens Sept 6, 2019 Related Story New Funan mall to have 24-hour drive-through for shoppers to pick up items Related Story Underground walkway will link the new Funan mall to City Hall MRT The new six-storey Funan mall will also utilise video analytics to study shopper traffic and crowd density, which will help CapitaLand to adjust tenant mix and placement. Shoppers will also be able to search for their car in the carpark using a video system that can scan licence plates. The former Funan DigitaLife Mall in North Bridge Road, which closed in July 2016, has been undergoing a $560 million transformation into an integrated development centred on lifestyle, technology, and the arts. About 70 per cent of Funan's retail space has already been leased to tenants such as Golden Village, FairPrice Finest and theatre company Wild Rice. New tenants announced on Friday include foldable bike brand Brompton Bicycle, which will be opening its flagship Singapore store, a farm-to-table restaurant concept by Spa Esprit Group and gaming store GamePro, which will host eSports tournaments in a dedicated eSports zone in the mall. CapitaLand Group's president and group chief executive Lee Chee Koon said that with the growing market share of online sales, brick-and-mortar businesses must go beyond passively selling products and services and create quality retail experiences and emotional connections. "We are taking a close examination of our retail portfolio in Singapore and abroad to identify areas for reinvention," he said. Elaborating on the use of facial recognition technology, Mr Tan said some may choose to have their faces scanned to receive personal recommendations. For instance, CapitaStar loyalty programme members who provide consent may in the future have their faces scanned to receive personal recommendations based on their purchase history. "The idea is that a retailer has a digital screen or wall that can recognise I am a CapitaStar member and have been a previous customer of that store, and the screen will be customised for me," said Mr Tan, who added that facial recognition technology may also be used for entry at Funan's office complex as well as lyf Funan. Other plans for the CapitaStar programme, which has about 920,000 members, include having data captured from receipts provided to members as insights into their spending patterns, he said. Annex 3 Great World City to Undergo First Major Asset Enhancement Initiatives April 26, 2018 Great World City is ready for its next chapter with a major Asset Enhancement Initiative (AEI). The mall in the heart of the River Valley district will undergo extensive works after nearly 20 years of service. The enhancement works will add new vibrancy, creating a more contemporary and elegant lifestyle destination at the mall for shoppers. The AEI will be carried out in phases over a period of two years, with some disruption to existing businesses in the mall. Customers will still be able to enjoy the wide variety of amenities and lifestyle services during the refurbishment. Work will commence in mid-April 2018 and is projected to be completed by the third quarter of 2020. This will coincide with the much-anticipated opening of the Great World MRT Station along the Thomson-East Coast line in 2021. Lee Yew Kwung, CEO, Allgreen Properties Limited, said: “With the revitalisation of Great World City, we are very excited to bring a new-found vibrancy to the River Valley area whilst maintaining its roots as a beloved leisure and lifestyle destination. We look forward to bringing our customers an enhanced shopping experience in the near future.” Contemporary design for an uplifted shopping experience Great World City’s façade will be refreshed to reflect an exciting and contemporary design. Entrances will have a distinctive and signature look, resulting in an impactful design statement that will welcome all shoppers. The skylights, flooring and ceiling will be updated with artistic flair and modern details. The space within the mall will be re-organised to create an intuitive flow for shoppers who can also expect new distinctive entrances that are designed to be seamlessly integrated with the mall’s brand new exterior. A reconfiguration of the interior walkways and escalators will ease navigation and improve accessibility. Shoppers will be greeted with uniquely-designed dual-level retail pods in the foyer, in addition to the shop fronts along the aisle. These uniquely-designed self-contained pods will house creative retail concepts and are one of the first to be seen in Singapore’s shopping malls. Shoppers can expect a lively and vibrant shopping experience in Great World City with these creatively-designed shop spaces. On Level 1, shoppers can enjoy a short stroll with a view of beautiful landscapes on their way to a dedicated F&B zone, located at the perimeter of the mall. F&B tenants in this dedicated zone will also trade at slightly longer hours over the weekends and on the eve of public holidays. Meanwhile on Level 2, an outdoor playground will be created near the existing pedestrian overhead bridge to keep children entertained while their parents are shopping. Great World City’s office tenants will enjoy hassle-free access to the mall, with plans to directly connect the office lifts to Level 3 of the mall. Previously, tenants had to take the lift to Level 1 office lobby before gaining access into the mall. Exciting retail concepts The mall’s new look will come with a carefully curated mix of approximately 50 new tenants, including a cluster of Japanese-focused retail and F&B tenants to cater to the Japanese community living in the vicinity. Great World City will also be ramping up its F&B offerings, from the current 20 per cent to 30 per cent of net lettable space when the AEI is completed. In addition to a diverse range of new concept stores, the food court will bring a whole-new dining concept and experience when they relocate from Basement 1 to Level 3 in Q1 2019. To better cater to the needs of the community around Great World City, Basement 1 will now feature a new food hall concept alongside other retailers and F&B operators for a marketplace experience. Improved connectivity to public amenities Once the renovation is complete, there will be three main access points from Great World City to the upcoming Great World MRT station. A new retail link on Basement 2 with extended shopping choices will provide the public with seamless access between the mall and the upcoming MRT station. Great World MRT station will be also be accessible from Level 1, and the pedestrian overhead bridge at level 2 that connects Great World City from the station. Business as usual during revamp The mall will remain open and accessible at all times during the enhancement work and tenants will continue to operate with minimal disruption during this period. Major retail, dining and lifestyle tenants such as Zara, Golden Village, Best Denki, Cold Storage, Imperial Treasure Cantonese Cuisine, Kuriya Dining and Food Junction will be unaffected and Great World City’s customers can continue to enjoy these outlets and services during the revamp.