BREM 303: Introduction To Real Estate Management PDF

# BREM 303: INTRODUCTION TO REAL ESTATE MANAGEMENT ## Week 5: Estate Management as an integral part of the organization ### Content * Learning outcomes * Recap of some key terms * Coverage of estate management * Types of estate management * Classification of properties * Factors that influence es...

# BREM 303: INTRODUCTION TO REAL ESTATE MANAGEMENT ## Week 5: Estate Management as an integral part of the organization ### Content * Learning outcomes * Recap of some key terms * Coverage of estate management * Types of estate management * Classification of properties * Factors that influence estate management in organizations ### Learning Outcomes At the end of this lecture students should be able to: * Explain the differences between terms such as land, estate, and property. * Identify the various types of estate management and properties. * Understand the scope of estate management. * Discuss the relevance of estate management in an organization. ### Some Key Terms in Estate Management A recap of some important four main terms in estate management: * **Land:** refers to the natural earth surface, subsurface, and the airspace. It includes all natural features on and below. * **Real Estate:** refers to land and all the man-made features attached or improvements made to it. * **Real Property:** refers to real estate and all the interests, benefits, and rights inherent in the ownership of real estate (i.e., bundle of legal rights attached to the ownership of a parcel of real estate). * **Management:** Management is the process of using resources of an organization to achieve the organization's goal by means of planning, organizing, leading, and controlling. * **Planning:** involves formulating goals and objectives and preparing ways to meet them by means of strategies, action plans, budgets, performance indicators, etc.). * **Organizing:** involves setting up a structure to perform, determining activities, and allocating responsibilities for the achievement of planned goals. * **Leading:** relates to staffing and involves assigning required human resources for each and every responsible activity with motivation and expected commitment among staff. * **Controlling:** includes monitoring and evaluation of activities and providing corrective measures. This fulfils of measuring the expected results and actual results. ### Coverage of Estate Management * Estate Management is traditionally recognized as a management function relating to real estate properties. * According to Stapleton, real estate management is simultaneously a generic description of a broad range of activities and a specialist technical discipline. * Estate Management activities may take place within the public sector, private sector, or under a joint venture. **Estate Management May Cover:** * **Public Estates:** * State Institutions: Ministries, Departments, Agencies. * Metropolitan, Municipal, and District Assemblies. * Incorporated Bodies: Universities, etc. * **Quasi Public Estates:** * SSNIT * SHC * **Private Estates:** * Individuals * Companies * Social Organisations * Private Joint Ventures, etc. Public or Private Estates may: * Entail properties of varied uses and of varied types. * Range from single to hundreds or thousands of units. * Be knit together or widely dispersed. * Be purely landed property or include chattels. ### Types of Estate Management * The **types** of Estate Management include: * Management of the proprietary unit. * Management of the estate management organization. * Management of specific estates, areas, or functions. * Management of individual properties. The types of estate management cut across different types of properties. ### Classifications of Properties Classification of properties for purposes of estate management can be done under the following criteria: * **Ownership:** * Public * Private * Joint Venture * **Tenure:** * Freehold * Leasehold * Sub-leasehold * Customary * **Usage/nature of development which includes:** * **Residential Property** * Luxury * Semi-luxury/middle income * Low income * Townhouses * **Commercial Property** * Eg. * **Agricultural Property** * Eg. * **Public Property** * Eg * **Industrial Property** * Eg. * **Service Property** * Eg. * **Locatio/Neighbourhood Development:** * Urban * Rural * **Other special classifications include by:** * Age * Materials Used * Technology Adopted * Value * Size of Property * Etc. ### Factors that Influences EM in an Organisation * An organization can be identified as: * Specialist or Generalist Organization * Centralized or Decentralized Organization * Effective or Efficient Organization * Real Estate (Land) is the fourth factor of production after Labour, Capital, and Entrepreneur. * An organization may have real estate assets that are part of the overall assets of a business organization. * The types of Estate Management functions in an organization depends on several factors. **Factors that influence Estate Management Function in an Organization include:** * Ownership and Management Structure of the Organization * Mission, Vision, and Goals of the Organization * Purpose of Having Properties * Economic Motive of the Organization * Asset Management Approach * Asset Utilisation and Capacity #### Ownership/Management Structure of the Organization * **Private Organization:** * Owners and shareholders in private real estate organizations. * They have clear and direct incentives to effectively monitor and control the behavior of property managers towards performance. * Managers are most likely to benefit from good performance through ownership of company shares or having their salaries linked to financial performance of the organization. * **Public Sector:** * Properties of National and Regional institutions. MMDAs (Metropolitan, Municipal and District Assemblies) and MDAs (Ministries, Departments and Agencies) are owned by the state. * The public sector finds it difficult to manage their immovable assets effectively and optimally. * Final decisions in the public sector lie with the executive which is made up of political appointees and politicians on Boards. * Strategic decisions to professional managers, therefore, flow from politicians who may not be well versed with the property market. #### Mission, Vision, and Goals of the Organization * The vision of an organization guides the organization to achieve and become what it wants to be. * **Private Sector:** The private sector exists for financial gain and profits. * **Public Sector:** The public sector's main reason for existence is basically service provision to the public. #### Purpose of Having Properties * Two distinct types of properties can be identified considering the purpose of the acquisition by means of developing, purchasing, compulsory purchasing, or gift by organizations or individuals. **Properties can be identified as either:** * **Operational Properties** * Operational properties are used for carrying out the activities of an organization and are occupied by organizational activities without letting to other parties. * **Investment Properties** * Investment properties are properties which are used fully for investment purposes by letting to other parties. * By management strategic decisions organizations may either purchase or lease properties that are required for the operations of the organization. * Management can decide to have properties not for the main business activities of the organization but by letting the property to others to earn income. * Operational property of one organization may be an investment property of other organization. * An investment property of an organization can be an operational property of the other organization which is using the leased property for its activities. * Investment properties are generally held by property investment companies (real estate firms). * #### Economic Motive of the Organization * **Private Sector:** * Basically, the private sector is profit-driven, and therefore its objectives are clear cut. * Private organizations may hold properties for cash flow reasons, tax advantages, portfolio diversification or capital gains from appreciation. * These different objectives drive the property manager's strategy. * **Public Sector:** * Immovable property is normally acquired to fulfil administrative, social, and environmental needs as well as economic responsibilities to the general public. * Returns from assets do not match the capital outlay mainly due to policy directive that emphasis on the principle of cost versus benefit. * Property Management in the Public Sector has specific characteristics which differentiate it from the Private Sector. #### Asset Management Approach * **Property Management** involves rental collection, administration, and accounting for service-related charges, landlord and tenant advice, rent reviews, and rating advice, among others. * **Asset Management** involves strategic decision making about the acquisition, holding, and disposition of immovable property. * Asset Management emphasizes the concept of portfolio activities. * Asset Management us distinct from Property Management which revolves along day-to-day operational activities concerning one particular unit of property. #### Asset Utilisation and Capacity * The **private sector** optimizes its asset by adopting measures which are integral in achieving efficiency and accountability in the management of an asset. * **The measures include:** * Property classification by functionality and financial goals. * Compilation of asset register. * Accounting for revenue and expenses as well as occupancy levels. * Valuation of property and record of liens. * Periodic assessment of financial performance on individual properties and portfolios in each asset class. * Strategizing on property acquisition, holding, and disposal. * The **public sector** generally does not optimize asset utilization and capacity potentials. * The public sector is generally known to be inefficient land and property owners and/or managers. * Public property management inefficiencies result in encroachment and illegal constructions and/or under-utilization of buildable sites. * Public sector entities are generally characterized by failure to classify properties into portfolios according to usage and form. * The public sector is characterized with inefficient use of surplus property and this negatively affects potential revenue. #### Service Delivery * **Service Delivery** is the service level provided by an asset. * Service delivery forms the basis of all asset management decisions so as to address the social, economic, and environmental needs of society. * These needs are achieved by integrating asset planning and management into corporate, business plans as well as budgetary and evaluation processes. * A service delivery strategy converts the broad aims of an organization into specific service outcomes that are adopted to satisfy the needs of society and obtain value for money. * To optimize service delivery clear assignment of responsibility and accountability need to be established for each asset and its related operations. * The public sector being nonprofit in nature seeks to achieve efficiency as well as equitable distribution of resources. * For the private sector, there is the need for measurements that address return on social investment. * For the public sector, there is a challenge between profit-motivated and socially responsible property management objectives in the public sector. * Private sector performance indicators do not fully cater for the measurement of service delivery in the public sector. **The factors include:** * Ownership structure of the Organization * Mission, vision, and goals of the Organization * Management Structure of the Organization * Purpose of having properties * Economic motive of the Organization * Asset Management Approach * Asset Utilisation and Capacity * Service Delivery ### Recommended Journals * Facilities Journal of Corporate Real Estate * Journal of Facilities Management Property Management # Thank you!