Just what does investment, asset management and finance mean in CRE?

Leslie Biz Finance BlogCREW AchievementBy Leslie Burke, Athena Real Estate Advisors

 

Many CREW Members are engaged in some aspects of the “bricks and sticks” of CRE, whether it is property management, project management/construction, brokerage, or vendors.  But there is another side of CRE that deals with investment, asset management, and finance. Just what exactly do these gals do?

 

Investment in the CRE world means dealing with property owners. For large CRE assets, these are normally financial entities such as life insurance companies, REITs, pension funds, investment funds, or publicly-traded companies. Often times these entities own more than just commercial real estate, which is referred to as an “asset class.”

 

In the hierarchy of ownership there are often Asset Managers.  An Asset Manager’s role is to act as the owner’s representative and ensure a specific asset strategy is being carried out. The Asset Manager is responsible for overseeing property management and leasing. Asset Managers are usually very involved in the approval of the property’s annual operating budget and capital improvements. They are constantly monitoring the property’s value, and often interface with brokers regarding lease proposals or when the property is slated for disposition.

 

Often Asset Managers are responsible for “unleveraged returns,” which quantify how the property is performing at an operational level, without considering financing.  An Asset Manager is generally in charge of several CRE assets, depending on the size and complexity of each.

 

In addition to Asset Managers, many companies have Portfolio Managers as well.  Generally, Portfolio Managers are focused on risk management and overall return objectives and strategies. In a Portfolio Manager’s world, assets are viewed collectively — some assets are held for the long-term; others are acquired to reposition and sell; and some may be acquired specifically to diversify risk.

 

Portfolio Managers often take on responsibility for debt matters, such as whether to place a mortgage on the property or use a capital expenditure line (similar to an equity line of credit) to finance property improvements. Often it is the Portfolio Manager who interfaces with lenders or other providers of capital. Portfolio Managers tend to focus on “leveraged returns” (which incorporate all forms of financing), as well as distributions (how much cash can be generated by a group of properties to pay investors or shareholders).  Portfolio Managers are generally in charge of funds or large groups of CRE assets.

 

In many organizations, a separate, dedicated group handles the acquisition of CRE assets.  Known as “Acquisition Managers,” they take the lead in developing investment sales brokerage relationships and seeking out investment opportunities that match their firm’s criteria. The Acquisition Manager will locate potential assets and go through a “due diligence” process which includes lease reviews, zoning review, several different types of property inspections, valuation, contract negotiation, and legal coordination.  The Acquisition Manager “underwrites” the property, which projects how the property will perform once acquired, and what financial returns will be generated. Normally the Acquisition Manager interfaces with the Portfolio Manager and/or an internal Investment Committee, which ultimately approves the acquisition. Once acquired, a property is assigned to an Asset Manager, who then takes over responsibility for the asset.

 

In a nutshell, there is a lot going on behind the scenes in the world of CRE finance! Those CREW members who are Asset Managers, Portfolio Managers, and Acquisition Managers perform an intricate dance behind those institutional walls. All of these CRE professionals are critical to the investment process, and they are the ladies who ensure things run smoothly “upstream” for owners/investors.

 

Leslie Burke graduated from SMU’s MBA program with a concentration in real estate finance.  She has been involved in commercial real estate for 25 years and is currently the owner of Athena Real Estate Advisors LLC, a certified woman-owned firm that provides due diligence and consulting/investment services to institutions and investors.  Prior to starting Athena in 2009, Leslie worked for MetLife, Archon Group/Goldman Sachs, and Prudential Financial, where she was involved with asset management, portfolio management, and investment/finance. She has been a member of CREW Atlanta since 2004 and is a 2008 Leadership CREW graduate. Leslie served as CREW Atlanta’s Network delegate in 2009 and as the Atlanta UCREW Chair in 2010 and 2011. She was also chosen to Chair the CREW Network Recognition Committee in 2009 and was awarded CREW Network’s national “Entrepreneurial Spirit Award” in 2010. 

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Author: CREW Atlanta

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