The relationship that exists between ownership and asset management can vary widely from one property to the next and from one business approach to the next. Some owners are extremely hands-on in the operation of their properties, some are not. Some asset managers are focused on particular components of a property’s operation, some are not. Each of these variables plays an important role in maximizing the benefit to all concerned. Ultimately, Ownership and Asset Management must take the time to understand one another as well as possible, in order to achieve the best possible results for everyone.
Sounds simple, right? When Ownership retains Asset Management expertise, it is with the specific purpose of improving the performance of an asset/assets. Simple as this seems, it is exactly within this statement that the potential exists for confusion. How so? From the outset of the relationship, Ownership must make clear its priorities for the asset(s), as well as its short and long-term goals for the asset(s). It cannot be assumed that “improved performance” is enough of a direction to enable Asset Management to set off on its assigned task. Included in, though not limited to, the key points that Ownership must communicate Asset Management throughout their partnership are:
History: Summarizing the history of the asset in terms of its positioning, its performance, its strengths, its opportunities, etc. is extremely important. This not only provides a benchmark from which Asset Management can work, it also provides a particular view on these important components. Ultimately, it may be determined that there may be a ‘difference of opinion’ on some of these topics between Ownership and Asset Management. This is not necessarily a bad thing, and may represent additional opportunities for growth.
Goals: It is crucial that Ownership has goals for its asset(s). Once these goals have been established, it is important to distinguish between short-term and long-term goals, as these may not be one and the same. A certain level of financial performance is always the number one goal, but there should be others along the way. For example, how is the asset perceived in the marketplace? What is the reputation of the asset in the eyes of the customer? Might there be a longer-term plan to make significant physical/capital changes to the asset? Every bit of this information is vital to Asset Management so that they can formulate, and then update as necessary, their strategic plan to maximize the returns against these goals.
By the same token, Asset Management will always have its own responsibilities to ownership, once again never as broad as simply “to improve asset performance.” As a start, included here are:
Communication: It is the responsibility of Asset Management to communicate clearly and frequently to Ownership, in both written and verbal formats. Whether in the form of monthly/quarterly summary reporting or in the form of bi-weekly conference calls, meetings, etc., the onus is on Asset Management to drive the communications process in this relationship. Ownership has placed its trust in Asset Management to oversee its properties; Asset Management must always take the lead in managing this relationship and in fulfilling the informational and financial requirements of Ownership.
Strategic Planning: Asset Management is typically retained to provide a level of expertise to Ownership that would otherwise not exist in the operation of Ownership’s properties. An important piece of this expertise lies in the realm of Strategic Planning. It’s important to note; Asset Management is not Property Management; in the majority of cases, Asset Management works with Property Management to support the day-to-day operation of the asset. Property Management will always have the ultimate responsibility for delivering and executing the Strategic Plan, but it is vital that Asset Management plays a proactive and contributory role in this process. In certain cases, Asset Management will supplement Property Management’s Strategic Planning efforts, while in other cases, Asset Management will draw from its own unique expertise to drive a Strategic Planning process that Property Management will need to embrace. Ultimately, however, Asset Management must either verify or challenge the strategic plan that is proposed by Property Management.
At the same time, Ownership may have its own Strategic Planning process in place as it relates to its assets. As much as is practically possible, Ownership’s and Asset Management’s Strategic Planning efforts need to be in sync with one another. While this may seem obvious, it is not necessarily so. In most Ownership/Asset Management relationships, non-disclosure agreements are in place, so it is possible for information to be shared relatively easily amongst the parties. Knowing this, Ownership needs to be diligent in communicating to Asset Management any changes, updates, or uncertainty relative to ongoing strategy. The best Asset Manager is an informed Asset Manager.
Most important is for both Ownership and Asset Management to recognize the importance of one another’s ongoing investment in their relationship. Ownership expects certain measurable results, and Asset Management expects information and support to ensure the achievement of those measurable results. The route to overall success of this relationship, and its associated assets, must always be a two-way street.