Maria Wood is senior editor of Real Estate Forum.
TORONTO-The respective outlooks toward real estate taken by the public and private sectors have switched in recent years. Due to the passage of the Sarbanes-Oxley Act, corporations are taking a closer look at how their real estate assets are used and the transparency with which they report their financials regarding those properties. Meanwhile, the public sector, which is accustomed to strict federal oversight, is taking a more equity return perspective on its portfolio.
That was the gist of an educational seminar, "Real Estate in the Era of Accountability: Public & Private Asset Management Initiatives," scheduled during CoreNet Global's Toronto Summit, which was held here from April 17-20. CoreNet is an Atlanta-based network of international corporate real estate executives.
Cathleen Kronopolus, deputy associate commissioner for real estate portfolio management, office of real property asset management for the US GSA Public Building Service in Washington, DC, said that the GSA has been under tight restrictions for many years. However, only recently has it begun to realize that the government's real estate holdings must bring a return on equity and support an agency's central function. "We may love that building, but we have fiduciary responsibilities, too," she said. Previously, the GSA was "biased toward assets." Now, an agency's specific real estate requirements drives the portfolio composition, Kronopolus said.
The GSA intends to "move properties offline that we don't need," and hold a portfolio that has a majority of income-producing assets. "We're moving in the right direction," Kronopolus said.
On the private side, Jean B. Boles, product manager for Famis Software Inc. in Irvine, CA, said that corporations are realizing the negative publicity and penalties that could come with violating the Sarbanes-Oxley Act. Therefore, she said that companies must ensure that real estate transactions are properly authorized and that properties are used for legitimate business purposes. This requires "effective management oversight of a company's real estate portfolio, comprehensive and open information, audit and internal controls," she said. Boles said that one reason many corporations may have gotten lax in their portfolio management is due to cutbacks in their financial and auditing departments. "They used to be the back-up," she said.
The session was moderated by B. Ray Summerell, vice president for corporate development for Herndon, VA-based Vista Technology Services Inc. Vista, an asset management consulting firm, has worked exclusively for the US Army and other government agencies, such as the US Department of Agriculture. Yet in recent months, the firm has started getting requests for its services from the private sector due to the increase in regulations. "Corporations are looking for best practices," he said.
David B. Baxa, president and CEO of Vista, spoke about the need to integrate real estate with a company's business mission and strategic goals. There must also be "visibility" about the financial results of a real estate portfolio. "It's all about money," he said. "You have to ask hard questions about the performance of the assets you have."
The conference was attended by about 2,000, according to Leslie Whatley, chairperson of CoreNet Global and SVP of JPMorganChase Bank in Jersey City. During the opening session, she said that the organization's research project, "Corporate Real Estate 2010," is now complete and available to members. Peggy Binzel, president and chief executive of CoreNet, said that the organization is set to launch its online knowledge database this fall and is currently beta testing its research center.
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