Creating enterprise or market value in the corporate sector is the envy of every chief executive officer in the country. Enterprise value is defined as the market value of the company's common equity plus the market value of the debt less the amount of cash and marketable securities. Creating enterprise value is accomplished by a coherent policy focused on three corporate maxims; company growth and strategy and capital allocation. All successful companies and CEO's excel at these three adages and are rewarded with higher stock prices and increased equity value. In the CRE world, there is little attention paid to creating enterprise value except at the public REIT level.

Private CRE companies are the primary entities that should be immersed in creating enterprise value in their firms as they have the flexibility in corporate structure and since they are private do not have to provide financial reports to outside parties other than their lenders and investors. Enterprise value in CRE is similarly defined as above in corporate America, however, market capitalization is replaced with the owner's net equity value in the real estate assets plus the imputed goodwill or market value attributed to the real estate operating organization. The market value of the real estate operating organization is derived from its reputation, property and asset management skill, financing prowess, development expertise, management skill, fee generation, quality of personnel and growth potential.

Many real estate companies are great at creating value in their real estate assets by retenanting, redevelopment and management policies, but often overlook the value in their company's organizational structure. Most entrepreneurial real estate investment organizations whether a developer, private equity fund or asset manager are structured with a primary operating company that is comprised of most of the company's employee's, provides accounting and management services and is the face of the organization. Each real estate investment in these organizations is usually owned in various bankruptcy remote affiliated limited partnerships or limited liability companies as separate entities. Entities controlled by the real estate ownership group are usually the general partner or managing member of these investment entities and own the carried interest or the general partner's equity interest in the properties. These entities have different equity investor groups that provide all or a large portion of the equity investment along with various third-party debt financing structures. The operating entity or an affiliate usually provides asset or property management services and acts as the investor relations department for the investment entities. I have seen numerous organizations with this structure and many with more than thirty affiliated investment entities. This organization structure is very unwieldy and can be difficult to manage, especially as the number of CRE investments grow.