Have We Learned Anything From The Meltdown?
Top 10 lessons learned in real estate: Ernst & Young
Below are 10 lessons from change that have emerged for the sector, which are also quickly becoming trends for 2010. According to the report, those who take heed of this advice are more likely to continue to adapt and grow in an increasingly global and competitive real estate market:
1. Focus on capital preservation - Most real estate executives are and will continue to be concerned with stabilizing their organizations and enhancing their ability to access capital and improve the flexibility of their balance sheets. Maintaining liquidity is paramount to capitalizing on future opportunities.
2. Form strategic alliances and/or partnerships with foreign investors - Partnerships will be formed to acquire assets on a scale never seen before. Expect Canadian companies with strong balance sheets to venture into foreign markets.
3. Provide more effective risk management and protection of asset values - Real estate companies are revamping their framework to more effectively manage risk. Pricing risk appropriately will define future growth.
4. Provide an increased focus on tenants - Property owners are becoming more diligent in evaluating the creditworthiness of tenants to determine who might present a risk. In light of this, underwriting will become even more stringent.
5. Evaluate supply chain and contractors - Corporations who hire developers and construction contractors are evaluating the risks of having financially troubled contractors/suppliers who could file for bankruptcy and stop work on a project.
6. Prepare for increased taxes and government regulation - Companies are preparing for regulatory framework - around private equity investment funds in particular, as well as arranging for fuller disclosure of investment plans, asset verification and other information of interest to shareholders.
7. Control costs and streamline operations - Companies are improving their overall performance, with issues such as tying executive compensation to performance resurfacing.
8. Look at Canada's relationship with the US - While there are noticeable differences between Canada and the US in terms of macro-economic structure and real estate fundamentals, don't overlook the influence and effect of our largest trading partner.
9. Accelerate decision-making - Decisions are being made more quickly to take advantage of shorter windows of opportunity and to respond more quickly to adverse developments.
10. Concentrate on long-term growth - Real estate executives are thinking about the future. They're looking at extending their company's market reach, building relationships, thinking creatively and strengthening their management capabilities.
From my perspective one of the most important lessons on this list is number nine, accelerate decision-making. Why? As more and more opportunities come back onto the market it'll become even more important than in the past to be able to make quicker acquisition decisions because there WILL be more competition for those assets. Slow decisions were a problem in the last boom when even well heeled tenants, investors and developers seemed hamstrung by indecision and this will continue to be a challenge going forward.
How do you see your company reacting to new opportunities as they become available? Have you got a plan to be able to streamline your acquisition process when deals are put on your table?
Source: Top 10 lessons learned in real estate: Ernst & Young
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