Real Property Management_Critical Function_01.31.17
- 1. Real Property Management (RPM) The case for establishing a best-in-class Real Property Management function Adam C. Liebi, Principal Coleburn Consulting
- 2. Today local governments depend on various data inputs to support RPM. 2 Multiple Inputs, One Analysis Machine Coleburn Consulting has developed and implemented a consistent, public-facing solution that delivers and protects the value in real property by: • Establish a consistent set of value drivers and financial analysis tools • Define controls and ownership around the RPM function • Enhance your people, processes, and tools to set up and sustain this program
- 3. Why is Improving Our Real Property Management Critical? Background – a strategic challenge: Annually, there are several examples of real property deals which fall short of using best practices. In general, cities lack of cross-divisional coordination, clearly defined roles and responsibilities, and sufficient knowledge about the cumulative impact which undervalued transactions have on local economy, business development, and taxpayer value. Material issues surrounding immature property management include: Uncollected fees, rents, deposits. Occasional evictions due to poor tenant management. Some key assets sold off to private sector without assessment. Execution of too many “give-away” deals, negatively impacting comps. Languishing property assets with high maintenance costs and negative nuisance value. “Bog” effect: Cities spend so much time reacting to ad hoc deals that while they see the value of proactively improving real property management, they feel the need to do the best they can with current resources. “Jenga” effect: Improper assessments of total commitments (e.g., long-term maintenance agreements, adjacency, encroachments), and total burden to taxpayers, business, and economy. Community residents look to city administrations to manage such transactions competently. Business investors have high expectations of cities’ ability to deliver completed deals transparently, and with clear foreknowledge of the costs (time and money) and risks. 3 thingstoavoid!
- 4. Purpose and value proposition Property Management is a function of sustainability Why we need a value-based, proactive, transparent real property management solution • While Ventura’s delivered budgetary values benchmark favorably with its neighbor cities, current real estate processes are inconsistently applied, and largely dependent on “tribal knowledge”. This may result in undervaluing some assets. • A best practice is to protect, and when appropriate, maximize the value of city portfolios by mitigating transactional risks. • Enhancement of values to a more market-facing orientation is better for urban planning, attracting smart investment, and taxpayer interests. • As a desirable and affordable beach community, Ventura’s future challenges will include proactive management of real property assets in order to prevent sprawl while creating an environment that fosters residential and business value. • Ventura has significant value to protect in its property management practices. 4
- 5. Elements of a stable solution 1. Consistent, repeatable workflow and process design, with standardized documents and approvals for facilitated review. 2. Seamless decision-making facilitation, defined roles, and where reasonable, approval triggers tied to total deal dollars. 3. Valuation of the existing Real Property portfolio referencing: • FMV or Fair Market Value (Recent, viable costs per square foot) • Appropriate segregation of zoning maps and neighborhoods, developed vs. undeveloped properties • Elimination of outliers and anomalies in the portfolio • Identify and incorporate key data into portfolio management routines: • TCO or Total Cost of Ownership – itemizes an asset’s or structure’s net positive or negative cost impact to City’s balance sheet; net revenue vs. burden. • FMV or Fair Market Value of a given asset. • Opportunity cost for given transactions. What value would the City forego by acting too slowly, or not at all? What revenue is forgone? 4. Policy and procedural documents reviewed for cohesion with existing processes. 5. Stakeholder buy-in on direction. Incorporation of comments into the overall strategy and solution deployment. 6. Policy and procedural documents reviewed for cohesion with existing processes. 7. Stakeholder buy-in on direction. Incorporation of comments into the overall strategy and solution deployment. 8. A System of Record to protect the integrity of a “single source of truth”: build upon GIS or other existing systems (see appendix). Analyze • Assess existing contracts • Valuations and Total Cost of Ownership • Zone and neighborhood •Value trend analysis Plan • Budgeting alignment • Economic development alignment • Future transactions • Enhance leverage Scenarios •“What-if” scenarios • Auction and RFP analysis • Assess budget impacts Transact • Standardized workflow • Standardized documents • Standardized analyses • Deal transparency Track and Maintain • Load new and existing detail into Real Property Portfolio • Audit integrity & SOR Property Management Lifecycle 5
- 6. Web Server City Server All City Map Data Tabular Data Tabular Data Extended RPM Data Set All City Map Data scheduling analysis, reporting billing reminders GIS input app RPM data input and customization Publish to web City Property Team & Road Map System of Record (SOR) Logical Design 6 Publish to web cross-functionalworkroutines
- 7. Thank you! Coleburn Consulting is a Los Angeles-based consulting firm with the resources, know-how, and focus to implement Real Property Management (RPM) programs in your city or county. We are insured and ready to enter into an MSA to deliver results quickly and ethically, with passion, commitment, and drive. Contact us! 7 Coleburn Consulting Adam C. Liebi, Principal adam.liebi@Coleburn.com mobile: 310.995.6701
- 8. Appendix 8
- 9. RPM Case Study: Ventura, CA Ventura, an attractive coastal community with ocean views: Public Works Land Development Division has been tasked with implementing City Council’s direction provided to staff at the Sept. 12, 2016 meeting. Specifically, Amended Agenda Item No. 7, recommendation (a): “Direct City Manager to come back to Council with recommendation on how best to handle real property leases, acquisition and disposals”, per Council’s recommendation. Given the complexity of scope, intricacy and variation of cost factors, and degree of change required to fulfill this request, Public Works Land Development Division has engaged an external consultant with specific relevant expertise. A program design has been prepared in the form of a proposed Ordinance and a proposed closed-loop process. Land Development has designed a robust administrative process with controls sufficient to mitigate risk, protect real property value consistently, and expand the City’s existing property management efficiencies. Land Development engaged Coleburn Consulting based on its credentials and experience in capital portfolio management to acquire the focus, financial and technical know-how, and dedication to put perfected processes in place. Results: Coleburn Consulting produced benchmark financial analysis and risk/reward framework to measure the engagement benefits. Coleburn created City Ordinance No. 2.340.020 for adoption by City Council placing the clear administrative responsibility of the real property management function within Land Development. Coleburn gathered stakeholder input and created a sufficiently detailed Administrative Policy & Procedure No. 50.1 defining an efficient, financially rational administrative process that protects real property value transparently (as described herein). Ventura is piloting the new RPM program, workflow, and potential technology systems capabilities and measuring results against a consistent set of service levels key to time and value protection, total cost of ownership, economic ROI, trending and reporting for future decades. 9
- 10. Strategy is supported by specific tasks Maintain value of real property Enhance community dvpt Create new opportunities Sustain taxpayer confidence Mitigate transaction risk Provide smart options Cost optimization Maximizemunicipalpropertyvalueandensure againstpropertydevaluation CityProperty Efficiency CityProperty Effectiveness • Portfolio valuation, Total Cost of Ownership, Opportunity Analysis. • Buy / sell / lease decision-making. • Portfolio management, distribution of reliable data, system mgmt. • Location and zoning analysis and recommendations. • Benchmark comparisons to like municipalities. • Investment attraction consistent with charter and econ. development. • Pursue innovative uses of city real property that harmonize financially. • “What-if” analysis, budgetary planning and property planning inputs. • Publish real property portfolio for investment-attraction and planners. • Measure timely and fiscally responsible use of tax moneys & property. • Propose real action for consideration based on analysis and strategy. • Create roadmap or long-term planning prospectus for city real property. • Transaction processes and approval hierarchies clearly defined. • Collaboration and coordination with other departments. • Proactive and reactive portfolio and transactional management. • Lease, lease-back, buy, sell, sublease, property mgmt outsourcing. • Analysis tools and methods included in proposed deal summaries. • High % of real property is up-to-date in GIS and RPM database. • Reduce purchase and finance costs, eliminate wasteful maintenance associated with opportunity cost. Inputs into fact-based negotiations. • Ensure real property is transacted with economy of scale and timing. Core Function Real Property Strategy Measurable Real Property operational tasks 10