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2 | Avison Young supplement to Canadian Property Management
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Avison Young Corporate Overview P
artner is a word that Mark Fieder uses a lot when he talks about how Avison Young approaches property management. Fieder, President and Managing Director for Ontario, says that to be a partner in the complex real estate market today takes comprehensive expertise in investment sales, leasing, property and project management, consulting, and financial services. Avison Young, he says, brings property owners expertise in all these areas. “We recognize that strategic solutions rely on insight and understanding that accrue through experience,” says Fieder, who adds, “By deploying a full-service solution executed by a best-in-class team of experienced professionals, we are able to capitalize on real estate opportunities that benefit our clients over the long term.” Fieder feels this integrated, fullservice approach is the recipe that makes Avison Young stand out, bringing its clients superior results.
Experienced Player Toronto-based Avison Young, founded in 1978, is a full-service commercial real estate firm with offices in Toronto, Vancouver, Calgary, Edmonton, Lethbridge, Regina, Winnipeg, Mississauga, North Toronto, Ottawa, Montreal, Quebec City, Halifax, Chicago, Atlanta and Washington, DC. Along with property management, Avison Young specializes in leasing services, property acquisitions and dispositions, corporate advisory services, mortgage financing, consulting, and research. Regardless of the scope of services a commercial property owner requires, Avison Young builds the partnership and delivers the services while thinking like an owner. It is a client-centric approach. In December 2008, Avison Young acquired Torontobased Darton Property Advisors and Managers, 4 | Avison Young supplement to Canadian Property Management
bringing it a highly experienced property management team. Today, Avison Young is Canada’s largest independently owned commercial real estate services company, representing 30 million square feet of retail, industrial, and office properties across the country.
A Client-Centric Structure Avison Young is owned and operated by over 66 active principals in 17 offices across Canada and the United States. Fieder believes that the unique corporate structure delivers significant benefits to clients, saying, “Our principal structure means that an owner in our business is looking after our clients’ business, and that their interests are well served because our best talent participates in the ownership of the firm, and is focused on forging long-term relationships with our clients.” Along with a client-centric corporate structure, another thing that sets apart Avison Young apart is that it is purely a third-party manager, with no property of its own. “We are purely focused on our clients’ needs,” says Peter Leroux, Executive Vice President & Managing Director of the Asset Services Group. Leroux is clearly enthusiastic about his business, nodding his head as he says, “We truly do like what we do.” He says that property managers with the company have on average at least 10 years of property-management experience, while members of the senior management team have 20-plus years of broad-based experience.
Partner Philosophy The belief in partnership permeates the culture at Avison Young. Leroux says the Asset Management Group partners with other divisions within the
company, with clients, and with suppliers. He feels the philosophy truly sets Avison Young apart from other companies in the field. “We view ourselves as a collaborative group with our clients: we go in and we really are an extension of their organization,” he says. Elaborating on the relationships with suppliers, he says, “Our service providers are more than just contractors to us.” That means helping cleaners, waste removal, and security personnel see themselves as important team members. “We view them as an integral part of our service delivery,” he says, even though they are not on the payroll. “They report to us, they become part of us,” he says, adding that such supplier relationships are longstanding.
Growing Value for Owners Leroux says that with all property management, the ultimate goal is to maximize owner value in both the short and long term. That means managing cash flow, planning capital expenditures, negotiating good rates on services, staggering lease expiries, determining the optimal tenant mix, and analyzing leases for costs that can be recouped.
REAL ESTATE Management and More Along with property management, Avison Young provides property owners with quality and timely market information and custom data—the sort of information needed to set goals and make timely decisions. The company obtains information from comprehensive market surveys and analyses derived from a number of external and proprietary databases. “Avison Young is proud of its investment into our research, market and client services group,” says Fieder, who notes that the company can offer national and global forecasts, Canadian market trends, local market tracking, and articles on major real estate developments ensuring data is comparable across markets. Yet that data alone is not enough. “Data is table stakes in today’s real estate industry,” says Fieder, adding, “It is what you do with the data that counts.” It is the strategic solutions. Avison Young clients, he says, rely on its acumen and counsel to help frame real estate strategies that meet their needs today— while establishing a strong foundation for the future. Along with market intelligence and strategies, Avison Young helps owners manage projects. Fieder explains why many clients are attracted to this service: “Occupiers and owners of real estate are finding themselves responsible for significant financial investment in capital expenditures. This leaves many clients out of their field of expertise. We protect our clients’ interests by making sure that specifications are delivered on time and on budget.” Good project management, he says, means working closely with property managers and tenants, and engaging Avison Young’s consulting and advisory staff to protect clients from cost overruns and delays.
Leroux says Avison Young service has three key pillars: “It’s really our people, it’s our systems, and it’s our experience.” He points out that the systems are more than just financial reporting systems: the company offers clients a strong system-based approach to tasks such as taking over property, yearend billing and adjustments, and how employees are trained. Together, those three pillars allow Avison Young to partner with clients. “We become an extension of our clients, and become part of their organization,” he says. “We bring a great host of services to clients,” says Leroux as he talks about asset management, brokerage, research, and consulting expertise. “We can do so in an integrated, cohesive fashion,” he adds. By having internal divisions that partner together, Avison Young makes itself a stronger partner for its clients.
www.avisonyoung.com 2010 | 5
THE AVISON YOUNG TEAM (clockwise from top left): Steve Harris (Senior Vice President), Peter Leroux (Executive Vice President, Managing Director, Principal - Real Estate Management Services) Steve Ichelson (Vice President, Operations), Susan Rusell (Vice President, Finance) and Gary Hudson (Executive Vice President)
6 | Avison Young supplement to Canadian Property Management
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Experts in Managing Data
...and Helping Customers Understand it
"W
e don’t believe it should always be about technology,” says Susan Russell as she explains how Avison Young approaches the accounting and reporting side of its business. Technology and reporting, she says, are fairly standard in the propertymanagement sector. And while both are extremely important, Russell, Vice President of Finance, says reports provide building owners with little value when not accompanied by competent interpretation.
Peter Leroux, Executive Vice President & Managing Director of the Asset Services Group, frames the importance of accounting know-how for property owners by saying, “If you have a property manager and an administrative assistant, the accountant is the other vital component of that team. Our accountants actually understand the business we’re in.”
“It’s all about keeping in touch with the client,” she says, pointing out that sophisticated reports do not help a client who cannot interpret them. “We are an extension of their business,” adds Russell as she describes how her team of accountants reaches out to give property owners advice and explanations.
Russell says accounting team members at Avison Young stay on top of developments in software and reporting, something that starts at the top. “I believe that I should know all the systems,” says Russell, who then feels qualified to see that support staff are trained properly.
The focus on personal interactions is rooted in a simple fact: computers do not think. “You can spit out t o n s o f re p o r t s , b u t i f t h e re i s n ’t s o m e o n e knowledgeable who can answer questions, how do you know whether a report is right or wrong?” she asks, adding, “You still need experience behind it.”
“If someone comes to us and we don’t have the in-house platform, we look at going into their systems to use their platform,” says Russell as she describes inputting data into systems and uploading budgets. “We try to be very flexible with the client,” she adds.
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Avison Young Accounting Services
While the accounting team makes itself available to property owners, it is there for Avison Young property managers too. “Not only do we have to provide clients with customized reports, but our managers too—so they can discuss them with our clients,” says Russell, who sees a big part of her team’s role as providing property managers with reports and insights. Russell gives the example of a property manager explaining a variance analysis to a client, while having an accountant on hand to help explain the rationale. “The accounting group and the management group aren’t separate,” she says. Accounting, once a hidden, back-room function, says Leroux, has moved to the forefront of what prospective clients want to hear about. “Now its right up there,” he notes.
"If you have a property
manager and an administrative assistant, the other vital component of that team is an accountant. And our accountants actually understand the business we’re in.
"
Client-Centric Accounting Mindset Russell says accounting team members at Avison Young have to be more than accounting experts— they also need to hone their property-management smarts. “They actually read the leases,” says Russell as she talks about the knowledge it takes to make the best recommendations, adding, “They know the properties, they see the properties.” Such property-management smarts help Avison Young accountants maximize value for property owners. A simple example is analyzing leases for inclusion of expense items so clients do not miss recoveries. “You want to maximize the recoveries in accordance with the lease,” points out Russell.
Alongside property management expertise, good accounting services require looking ahead to see what is on the horizon. Russell gives the example of the forthcoming HST in Ontario. Her team must understand how it can affect both property managers and owners. Her goal is to provide HST answers before clients even ask the questions.
What’s Happening in Accounting With an increasing number of institutional property owners, the demand for accounting expertise has increased, with a trend towards more comprehensive, frequent, and broader analysis. Pension funds, private investors, and asset managers all have different requirements. “We provide a standard set of reports, but we also customize depending on the needs of the client,” says Russell, who also points out that today, smaller clients can greatly benefit from reporting capabilities developed for institutional owners. While client type affects how Avison Young prepares reports, so does asset class. Retail owners require different analyses than office and industrial ones, says Russell. Cash flow is on everyone’s mind today. “It’s not just about looking at an income statement,” says Russell as she explains how her department works with clients to maximize cash flow. “Cash management is a big component of our business now,” she says. One of the biggest changes in accounting is that it is now on the radar of property owners. Steve Ichelson, Vice President of Operations, says, “When we go out and do a pitch to a client, one of the things we bring with us to the first meeting is our accounting package.” Leroux, too, notes a dramatic change in the business over the past few years, saying, “Reporting requirement is equal or more important than our physical management of properties.” And he thinks Avison Young is in the right place when it comes to reporting. More than technology, it is the personal touch that the group provides clients. “Our clients, as often as they call the property manager for a question, they’ll call the property accountant. Our accounting group really sets us apart,” exclaims Leroux. www.avisonyoung.com 2010 | 9
Experts in the Industrial Sector
"I
t’s a people business: we manage bricks and mortar, but it is all—all—relationships,” says Gary Hudson as he talks about industrial property management. Hudson, Executive Vice President at Avison Young, continues, “We have a tenant retention culture that’s based on responsiveness and communication.” That culture means calling back tenants even if there is not yet a solution to a problem, simply to let the tenant know he has been heard. Hudson says that institutional ownership trends in real estate mean that many clients are more involved in the management of their real estate than in the past. In response, he says, Avison Young tailors its services to the style of the owner. “We have developed client-specific service teams,” he explains. Many clients, says Hudson, interface with all levels of those Avison Young teams. “They’re accessing our organization at almost every level,” he says, listing off field representatives, managers, and property
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accountants. Some clients even like to have a line to people on the site, he says. That is a lot of relationships— and Hudson likes that.
Avison Young in the Industrial Sector Hudson says that Avison Young helps industrial property owners create a plan based on more than just numbers. “We’re fortunate if we can be involved in the due diligence process,” he says, explaining that such preliminary involvement is the right place to start for an asset plan. “Quite often there will be hidden gems in leases,” he says as he points out that no plan is complete without complete scrutiny of such documents. Discrepancies in measurement standards, for example, can mean value enhancement opportunity there. There can be hidden liabilities too: “There may be clauses in those leases that restrict the landlord’s ability to recoup costs,” he points out, adding it is important to earmark such clauses for review at renewal time.
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Good planning is an interactive process that helps Avison Young understand what clients want. “We can find out how integrated they want their services to be,” explains Hudson, adding that some customers want only property management, while others want leasing services, lease administration, and project management too. He likes to establish that at the beginning of a relationship so there are no surprises. “Then we can mould our operation to provide it,” he says. The planning process also involves a look at ways to generate additional revenue. There may be space for another building, or space in which to park trailers. “Knowing where to look and how to earn enhanced revenue is a big part of the planning process,” says Hudson. Any plan, says Hudson, must be predicated on the owner’s goals and time horizon. For example, capital expenditures should be timed to ensure payback—and if the sale of a property is imminent, it might cost less to negotiate the expenditure with the purchaser.
Standing Out With people nervous about the economic outlook, says Hudson, cost compression—creative belt tightening—is common. “A lot more people are not taking costs at face value: they’re challenging them,” he says. He likes that because it gives Avison Young the chance to interact more with tenants, by engaging them in the budgeting process where possible. Tenants really appreciate knowing what is coming down the track he says, and getting buy-in before expenses occur is an important part of building lasting relationships. “They’re a part of the process,” he says. Another way to control costs is by capitalizing on the synergies from which a larger property manager such as Avison Young benefits. Hudson says that there can be considerable savings in areas such as snow removal, landscaping, fire and life safety programs. “We’ve got that critical mass,” he says. Managing properties in the acutely cost-conscious industrial sector, says Hudson, is not like other sectors. “It is a true commodity,” he says. Peter Leroux, Executive Vice President & Managing Director of the Asset Management Group, notes that there is an ongoing correlation between occupancy cost and output cost that 12 | Avison Young supplement to Canadian Property Management
has to be factored into products. So occupancy cost is very much a factor of profitability.
What’s Happening in the Industrial Sector While green initiatives are hot in the office and retail sectors, in the cost-competitive industrial sector they must first translate into concrete savings. Hudson says many people are still taking a wait-and-see approach to get a better understanding of the economic returns. He has noticed a drop-off in speculative building. “That type of activity has almost ceased,” he says, noting that most building in the sector is now design build. As companies move into new design-build facilities, the resulting vacant buildings have brought about some new opportunities for repositioning. “Asset owners who have bought vacant buildings are
"It's a people business: we manage .brick and mortar, but it is all-all- .relationships." looking to reposition them, perhaps into multi-tenant opportunities,� he explains. In some cases, he has seen industrial buildings condominiumized into smaller 1000-1500 square foot units. Along with repositioning into multi-tenant buildings or condominiumized industrial units, Hudson notes that some industrial buildings have the potential for conversion into office space. The reason, he says, is that many companies are moving their offices from vertical city-
centre buildings to former industrial space, which costs less. Call it the gentrification of former industrial lands. “The horizon in the sector is very short,� notes Hudson, as he talks about the current situation in the industrial property market. Tenants are looking for immediate access to space, but on a short-term basis. For a management company such as Avison Young, he notes, this means a lot of churn, but luckily, his company has the experience to deal with that.
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Experts in the Retail Sector
I
n an office building you can hide a vacancy, but in retail you cannot. That can be a problem, says Peter Leroux, Executive Vice President & Managing Director of the Asset Services Group at Avison Young, because it takes consumers mere seconds to form an opinion of a shopping centre. “Retail property management is not just about collecting rent,” says Steve Harris. According to Harris, Senior Vice President, good retail property management means getting out, walking around, and having day-to-day contact with retailers and customers. “It’s hearing too,” adds Leroux, who says simply listening out for shopper reactions to goings-on in the mall is a good starting point for market research. “Your customer will provide you with direct feedback if you’re paying attention,” he says.
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Avison Young in the Retail Sector Along with knowing what is going on in a retail centre, managing retail property well requires a plan. Harris says that one element of such a plan is an operating budget that analyzes capital expenditures and exposures such as lease expiries. But a good plan goes beyond a budget to look at the surrounding retail landscape, giving insight into how a shopping centre fits into the neighbourhood. “We then take it to another level and evaluate the retail mix,” says Harris, explaining the importance of identifying strong and weak retailers—figuring out the stars and dogs, he says. Doing so allows Avison Young to help develop a retail mix that strengthens the shopping centre.
Leroux points out that Avison Young often performs specialized market research such as customer surveys. “It allows us to understand the property from the perspective of the consumer,” he says. And that in turn is useful information when seeking retailers who meet the expectations of the market. “Until you go out and survey the marketplace, you truly don’t know. It’s quite surprising at times,” adds Leroux. Such research also helps ensure the selection of new tenants who do not cannibalize the existing ones. Gary Hudson, Executive Vice President, points out that the retail landscape is vastly different from other property classes because it is not truly a commodity: a property owner can really only charge rent based on what a tenant can sell. With that, says Hudson, retail property management takes on aspects of a partnership, with the property manager keenly interested in store sales because that influences rents. “Rents are only as good as we can help tenants achieve sales,” he says. The retail property manager is as concerned with good retail sales as he is with good rent. “It’s all about sales,” he says. When tenants flounder, Harris says there is more to consider than the monthly rent cheque: there is the possibility of vacant space, and the impression that gives to shoppers and prospective retailers. Harris says management must consider the effects a vacancy at that time would have, and whether a tenant is viable in the long term.
Standing Out Retail property management, says Harris, requires a combination of good experience and great people skills. That is what he thinks makes Avison Young shine. “It’s our people,” he says, adding, “Our managers are very experienced.” Those people skills foster relationships beyond property owners. Harris explains that retailers are customers too, saying, “Retail is very much about relationships and all of our property managers have great relationships with our tenants and clients.” Good property management, along with strong interpersonal skills, requires lots of experience. Amongst Avison Young’s current roster of retail property managers, nobody has less than 10 years experience. Harris says managers work from the bottom up so that they fully understand the business. The rationale is simple, he says: “As a fee manager, one of the things you have to do is provide the client with experienced people.” A large team of experienced management professionals gives Avison Young a full slate of relationships with national
and regional chain stores, food anchors, anchor tenants, and independents. Harris explains that if a client has issues with a retailer, chances are that Avison Young already has a relationship with that retailer and can help.
"Good retail property management means getting out, walking around, and having day-to-day contact with retailers and customers." What’s Happening in the Retail Sector Harris says that beyond good retail stores, consumers today are looking for a shopping centre to provide a satisfying experience. That is a good thing, he says, because it means retail property managers can encourage consumers to stay on the premises longer: it means planning for shopper comfort by including features such as seating areas, where the customer can have an enjoyable stay. “Quality elicits a sense of comfort and confidence and it makes it a destination where the consumer wants to shop,” he explains. Planning to make the retail experience pleasurable is a smart business move for another reason. Leroux points out that the Internet has changed the game. Many shoppers, especially younger ones, will research a shopping centre before visiting. “Today, the consumer researches before going shopping,” says Leroux, explaining that people often establish ahead of time what stores they will visit, and see how the mall is laid out. Beyond online ordering, he says, the Internet has dramatically altered retail. It can take shoppers mere seconds to form an opinion of a retail setting. To make sure it is a positive one, Harris says, Avison Young places a great deal of emphasis on a clean and safe environment. “The cleaning and security components of a shopping centre are very important,” he says, adding, “We make those service providers an extension of our organization.” The result is a team of people on the ground who communicate problems to management. More than collecting rent, good retail property management means knowing what is going on. And that is a lot easier when good relationships open up the communication channels with retailers, shoppers, and service providers alike.
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Experts in the Office Sector
" Avison Young philosophically believes that to be successful today, you have to bring an integrated approach to management, which in turn provides the real estate solutions that clients are looking for."
"H
e’s the constant: he’s the face of the building,” says Steve Ichelson as he recalls a reluctant office tenant who turned down renewal overtures from the building owner’s leasing agent. But then the tenant called the Avison Young building manager and said he was ready to talk. Ichelson, Vice President of Operation at Avison Young, says that is the sort of iron-clad bond that his company builds with clients and tenants alike—and it is the sort of touch that can affect the way tenants and prospective tenants view a building.
16 | Avison Young supplement to Canadian Property Management
Peter Leroux, Executive Vice President & Managing Director of the Asset Services Group, explains how that reluctant office tenant represents what his company offers office clients, saying, “Avison Young philosophically believes that to be successful today, you have to bring an integrated approach to management, which in turn provides the real estate solutions that clients are looking for.” In short, good real estate management must go beyond the traditional narrow scope of management to include things such as working with other brokerages, becoming involved in research and analysis, and—as with the reluctant tenant—creating relationships that move business forward. Leroux adds, “We see our job as being co-ordinator: we co-ordinate and we produce the results.”
Avison Young in the Office Sector Managing any asset well takes a plan, and planning from the bottom up with numbers is a common approach. But Ichelson thinks that approach invites lost opportunity. “We look at a building on a top down basis,” he says, explaining that means considering things such as capital, how the office building fits into the market, operating costs, and competitiveness. “We don’t just take a list of expenses and say, ‘Here’s what it would cost to operate your building,’” he adds. Leroux likens a good plan to a financial snapshot of the coming year and years to come—helping building owners see revenue streams, foresee expenses, exposures, and budget for capital requirements. “It gives them a good financial snapshot of what to expect out of the property for the year and for the coming years.” This sort of comprehensive approach is important, he says, to weed out hidden costs and expenses. One key consideration in such a top-down approach is analyzing upcoming holes in leasing. For example, if most of the leases in a building expire in the same year, the owner has a higher level of risk, something that makes lenders nervous. In this sort of case, says Leroux, Avison Young can help building owners devise a lease-expiry plan that makes financial planning more predictive. If it makes sense, some leases might have five-year renewals—or maybe even seven. Done right, says Leroux, it becomes easier for the owner to obtain financing on a property, and even makes the property more saleable. Ichelson talks of a building where Avison Young restructured the building’s leasing profile so that every three years one third of the leases were due for renewal. A good top-down plan requires looking at what competing buildings are doing, and then gauging their numbers. “Is there a perception in the market that the building is tired and out of date?” asks Ichelson, adding, “All of that becomes the basis of plan that isn’t just dollars and cents.” Underlying all planning is a central assumption, says Leroux: Every property purchased is an investment on which someone, at some point, will wants to realize gains. That means a plan must be tailored towards the investor’s time horizon.
Standing out Avison Young places a heavy emphasis on a team approach to meeting customer needs, drawing upon all the resources available to Avison Young clients, including
market research, leasing, and consulting services. “With our integrated approach there is a greater depth of property-management knowledge from which customers can draw,” says Ichelson. Leroux points to another way the company fosters communication, saying, “We don’t have a call centre.” Throughout the day, tenants interact directly with the management team. Leroux likes that approach, noting that it fosters an ongoing dialogue. “The beauty of that is they call for one thing and you can talk to them about something else,” he says. Not having a call centre does not mean that the company is averse to technology. Avison has an online dispatching and work-order-management system that allows tenants to enter work orders via the Internet. But Leroux is emphatic that people do not have to use the online system: they can also call the property manager, send an e-mail, or just drop by the management office — whatever is most convenient. When it comes to those phone calls, Ichelson likes to point out that there are not layers of management between building operators and senior management. “It’s very easy to reach one of us,” he says. In many cases, he adds, the management team at Avison Young has tenant relationships that stretch back 15-20 years. “The president of a company can pick up the phone and call me because it’s taken too long for a light bulb to be changed—and I don’t mind,” he says.
What’s Happening in the Office Sector While green buildings are not new—energy savings and reduced carbon footprints have been hot for a while— Ichelson says that the notion of green workplace environments is just starting to catch on. “Five years ago, when I was talking to clients it didn’t matter to them,” he says. But that is changing, he says, as people realize that a green workplace can mean fewer sick days. “It’s more than just how much electricity and water you saved,” he says, explaining that the trend now is to equip buildings with better air circulation and filtration systems. It is more than a feel-good measure, he says: green means more productivity, and that positively impacts the bottom line. Leroux says relationships make Avison Young stand out in the office sector. “Our goal as managers is to make sure that no tenant leaves the client because they are dissatisfied,” he notes, adding he has had tenants approach him when they outgrew their building, wanting to know if there was another Avison-Young-managed building nearby. It is this sort of iron-clad relationship that helps Avison Young produce results for owners. www.avisonyoung.com 2010 | 17
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Do you know the square footage of your roof areas? In what years were your roofs installed and do you have warranties in place? What was the expected service life of your various roofs? What is the remaining service life of your roofs? What factors were taken into consideration in deciding on the roof system installed? Have you scheduled semi-annual inspections of your roofs? Do you have a roof management plan in place? What is the estimated replacement cost of your roofs? Do you have a financial plan in place for roofing expenditures?
Well, how did you do? Don't worry if you didn't have all the answers - most owners and property managers are not able to answer all the questions - but they certainly can have this information at their fingertips if a comprehensive roof management plan is in place. Developing a plan can be a little intimidating, but with the assistance of a qualified independent roof consultant, the process can be easy. Log on to www.dycon.ca
PROUD TO SERVE AVISON YOUNG PROPERTY ADVISORS & MANAGERS 20 | Avison Young supplement to Canadian Property Management