MODUS Asia Edition Q3 2015 by ROF Media

MODUS ASIA Q3 2015 RICSASIA .ORG

Q3 2015

ricsasia.org/modusasia

IN THIS ISSUE CULTURE COSTS

Should Asia’s heritage assets pay their way? / 16

DREAM TEAM

The art of international business partnerships / 26

STEP CHANGE

Real estate investment trusts: new frontiers / 38

A LIGHT IN THE SHADOWS How a global ethics movement is building a brighter future / 32

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Contents MODUS ASIA Q3 2015 RICSASIA.ORG

“I don’t see much downside to creating an international ethics standard. It will give investors more confidence, which means they will travel more, interact more and invest more”

06 DIFFERENCE OF OPINION Do Chinese developers have a coherent overseas investment strategy? We hear two points of view 07-15 NEWS IN BRIEF Essential industry news, advice and information for RICS members 08 THINKING: PETER CHURCHOUSE Where do Chinese-listed real estate stocks stand after a period of frenzied activity in Shenzhen and Shanghai? 13 PRESIDENT’S COLUMN Louise Brooke-Smith FRICS looks back on her year in office

Foundations

Features

Intelligence

KATHY TSAO, ASIAN REAL ESTATE ASSOCIATION OF AMERICA ETHICS, P32

16 PAYING FOR KEEPS Realising the commercial potential of Asia’s heritage properties

44-45 CAREERS Video interviews – don’t fail your screen test; Turner & Townsend’s Chris Carr MRICS

22 CULTURE CLASH Mind your language – and your manners – on those cross-border projects

46 BUSINESS Seamlessly move your office’s IT function

26 HOWDY, PARTNER Forging cross-border relationships 32 COVER STORY An international coalition is shedding light on the world of ethics standards 38 THE REAL DEAL Could real estate investment trusts be the solution for struggling economies? 42 BARANGAROO BOUNCES BACK How an old container port is being turned into Sydney’s newest business district

47 LEGAL 101 When is a project really complete? Make sure to tie up all your loose ends 48 BRAIN GAIN Take a corporate finance primer 50 MIND MAP Aedas global chairman Keith Griffiths ponders China’s urban future PLUS 48 Events

Views expressed in Modus are those of the named author and are not necessarily those of RICS or the publisher. The contents of this magazine are fully protected by copyright and may not be reproduced in any form without the prior permission of the publisher. All information correct at time of going to press. All rights reserved. All submissions are edited. The publisher cannot accept liability for errors or omissions. RICS does not accept responsibility for loss, injury or damage or costs that result from, or are connected in any way to, the use of products or services advertised. All editions of Modus are printed on paper sourced from sustainable, properly managed forests. This magazine can be recycled for use in newspapers and packaging. Please dispose of it at your local collection point. The polywrap is made from biodegradable material and can be recycled.

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Feedback USEFUL RICS NUMBERS CONTACT CENTRE +852 2537 7117 Enquiries / APC guidance / Subscriptions / Events / Training / Bookshop REGULATION HELPLINE +852 2116 9713 CONFIDENTIAL HELPLINE +44 (0)20 7334 3867 DISPUTE RESOLUTION SERVICES +44 (0)20 7334 3806 UK SWITCHBOARD +44 (0)20 7222 7000

RIDING TO THE RESCUE Sir, In the Q2 2015 edition (feedback, page 5) Nick Hanson wrote to express his concern, and that of his peers, on the “significant lack of information relevant to the quantity surveying profession” in Modus. May I respectfully suggest to Mr Hanson and his peers that they consider generating such articles themselves, by bringing matters of interest in the quantity surveying profession to the attention of the Modus editorial team. Modus is one of the few magazines I always read as I enjoy the diversity of its content and I have, in the last year or so, initiated articles on heritage conservation and property asset health management. It is our magazine and it’s up to all of us to contribute to sharing matters of interest. Michael J Moir FRICS, director of property, Hong Kong Jockey Club WORDS OF WISDOM Sir, At present there seems to be a great motivation to improve building methods, but most improvements have been made already, in the late 1970s. There are a couple of reports that are very specific about the way to proceed. The problems are politics, corruption, conflict of interest, ignorance, greed and the search for power. Until the day these are swapped for wisdom at the centre of a table of discussion, we will keep returning to the same problem. There is no place for discussions about direction of actions emerging from these tables if there is no wisdom. Business leaders need to show wisdom if they want to move things forward and avoid critical mistakes. Cynthia Morales Castillo, Corporate Innovation for Construction, Edinburgh

Join the debate Do you have a comment about this issue of Modus? Email your letters to editor@ricsmodus.com. If you would like to contribute to future articles, please contact us first to discuss your idea

@RICSAsia // #RICSmodus @BettySMellor @RICSnews #ricsmodus Great article on Out of Office Assistance. Flexibility of home working: brilliant, face to face meet ups: essential! @reachaashish Wow @RICSnews: China ready to plough £150bn into UK infrastructure by 2025: (p.10) #RICSmodus @AlexGrocott1 @RICSnews Just cut my finger opening up the latest issue of Modus! Should come with a health warning!

GETTING THE PICTURE Sir, It was interesting to note the variety of surveyors from different backgrounds opining on the relevance of Modus to their locality or specific fields. It struck me that these esteemed professionals had rather missed the point. Modus, surely, is not about locality or even our different fields of endeavour. It is aimed at big-picture property and construction and land-based news. What are the big stories? What is the landscape like? How does our wider profession fit into the world politics and economy around us? It is up to us to translate these to relevance in our own fields and, if we have an opinion on them, then we could also write a letter. Robert Burke FRICS, Watts Group, London

GRAND CAYMAN Sir, I very much enjoyed attending RICS’ Cayman Islands Property & Construction Conference. It was great to hear RICS President, Louise Brooke-Smith, give the keynote speech. The event coincided with the first day of the official Caribbean-wide implementation of the Valuer Registration programme. From this date, all RICS members performing valuations in the region are required to become Registered Valuers. Following the introduction of the VR programme in the Cayman Islands in July 2014, valuers there have seen an upswing in reporting standards, with increasingly high levels of transparency, credibility and consistency shown in valuation reports from the island. It really was an eye-opening event that offered great insights into local issues. The afternoon sessions were of particular interest to me as they both centred around issues that directly impact the way our company does business. There was plenty of controversy, which is essential to get any far-reaching idea moving, and RICS was the perfect forum to host these important national debates. Shane Roberts MRICS, Cayman Islands

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Read the latest and all previous issues of Modus Asia edition at ricsasia.org/ modusasia. To reduce your carbon footprint, unsubscribe your hard copy and receive a digital edition only by emailing your name and/or membership number to ricsasia@rics.org with the subject line “Unsubscribe Modus Asia”.

FOR SUNDAY Editor Oliver Parsons / Art Director Christie Ferdinando / Contributing Editor Alex Frew McMillan / Production Editor Andy Plowman / Senior Designer Isabella Fernandes / Creative Director Matt Beaven / Account Director Karen Jenner / Advertisement Sales Director Emma Kennedy / Advertisement Manager Karren Cook / Asia Advertising ROF Media, Bryan Chan, +852 3150 8912, byan@rofmedia.com / Production Manager Michael Wood / Managing Director Toby Smeeton / Repro F1 Colour / Printers ROF Media / Cover Illustration Adam Simpson / Published by Sunday, 207 Union Street, London SE1 0LN wearesunday.com / For RICS James Murphy and Kate Symons [UK] / Roy Ying and Jeanie Chan [Asia]

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Intelligence

News / Reviews / Opinions / Reactions

DIFFERENCE OF OPINION

Do Chinese developers have a coherent plan for international investment? Discuss.

HOW TO SPEND IT Go it alone or partner with a local expert? Stay safe in capitals or go to the regions? As Chinese real estate companies ramp up their overseas investment activities, how do they balance risk and reward?

IN RECENT YEARS, THERE HAS BEEN A SHARP INCREASE IN OVERSEAS INVESTMENT by Chinese real estate companies, from around $3bn in 2012 to more than $12bn in 2014. While much of this has involved institutions purchasing prime incomeproducing assets in the principal cities of North America, Europe and Australia, we have also seen developers acquiring land or forming joint ventures with local developers. Prior to 2015, nearly all the sites bought by Chinese developers were intended for residential development. The idea is very straightforward – build housing units to sell to individual buyers from China, VENANT CHIANG HEAD OF HONG KONG AND CHINA whether it be for their own use, for their children while PROPERTY RESEARCH, JEFFERIES studying overseas, or for investment. Consequently, the development sites are in places where there is demand from IT MAY MAKE SENSE TO GO OVERSEAS IF CHINESE DEVELOPERS Chinese buyers, such as London, Sydney and California. already have a high volume of production in China. It is now In 2015, Chinese developers have started to diversify into a lot tougher to secure property-related financing in the country, so relying commercial and mixed-use schemes. These projects tend to on cashflow from domestic sales no longer sustains a high-turnover model. be driven by the developer’s other businesses. For example, The key advantage of growing outside China may be to learn through joint if an investor has interests in the hotel sector, the acquisition ventures or to seek a more sustainable business model. But there are few and development of similar leisure assets is a natural fit. successful examples of overseas deals. Country Garden’s expansion into The challenge will come when Chinese developers start buying land on which to build housing for the local market, Malaysia was not that well received by the market. Even China Vanke, the or investing in speculative commercial schemes for local market leader, does not have an aggressive overseas expansion plan. The China market is very big, and isn’t yet saturated. Even in Hong Kong, occupiers. This has not yet happened on any great scale, and there is still room to grow. Therefore, going overseas may not be a priority if most will enter this market through joint ventures so they a developer is able to find a niche in an admittedly competitive marketplace. can learn the local market before venturing out on their own. If Chinese developers are related to state-owned enterprises, there should They have a plan, but like all things in China it will evolve, be plenty of potential for growth within China. They usually benefit from very quickly. low-cost financing, which allows them to seek counter-cyclical expansion. Select niche players could also take up more market share within China Overseas investment: global domination or with prudent financial management. domestic bliss? What’s your view? Join the More and more developers want to secure long-term, recurring income discussion on LinkedIn at rics.org/linkedin, by building commercial investment property, which is less volatile than or tweet using #RICSmodus residential. Since development is a highly capital-intensive endeavour, they will need to find joint-venture partners to share the risks. But the commercial property sector is very large in China and could be one of the key areas for developers to focus on and build their capacity, rather than going overseas. 06

INTERVIEW ALEX FREW MCMILLAN ILLUSTRATION ANNA-KAISA JORMANAINEN

DAVID FAULKNER FRICS EXECUTIVE DIRECTOR OF VALUATION AND ADVISORY FOR ASIA, COLLIERS INTERNATIONAL

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Intelligence

21%

TOP FOREIGN INVESTORS IN US REAL ESTATE

12%

10%

Canadian investment in 2014 was one of the largest cross-border capital flows in the world Source: Real Capital Analytics/CBRE

Canada

NEWS IN BRIEF ricsasia.org/ modusasia

Others

Norway

China

Japan

Governments and global bodies get behind IPMS Since its launch last November, governments and organisations around the world have been expressing their support for the first international property measurement standard, IPMS: Office Buildings. In the UK, the Valuation Office Agency (VOA) will be working closely with RICS on IPMSbased guidance. The VOA maintains the valuation lists of 1.9 million commercial properties and 24.7 million residential properties in England and Wales. In 2013 it collected about £48bn in nondomestic rates, or business rates. As the largest employer of chartered surveyors in the UK, its Valuation Measuring Guide already complies with the RICS Code of Measuring Practice. Niall Walsh, VOA chief operating officer and chief valuer, said: “The VOA is keen to work with RICS on all professional guidance and standards. We are pleased to have been involved with the development of IPMS.” The Dubai Land Department became the first government agency in the world to state its intention to use IPMS back in October 2013. In the Caribbean, the Lands & Survey Department in the Cayman Islands, as well as Jamaica’s National Land Agency have mandated the use of IPMS: Office Buildings. The International Monetary Fund has also announced its intention to re-measure its entire global portfolio using IPMS. The fund works in 188 countries and has been a vocal supporter of the initiative.

100 90 80 MODUS_Asia_Q3.15_P06-15_Intel_desFIN.indd 7 70

Germany Switzerland Singapore Hong Kong South Korea

INDONESIA ®

1994-2004 41%

MANSION TAX SET TO SQUEEZE HOME SIZES % 2004-2014

Hotels

+5 2013 11% 2014 16%

1994-2004 40%

277

Industrial

Residential

Mixed

% % % +5 +2 +4 2013 2% even2013 3% 2013 1% applied to subsidised housing.

INFOGRAPHIC IAN DUTNALL

INTERVIEW ALEX FREW MCMILLAN ILLUSTRATION ANNA-KAISA JORMANAINEN

26%

2004-2014

% 2014 7% 2014 5% 2014 5% 260 The higher limit will ease those

fears, but it will still hit many middle-class buyers. -3 % 1994-2004 38% -14 Nomura analyst Anthony Yunus 2004-2014 2013 14% 2013 68% 2014 54% 2014 11% said in a research report that mid-range buyers are less price conscious, so the tax would not have a significant impact on property demand. However, he 24 22 predicts that developers will 20 maintain their margins by reducing The Indonesian government has % 28 18WINDSOR % 26of% units and23charging 79 % 16 HASSLE the floor area introduced an added tax on “super% 64 Four-bedroom 14 % applies to many higher prices per square metre. luxury goods” that % 49 46 and12 penthouse The Ministry of Finance is, properties in Jakarta in particular. 10 apartments in 8 Signature however, also discussing applying a The new tax puts an extra 5% the 6 Italy Poland Spain Greece France UK Germany Tower at the 20% luxury tax on sales to a broader on the selling price of homes worth 4 Windsor in 2 range of homes. That tax is now more than IDR5bn ($375,000) or Jakarta 0% will fall 2 2 levied on houses of more than 350 larger than 400 m (4,300 ft ) in the under the tax 2 m2 (3,770 case of houses, ft2) andWaste apartments Coal Nuclear Hydro or 150 Gasm (1,600 Fuel Oil Wind Biomass Peatof Geothermal 2 ft at least 150 m2 (1,600 ft2), but the ) for apartments. Previously, the % % 82 INDIA 84 tax applied to properties worth threshold may be reset at IDR5bn % % more than IDR10bn ($750,000), as well. That would hurt the profits CHINA 70 82 houses bigger than 500 m2 (5,400 of mid- to high-end developers in % 60% greater Jakarta, warn Deutsche ft2) or41 apartments US larger than 2 2 400 m 52% Bank analysts. Buyer sentiment 43%(4,300 ft ).UK could take a hit, and the developers 2008 ¤0.7bnThe industry had been bracing for % CANADA($150,000)47% would be forced to change their a 49 threshold of IDR2bn 2013 for the40tax, whichJAPAN would have % ¤2.2bn 48% product mix even more. Office

2018 2023

Retail

254

THE DATA GERMANY

50%

FRANCE

42%

Government

45% ¤4.5bn

RUSSIA

54%

26%

SPAIN

145

Cape Town

Dubai

Geneva

Hong Kong

London

45%

HOW MUCH LUXURY RESIDENTIAL PROPERTY WILL45$1M BUY? (m2) %

¤7.7bn

Business

43%

Source: Knight Frank

204

Solar PV

Los Moscow Angeles

142

New York

São Paulo

Shanghai Sydney

86 Tokyo

Q3 2015_MODUS A SI A 07 SE Europe Baltics Slovakia Romania Hungary 17:42 16/07/2015

“The situation with Chinese initial public offerings is nothing short of a mania … Naturally, we’re left asking when and how this will end”

tock speculators in mainland China are partying like it’s 2007. I say speculators because there’s absolutely no pretence of investment. The government crackdown may have slowed things down at the gaming tables in Macau, but there’s clearly a new game in Shenzhen and Shanghai. How else can you explain the record 4.13 million in stock accounts opened in mainland China in the last week of April alone? Then there’s the 45% rally in the CSI 300 stock index in just three months. The Shenzhen index is up by more than 100% in the year to date, moving at a parabolic pace. The situation with Chinese initial public offerings (IPOs) is nothing short of a mania. As analysts at Morgan Stanley point out, since the start of 2014, a total of 225 companies have gone public in the A-share market. They have posted an average gain of nearly 420% since the IPO. Naturally, we’re left asking when and how this will end. People may ask if these market volumes and levels are justified in any sense. The answer is, simply, no. To give an idea of just how frothy the Shanghai and Shenzhen exchanges are, consider this: on Friday 22 May, stock-market turnover hit $315bn. The previous day, the New York Stock Exchange saw turnover of $23bn. So, rest assured, it will end badly. But making any kind of prediction as to when is futile. In my opinion, 12 months from now this market could either be up double or down by half. As an investor, you need to be ready to exit at any sign that things are breaking bad. Those holding China stocks would do well to run a 20% rolling stop loss on their positions. This means that

you sell the stock immediately when it falls 20% from the highest point since you bought it. In April 2014, I recommended that my readers buy Hong Kong-listed Chinese developers, when real estate was a no-go area. When I said I expected an upside of 30%-50%, plenty of people said I was crazy. Now, some of our recommendations are up around 105%. The first signs of policy reversal came in April last year. This prompted us to make the call to re-enter China property stocks. There has been a steady stream of policy initiatives – both monetary and fiscal – aimed at resuscitating the real-estate sector. Most cities have eased up on the home purchase restrictions put in place to curb enthusiasm, stamp duties on resale properties have been cut and loan-to-value ratios have been increased. In recent months, sales volumes have edged up quite sharply in some Tier 1 and Tier 2 cities. The month-on-month price falls across the country are receding. Prices are already rising for quality developments built by reliable, well-known developers. Basically, the residential market is forming a bottom. So, are Hong Kong-listed, Chinese real estate stocks expensive? A year ago the sector was trading at around four times forward earnings. Today, the average valuation is about nine-and-a-half times forward earnings. That is not expensive by any means but certainly shows that investors have noticed. We still remain focused on the larger, better-capitalised companies that have modest debt and a strong brand. Big, state-owned parents can also give a bit of comfort to investors, as do those that hold large portfolios of rent-producing properties. These operators will benefit from any debt-driven shakeouts in the industry. The top 25 companies listed in Hong Kong have raised market share from around 14% of total sales a couple of years ago to closer to 22% today. The Hong Kong-listed China property universe last year hit close to 95% of the revenue and profit targets. And that was in a difficult year. I expect the same this year. Stay long on the sector – but watch those stop losses in the event of a big market correction. WHAT’S YOUR VIEW? Email editor@ricsmodus.com to join the debate

ILLUSTRATIONS ANDREA MANZATI, MARK BOARDMAN

PETER CHURCHOUSE PROPERTY INVESTOR AND AUTHOR OF THE CHURCHOUSE LETTER

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Hydro

Gas

Fuel Oil

Wind

Biomass

Waste

Peat

Geothermal Solar PV

Intelligence CONTAINS ADDITIVES

2008 $0.8bn

Projected size of the global additive manufacturing (3D printing) market

2013

Source: Statista.com

$2.5bn

2018

$5.0bn

2023

NEWS IN BRIEF

$8.6bn

WE LIKE

ricsasia.org/ modusasia

Valuer Registration launches in south-east Asia

INFOGRAPHIC IAN DUTNALL

ILLUSTRATIONS ANDREA MANZATI, MARK BOARDMAN

Nuclear

Coal

Valuer Registration became mandatory in Vietnam from July onwards. The Vietnamese real estate market is recovering from a long period of stagnation, therefore minimising the risks associated 21 with property valuations is 20 Hong London essential if foreign investorsKong are to feel confident. Already implemented in Hong Kong in 2014, Valuer Registration is an individual 100 90 monitoring scheme aimed at 80 creating a single regulatory 70 framework for all the RICS 60 valuers globally by promoting 50 compliance with the RICS Red 40 Book and embedding use of 30 the International Valuation 20 Standards (IVS). 10 Commenting on the launch, 0% 1997 1998 1999 2000 2001 2002 Francis Chiu FRICS, general manager, finance, Sino Land Company Limited, and member 100 of90the RICS Asia Commercial Property Professional Group 80 Board 70 and Hong Kong Valuation Professional Group, said: “RICS 60 Registered Valuers add credit to 50 the 40 published valuation reports in30 terms of communicating 20 international valuation 10 standards, prudency of the 0% methodologies, and the reliability 1997 1998 1999 2000 2001 2002 of the valuation profession to business stakeholders around the globe from fund managers, bankers, lawyers, regulators, loan lenders, credit analysts, asset managers, credit rating agencies, equity analysts, bondholders to unit holders, retail and institutional investors”. FOR MORE INFORMATION on RICS Valuer Registration, please visit rics.org/valuerregistration

FORWARD PLANNING Proposed developments are also shown on the model, helping professionals make decisions based on structures that 34 39 do not yet exist New York

Geneva Sydney Shanghai

2003 2004

VUCITY

Los Moscow Angeles

142 145 204

Tokyo

São Paulo

Dubai

Cape Town

What’s that? Covering an incredible 80 km2 (31 square miles) of central London, it is perhaps the first ever fully interactive 3D digital model of Europe the capital. Created by agency Wagstaffs Design, andSE3D modellers Baltics Vertex, London has been rendered in exquisite block detail Slovakia for users Romania to view, zoom and rotate around buildings, streets and landmarks. Hungary The model could change the way developments are planned in complex Russia urban locations. How so? As well as displaying the existing built environment, the VUCITY model helps property professionals to see what doesn’t yet Czech Repexist, by overlaying proposed developments to see them in context. “This could help them make key decisions more accurately and rapidly than was previously possible,” says Jason Hawthorne, managing director of Poland 2005Wagstaffs. 2006 2007 2008 2010since 2011planning 2012 2013 2014 “It is not 2009 that long applications only required site maps and elevations. Now no planning department will accept an application without CGIs.” SE Europe Because the model uses a standalone viewer that runs independently of Baltics Slovakia any other software, it can be used on all platforms – from touchscreens, to Romania Hungary video walls, tablets or desktop computers. Hawthorne believes the modelling technology has the potential to be applied to any city.Russia “We are working on a model for Manchester, and would welcome suggestions for others.” vuitnow.com Czech Rep

ONE THING I KNOW

Poland

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

“Trust your knowledge base and you will add the best value for the client” Stuart Christmas MRICS Cost manager, Gardiner & Theobald, New York In a fast-moving city such as New York, one

of the key attributes you need to be successful is the ability to adapt. Differences in currency, units of measurement, unit rate costs and projects that are very much schedule driven, pose varying challenges. Despite the many differences of working

in a foreign country, the core skills I learned while working in the UK were transferable, and a huge benefit in the American market. Trust your own knowledge base and apply your experience, and you will add the best value for the client and the project. Q3 2015_MODUS A SI A

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SECRET SURVEYOR

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“I struggle to comprehend, in this day and age, that we have not improved upon the designs of our predecessors”

New guidance on valuation of intellectual property rights RICS has published an intellectual property (IP) valuation note, choosing Hong Kong – a city well placed to become a future global IP trading hub – as the location for the official launch event. Developed to clarify the legal, functional and economic characteristics of IP, the guidance will help to establish industrywide professional standards, and ensure that RICS members provide the highest quality and consistency of valuation services. The economic importance of IP has resulted in an increased need for robust IP valuations for purposes such as financial reporting, tax compliance, and litigation. It is estimated that net tangible assets represent only 16% of the enterprise value of the NASDAQ-100 Index. A significant portion of the balance is generated by technology, brands and artistic content. By upholding the highest professional standards to mitigate risk, the guidance note benefits both IP trading and intermediary services. It is a resource for the development of IP intermediary services, in areas such as IP agency and management, consultancy, legal services, dispute resolution and due diligence, and benefits private enterprises as well as buyers and sellers of IP. The note was developed by an international steering committee of IP valuation experts from Hong Kong, China, UK, US and Australia, and draws from the International Valuation Standards and RICS Valuation professional standards. RICS Asia Business Valuation Committee Chairman, Gary Man FRICS, said: “RICS is committed to contribute to building Hong Kong as a hub for IP trading and the publication of this guidance is our effort in offering confidence to users of IP transactions through a standardised approach.”

ar too often I have heard developers argue that the planning system restricts their ability to produce the housing needed to meet demand. It is therefore frustrating to see that new developments are uninspiring and insipid in design, with little thought given to the provision of any interesting features. If you are fortunate, your detached box may come complete with a limp attempt at replicating a feature or two, such as polystyrene coving, or a plastic-framed sash window with plastic detailing in lieu of lead. As a case in point, take the innercity suburb of Holbeck in Leeds. Where once stood back-to-back Victorian terracing, replete with stone facades, lintels and slate roofs, there is now a sea of faceless and uninspired flats built using mass-produced, red clay brickwork, clay pantiles and plastic-framed windows. The UK is spoilt in that previous generations have built us housing stock to be admired and of which to be proud. As a chartered surveyor,

I have been fortunate enough to sample at first-hand those impressive features. I struggle to comprehend, therefore, that in this day and age we have not learned from and improved upon those designs of our predecessors. As a nation, I’m sure that we are largely proud of the built legacy our ancestors and predecessors left us. Even today, some of the 1960s brutalist concrete monoliths, such as the Barbican in London, are regarded fondly in some circles. I struggle to believe that, in years to come, the housing that this generation has produced will be viewed with similar admiration. As an institution, we are well placed to challenge lazy development and take the lead on design-led, high-quality and architecturally inspiring schemes. Otherwise, we run the risk of leaving a housing legacy that our successors will be quick to replace themselves. ARE YOU INTERESTED in writing a future Secret Surveyor column? Email editor@ricsmodus.com

VIETNAM

COUNTRY TOPS GLOBAL OUTSOURCING LIST ROUND UP IT outsourcing company FPT Software is building a new campus in Da Nang

Vietnam is now the world’s top outsourcing location, according to research from Cushman & Wakefield. The global firm’s Where in the World? Business Process

Outsourcing (BPO) & Shared Service Location Index assessed the factors likely to affect the successful operation of BPO functions around the world, such as costs, risks and operating conditions. Vietnam has established its presence in the sector as an alternative destination for lowcost offshoring services, rising from fifth place in 2014. Much of this can be attributed to the government’s policies

to promote the country as an outsourcing destination, which has rapidly expanded the services sector. Further investment in education and training has also helped many Vietnamese people develop better literacy and numeracy skills, which has allowed more workers to swap low-productivity agricultural jobs for higher-productivity office work. DOWNLOAD the index at bit.ly/CW_wherein theworld

IMAGES FPT-SOFTWARE.COM; HANNES COUDENYS; KEVIN FAIGNAERT

NEWS IN BRIEF

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Intelligence

THEREâ&#x20AC;&#x2122;S NO PLACE LIKE THESE HOMES For any residential surveyors exasperated by how unattractive new homes can be these days, we have some light reading material for your holiday. Ugly Belgian Houses by Hannes Coudenys is a collection of photos, taken over the course of the last four years, of some of Belgiumâ&#x20AC;&#x2122;s most undistinguished dwellings, illustrating a situation that he feels has reached crisis point in the country. Opinion is divided between that of censure for his single-handed shaming of otherwise innocent architects, and acclaim for his genteel vigilante action. uglybelgianhouses.goodsie.com

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Intelligence

+5 2013 11% %

MIXED MESSAGE

2014 16% Hotels

Asia-based investors are starting to diversify beyond offices, as this year-on-year change from 2013 to 2014 shows

+4 2013 1%

+5 2013 2%

2014 5% Mixed

% -3 2013 14% 2014 11% Retail

Source: CBRE

% +2 2013 3%

2014 7% Industrial

2014 5% Residential

% -14 2013 68%

2014 54% Office

AUSTRALIA 24 MONEY LAUNDERING 22 20 PROBE TARGETS CHINA 18 16

14 real The flow of money into Australian 12 estate, frequently from Asia, is 10the target of 8 legal and regulatory scrutiny as the country 6 attempts to combat repeated4 efforts to 2 launder money via property purchases. 0% Intermediaries such as agents, financial Coal have Nuclear Hydro Gas Fuel Oil Wind Biomass Waste Peat Geothermal Solar PV advisers, trust companies and banks been warned they may be complicit in facilitating such deals, even if unknowingly. Although China was not mentioned as the source of illegal funds, a report from the government’s financial intelligence watchdog identifies one of the motives of 2008 0.7¤bn money laundering as an attempt to hide cash from foreign governments. Both LOUISE BROOKE-SMITH FRICS RICS PRESIDENT 2013 2.2¤bn China’s tight restrictions on the official 2018its 4.5¤bn “EXPECT THE UNEXPECTED , LOOK THE PART AND ENJOY THE RIDE”was the advice VALEDICTORY flow of money out of the country and SPEECH corruption crackdown on suspicious I received before taking on the presidential mantle. I’m not sure I’d call it a 2023 7.7¤bn After her year income provide plenty of motivation ride but it’s been an unforgettable year and a unique honour. in office, the for people to move money offshore. outgoing Being the first in anything always arouses a mixture of excitement and Chinese investment into the Australian President trepidation, especially when the role is as ambassador for a leading reviews RICS’ real estate market has been growing at an professional body. Being the first female president adds a certain twist. position on the exponential rate in recent years. Chinese global stage I shouldn’t have worried. I have been privileged to address audiences buyers won approvals for A$12.4bn around the world and have met brilliant practitioners, an array of politicians ($9.7bn) in real-estate deals in the 2013and a smattering of prime ministers. Everyone I met readily accepted the 14 tax year, according to the Foreign need for professionalism on an international level. Investment Review Board, which must RICS has been setting professional standards, influencing policy, offering approve investment by international buyers. Australia is being used as a laundry for training and regulating its accredited members for years. But the requirement illicit gains, providing a relatively easy way for professionals to address the needs of burgeoning populations, and a huge of “washing” millions of dollars, claims a deficit in infrastructure, has never been greater. Employers are increasingly report from the Australian Transaction recognising how important a diverse workforce is to remain competitive and Reports and Analysis Centre (Austrac). relevant in the future. While surveying has lagged behind other professions The Australian Federal Police seized in attracting, developing and retaining such talent, we are catching up quickly. A$62.5m ($49m) in property assets in the20 21 34 39 41 48 57 79 86 142 145 204 We have been championing diversity across our sector throughout the Hong London New Geneva Sydney Shanghai Los Moscow Tokyo Sao Dubai Cape fiscal year to June 2013, while prosecutors Kong York Angeles Paulo and Africa. TownThe art is to be determined UK, continental Europe, Asia-Pacific recovered A$10m ($7.8m) in assets. in the war for talent, to develop new ways of engaging and inspiring a younger “As an established money-laundering generation, and to invite other built environment professions to supplement channel, criminals are likely to continue their chosen careers with a surveying qualification. We need to widen the to launder money through real estate,” SE Europe 100 Baltics says the 90 report. With the ability to entry gate to as diverse a workforce as possible, while keeping entry standards Slovakia Romania renovate80 and sell on, “criminals are as high as ever: quantity and quality. My mantra all year has been that there Hungary also motivated to buy property for 70 should be no barrier to anyone who aspires to be a professional, and the more 60 Russia further profit or lifestyle reasons”. we shout about the fantastic range of careers across the world of property, 50 The Austrac report gives a checklist land and construction, the better. 40 of 20 “indicators” or warning signs that So, yes, it has been a hectic presidential year Czech withRep some surprises and 30 a property deal may be a method of 20 many happy memories along the way. Others can judge whether I’ve looked deploying10illegal assets, and cites 10 the part but wearing a skirt hasn’t been an issue from my side of the table. common0% money-laundering methods. Poland I’ve tried just 2009 get on2010 with2011 the job behalf of the profession. And yes, 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 to 2008 2012on2013 2014 I have absolutely enjoyed the ride! DOWNLOAD the report at bit.ly/ AustracLaundering Follow Louise on Twitter @LbsLouise SE Europe 100

INFOGRAPHIC IAN DUTNALL ILLUSTRATION BERND SCHIFFERDECKER

“It has been an unforgettable year and a unique honour”

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Russia

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Intelligence NEWS IN BRIEF

SELF-STORAGE

SOCIAL CHANGE ACROSS REGION MEANS SECTOR IS RIPE FOR GROWTH

ricsasia.org/ modusasia

RICS appoints Japan Chief Representative Hajime Kojima has been appointed RICS Chief Representative in Japan, with a remit for overseeing business development and delivering business plans. Working closely with council and members, he will bring in global professional standards of the land, construction, property industries and built environment to Japan, promote recognition of the RICS qualification and standards, and expand RICS membership in the country. Mr Kojima has 30 years’ experience in Japan’s real estate and asset management industry, serving in the leadership teams of corporations such as Nissan and Cerberus Capital Management. He was managing director of Manulife Life Insurance Company before he joined RICS and, prior to this, was managing director at Landauer Associates in New York. Japan has been increasing its global real estate activity in recent years. The addition of Mr Kojima to the team will help local professionals advance beyond the domestic market, and lead RICS’ development towards the recognition of professional standards and expansion of member services in Japan. Global roadshows follow RICS Futures launch Attracting and developing talented professionals, sustainable future cities, ethics, leadership and big data are some of the key themes tackled by RICS Futures. The project identifies the opportunities and the challenges facing the built environment and related markets. Based on extensive research, RICS has outlined a set of actions and these will be discussed at a series of RICS Futures events around the world. For more information on how to get involved, visit rics.org/futures or email futures@rics.org.

HUB SNAPS Singaporebased StorHub (pictured) expanded with purchase of Big Orange in 2013

The four Ds – death, divorce, density and dislocation – are creating strong demand in Asia for self-storage space, a market that, compared with the US, Britain and Australia, has very low levels of penetration. The industry in Asia is 20 years behind the US, states CBRE in its report: Demographic Changes Drive Demand for Self-Storage Space in Asia. In the now-mature US market, self-storage space per capita quintupled between 1984 and 2004. There is now 21.6 ft2 (2 m2) of rentable space per American household. Asia looks likely to experience similar growth, CBRE believes, as populations age – leading to

fewer people looking after more elders with less space, and sadly sometimes needing to “curate” the possessions of the deceased. Asian nations now typically divorce at higher rates, while their citizens move to crowded cities. They also go through more-frequent lifestyle changes, such as heading to college or moving in with a spouse instead of an extended family. CBRE estimates that, based on US growth from 1984-1994, Hong Kong needs another 3.9m ft2 (369,000 m2) of self-storage space, with Singapore not far behind at 2.4m ft2 (223,000 m2) and Japan requiring 2.2m ft2 (204,000 m2). But by using the relatively crowded and populous New York state as a proxy for Asian urban living conditions, there is a case for a more optimistic prediction of as much as 27.9m ft2 (2.6m m2) being required in Japan. This is drawing interest from investors. CBRE reports that 7% of Asian institutional investors already hold self-storage assets and another 9% are interested in entering the sector. Blackstone bought MiniCo Self-Storage in Hong Kong for HK$420m ($54m) this year. Singapore-listed CapitaLand has a self-storage subsidiary, StorHub, which in 2013 bought Big Orange for S$92m ($68m). DOWNLOAD the report at bit.ly/ CBREAsiaSSS

PAGETURNER LEADERSHIP AND SUSTAINABILITY IN THE BUILT ENVIRONMENT ALEX OPOKU AND VIAN AHMED Good organisational leadership from the construction industry is vital in our drive towards a sustainable built environment. Opoku argues that the real effect of legislation and the guidelines designed to promote

sustainability within the construction industry is closely linked to the leadership behind it. The book identifies the drivers, challenges, leadership roles and styles that influence the promotion of

sustainability practices on construction projects worldwide. It compares experiences in different economies and cultures, and could serve as a guide to all organisations that wish to adopt sustainability in construction. ENJOYING A BOOK? Tweet to let us know, using #RICSmodus Q3 2015_MODUS A SI A

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Heritage

PAYING FOR KEEPS

Adaptive reuse offers a viable model for Asia’s heritage, writes Alex Frew McMillan

，当保留古旧建筑物时，发展往往一。不过，化用旧建筑物的受认，而更多高建筑物化成为负的意而现新会。香港大学建筑学建筑保育程李浩然认为，旧新是“ 三世界的 ”。不过，要让大旧建筑物如以商业模式造，变人的心。李博： “ 多人对这个然，一代人更加认为文物都不该与商业。” ）范了旧来西蓝屋 (Blue Mansion)（对建筑物过商业化来的成。该房在 1880 年代由商人建，成后式为大。这座于城的市，面积 33,000 平方英个通的院，现变身尺（3,000 平方米），环绕为有间房的。 1916 年当世后，大被为多个供34 个家。其后，一批华人工大翻新工作。过年多的，蓝屋那的房顶地和心工以重现。重建工程。他建筑 Laurence Loh购入该，并将翻新历史建筑物为保老：然的个都以更，但古老相类的： “我只是以相似的物更。Laurence Loh ，并没有 ”。如需要间时，他说：“ 其间来，不跟间不相的物。” 成翻新的年）被合育蓝屋于 2000 年（学文化 “最项目 ”，并被为将旧建筑物»

IMAGE ALAMY

sia has typically placed economic advancement above all else when it comes to the preservation of its architecture. But the adaptive reuse of heritage buildings is gaining ground as a concept, and it has now taken a new turn, with buildings being transformed into self-supporting businesses – despite their great age. It is a “third-world approach” to favour the new over the old, suggests Lee Ho Yin, professor of architecture at the University of Hong Kong (HKU) and head of its architectural conservation programmes. But it requires a shift in mindset to envision how old buildings can be recast in a commercial context.“There is still a lot of resistance to this concept,” Lee says. “The older generation in particular thinks any heritage should not be tied to any commercial purpose.” The Blue Mansion in Malaysia (pictured, opposite) serves as an example of what can be achieved with a commercial heritage project. The house is officially known as the Cheong Fatt Tze Mansion, after the merchant who built it in the 1880s. The 33,000 ft2 (3,000 m2) property in the heart of George Town, Penang is designed around five airy courtyards, and is now a hotel with 16 bedrooms. After Cheong’s death in 1916, the building fell on hard times, being divided into small apartments for 34 families. Only after a restoration of more than seven years, during which period Chinese craftsmen lived on site, were its ornate sloping roofs, intricate floors and woodwork restored. Laurence Loh, the architect who bought the mansion and oversaw its reconstruction, likens renovating a historic building to maintaining a classic car. Each part can be replaced, but this should be done only if a period or similar part can be found. “I just replaced like for like – you don’t change anything,” Loh says. In situations where something like a toilet needs to be installed, “you must be sympathetic to the space of the room, and choose materials so there isn’t any discordance in one’s perception of the space”. »

Alex Frew McMillan

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翻新用

院大楼时化现有，如将变为会

ORIGINAL SIN The restored North Kowloon Magistracy building makes imaginative use of existing features, such as jail cells that double up as meeting rooms

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Heritage

It’s no good holding on to these old buildings simply because they are old buildings. They ought to contribute to the community MARGARET BROOKE FRICS Professional Property Services Group

The Blue Mansion won UNESCO’s prize for “Most Excellent Project” in 2000, the year after it was completed, and is widely held as an example of a heritage project that has become a successful commercial enterprise. “The important thing is that it shows the economic potential of adapting a heritage building for reuse,” Lee comments. While Loh is critical of Hong Kong’s relative lack of measures to preserve historic buildings, he is also outspoken about the approach taken in Singapore, which has what he sees as an overabundance of restrictions.“They even tell you how to conserve your building.” Loh also believes that Singapore, often seen as a leader in heritage preservation, stresses the external appearance of buildings while disregarding their true nature. He cites Sino Land’s transformation of the former general post office in Singapore to the Fullerton Hotel where, for instance, there is now a grand staircase on entering the building that was never there in its original iteration.

eanwhile, in Hong Kong, another interesting heritage project is taking shape in the form of the Blue House. One of the city’s oldest tong lau tenement buildings, it’s a brilliant-hued, four-floor classic from 1922 that sits on Stone Nullah Lane in Wan Chai. Now a Grade I-listed building, the Housing Society and the Urban Renewal Authority opted in 2006 to preserve it and eight other blocks at a cost of HK$100m ($13m). Some residents will return to live in the Blue House on its completion, with the addition of mod cons such as flushing water. Margaret Brooke FRICS, CEO of Professional Property Services Group, has worked on the Blue House project since its inception. Partnering with the government on such a project brings funding but also restrictions, she says. Tendering typically goes to the lowest bidder, for instance, rather than the most appropriate provider.“There’s what you would like to do, what you can do, what you can afford to do, and what you are allowed to do. It’s always a trade-off.” There has been no thinking, Brooke adds, “in a grown-up way” of how to preserve buildings in Hong Kong. Development has come first historically, and perhaps that is the way it should be except in a handful of cases.“It’s no good holding on to these old buildings simply because they are old buildings. They ought to contribute to the community.” The building does not necessarily have to be the most important architectural example for a conversion to work. For instance, the Savannah College of Art and Design (SCAD) has taken the 1960s-built North Kowloon Magistracy building – a fairly basic design from architect Palmer & Turner – and transformed it into its Hong Kong campus. »

纯为这些建筑物古旧而保留并没有处，们该对会有 FRICS Professional Property Services Group

变为商业化业的成。李博：“最重要的是，这个出化用旧建筑物的在效。” 了出香港保育历史建筑物的不，Laurence Loh 大批评新加的。他认为新加有多限： “他们如保育的大楼。” 被为文物保育的外，Laurence Loh认为，新加只建筑物的外貌，并不重建筑物的内在质。他以信和业将新加前政变为一为，入口处现有的华是大楼没有的。港在一个有的保育项目：蓝屋。蓝屋是香港最古老的唐楼之一。这座的街成，四层建筑于 1922 年在现为一历史建筑物。香港房屋会和市区重建以港（1,300万）保育该楼房和于 2006 年外栋楼房。在成保育后，蓝屋会便利现代，会。蓝屋项目以来，Professional Property Services Group 的政 (Margaret Brooke FRICS) 便一与其中。然跟政府合作这类项目来，但时会来限，如时，工程通是批出价最低但不是最合的公司。说： “此外会其什么以什么什么工作什么，这往往要作出舍。” 香港并没有以“成的方式”保育建筑物。香港来是发展，只有的外。 “只为这些建筑物古旧而以保留并无处，古旧建筑物该对会有。” 不一定是最重要的建筑范值建。如学院的舍是建于 1960 年代建成的 (Palmer & Turner) 公司院，那是为的。该学院的对外信 (Robert Dickensheets) 香港的历史建筑物会不受限的发展而。学院认为，此“新”物业的建筑对过程具作用，此保留其结构和，并寻求新的用途。» Q3 2015_MODUS A SI A

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All too often in adaptive reuse, people use the building as a shell for a design that doesn’t always work ROBERT DICKENSHEETS Savannah College of Art and Design

Robert Dickensheets, the college’s director of external relations, laments the losses of historic buildings in Hong Kong as the city embraced unfettered development. With its “new” property, SCAD decided it was important that the building inform the design process, allowing its structure and decorative elements to live on and find new uses. So the renovation paid special attention to maintaining features such as the bronze-studded panel doors at the main entrance, the natural granite staircases with Grecian motifs on the balustrades, and the original flooring. The architects even preserved an original detention cell, while converting many others into meeting rooms. “All too often in adaptive reuse, people just use the building as a shell for a whole new design concept that doesn’t always work,” says Dickensheets. “The building, in a sense, tells us what it can become.”

he Hong Kong Jockey Club is in the process of restoring the Central Police Station, turning it into a cultural and leisure destination. The project covers 16 buildings of historical importance, including the Victoria Prison and the old Central Magistracy, over the 3.4 acre (1.4 hectare) site. Such renovations of historic governmentowned properties must now be completed by non-profit organisations. This decision came in the wake of the redevelopment of the former marine police headquarters in Tsim Sha Tsui, where developer Cheung Kong was criticised for hollowing out the space below the building for luxury stores in a way that did not reflect the original structure. Michael Moir FRICS, director of property at the Jockey Club, says it has focused on ensuring that the Central Police Station is both authentically renovated and commercially sustainable. Although the overall project is not for profit, it does include commercial elements such as restaurants and shops. Indeed, it is from the lease of 70,000 ft2 (6,500 m2) of such space that the project will support itself. The leasing panel charged with monitoring the site’s tenant mix includes the chairman of the Antiquities Advisory Board in Hong Kong, and will seek to ensure a balanced tenant base. Operators “are expected to be compatible with the character of the site,” comments Moir. As is the case with many heritage schemes, the police station has taken much longer than first expected to restore. “Anyone who has renovated old buildings will tell you it’s a voyage of discovery,”Moir says. The project should complete in the second half of 2016. One of the problems encountered was that the foundations of the police station buildings were very shallow, which meant they had to be reinforced to support the new loads that the building would place upon them. To be left in place, the old wooden floors also needed strengthening.

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多时候，化用旧建筑物只是利用外壳造，但效往往不理

翻新工程重建筑物的有，如的古案的然以及地。建筑将一个留保留了貌，外将多个为会。信： “ 多时候，旧建筑物在化用时会保留有外壳，但以新的造，其效往往不理。建筑物身程以我们变成什么。” 港会现里道的中区警署建筑，将化成为文化及目的地。此化项目包括多利和中司署，面积过 3.37英（1.36公），合 16栋具重要历史意义的建筑物。现时，不历史政府物业的翻新工程都由非牟利构负责，而不商业构，这是政府于重建前警的而作出的。在前警重建项目中，多认为发展商实业在建筑物最低楼层开品商的建筑物的有结构。香港会物业文志 Michael Moir FRICS ，化项目的重是如实古的价值，时保的。然项目并非在牟利，但包和零售商业，既的需要，来入项目的。将 70,000平方英尺（6,500平方米）的间出和零售，有项目。负责该项目商业合的评成之一是香港古物会。会保建的商业者合，以的多需要。文志，的 “ 重并合建筑的历史 ”。跟多文物保育一样，建筑需的时间过。文志： “这是一个发现之，没有。这项目发展出来的新决方案为日后年香港的化工程供。”此项目于2016年成。此项目的其中一个是建筑物的地非，加化用建筑物时来的外，而以保留的有地加。一个是。这些以质造，然体，但合现代规，高了公。由于拆不保育，此会出一个政府人意的方，是加旧，并在旧对面的新的。

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IMAGES HERZOG & DE MEURON; ALAMY

A further issue was that the hand rails, made from hardwood timber, were often in great condition – but just below the height required by modern regulations. Loathe to scrap them altogether, the Jockey Club fixed on a solution that satisfied inspectors by reinforcing the vintage hand rails and installing entirely new railings on the opposite wall.

蓝幼线蓝屋（右）是香港最古老的唐楼之一。中区警署（左）翻新工程包括 16栋具重要历史意义的建筑物

THIN BLUE LINE Hong Kong’s Blue House (right) is one of the city’s oldest tong lau tenements. Central Police Station’s (left) renovation covers 16 historically important buildings

entral Police Station has a larger counterpart in China in the form of the Daci Temple Project in Chengdu. When the municipal government decided to redevelop the area around the 1,000-year-old temple, it sought a solution that would mesh Sichuan’s centuries of history with its future as a gateway to China’s west. However, this scheme, developed by Swire Properties and Sino-Ocean Land, is wholeheartedly for profit. The temple is now backed on three sides by the steeply pitched Sichuan-style roofs of Sino-Ocean’s shopping district. In a bid to capture the city’s past, it comprises a low-rise 1.2m ft2 (111,000 m2) retail “village” of lanes and alleyways. The streets lead on one side to a century-old courtyard house that now forms the entrance to the modern Temple Hotel. Across the street is the 47-floor glass and steel Pinnacle One office tower. Swire, which developed both, has established a clear transition between the old structure and the new buildings. Critics question incorporating the temple into what they see as a crass shopping mall. But to Roderick Tong, who started the project for the architect Make and now runs its Hong Kong office, the point is that the city will evolve around these ancient structures anyway. To his mind, it is better to ensure that the inevitable encroachment of the modern world is handled with sensitivity rather than a heavy hand. “We tried to integrate the temple in a very harmonious way,” he says. “This is more to do with preserving the heritage rather than knocking down the buildings.” Such projects occasionally draw criticism for their commercial nature. But HKU’s Lee believes that maintaining buildings purely for cultural use doesn’t achieve anything. In that instance, “the scope is inherently reduced to a museum. And why do we need a new museum? A museum is about the collection, the content, not the shell.” n

成

都大慈寺项目跟中区警署相似，但规模更加大。当成都政府决定重建这间座千年寺庙的外围地区时，便寻求方案将其融入四川多个世纪的历史，并在日后成为华西地区的入口。不过，现在此项目变成纯粹牟利的项目，并由目太古地产和远洋地产负责发展。目前，大慈寺有三面被远洋地产的四川式陡峭房顶购物商场环绕。为体现四川昔日的面貌，项目涵盖了由里巷构成的低层零售“村”，其面积达120万平方英尺（111,000平方米）。昔日通往百年老院房的街道，现在变身为通往现代化“博舍”的入口。街道对面是以玻璃及钢建造的47层高办公楼“睿东中心”。负责发展两者的太古地产没有将新旧建筑物融和结合。评论家质疑，发展商将大慈寺与他们眼中的庸俗购物商场结合并不恰当。不过，对于展开此项目的“承构建筑”香港公司负责人唐聃来说，最重要的是让城市围绕这些古旧建筑物来蜕变。他认为，既然建筑物难免受现代世界的蚕食，与其大刀阔斧，倒不如以敏锐的触觉作出处理。他说： “我们尝试将寺庙融为一体，这是志在保育文物而非拆毁建筑物。” 这类项目有时候会被批评为流于商业化。不过，香港大学的李浩然相信，纯粹保留该些建筑物供文化用途并无实效。要是那样， “项目范围只会限于用作博物馆。我们为什么需要新的博物馆？博物馆的是价值在于藏品和内容，并非外壳。”n Q3 2015_MODUS A SI A

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n the 1970s, a vogue developed for what became known as the mid-Atlantic movie. The idea behind such films was that, by bringing together US and UK stars, they would appeal to audiences on both sides of the Atlantic. The trouble was that such films, most famously Raise the Titanic, made so many cultural compromises that they ended up appealing to neither the Americans nor the British, resulting in a string of flops. Since then, cross-border collaboration has become more common across the business world. Thomson Reuters’ annual snapshot of global mergers and acquisitions (M&As) recorded $3.5tn of such deals in 2014, an increase of 47% on the year before. The internationalisation of finance and M&As means that project teams and advisory relationships are following suit. Noah Steinberg FRICS was born in the US, but has worked in Hungary since moving to the country after graduating at the turn of the 1990s. Now chief executive of Budapestbased developer Wing – and Chair of RICS Hungary – he is well placed to observe the cultural changes. “Market practices have become more standardised over the last 10 years. If you look at the nature of the different parties in a transaction, you have international tenants who are operating in

multiple markets. You have advisers who are part of an international company, such as JLL, who are present in lots of markets.” Mary Ann Reynolds FRICS, director of Coburn Consulting and manager of RICS in Switzerland, has also observed a “huge” increase in the number of expatriate workers in the country’s property industry since she migrated there.“When I came to Switzerland 13 years ago, there were none of the big players like JLL. The Swiss had only recently removed the barriers to foreigners owning property, so there had not been a market for international investors to get involved in.” Although the business environment may be more globalised, cultural differences persist, however. Get these dynamics wrong in the context of mergers and “a seemingly good deal can turn disastrous”, warns Adam Rosenberg, UK head of mergers and acquisitions at human resources consultant Mercer.“If you talk to most chief executives involved in mergers and acquisitions, they will say the deal didn’t deliver the value they were expecting it to. If you delve a little deeper to find out why, five or six of the top 10 issues they quote will typically be related to legitimate cultural differences. “The maths made sense, but they didn’t really think deep down about the people. If you don’t think about that you will never get the value you expect to get,” he cautions. Fons Trompenaars, a leading expert in cross-cultural management, agrees. “Often we see that after takeovers, within three months the reason they bought the company has gone because the people have gone.”

Culture clashes are not just a result of different nationalities, of course. Companies’ organisational cultures can vary dramatically even within the same country. However, differing national norms will only exacerbate these clashes. Cultural difficulties can also arise when companies from different countries come together in project teams where the need to get the job done means there is often less time to negotiate potential culture clashes. Charlie Irvine grapples with the challenges that apparently trivial differences can throw up as managing director of London-based Questions of Difference, a consultancy that advises on cross-cultural differences. His view is that any company that works internationally must be alive to differences, and able to address whether or not it is truly multinational. Where senior management remains largely rooted in the company’s home country, Irvine says there is a risk of assuming that “our way of working is the norm and everybody else is funny and different”. Cultural differences often come down to language and terminology, which can foster misunderstandings even among those for whom English is a first language, suggests Alexia Nalewaik FRICS, a California-based construction risk management consultant, who is researching the topic for RICS in the Americas. “We use different terminology all over the world and we call ourselves »

Misunderstandings in meetings, mixing up time zones, offending team members – as cross-border collaborations increase, so too does the risk of upsetting office harmony. David Blackman tries to keep his foot out of his mouth

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brainstorm, you put an idea on the table and if it’s attacked no problem, but a German feels that they are being attacked personally.” In this instance, Trompenaars instead asked the Americans and Germans to brainstorm among themselves. Each team then presented the best ideas to the other in a way that removed the personal element from the equation, meaning that they could be debated in a more dispassionate way.

STORM WARNING Brainstorming sessions are fertile grounds for cultural clashes between those who take criticism personally or not

You have to accept that wherever you are, business is done in a different fashion. The emphasis is on you to fit into the culture MIKE DAVIS MRICS Hill International

different things,”she says.“We have a shared language problem that is almost worse than the acronym problem and goes well beyond cultural misunderstanding or the need to speak more clearly or more slowly.” The meeting room is often the arena in which cultural clashes can crop up. Chris Guthkelch FRICS is a UK-born project director at Swedish contractor Skanska’s US infrastructure arm. He comments: “You need to understand how the Swedish work and think. They don’t like to see pushy people. Just because they are being quiet doesn’t mean they are not listening to what is going on. If you don’t ask a straight question you potentially lose out.” Gaby Joyner, a spokeswoman for workforce integration at multinational human resources consultant Towers Watson, says meetings often highlight deep behavioural differences, citing as an example the Middle East. “You have to be aware of cultural norms and the way work gets done. Whether you shake hands at the beginning of a meeting will depend on what sex you are. As time goes on, those norms are becoming less strict but to be polite you have to be aware of them.” Trompenaars, whose company THT Consulting is part of KPMG, remembers one situation where the brainstorm, a common way of tackling problems in the AngloSaxon corporate culture, went down like a lead balloon when bringing together American and German teams from a multinational company. “In America, if you

he contrasting ways in which these meetings are conducted reflect the varying methods by which decisions are reached in different cultures. Mike Davis MRICS, vice-president of claims resolution company Hill International in Washington DC, often found himself a middle man between Far Eastern, Gulf and Western companies when working in the Middle East. He found “the Western approach is to debate what you want to happen, the Asian response is to sagely nod but not to want to engage in any kind of argument. “One party will leave the meeting thinking they have got their point across, but the next day you will get an email that completely contradicts what you thought happened.” Rosenberg has observed this scope for misunderstanding across several different industries. “We find very frequently that people don’t vocalise what they are really thinking, so they don’t really leave the room fully understanding what the next steps are.” Mark Greener MRICS, associate director at consultant Systech International, says this kind of misunderstanding often arises as a result of the profoundly different nature of decision-making in Japan.“Things are done by mutual agreement rather than one key individual making the decision. The process [therefore] takes a bit longer. “You have to understand that the meeting is not going to be the end of the process, in contrast to Europe, where things are thrashed out until there’s an agreement: the process is slightly different. In Japan, people are far less confrontational than in Europe, but nobody likes to be backed into a corner, wherever they are – it’s not the best approach to take with people.” Akio Yamamoto FRICS, senior manager in the building construction management division at Japan’s Kajima Corporation, acknowledges that the traditional Japanese decision-making process, known as “ringi seido”, takes time compared with the Western style. “We need to lobby the key senior managers at first, before raising the issues formally to responsible directors. But we can fine-tune the contents for discussion during this process, and eventually we

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can minimise any negative opinion or unnecessary argument at board meetings. “This system is acceptable when we work in Japan, however we do need to speed up this process in overseas [markets].” Yamamoto adds that this consensual decision-making process can actually lead to time savings later, once the project is on site. In India, by contrast, real estate organisational cultures tend to be less formal and more entrepreneurial, according to Jasmeet Chhabra MRICS, managing partner at Religare Global Asset Management.“The fundamental disconnect is that institutional investors are very organised‘shops’, whereas India is very entrepreneurial and likes quick decisions,” he says. “This creates a level of complication in terms of information flow: at some stage, with the best of intent, information doesn’t come back, which can be interpreted as opaqueness.” Communication issues can be sharpened by the frustrations involved in working in different time zones, particularly if you have a head office that likes to hog the decisions. The window available for coordinating with Middle Eastern partners, who do not work on Fridays, can narrow down to two or three days, points out Davis. “It means you will have either very early or very late calls or you are working on your weekend.” Irvine agrees: “We see real issues emerging where there is an assumption that people will be available both at 11 pm and 5 am and people get exhausted. Surprise, surprise: tempers become frayed.”

stereotyping. The next step, therefore, is to respect those differences, then reconcile them before moving to realisation – putting them into practice. Ultimately, even the biggest companies must acknowledge that the local markets in which they work are rooted in very specific places. Steinberg says: “Property is a very local knowledge – one street corner is different to another and you are not going to know that when you arrive. You either have to spend time learning that or you need to have somebody who can help you out.” Davis emphasises the need to adapt to local conditions. “You have to accept that wherever you are, business is done in a slightly different fashion, rather than try to make other people change. The emphasis is on you to fit into the culture.” Steinberg agrees: “In any multinational environment, a dose of humility can take you a long way and the lack of it can be a mistake. Even if you are really good at what you do, a bit of humility is a good idea.” n

We see real issues emerging where there is an assumption that people will be available both at 11 pm and 5 am CHARLIE IRVINE Questions of Difference

owever, he warns against the temptation to default to email communication. “A meeting or phone call can replace 10 emails and result in less miscommunication all round,” he says. And it is important to remember that conflict is acceptable within an international business environment, argues Irvine.“When a conflict occurs, view it as a positive indication that an issue has come up that conversations will resolve. If there is disagreement, that is fuel for innovation – it gives us license to operate differently.” A common misconception when working in a multi-cultural environment is to focus on diversity, rather than what is shared, says Trompenaars. He identifies what he describes as the four “Rs” of managing multicultural teams: respect, recognition, reconciliation and realisation. The first step is to recognise that differences exist, which can be achieved by running workshops. However, recognising differences alone will not achieve much if it leads to greater

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Forming a global alliance can extend your companyâ&#x20AC;&#x2122;s reach overseas. But how do youWords ensure your businesses are right for each other? Roxane McMeeken Q3 2015_MODUS A SI A

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A Words Roxane McMeeken

FACE TIME London-based Alinea partner Steve Watts MRICS (left) and his opposite number in New York, Dharam’s Andrew Smith (previous page)

strong and well-managed affiliation with a firm in another country can open up all sorts of opportunities for surveying businesses large and small – and without the expense and risk of an acquisition. The typical international alliance brings each of the two parties a different type of benefit. Usually a larger business gains a foothold in a new market via a smaller, local firm, which in return for its local contacts and expertise gets to draw on its partner’s deeper resources, broader range of experience and global reach. “Without international alliances, we would not have grown into the global entity that we are today,”says Peter Victor, Londonbased senior managing director at Cushman & Wakefield. But he warns: “An alliance brings just as much potential downside as upside because your partner is carrying your flag in another country. This is why we choose our partners carefully and pay a huge amount of attention to these relationships.” The American firm’s first alliance was in 1990 with London property practice Healey & Baker, which led to a merger. In the following four years, Cushman formed partnerships with real estate companies in Asia, Canada, Europe, Mexico and South

America and its alliance programme continues. Victor says: “If it’s done well it allows a company of modest size to punch way above its weight while the larger firm gains local knowledge, which we have found is fundamental to succeeding overseas.” So why not acquire the foreign partner and lock-in that knowledge?“Our clients are often going into multiple cities but only on rare occasions, so it doesn’t make sense for us to set up an office and base members of staff there permanently,” Victor says. “For these sorts of places it’s much more efficient to have a local partner.” Savills, which also has alliances all over the world – particularly with smaller, residential agents – has a slightly different reason for forming its own tie-ups. Jeremy Helsby FRICS, group chief executive, explains:“Usually we form an association in a market that is too small to warrant an owned office but where we still want a presence because the market is high profile, such as Venice or Ibiza.” However, an alliance can be the perfect prelude to an acquisition. Each party can assess whether it can really work with the other and if collaboration would result in increased turnover and profits. Victor says: “In theory, we would always hope that an alliance would lead to an acquisition because you only want to work with a company that would be good enough to acquire.” A fruitful international affiliation can also be formed between two more equally aligned partners. London-based Alinea, a 50-strong construction cost consultancy launched by former Davis Langdon partners in May 2013, has formed an alliance with Dharam Consulting in New York. Alinea partner

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Steve Watts MRICS, says:“Dharam’s clients are mostly architects, many of whom do high-end cultural projects. Some are based abroad but doing work in Europe – one, for example, is looking at a project in London, so we can bring our knowledge to that client. Conversely, we have been able respond to requests from London-based architects looking at projects in New York.” Andrew Smith, Dharam’s managing director, adds: “The two business’s coming together is about extending our collective reach, sharing expertise specific to either geography. Our motivation is based on the belief that we can support each other to win high-value work and, as important, maintain the strong ties and relationships that have existed between us over many years.” While an alliance could bring benefits, it all depends on finding the right partner. CK Lau MRICS, international director, valuation advisory services at JLL in Hong Kong, says: “We would normally go for a company that we had already worked with, someone with whom we have a first-hand relationship. Failing that, you need a referral from a business partner. You can’t just go to a company’s website and read how good they say they are.” In addition, the partners must share the same quality standards. Andy Reynolds FRICS is director at Rider Levett Bucknall, which has alliances with 22 companies in Europe and a cost consultancy in South Africa. He says: “Each of our selected partners demonstrated high professional standards, an excellent track record and technical and internationally accepted

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practices.” This, he, says, ensures that the company “can deliver a seamless service”. However well you know your prospective partner, it is essential to carry out your due diligence. This is usually at a level below the intense financial and legal checks that would be done before an acquisition. Grant Sprick is environmental leader for Asia at Arcadis, which last November formed an alliance with Shanghai-based sustainable technology specialist Greenment. He says that due diligence on any potential alliance partner should cover three main areas: screening the firm’s business practices to ensure that there is no corruption, examining the quality of its work by reviewing its projects and talking to its clients, and engaging with the company’s team.“Go to dinner and see if you really have a rapport. See if you can develop what in China they call ‘guanxi’, which means connectedness. Here, this is more important than experience or technical expertise.” Sprick recommends ensuring that the goals of both parties complement each other. “Our alliance with Greenment makes sense because Arcadis is looking to expand in Asia and, although we have great relationships with large corporates, we lacked them at a local level in China. Greenment has those relationships, so it opens doors for us.” Meanwhile, Arcadis has multinational clients moving into China, to which Greenment now has access.

he structure of the alliance is the next element that will determine how it fares. Some partners prefer to sign a contract, while others opt for a slightly less formal – albeit legally binding – memorandum of understanding. If the latter is used the alliance may sign individual contracts for each project they do together. When it comes to the key clauses on how the spoils will be shared, Helsby says that Savills takes different approaches depending on the partner. These are based broadly on either a percentage of revenues to be paid to Savills, underpinned by an annual license »

Go out to dinner and see if you have a rapport. See if you can develop what here in China they call ‘guanxi’, which means connectedness. Here, this is more important than technical expertise. GRANT SPRICK Arcadis

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fee, or a fee sharing agreement to be applied to all referred business. “If it’s a very small business their turnover might be low, so we would probably prefer to receive a fixed fee. If we are going to receive a percentage of turnover or profit, it gets more complicated because you have to go through their books.” Others divvy up fees on a project-specific basis. Sprick says:“Our approach is based on who owns the relationship. If Greenment brings an opportunity to the table they take the lead and Arcadis supports, and vice versa. We then get together and develop a project structure for the case, including a plan for staffing, the main client contact and fees. It can be more onerous but I think it’s worth it, as it builds trust between us.” Alliance contracts commonly stipulate some degree of exclusivity. Typically the global practice agrees not to work with the rivals of the local firm, which in turn agrees to only team up with the one international ally. Contracts also require confidentiality. Watts says: “What we share must stay within both firms, whether it’s client information, benchmarking data or insight into construction processes and costs.” Helsby also usually asks that if the partner should decide to sell up, Savills has first refusal on the acquisition. This can entail taking an equity stake in the alliance partner in due course, he says.

nce the contract is signed, ongoing communication will be required. Sprick says: “I have weekly meetings with Greenment to discuss client opportunities, potential collaborations between our staff members, conferences we should be speaking at and so on. You have

If your partner does not have good English you cannot underestimate how much trouble this can cause. So explain everything you need from day one CK LAU MRICS JLL

to force yourselves to sit down together every week, otherwise you’re in separate offices all the time and you could end up effectively forgetting to work together.” Lau recommends supporting any verbal discussions with written confirmation. “With an international alliance there could well be a language barrier, and if your partner does not have extremely good English you cannot underestimate how much trouble this can cause. So get everything in writing and explain what you need from day one.” After communicating an assignment it is then vital to monitor how your partner tackles it, Lau adds.“I would send a colleague to the service provider’s office, part time or even full time, while also keeping track myself remotely by email and phone calls.” Victor points out that the best way to keep the alliance healthy is to make money together. “If things are slow then the relationship becomes strained. So do all you

can to promote the flow of business and collaborate on business development.” The icing on the cake is to find efficiencies through working together, says Reynolds. An example of where the RLB Euro Alliance has achieved this is for an international retail client. “We have identified that four of our partners are currently working for this client separately in [different regions]. By bringing them together and sharing their knowledge, we have been able to create a European service model that is now adopted and recognised within each region. This has improved the depth of coverage and delivery for the client and created more opportunities for the alliance partners involved.” Not all alliances work out. A contract normally states what each party is expected to bring to the partnership and allows one party to end the relationship if the other is failing to meet those expectations. Victor says: “We have just terminated an alliance agreement [because] there was so little business getting done between us that we did not feel we were getting much out of it, while we think we could be doing more business in this country.” On the other hand, “the alliance might be so good that you are acting as one firm,” says Lau, in which case an acquisition becomes an obvious step. An international alliance, then, can allow companies of all sizes access to new clients and expertise, in a relatively efficient and low-cost way. But like any relationship, you should choose your partner carefully and then both parties will need to work at it, communicating regularly and each doing what they promised. And ultimately, if it’s not working, you may decide to split. n

TAKE SIX…

Secrets of a successful alliance A MEANINGFUL RELATIONSHIP When choosing an overseas alliance, be sure that it really will lead to business. Savills’ Jeremy Helsby says: “Don’t just do it to get a flag on the map.” HAPPINESS JLL’s CK Lau warns against taking an adversarial approach: “To ensure that your partner is eager and happy to work with you, they must be compensated properly.” 30

RESPECT “Each partner must respect and trust the other and treat them with the same professionalism that they would a client,” says Lau. This will help to promote goodwill and ensure that clients receive the same standard of service. EXCLUSIVITY – MOST OF THE TIME While both sides should expect a degree of exclusivity, there should be some flexibility,

too. “If you try to restrict your partner too much, they may not be able to grow their business and they may choose to drop you altogether,” cautions Lau. MONEY Cushman’s Peter Victor suggests a flexible approach to divvying up fees. “Your feesharing agreement will apply in nine out of 10 cases but a situation may arise where one side will be doing more of the

work than normal, so in those cases it is fair to negotiate a different fee arrangement.” COMMUNICATION Have a strategy for informing clients about the alliance. Arcadis’ Grant Sprick recommends developing a bespoke plan for every client: “Engage with each client to look in detail at how the alliance might deliver something valuable for them.”

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STEP INTO THE

LIGHT Real estate is a global industry, but how certain can we be that the ethical behaviours of professionals are consistent around the world? Modus spoke to members of an international coalition that hopes to provide the answer Interviews Brendon Hooper Illustrations Adam Simpson

Who’s in the discussion? KARIN BARTHELMES-WEHR, corporate secretary, Initiative Corporate Governance of the German Real Estate Industry, Berlin PETER BOLTON KING FRICS, Global Property Standards Director at RICS, London and chair, IESC board of trustees TONY GRANT FRICS, honorary president, International Real Estate Federation (FIABCI), US GEORGES PAHUD, vice-chair, International Consortium of Real Estate Associations (ICREA), Vancouver ALEXEY SHASKOLSKY MRICS, chairman, Russian Society of Appraisers, St Petersburg branch KATHY TSAO, 2014 executive board, Asian Real Estate Association of America (AREAA)

lthough the key concepts of right and wrong in business are agreed across most markets, the space given over to the shades of grey in between – especially over the specifics of business and property transactions – are far from unified. To help re-define the role of ethics in real estate, organisations representing property and related professional bodies from Asia, Europe, Oceania, and North and South America met at the United Nations in New York last October to establish an International Ethics Standards Coalition (IESC). The coalition aims to develop and implement the first industry-wide ethics standards for property and related professional services. Focusing on qualities such as trustworthiness, integrity and respect, they will seek to align fundamental ethics principles through a new international ethics standard (IES). The goal for professionals is to undertake work in an ethically consistent way, regardless of where they are located and the nature of their work. Ultimately, it could help raise the standard of professional services and promote stable property markets around the world.

Modus asked six IES coalition trustees to discuss the international ethics challenge, the ongoing collaboration over the IES, what is to be gained and what challenges lie ahead.

WHY IS IT A PROBLEM HAVING VARYING ETHICS STANDARDS AROUND THE WORLD? ALEXEY SHASKOLSKY There’s no doubt that the world is drifting towards being a more unified economic community. This means that diverse ethical norms in real estate activities will have to be respectively unified. Just as measurements, like distance or time, were once universally agreed upon, internationally adopted professional behaviour in real estate has to be developed, declared and followed. GEORGES PAHUD It is not a problem, as such, to have varying standards of ethics from country to country, but what we are doing is recognising that there is a problem of inconsistency that needs to be resolved. I think it’s mainly a problem for consumers, because their expectations are so varied. They might find business is done quite differently when in another country. »

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KARIN BARTHELMES-WEHR The real estate market today is more international than it has ever been. Investors conduct business all around the world and, while doing so, they face totally different business environments and cultural behaviours. What may be a “no go” in one country could almost be standard in another – for instance, in using a facilitation payment to secure a deal, or in having to adhere to certain social standards, such as a national minimum wage. KATHY TSAO Purchasing overseas property can be a daunting task when you are not familiar with how a system works in the particular country. Prospective buyers may not really know what levels of service will be delivered and what type of information they should expect. There needs to be a common ground for people to know they are getting what they paid for. PETER BOLTON KING When you think that the real estate sector advises on assets worth between 50% and 70% of the world’s wealth, then finance and real estate are intrinsically linked together like never before. So it matters that people can trust who they are operating with from overseas markets. TONY GRANT We have a global market, but we don’t have a single point of reference to understand what ethics apply to 34

practitioners in a certain region, and how to find those standards. It’s about making the market aware of the industry’s one voice on the matter of ethics. Unlike varying property measurement standards, the problem is not so much the variation between standards of ethics. Almost every organisation’s code of conduct contains the fundamental principles of transparency and honesty, but different professional disciplines have different applications of those principles. With ethics, it’s a matter of how these fundamental principles of honesty and decency are applied to the profession as a whole and its individual parts.

WHAT KINDS OF ISSUES DOES A LACK OF CONSISTENCY RAISE? KT As we all know, there are countries where agents can work without a licence or any training. I have worked with buyers from such countries and you can see the trust levels are not there. For instance, after a showing, buyers will demand to see the seller or developer directly because they believe they can get more direct information and negotiate a better price directly from the sellers. They may also engage two or three

agents to show them the same property and see who can get them the best price. So a commonly recognised standard of ethics will help people understand how we should practise and where the boundaries are. GP Problems can arise when you work in a country that has higher standards of ethics, and you have a consumer who comes from a place that has lower standards. If you can’t give them consistent advice, it may lead to them having little or no respect for the professional that you claim to be. PBK Look at the question from the other way round: what are the dilemmas for the users of those professional services? Conflicts of interest are a prime example. RICS makes sure its members are absolutely transparent and that people are always aware of a conflict of interest. But this is not something that happens on a simple level everywhere around the world. For example, investors can have an impression that the Indian market can be fairly cloudy and not transparent. But confidence and trust will be boosted if they know that the same ethics standards are being applied there. TG And if a member of the public wishes to buy a second home in a different part of the world, knowing that an international ethics standard exists, they can seek out practitioners who adhere to those standards.

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The standard has got to work in developed, as well as developing, markets. That will be quite a challenge, but it will help clarify the definition of ethical behaviour TONY GRANT FRICS International Real Estate Federation

AS However, I don’t think the quest for a common standard of ethics is a compromise between pioneering and obsolete national ethics regulations. It’s more a chance to move towards the leading positions of ethics norms of the world’s most respected unions and organisations.

ARE COMMON PRACTICES ACROSS GLOBAL MARKETS TOO DIVERSE TO BE BOUND BY AN INTERNATIONAL ETHICS CODE? KBW It will definitely be a challenge, but it can work. The standard will have to be, to an extent, generic and part of a framework. Each coalition organisation will be responsible for making specifications regarding country,

culture, professions and market segment. The organisations are the guarantors for the success of the standard – so there is an incentive to make it work. As more countries and organisations get involved, it will raise the chances of the standard finding acceptance and being implemented. KT Finding a common ground and setting up the framework can be done and the standards can also serve to complement other organisations’ existing codes or to help others broaden theirs. If it is a win-win situation for our industry, why not do it? PBK I don’t think there is a problem with “gluing” the real estate market together, but it should initially be at a high level. We now have around 40 organisations involved in the coalition, from the Electrical Suppliers Association of China, to the Bogotá Real

Estate Association. I think that indicates a genuine desire for an international standard to work, but this is also why we have agreed that it should be at a high level, so we have a framework we can start working with. TG We don’t see the diversity of the market as being an issue – on the contrary, the diversity gives a legitimate function for the codes of conduct of the individual organisation. We already share a lot in common, for example, putting clients’ and the public’s interests before your own could apply to any organisation. The IES is certainly doable because when it is launched, it will be a set of fundamental principles that many organisations already have, but better expressed and more widely recognised, and available in many languages. Furthermore, there’s no suggestion that member organisations will be expected to scrap their own established codes of ethics. There is plenty of opportunity for them to apply the general IES principles to their own specialist locations and professional disciplines. AS The good thing is we are not starting from scratch – professionals everywhere already share most of the ethics norms we are aiming for. The issue is how we finalise the international ethics standard, display its support from dedicated organisations, » Q3 2015_MODUS A SI A

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There have been cases of important stakeholders losing trust in the real estate industry and its players, and we need to do all we can to regain this trust KARIN BARTHELMES-WEHR German Property Federation

and make it an indispensable tool for real estate professionals for doing their jobs worldwide. GP The key to the success of the IES will be in its enforcement and implementation. Because setting up a universal ethics standard and then not enforcing it, could well be a breach of those very same ethics standards. Further down the line, I would very much like to see enforcement happen.

WHAT ARE THE CHALLENGES IN IMPLEMENTING A GLOBAL ETHICS STANDARD? KBW The countries that are taking part in this project are very different – from Brazil to China and from the US to the UK, and they will have varying approaches to guidelines. The challenge will be in gaining a worldwide acceptance of the standard, without diluting the standard itself. PBK It is going to be up to individual parties that have signed up to the coalition to decide what advice and guidance they are going to give out to their members. While accepting that there will be some element of flexibility in meeting the standards, I do believe that they can be applied right around the world. TG The IES has got to work in developed, as well as developing, markets. That’s going to be quite a challenge, but it will help clarify the definition of ethical behaviour. The coalition needs to maintain the collegiate style of working that was successfully established in New York in October. AS Of course, some national “habits of the heart” may not be compatible with the most advanced ethics norms we are trying to implement. But more than anything, public sentiment is essential – if ethical behaviour in general is only seen as being of peripheral value, our efforts to introduce high ethics could encounter difficulty. GP This is why I hope the coalition will, in time, create some form of enforcement and auditing protocol, otherwise I don’t think we will be doing as much good as we can. 36

WHAT DO PEOPLE STAND TO LOSE AND GAIN FROM AN INTERNATIONAL STANDARD? KT Although it’s going to take time, I don’t see much downside to creating an international ethics standard. It will give investors more confidence, which means they will travel more, interact more and invest more when they deal with practitioners who can apply this standard. AS The property profession in general, business, and society are all interested in having common professional ethics. GP I think if the IES is implemented and followed, there’s no doubt that consumers will be better served. They will be getting a far more rewarding experience for whatever real estate service they use. But if it turns out that the standards are just for show, and not actually delivered, then I think consumer confidence will be shattered. KBW There have been cases of important stakeholders losing trust in the real estate industry and its players, and we need to do all we can to regain this trust. Times are changing – ethical behaviour used to be seen as a “nice to have”, but in the future it’s going to be the only way to conduct business. PBK If people lose out, it may be because they are not doing what they should be doing in the first place. The general feeling is that if we can crack this, the industry and its members will have an awful lot to gain. That’s why although government bodies are not allowed to be part of the coalition, we’re encouraging them to become supporting partners – for example, we have the UK Land Registry and the Dubai government on board. It’ll be interesting to see how this goes. TG Once people understand that the IES is not intended to replace individual organisations’ codes of conduct, then there is nothing to lose. The effect on the property market and on property values will be enormous. The standard will generate more confidence and bring stability to the market, because good ethics is good business.

HOW WILL YOUR ORGANISATION BE INVOLVED? AS I’m glad to say we’ve helped initiate the IES project. Our present involvement will be a logical step in the direction that was chosen 20 years ago – to bring world-class valuation professionalism and respective ethical behaviour to the Russian market. GP Hopefully we will try to get our member associations to commit to not just adopt the standards, but also to implement and enforce them. Whether they will be able to or not will be the challenge. Don’t forget, some real estate associations will have trouble getting their associated members on board, as they may not want others speaking for them. All we can do is sell the concept and negotiate. KBW For 13 years, the Initiative Corporate Governance has developed guidelines for the German real estate market, and developing an IES will be an extension of this. We’re proud to be part of this important project and will put all our efforts towards implementing it. KT This will be an educational process for members of the Asian Real Estate Association of America, and we can support this endeavour by raising members’ and partners’ awareness through newsletters, conferences and educational seminars – both domestic and abroad. TG I’m very involved with the International Real Estate Federation, of which RICS is a principal member, and we’ve been able to use our global reach to encourage our principal members around the world to join the IESC, from SEGOVI in Brazil, to the Malaysian Institution of Surveyors. Even architectural organisations such as RIBA [Royal Institute of British Architects] are also joining the coalition. Every member of the IESC is equal, but I do see RICS taking a leading administrative role, because of its worldwide reach and impetus. PBK I’m honoured to have been recently made chair of the IESC Trustees, and RICS has been asked to take a leading role in providing background services and maintaining the IESC website. I believe with RICS’ global reach, we can get the message out to all corners of the world. In time, RICS expects it will completely replace its ethics standards with the new international ethics standards, and we will be providing guidance to help members meet them. n FOR MORE INFORMATION on the role and work of the coalition, go to ies-coalition.com

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Investment

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THE REAL DEAL

Tax efficient, yielding high returns and capable of reviving ailing economies – in global markets postrecession, have real estate investment trusts (REITs) finally come of age? Words David Hatcher

GAINS IN SPAIN Axiare is one of a new wave of REITs that have reinvigorated Spain’s real estate market, buying assets such as the Madrid office complexes at Francisca Delgado (main picture) and Fernando el Santo (left)

aving an established REIT regime is something that RICS members in the US, UK, France and Japan are at risk of taking for granted. Many of these countries’ largest real estate entities have REIT status. They serve as stable, income-generating companies that are an attractive investment for the man on the street and into which successful asset managers and developers want to sell. Despite their advantages, governments in many immature markets have been slow to wake up to the benefits of REITs. This can lead to a lack of institutional investment in real estate, the knock-on effects of which include poor infrastructure, a lack of buyers for mature assets, and generally subdued property values. The impact of their introduction has been keenly felt in Ireland and Spain over the past two years. They have helped increase the flow of capital into these key European markets, aiding their rejuvenation and fuelling already rapid real estate recoveries. The effect could be even more dramatic in Asia, where both China and India are flirting with introducing a fully fledged REIT system. Boasting strong economic growth and the world’s two largest populations, the potential for both countries to revolutionise their property industries through institutional investment is enormous. The legislative changes necessary to establish a REIT regime are rarely enacted quickly, however, and a lack of confidence in a country’s economy, or a negative stance from government could halt their adoption. » Q3 2015_MODUS A SI A

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“The REIT regime’s introduction from our perspective meant that we had the right vehicle at the right time, at an opportunistic point in the cycle. It allowed us to capture the recovery,” says Pat Gunne, chief executive of Green REIT. The company was the first REIT established in Ireland, listing with a €200m ($225.5m) float in July 2013. “Accessing equity through the public market was fantastic, as if we had tried to raise a closed-ended fund we’d have missed the timing, but this allowed us to start deploying capital within a matter of months. It was also symbolic, a local player coming into the market and being able to raise money like that.” Gunne is not sure whether it was the particular advantages provided by REIT status that allowed Green to raise capital, but says it provided an extra boost and that the legislation may allow for the evolution of a more cohesive, listed real estate market in the future. “If a REIT hadn’t been possible, we would have looked for a different structure. Really, the US private equity that has been invested has been the biggest factor of the recovery. I do think there’s a place for property within the public market long term, though, and that the periods where companies trade at a discount to net asset value will be lessened by the REIT regime.” Because a REIT is focused on income, they need to have a seed portfolio of assets on their inception to generate this. After investing €882.4m ($995m) in property since its float, Green REIT is now shifting into a second phase that will see the company become a developer as well. In both Ireland and Spain, floods of private equity investment have provided benchmark pricing for the market over the past two years. However, that capital has been unwilling to invest in the highest quality real estate or hold property for a long time, as it does not fit with its return requirements. This is where REITs have picked up the slack. A steady REIT regime allows for investors to trade assets more easily once they have realised a successful asset management plan. “REITS are investing in a market that was long gone in Spain,” says Ismael Clemente,

The REIT regime meant we had the right vehicle at the right time. It allowed us to capture the recovery PAT GUNNE Green REIT

executive chairman and chief executive of Merlin Properties, the country’s largest SOCIMI – its equivalent of a REIT – which raised €1.5bn ($1.69bn) in June last year. “From 2007 to mid-2011 there was no capital chasing deals and the market was completely dry. Then, a wave of opportunistic capital appeared in 2012 and everyone started to turn to Spain and create associations with local operators. That stabilised the market but these funds are not good when it comes to dealing with prime assets, as they tend to be picky on price. Many who wanted to sell but were not in major distress were missing an exit and REITs like ours bridged that gap.” Last year the launch of several SOCIMIs sparked a flurry of interest from investors who, desperate to increase their exposure to the country’s upswing, bought up shares. In addition to Merlin, Grupo Lar launched the first €400m ($451m) vehicle in February, Hispania followed in March with a €500m ($563.8m) offering and Axiare raised €360m ($406m) in July. As a result, says Clemente, in 2014 REITs accounted for 40% of the buyers in the country’s investment market. “The introduction of the REIT regime has been a resounding success for the government. It has achieved exactly its objective by bringing some fresh air into the market and little by little it has allowed the banks to unload the problems on their balance sheet in a more natural process, and not necessarily at distressed prices,”he adds. These successes prompted the Italian government to heavily amend generally unsuccessful existing REIT legislation last September as part of its economic“Unblock Italy” reforms. The changes included reducing the cap one shareholder can own from 60% to 51% and reducing the required dividend distribution from 85% to 70%. »

GREEN SHOOTS Green REIT is moving from buying assets into development. Work starts this year on Block H at Central Park (above), 13-17 Dawson Street (below) and three other sites in Dublin

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Investment

Despite these changes, the country is still waiting for a new REIT to emerge. Italy is further behind in its recovery than Spain or Ireland and the market is considered to be more opaque for international investors. Fund manager Sorgente had to pull an intended float of its Sorgente Res vehicle in November because of volatility in the financial markets. It had planned to sell into the vehicle a seed portfolio from its existing funds. The company intends to attempt another listing in the coming months. “There needs to be a window of tranquillity for at least a couple of months to finalise the process of an IPO,” says Alexandre Allison Astier, head of CBRE Capital Advisors in Italy and the former head of business development at Beni Stabili, one of only two existing REITs established before the recent legislative changes. “There is also a bit of a shortage of product at the moment that can be used to raise capital against and a lot of what is coming out of the banks to buy is of poor quality and not suitable for a REIT.” In Asia, two of the continent’s most important economies are attempting to establish a REIT regime. It is estimated by the European Public Real Estate Association that a properly developed REIT market in China could see its listed property sector grow by a factor of 10 within a decade from around £325bn ($506.4bn).

The introduction of REITs [in Spain] has achieved its objective by bringing some fresh air into the market

IMAGE CORBIS

ISMAEL CLEMENTE Merlin Properties

Chinese investment bank Citic Securities raised $835m for a vehicle called Qihang Specific Asset Management and seeded its portfolio with two offices in Beijing and Shenzhen. However, the vehicle is a world away from what European investors would expect. It has been listed on the Shenzhen Stock Exchange, which is for large, institutional investors rather than individuals, and the stock is highly illiquid. It is neither obliged to distribute dividends, nor does it gain tax advantages. Similarly, Suning Yungchuang, a vehicle seeded with 11 electrical appliance stores, was listed on the Shenzhen exchange in February, raising RMB4.395bn ($708.24m). “These vehicles are not available to buy on the main screen stockmarket. If you want to

BRIEFING

How do REITs work?

buy them, you need to find a buyer yourself and undertake a large transaction,” says Will Chen MRICS, managing director of fund manager GoHigh Capital and former co-head of real estate finance at Citic. “The regulator doesn’t seem to be open to allowing a big, mature market which will allow everyone to buy.” In India the situation is somewhat more progressed. The election of businessfriendly Narendra Modi last May was followed in August by approval for REITs. It is thought that the market could grow to $12bn in the first five years and $20bn by 2020. However, the REIT regime will not be implemented until 2016, much to the frustration of the country’s developers, some of whom have built high-quality assets only to find there is insufficient demand for Indian real estate and are now looking to exit through the capital markets. The imposition of a 2% conversion charge for those companies that want to become a REIT has also become a sticking point. The UK, by contrast, scrapped conversion charges altogether in 2011. “As the regulations stand, the cost to transfer is very high,” says Gulzar Malhotra MRICS, chief operating officer of fund manager Indian Property Advisors. “I still think some of the larger companies will convert as they are in a bad state. They have developed stable, income-generating assets let on long leases but there is not enough demand to buy them, plus they have debt that is very expensive.” The introduction of REITs can have a clear, positive impact on a country’s real estate market, but getting to the point of having a fully functioning system is a long and bumpy road. If China and India can replicate the successes of Ireland and Spain, then they could very quickly become two of the world’s largest REIT markets and have a significant influence on global investors’ strategies. n

RISING SUNING Although not a REIT in its truest sense, Suning’s seeding in February of a vehicle with 11 stores heralds a new era for Chinese real estate

At their core, REITs are a straightforward financial vehicle – they are listed property companies with a tax wrapper. Although regulations differ between countries, most crucially, REITs are not taxed on the income that they distribute. Instead, the income is only taxed as part of shareholders’ overall income, therefore avoiding any double taxation. This puts REITs on a level playing field with owning property directly, as well as making real estate exposure possible for someone that only has a small amount to invest. In exchange for these allowances, REITs must distribute a high proportion of their income to shareholders, sometimes as much as 90%. They must also have a fragmented ownership structure. This can mean having a minimum number of shareholders – often around 100; that a certain percentage of the stock must be owned by investors that own less than 1% or 2%; or that an individual investor cannot own more than a certain amount of stock – often around 50%. In order to become a REIT, many governments impose a conversion charge, usually calculated as a percentage of the company’s assets. Some companies regard this cost as prohibitive. Because the vehicle has to be focused on income, companies need a seed portfolio that will generate this, which either has to be lined up to buy before a float, or is already owned by the company and is effectively being sold to the market. Q3 2015_MODUS A SI A

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BARANGAROO BOUNCES BACK The redevelopment of Sydney’s old container port into 22 hectares of prime waterfront is one of the world’s most ambitious urban renewal projects. Stuart Watson reports

Client New South Wales Government Developer Lend Lease Architect Rogers Stirk Harbour + Partners Cost consultancy and advisory Rider Levett Bucknall

FLAT OUT Two low-rise buildings make up the retail and residential element of the scheme. The first 159 of 1,000 planned flats sold out in less than four hours after going on sale in 2013

“IF YOU DON’T GET EXCITED ABOUT WORKING on a scheme like this, then it’s probably time to consider another career,” suggests Kevin Lemaire MRICS, commercial and contracts manager at Lend Lease. The scheme in question is Barangaroo, a new waterfront district of Sydney within sight of the Harbour Bridge and Opera House. Barangaroo’s name reflects its early history as an aboriginal settlement. By the late 20th century the district was in use as a container port and in 2003 the New South Wales government designated the 22 hectare (54 acre) site for mixed-use development. It is divided into three zones: Barangaroo South, an extension of the city’s central business district comprising three office towers plus residential and retail space; Barangaroo Point, a public park and cultural facility on the headland; and Barangaroo Central, which will consist of low-rise housing and civic buildings. Barangaroo South, where Australian construction giant Lend Lease is acting as

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Case file

MONEY WALKS PwC, KPMG and HSBC have already signed up for sizeable prelets at Barangaroo South, and the A$6bn scheme is expected to shift the centre of Sydney’s financial district

PRIME MOVER Rogers Stirk Harbour + Partners has designed the office element of the scheme which, when fully completed in 2016, will add 11% to Sydney’s prime office stock

BUSINESS WITH LEISURE International Towers Sydney, Barangaroo South’s first phase, is under construction (centre, right). The six-star Crown Sydney Hotel Resort (left) will open in 2019

developer and contractor for the whole first phase, is already well under way. The first tenants started moving into the 43-storey office Tower 2 this July, while the other two Rogers Stirk Harbour + Partners-designed towers will be completed in 2016. In all there will be around 320,000 m2 (3.4m ft2) of new commercial space, adding 11% to the city’s prime office stock. PwC, KPMG and HSBC have signed up for big prelets. Two low-rise residential buildings are also under construction. The first 159 of the 1,000 planned apartments at Barangaroo South sold out within three and a half hours of going on the market in August 2013. There will also be around 25,000 m2 (270,000 ft2) of shops and restaurants. When complete, the A$6bn ($4.64bn) Barangaroo South will shift the focus of Sydney’s financial district to the south, creating a new carbon-neutral waterfront community to boot. Lemaire provides contracts administration assistance to 20 development managers.“Even though I have

worked on extremely large projects in the UAE, I find the scale of the Barangaroo scheme truly impressive,” he comments. There are more than 2,200 construction workers on site and the number of professionals involved is correspondingly large. David Woodcock FRICS, executive director for operations and commercial, says: “There are currently over 400 of us on the project team alone, covering a range of disciplines including construction, engineers, environment, health and safety, p ro je c t m a n a ge m e n t , m a rke t i n g , development, leasing, design and finance.” Wayne Elsom MRICS is commercial contract manager on Tower 1. With 49 floors, it is the tallest of the office buildings. He says:“Together it’s a massive project, but each building is run as a project in its own right, so it is manageable. Communication and coordination across the team and between individual project teams is key.” Quantity surveying firm Rider Levett Bucknall helped Lend Lease to cost plan the

scheme and is now employed in project certification, signing off on the completed work of the subcontractors so they can be paid. Managing director Bob Richardson FRICS says his team cover huge distances on site as they certify the individual jobs.“As superintendent, signing off on the largest variation in my 50-year career gave pause for consideration,” says Richardson. “The extent of contamination on the site was significantly greater than anticipated.” The involvement of much of the Lend Lease team will come to an end in late 2016 with the completion of the main commercial buildings, but it is estimated that the later phases of Barangaroo will take until 2020-22 to finish. Elsom is looking forward to seeing the end product: “It will be a permanent reminder of a period in my life – instant nostalgia,” he says. “In years to come when I visit with family and friends and we have lunch at one of the cafes or stroll along the foreshore, I will be able to share all of my Barangaroo stories with them.” n Q3 2015_MODUS A SI A

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Careers / Business / Legal / Training

Foundations CAREERS Video interviews make recruiting easier for employers, but how do they change the game for candidates?

VIDEO NASTIES

Offering recruiters large savings in time and money, it is no surprise that videobased interviewing is becoming more popular. Research by equipment provider Office Team found that 49% of HR departments will use it in some form by the end of this year. But while many recruiters might love video interviews, candidates will need to find new skills to replicate the firm handshake, confident composure and likeability that a face-to-face meeting reveals instantly. “Ninety percent of communication is non-verbal,” says James Campanini, vice-president at video conferencing service BlueJeans. “In videos, people can forget this, so we advise them to over-do mannerisms and hand-signals.” Among the built environment employers who use video interviewing is student accommodation provider Unite, which works with the Needle Online, a provider of a socalled ‘‘asynchronous” (non-live) video interview app. Candidates answer fixed questions via their computers or Apple devices and submit a finished video. But candidates will need to make sure that they understand how the systems they might be expected to use work, because it will impact their approach. The Needle Online, for example, lets candidates rerecord an answer if they make a mistake. HireVue, on the other hand, sets its system up so candidates have to do their interview in one take – to maintain the sense of adrenalin rush that an interview should have. Nicola Mossman, HR director at global candidate due diligence firm Hire Right, comments: “Live interview

01 Don’t just show yourself from the shoulders up. Try sitting further back to give interviewers the chance to see more of you and your movements. 02 Some people still hold their tablet device in their hands rather than fixing it to something that doesn’t move. Camera shake is off-putting, so place the device somewhere stable. 03 If the technology does fail – such as the app or website crashing, you need to be prepared for what you might do. Employers will be looking to see how you deal with this as an indicator of working under pressure. 44

candidates often forget they should look directly into the webcam lens, rather than look at the pop-up of the interviewer on their screen. Otherwise, from the interviewers’ perspective, we can’t see them directly.” At the end of the day, though, a video interview is still an interview, and experts agree many of the traditional rules apply. Tom Stroud, managing director of video interview platform Tazio, says: “If people treat the importance of a video interview the same as a face-to-face one, they can’t go too wrong. This means still getting dressed properly – it gives the right look, but also puts you in a professional frame of mind – and keeping answers concise.” However, he adds: “Sometimes virtual interviews are much more specific in their questioning, because there’s not the preamble you often get sitting in front of someone. So, it’s worth being prepared for that, and having to answer questions in a more succinct fashion.” Generally speaking, recruiting employers will want to see the best in people, so interviews should always be seen as an opportunity to demonstrate the real you. Some might say that video interviews inevitably dilute this, by not allowing candidates to reveal the same person that others see in the flesh, but if there is one advantage they do have, says Campanini, it is this: “I’ve lost count of the number of times candidates regret not saying a key fact, or forget to mention a pivotal skill. With video, you can at least fill your computer screen with Post-it notes containing aides-memoire that you can refer to discreetly as the interview progresses. Done well, the interviewer hundreds of miles away will never know.”

NEXT ISSUE: WINNING ON LINKEDIN For further careers advice, go to rics.org/careers, and for the latest jobs, see ricsrecruit.com

WORDS PETER CRUSH ILLUSTRATION MARCUS BUTT

SCREENING PROCESS

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Foundations

HOW TO

PORTRAIT CHRISTOPHER IRELAND ILLUSTRATION GIACOMO BAGNARA

MANAGE CASHFLOW Know at all times your exact cash/bank position If you don’t know what you have available in the business, it’s hard to make fully informed decisions. The importance of liquidity cannot be underestimated Ensure that the finance function can always provide you with an accurate position at any moment. Always know who owes you and be firm in your terms Businesses must be able to collect cash from customers within the terms they set, and collect this proactively. A bad paying customer is not usually worth having Don’t be tempted to trade with businesses who repeatedly fail to meet their payment commitments. Deal with queries from customers promptly They won’t usually pay anything if there are any matters to be resolved on an invoice, no matter how trivial. Don’t pay suppliers in an ad-hoc manner This means the business’ outgoings can be controlled and planned. Stage monthly salary payments at a different date to supplier payment runs. Keep your bank informed Any unexpected changes in cashflow expectations must be reported. Neil Sevitt is partner and specialist in middle market services at Baker Tilly. bakertilly.com

MY WAY

Chris Carr MRICS

SENIOR COST MANAGER, TURNER & TOWNSEND, SYDNEY

It was my dad who first got me interested in construction. Driving to football games when I was a boy in Yorkshire, he’d point to buildings and say, “I worked on that”. He’s a surveyor, and I’m proud to be continuing in his line of work. You can’t beat the variety of work surveying brings – every year brings different people, projects and technologies. In 2006 I received a sponsorship from Taylor Woodrow, which became Vinci Construction, to take an RICS-accredited degree in quantity surveying at Sheffield Hallam University. I then continued on to take my APC at Vinci. Being sponsored helped with this, as I gained a tremendous amount of experience during term holidays. A big turning point came when I moved to London from Yorkshire in 2008. It was right at the start of the recession, and a difficult time for many graduates, but my experience

with Vinci was a good grounding. Some of my best memories include working on the incredible concourse of the King’s Cross station redevelopment. I loved the sense of legacy from restoring and regenerating 150 years of history for the next 150 years. After becoming chartered, I joined Turner & Townsend (T&T) and worked for two years in the project controls team on Crossrail. We created a new proposition around commercial assurance, reviewing and improving the performance of contractors, and sharing innovation between projects. I now work in Australia for T&T, in the commercial delivery team of North West Rail Link – the largest public transport infrastructure project under construction in the country. There is a lot of activity going on and in the pipeline, especially around the proposed Sydney Rapid Transit, which will extend the link under the harbour and the city. It’s a similar project to Crossrail. Construction is the bedrock of a country’s economic growth, and it’s exciting, as a chartered surveyor, to have a role to play. rics.org/chriscarr

“Some of my best memories include working on the incredible concourse of King’s Cross station. I loved the sense of legacy from restoring and regenerating 150 years of history for the next 150 years” Q3 2015_MODUS A SI A

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BUSINESS Moving office is easy compared to the IT headaches that it brings

TAKEAWAY TECHNOLOGY

Moving a business to new premises while minimising the impact on revenues is hard, especially relocating IT and communications systems with no downtime. The traditional way of moving office involves getting broadband and telephone systems providers to manage the big changeover on the same day. Delays are common, and can be disastrous for customer service and revenues. Steve Earwicker is relocations manager at IT infrastructure, datacentre and communications solutions provider Comtec Enterprises, which has offices throughout the UK. He has managed technology relocations for numerous companies and, in his experience, “the main problem that is encountered by companies who are moving location is getting the new telephone and broadband connection installed. Often this means waiting while the work is completed”. Earwicker recommends calling telecoms providers well before moving and asking about the lead time they require to install lines at the new address. Nevertheless, projects can overrun, so there is always a risk that communications lines could be down for a few days, with the risk of customer and financial losses. There are, however, ways to minimise this disruption. Andrew Williams FRICS of Andrew R Williams & Associates, who has two staff, moved the practice from a rented office to his own premises in Rainhill, north-west England. He says: “I chose a time close to the Christmas break when business impact would be minimal, told all my clients well NEXT ISSUE: CONFLICTS OF INTEREST in advance and gave them our business mobile numbers in case of a break in HOW TO BEST represent clients without landline phone or internet services.” falling foul of conflicts of interest. The change of business location meant To take part in future business advice the practice telephone number changed, columns, email editor@ricsmodus.com 46

FORECASTING CLOUDS Cloud-based systems store information and data in an IT company’s data centre and users access the information through a secure connection. In theory this means that users can access their information anywhere, without needing their own servers, so office moves require only a broadband connection at the new location. Chris Roberts MRICS, managing director at London-based Lamberts Chartered Surveyors, found a cloudbased system made things easier when consolidating two offices into one larger premises in December last year, which meant moving IT and communications facilities for 18 members of staff. “We had already introduced a cloudbased system across both offices, so we could have just plugged the technology in at the new office,” he says. However, Roberts took the opportunity to have a faster fibre-optic connection and more powerful communications switches installed that allowed for much speedier broadband connections. “We had to wait three months for connection but it was finished ready for the scheduled moving day,” says Roberts. “When we moved in, we plugged in our technology and it worked first time.” The upgrade also meant the practice could switch to VOIP (voice-overinternet protocol) and ditch its traditional telephone system. VOIP systems reduce call costs and allow the same phone to be used almost anywhere. Roberts advises: “Plan to implement any IT changes well in advance so you can make sure it works before moving in.” Kevin Meager, technical consultant at UK cloud telecoms specialist Olive Communications, has handled technology

WORDS LINDA WHITNEY ILLUSTRATION MARCUS BUTT

but he retained his old office while the new one was set up, and had all calls transferred to the new number automatically. A local IT specialist reconnected the practice’s server and five computers in the new office, and Williams asked his internet service provider to keep the connection open throughout so that it could be accessed as soon as the system was ready. “It took about a week before the new system could be used but I used my home computer to access our website and emails in the meantime,” he says, but adds: “We are now using cloudbased systems, which will make any further moves easier.”

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WORDS LINDA WHITNEY ILLUSTRATION MARCUS BUTT

Foundations

LEGAL 101...

moves for many smaller companies. He comments: “Relying on traditional telephone system and IT providers to get everything ready on the same day is risky. Cloud-based systems mean you only need one fast broadband connection. It can be a good solution for growing practices that need to move to bigger offices more often.” If you do choose to take this route, Pete Hedge, director of South Yorkshirebased telecoms consultant Raw Communications, warns: “Check the data

“Slow speeds can make cloud-based systems hard to operate effectively, and solving the problem with a dedicated line can cost hundreds of pounds a month” PETE HEDGE Raw Communications connection speed at a proposed new site before deciding on it. Slow speeds can make cloud-based systems hard to operate effectively, and solving the problem with a dedicated line can cost hundreds of pounds a month.” Hedge also recommends speaking to existing tenants to ask about the kind of real-life broadband speeds they get, and checking how well your mobile phones work in the building. If you plan to use wifi for your computers, check the signal – you may need to install a signal booster for full coverage. You should also check if the new office’s cabling and infrastructure support your practice’s systems.

RELOCATION CHECKLIST ■ Appoint one person to oversee the relocation – ideally not a fee-earner. ■ Research the broadband speeds in prospective new offices before signing leases. ■ Decide whether to go DIY or bring in IT or office relocation specialists. If no one in the firm is that tech-savvy, the best option is to outsource.

■ Consider using cloud-based solutions for communications and storage if the broadband speeds in the new office can support it effectively. Try to change to cloud-based internet and phone solutions before the move. ■ Otherwise, contact your communications provider to check if a change of business telephone number is required and the time it will take to get the new office connected. ■ Tell clients about the office move in advance and offer alternative contact methods. Inform them once the move is complete.

When is a project complete? EUGENIE LIP FRICS Executive director, Davis Langdon KPK

When a construction project reaches completion, it marks a milestone. The project is nearly done. On the legal side, though, life is just beginning. There are issues in terms of risk transfer, payment issues and damages liability. What exactly constitutes completion itself needs to be decided. Different contracts describe it in a variety of ways. There may well be phrases such as “practical completion,” “substantial completion” and “taking over” to connote completion. The employer and their contract administrator should take note of the following when the works are said to be completed. Check the contract to establish what exactly “completion” means. Contracts usually set out the criteria before completion is considered to have been achieved. Minor outstanding works that can be completed during the defects-liability period are permitted as long as the employer’s enjoyment and occupation of the completed building are not affected. Beware the start of the defects-liability period. The contractor’s obligations toward remedying defects commence from the date of completion of the works. During the defects-liability period, the contractor must complete any outstanding work and remedy defects as notified by the contract administrator. Get some insurance. Upon completion of the works, the

contractor’s responsibility for care of the works and to insure the building ends. So the owner should immediately arrange cover for the completed building. Pay back any retention monies. These are held by the employer as a financial safeguard to make sure that the contractor carries out its obligation to remedy defects and completes any outstanding work. Upon completion, half of the money should be released to the contractor, with the rest due at expiry of the defects-liability period and when all the defects identified during that period have been remedied. Be aware of the end of the liquidated-damages period. Upon certification of the completion date, the contractor will no longer be liable for liquidated damages. The contract administrator should not withhold the completion certificate to permit liquidated damages to accrue if the contractor has fulfilled the criteria for completion and the works can be handed over to the employer. Do not issue further variations. The completion date serves as a cut-off point for the contract administrator to issue instructions for variations once the works have been certified as completed and handed over to the employer. After that point in time, the contractor can refuse to carry out the variations. If he is willing to do so, the variations should be the subject of a fresh agreement with new terms and at rates different from those in the original contract. Q3 2015_MODUS A SI A

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Foundations

shareholders if the company is profitable or asset prices are rising. There are also tax benefits associated with debt, so it is considered an important part of the capital structure of a company. Finance can also be raised by securitising existing assets into a new financial product or by disposing of non-core businesses.

BRAIN GAIN

CORPORATE CODE CRACKER Chartered surveyors can benefit from having an understanding of some of the corporate finance decisions companies have to make, such as raising finance and investing capital. If a business needs finance, there are questions that need to be answered. Should the company borrow money or issue shares? What are the pros and cons of issuing and investing in debt and equity? What are the lending criteria for banks providing the debt, and when should a private company go public by making an initial public offering (IPO) of its shares? There are myriad debt and equity financing options, and they can often be confusing to understand. Many people believe, mistakenly, that debt is not good. However, leverage can actually increase returns to

EVENTS

BOOK RICS EVENTS ONLINE ricsasia.org For inquiries, call +852 2537 7117

HONG KONG

››RICS Strategic Asset Management Seminar 11 September By analysing Hong Kong’s asset management environment, latest global challenges and trends, and property asset health policies and standards, this seminar will engage 48

professional leaders to evaluate current market conditions and how the integration of asset management earlier on in the development process can help promote a sustainable formula for success that can be applied to any business, sector or region.

The ultimate aim of investment activity is to maximise shareholder value through, for example, asset purchases and mergers and acquisitions. The question is, where should a real estate company invest to grow? With these types of transactions, the considerations concern opportunities to add value, growth strategies, valuation issues, and the acquisition of private and public companies. The financial crisis of 2008 had an adverse impact on real estate companies – the dramatic fall in asset prices led to large losses and a depletion of equity. As a result, some listed real estate companies had to issue shares to strengthen their balance sheet. In some instances, the amounts received from the issue of additional shares were used to pay off debt to avoid breaching banking covenants. Many companies are now at a stage to take on new projects, and the challenge is to raise finance and make investments in a manner that maximises shareholder value. Once you get to grips with the world of corporate finance, you can better understand the decisions companies make. SAKET MODI is director of Square Mile Global Consulting. smglobal.co.uk

››RICS Golf Day 16 October Members, friends and clients are looking forward to a fun day out at the Hong Kong Jockey Club Kau Sai Chau Golf Course. Teams of 20 will compete for dozens of interesting prizes, ranging from nearest to the pin to the most unconventional outfit on the Gary Player-designed South Course. The organising committee has a challenge to bring a big smile to everyone’s face towards the end of event.

››RICS Asia Construction Conference 8 January 2016 This conference provides a platform for industry leaders to share solutions from case studies and knowledge around stabilising costs, energy sustainability, technology and policies and standards. With Construction 2025 being viewed as a charter for quantity surveyors, remaining competitive and providing innovative solutions are critical in staying robust.

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Mind map

WHAT IS CHINA’S URBAN FUTURE?

The country’s New Urbanisation Planning Policy for 2014-2020 is an attempt to create future cities that are compact, efficient, sustainable and inclusive to existing communities.

Keith Griffiths, global chairman, Aedas, Hong Kong

20 million people are urbanising each year – many towns are becoming cities, and new cities are rapidly being built.

China already has the three largest “megapolises” in the world – Guangzhou, Shanghai and Beijing – and is developing models of urbanity that far exceed any current urban densities.

Urban “densification” will be best achieved by coordinating transport nodes and creating innovative mixed-use buildings that promote activities and life at all levels of the buildings.

ILLUSTRATION STUART PATIENCE

Although urbanisation in China has succeeded in lifting half a billion people from poverty, it has brought with it huge issues of pollution, social inequality and urban sprawl.

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SAVILLS

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