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Emerald Group Publishing Limited
Copyright © 2008, Emerald Group Publishing Limited
Article Type: Review From: Journal of Corporate Real Estate, Volume 10, Issue 2
CRE critique and expert interpretation
A review of Journal of Corporate Real Estate, Vol. 10 No. 2, 2008
By Alan M. Scott, Managing Director, Regional Head, Americas – Corporate Real Estate and Services, Deutsche Bank, USA.
Christopher Heywood and Russell Kenley (2008), “The sustainable competitive advantage model for corporate real estate”, Journal of Corporate Real Estate, Vol. 10 No. 2
This is a well-researched paper that looks at an interesting subject that is material to the world of CREM. How relevant is the CRE Department to the organizational competitiveness of the corporation it provides services to? To answer the question I took a contrarian viewpoint – does an underperforming CREM organization negatively impact the performance of an organization and how visible and measurable is a high-performance team in comparison? I read the paper several times and did not come away with any strong conclusions although I was convinced that the research was relevant and the subject was a necessary one to debate.
The aspirational goals of all CREM professionals are to be both relevant and to make a difference and I wanted the author to convince me that this was the case.
To be frank, I may not be the best reviewer of academic papers – it is not my world and I constantly look for practical answers and solutions. However, I do recognize a well written paper, well researched and with sound and logical conclusions and I do not have any major suggestions because it is first and foremost an academic paper and as I looked at various changes I found that it simply diluted the purpose of the paper and the Author’s well defined discussion.
Howard Cooke and Simon Woodhead (2008), “Break strategy – the key to breaking out”, Journal of Corporate Real Estate, Vol. 10 No. 2
This paper would primarily be of use to a UK-based readership. Although the paper might be topical in the UK because of the declining commercial real estate market, it will have a very narrow interest beyond the UK because the UK landlord and tenant law has very little overlap in the global marketplace. The article is one that could be published by the RICS or the EG under best practices/recent case law.
The paper is well researched and clearly benefits from an actual case study. The break option has been a part of UK commercial leases since the 1970s/1980s and has been used to effect in other down cycles. The reviewer has personal experience of negotiating break options and the implication of the underlying message – read the lease contract carefully – is clearly the lesson learned although it is difficult to believe that this is really new news.
To make it relevant on a global scale, the authors might consider broadening the discussion to include the impact of new accounting standards – IFRS, and the accounting rules associated with reserving losses.
Ting Kien Hwa (2008), “Sources of net present value gains in the acquisitions of corporate real estate”, Journal of Corporate Real Estate, Vol. 10 No. 2
This could be a very interesting subject because the underlying value of real estate is frequently ignored or misunderstood during the M&A due to diligence process and there are value investors that transcend core businesses and real estates that look carefully at the underlying nbv of assets and are able to mark to market to improve cash flow and earnings either through outright sales of assets or through refinancing like sale and leaseback or debt restructuring.
Some of the arguments could be developed further and while I was interested in the subject I was not convinced by either the case studies or the conclusions even though I know intuitively and through personal experience that the author is correct.
My suggestion is that the author looks at additional research material, perhaps by speaking to investors or examining case studies that were conceived as real estate-leveraged transactions under the veil of a corporate business transaction. The most notable recently are those in the retail sector – Toys R Us, where the value of the real estate exceeded the book value of the corporation. There have been many historically in the industrial sector where corporations have been acquired for the underlying assets as opposed to the profits derived from the business that is located there.
There are many private equity partnerships established between real estate investors like REIT’s that will acquire both surplus and retained for operations assets and operating companies whose core business is research, manufacturing, retailing, etc.
There are also case studies where the real estate assets were subsequently found to be a contingent liability through environmental pollution, zoning and regulatory noncompliance, or where the acquiring corporation achieved windfall profits because of changes in town planning zoning changes or transportation infrastructure decisions by public authorities.
Wan Zahari Wan Yusoff, Maziah Ismail and Graeme Newell (2008), “FM-SERVQUAL: a new approach of service quality measurement framework in local authorities”, Journal of Corporate Real Estate, Vol. 10 No. 2
One of the most difficult areas of measurement is in the provision of services. For facilities management where the absolute cost of providing that service is typically the key decision maker is refreshing to see an example where quality is measured and is additionally used to define performance.
What I liked about the paper once you read through the academic references was the sheer practicality of the measurement process which described the client experience – how novel to actually care about the means for delivering the services (was the bathroom clean) and the quality of the support (like investment in IT)! These are more typically known as KPI’s but it was rewarding to learn that in the municipal area there was this level of sophistication.
Another important issue that most can relate to from personal experience is that when bidding services the gap between what is wanted and what will be delivered cannot be bridged by lawyers or attorneys by creating a contract. This process provides a platform to specify measurements of satisfaction or success to both very clearly and simply. Understandably, there will always be room for interpretation but this gets both the client and the vendor closer to having a common understanding of what is required.
I thought the paper could be narrowed with the introduction and history reduced so that the reader could arrive more quickly at the heart of the paper which was the how and what. I recognize that may be my personal less than academic approach but there is some good stuff here and the reader has to wait to get to there.