Asset management's evolving role for institutional owners.

The institutional ownership marketplace has changed significantly over the past decade. Where asset managers were once simply expected to be financial analysts, holding a project's purse strings, they are now more sophisticated, responsible for a greater realm of services that is now demanded by these large owners.

Institutions, such as pension funds, insurance companies, and investment advisors, have not only become aggressive owners of real estate, but still continue to become reluctant owners of real estate. Many of the large owners have lofty investment goals that send them to far reaches of the country in search of highly occupied marquis properties.

However, separate from their investment programs, these owners also have become unwilling holders of a range of properties that may have fallen into their portfolios as a result of loan defaults, strategy shifts, and sub-par performance.

The institutional owner's asset managers must take on their building assignments with the owner's specialized goals at the forefront. In fact, properties have an increasing tendency to move from one institutional owner to another, with the goal being a shortened holding period. Many owners may just want a property leased up quickly to increase its value for a near-term sale.

Regardless of the property backgrounds, institutions are mining to specialists with increasing frequency to manage the assets. The assignment may be tailoring the property into a strongly performing asset that will become a long-term component of their portfolio. Or, perhaps the owner just wants to give the property a facelift which will boost its leasing rates, positioning it for a quick sale. Other times, the assignment may call for a long-term management strategy. But, despite the property's fate, the question the owner wants answered is: How do we maximize the value of these assets?

Ten years ago, the answer would have been one that was encompassed in property management. Today, that answer is best defined by the phrase "ownership services." This function not only includes property management, but also marketing and leasing, development of strategic business plans, financial reporting, and economic modeling.

When CB Commercial Real Estate Group contemplated a venture with Hampshire Management Company, a New Jersey-based management services firm, in early 1995, we were looking to provide commercial real estate functions to owners that was not only integrated in a full service package, but was greater and more comprehensive than what was available in the marketplace.

Launched in April 1995, CB Commercial/Hampshire L.L.C.combines the local and national brokerage network, market knowledge, and technological strength of CB Commercial, with the real estate management and ownership perspective of Hampshire Management. The venture provides a full range of real estate ownership services to institutions, corporations, and third-party owners in the New York TriState area.

With the formation of CB Commercial/Hampshire, we know our objective of more comprehensive service has been accomplished. In less than two years of operation, we have net more than 6 million square feet of ownership services assignments. Our clients include some of the most prestigious names in commercial real estate, including New York Life, Westmark Realty Advisors, John Hancock Real Estate Investment Group, GE Investments, Equitable Real Estate Investment Management, and Allstate, to name a few.

CB Commercial/Hampshire is fully integrated within the CB Commercial culture, which boosts the service offerings we provide to our roster of owners. For instance, we can draw upon CB's international research, marketing, and leasing structure to support all our resources. Leasing and marketing of our clients' properties is handled by CB brokerage professionals in the Tri-State region, as well as other offices nationally. CB Commercial/Hampshire utilizes CB's Area Systems asset management software package at our properties. This premier program monitors all financial functions, operational aspects, and marketing and leasing in one comprehensive package.

CB Commercial/Hampshire's team members come with advanced real estate skill sets and are supported with state-of-the-art technology, which helps us better meet the demanding needs of institutional owners. We routinely handle construction supervision, capital improvement programs, marketing and leasing, and strategic business plans. Institutions demand these skills from third-party service providers today.

One of the functions that sophisticated property owners request most often today is construction planning and supervision. Many facilities that have been built in the '70s and early '80s are now in need of facelifts to remain competitive or at the top of their markets. Institutional owners rely on their service providers to oversee these projects. However, many property managers farm this function out to specialists that often have different reporting and supervisory goals than the asset manager and owner.

It is essential for the premier asset managers to have the same skill sets as the institutional clients' asset managers. They need to be skilled in technical areas, such as financial reporting and modeling, so they can "talk the talk and walk the walk" with institutional building owners. CB Commercial/Hampshire's team members are adept in these functions, so clients do not have to educate their third-party service provider.

At John Hancock's Plaza Nine office building in Woodbridge, NJ, CB Commercial/Hampshire is overseeing a renovation as part of an overall ownership services package. The $1.3 million renovation includes an upgrade of the exterior and common areas, new landscaping and signage, and a replacement of the HVAC system. The building's lobby will also receive a full-scale renovation with improved lighting, marble floors, and brass accents. Plaza Nine is a very visible office building, but this renovation will raise its reputation to a top-tier business location when it is completed this summer.

We are currently overseeing a $750,000 capital improvement program at 538 Broadhollow Road in Melville, NY, which will create significant building enhancements. CB Commercial/Hampshire is managing the program for the institutional owner, which is designed to soften the look of the 177,000 square-foot building without detracting from its high-tech appeal. The five-level building has a unique inverted pyramid design that creates floorplates where tenants can be a partial-floor user yet have a distinct, full-floor identity.

Included in the improvement program is new lobby lighting, wall coverings, and custom carpets, installation of palm trees and teak wood benches in the atrium, upgraded elevator cars, a new food court with seating, a dedicated mail services area, new entrance doors, a state-of-the-art card access security system, and improved interior and exterior signage programs, including a new entrance monument. Additional landscaping was planted this fall.

CB Commercial/Hampshire is also putting Hauppauge Corporate Center in Hauppauge, NY, through a major capital improvement campaign that will strengthen its position as one of the premier buildings in the Hauppauge/Islandia market. Included in the capital improvement program is a new interior and exterior signage program, including a new entrance monument, new carpeting, wall coverings, and improved lighting, a new interior corridor and tenant door design, upgrading of the elevator interiors, and a renovation of the building's 1,500 square-foot health club and racquetball courts. The parking lot was recently resurfaced and the landscaping was upgraded. The 195,000 square-foot, Class A building is truly one of Long Island's best corporate facilities.

Not all clients need to perform major construction on a project to position it to be competitive in the market. At Sylvan Corporate Center in Englewood Cliffs, NJ, John Hancock has commissioned CB Commercial/Hampshire to reposition the 126,000 square-foot property as one of the top Class A office buildings in the market.

Sylvan Corporate Center has one of the very few large blocks of contiguous space available in Englewood Cliffs and the surrounding Northeastern Bergen County market, at 63,000 square feet, making it ideal for a headquarters or regional office operation for a major company. An additional 20,000 square feet of the 910 Sylvan wing is available for lease. The ideal occupant for the 63,000 square-foot wing would be a corporate tenant or an expanding high-growth organization. Major Japanese and Korean companies and up-and-coming, rapidly expanding corporations are primary leasing candidates.

To fill this space, we have instituted a marketing program that projects the property as one of the key office buildings in the "Billion-Dollar Mile," a prestigious office submarket just north of the George Washington Bridge. We are telling the market that the property now has financial stability from an owner with long-term objectives in John Hancock. Additionally, the market is hearing that this respected real estate owner, a household name, is a well-financed organization that has the wherewithal to complete building improvements and tenant fit-outs, as well as deliver timely commission checks.

The success of CB Commercial/Hampshire has CB Commercial contemplating similar opportunities in other regions of the country.