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Standardizing decentralization for asset management.

Standardizing Decentralization for Asset Management

Like many other institutional owners, Travelers' Realty Investment Company relies on third-party fee property managers to oversee its national portfolio of properties. Traditionally, Travelers' received paper copies of financial statements and other operating information for each of our over 80 management firms. Our in-house accounting staff then had to reenter the data into our mainframe computer system in order to provide the consistent reporting we require. Data also had to be available in the mainframe so that our portfolio managers could analyze property performance.

About eight years ago, we began to realize that our analysts needed more information - lease abstracts, tenant records, and many other facts on each property. Quite often, the fee managers routinely supplied this information, but there was no efficient way to transfer that information to the portfolio staff. Adding more information into our mainframe duplicated effort and wasted time and money.

Moreover, we had a tremendous problem keeping our in-house data up to date. The fee managers who work daily with the properties did frequent updates, but our centralized data was often a month or more old. This delay was unacceptable.

In looking for a solution, Travelers' realized that if we were to receive data directly by modem from our fee managers, we would eliminate duplication of effort. We would also be able to access more detailed lease and financial data with little extra work.

Initial planning

Our first decision in implementing this computer-linked decentralized system was to determine that we wanted a PC-based system. We already had an established interface from a PC to our mainframe, so transferring data would be less technically complex. In addition, PCs have become so powerful that we felt our fee managers could adequately store all their data on a PC-based property management program.

Using PCs also allowed individual fee managers to perform daily operations independently because they were not dependent on access to a centralized computer for all operations. A system in which each management office time-shared on a central computer would not allow for this flexibility.

Having reached the decision to rely on a PC-based system, the next step in our decentralization plan was to require all our fee managers to compile and transmit data using the same property management software program. Using the same program helped ensure that all data would be recorded in a consistent fashion and that transmission and downloading procedures could be standardized. We recognized that this standardization would save time in data manipulation and in training fee managers.

Next we spent nine months meeting with our four regional directors of property management to assess what features they felt they needed. Their input helped us realize that a system could be more effective if it had the capacity to include nonstandard property information as part of the standard screens to set up a property. We also involved two of our largest fee managers in the initial needs analysis and software selection.

We determined that adding important, but nonstandard, data, such as the building's construction, its exact location, or whether or not it has asbestos would increase the ability of our in-house asset managers to assess the building's performance and its place in the management portfolio. The ability to sort data based on many different criteria offered our asset management staff the opportunity to see correlations that might not be evident otherwise.

After developing our "wish list," we spent approximately six months working with computer consultants reviewing PC-based property management programs. Initially, our asset managers and data processing personnel worked with these consultants to run concurrent test operations of several property management systems. We wanted to be certain that the system we eventually chose was the best available from both the real estate manager's and the MIS staff's point of view.

Eventually we chose the "Skyline" program from the Softa Group in Northbrook, Illinois. In part we chose this package because it offered the flexibility of incorporating the additional selection parameters we wanted without significant reprogramming. Buying a standard package and then reprogramming it extensively does not make sense.

Once the Skyline program was selected, programmers from Softa worked with our in-house MIS staff and asset managers for four months to perfect the technical aspects of the system. Our programmers wrote an interface that would allow fee management offices to import data to our mainframe with only a few keystrokes. At the same time, Softa added over 300 supplemental parameters we had requested. Some of these entries have now been added to the general program.

This short time frame for implementation was possible only because of the excellent cooperation and high level of professionalism displayed by personnel on both sides.

Installation

We actually begin installing the system with the first eight fee management firms in January 1989. We completed installation just this September.

Travelers provided the property management software, the communications program, and training on how these operate. We also contracted for a hotline service from Softa for our fee managers.

The individual fee managers were asked to buy hardware to support the property management and communications software. However, the Skyline program will run on the equivalent of an IBM PC/AT, so the outlay was not large. In fact, many of the management firms already had appropriate equipment.

One change for some of the management companies was a shift of the principal collection and processing of the data to individual property sites. Although most firms already used computerized processing, the majority still had data manually batch processed at the properties and then entered and audited at the firm's main office. With our system, most processing is done on site. This improves the speed of response and flexibility. It also allows for more efficient use of telecommunications.

We organized two four-day training sessions for the initial eight users. We felt that two shorter sessions were better than one long one; there is a limit to how much a person can absorb at one time. At the same time, by splitting the sessions, the fee managers were able to practice what they had learned in the first session and get any questions answered promptly. Additional sessions were scheduled as other users began using the system.

Representatives of our asset management and accounting staffs were present at each training session, which were primarily conducted at the fee managers' offices. While the actual training was done by representatives of Softa, we wanted our people there to answer any questions on new reporting procedures and to reinforce our involvement to the fee managers. Softa created standard workbooks and tests to ensure that teaching was consistent.

Softa also performed system audits for each management company about one month after the last training session. This process helped ensure that the systems were working and that each fee manager understood all the required procedures well.

Benefits of Decentralization

Decentralizing our property management record-keeping and accounting input has resulted in some significant savings.

Receiving all the data from our properties in the same program format has greatly simplified reporting standardization. Because each management firm uses the same screens to enter the same data in the same order, our portfolio managers can compare performance among properties easily. The input was also designed for easy comparison against industry averages published by IREM and BOMA.

Eliminating the re-entry of property data has reduced the time needed to do an in-house property analysis by 80 percent. On the accounting side, the new system has eliminated one-half day's work per month in entering invoices, receipts, and other financial statement information for each property. Because financial data is now transferred directly, the accounting staff is also able to review accuracy with a program that looks for inconsistencies in logical relationships rather than checking the data manually. If they see an inconsistency they will clarify it with the fee manager.

This time savings in the accounting area has allowed some centralization of accounting functions. It has also made it possible for accountants to spend more time visiting properties to answer questions and monitor internal controls. This practice helps ensure that future data will be entered correctly.

Another benefit of acquiring all available property information regularly is that if another property management firm takes over the property, we have all the records available immediately. We just need to give the new firm the software, load the records from diskette, and the property is up and running.

Responses to the system have been very positive from our fee managers (see sidebar), although some managers preferred the system they were previously using. However, Travelers' made a commitment that all our properties would use this decentralized system, and, without exception, all participants have complied.

One unexpected problem we encountered in implementing the system was in defining terms. Each manager seemed to have his or her own definition of exactly how to calculate leasable square feet or "net/net" rent. We finally had to specify just what was meant by such terms. Otherwise, the data used for analysis and comparison would have been inconsistent.

Conclusion

Despite a few, minor problems, the design and installation of this decentralized computer system has been a tremendous benefit for our organization. A far wider range of property data is available to us on a much more timely basis. In today's competitive environment, outdated information is worthless.

Long-term savings in data entry and accounting hours have also helped hold down overhead costs. Even more importantly, the almost immediate availability of current property data has enabled our asset managers to refocus their time more productively. Instead of spending a good portion of their time assimilating daily information for comparison, the asset managers are now able to give more consideration to the property as an asset, to compare it with other asset classes, and to do the types of analysis and valuation that are truly necessary for asset management.

Asset management is a popular buzzword today, but only when the manager goes beyond daily accounting and recordkeeping does real asset management take place. The implementation of this decentralized information has helped make it possible for our asset managers to do everything that their name implies.
COPYRIGHT 1989 National Association of Realtors
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Author:Wendt, William; Healey, Warren R.
Publication:Journal of Property Management
Date:Sep 1, 1989
Words:1688
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