Property assets: reasons to audit
Time for an audit?
6 April 2017
Stewart Little offers five key reasons to consider an audit of your property assets
Asset portfolio managers are responsible for millions of pounds’ worth of bricks and mortar. Their reputation dictates that they need to be fully aware of the value of the assets they are managing, so they can advise their clients on the best course of action for their investment.
To maintain an up-to-date understanding of your asset portfolio, look out for the following five signs that it is time to commission an audit.
- You do not trust the data you have.
- Your company is merging with another firm.
- Your client wishes to dispose of its assets.
- There is market uncertainty thanks to Brexit.
- Legislation presents a risk.
This article will review each of these in turn, before considering how technology can help you conduct audits more smoothly.
You must be in possession of the facts to make good decisions. Too often, businesses are forced, coerced or misled by dodgy tradespeople into carrying out works that are not required.
Businesses can be forced, coerced or misled to carry out works that are not required
If you are being asked to embark on a major capital programme but are not given the resources and tools to achieve results without risk, think again. Do not rush headlong down a path without examining the data and ensuring that it is accurate and impartial, having come from a trustworthy source.
Merging businesses means merging portfolios, so you need to be certain whether or not the other company’s data is accurate.
Do your due diligence better than the other party and you stand a good chance of leaving the room confident in your decision. Royal Bank of Scotland’s due diligence on the purchase of Dutch Bank was actually so lacking in diligence that it almost bankrupted the firm.
At some point your client will want to sell on a property or 2, or maybe even its whole portfolio. What do you advise? Which ones do you sell?
Nothing short of an in-depth understanding of that portfolio is good enough. You need to be confident that you know it inside out and that the information that you have at your fingertips is up to date if you are going to provide accurate advice.
Last year brought a fresh challenge for the property world in the form of the UK’s vote to leave the EU. Investors find bricks and mortar appealing as they represent the long-term stability of the built environment, but Brexit threatens this situation. The market will definitely recover, but the long-term uncertainty and risk of dramatic change is toxic for us all.
Yet the world is still turning: people want to invest and make decent returns. If you are currently trying to dispose of a portfolio, you may want to consider putting it on the back burner while the weak pound creates low-price sales and instead use the time to ensure it is the very best it can be – by using technology to increase the value of assets, for example, in improving energy efficiency.
Legislative uncertainty as a result of Brexit is a credible risk to the market. So will Minimum Energy Efficiency and Performance Standards be scrapped by a government looking to break away from the EU’s Energy Performance of Buildings Directive 2010 that underpins these?
Both pieces of legislation prohibit the sale, renting or lease of a building with an energy rating of F or G – which consultancy WSP estimates could represent 31% of the built environment, based on its assessment of Aberdeen Asset Management’s portfolio. There has thus been opposition from property professionals, whom a post-Brexit government may wish to appease through a bonfire of EU-led legislation.
Technology can help
Today, rapid portfolio evaluation and impartial advice are readily available. Technology has progressed to the point where infrared images can be quantified, data can be augmented and calculations carried out by sophisticated algorithms.
Advances in drone technology and software mean that surveying is easier, reporting can be carried out online and the software, analysis and road mapping are all dynamic and interactive.
Experts are being replaced by dashboards that allow asset managers to test the combination of one or several changes to energy efficiency measures and watch potential energy savings achieved.
So although there are plenty of good reasons to audit your portfolio, it has never been easier to do so.
Stewart Little is CEO of irt surveys
- Related competencies include Corporate real estate management
- This feature is taken from the RICS Property journal (March/April 2017)