Global Viewpoints

Data Standardization – OSCRE Work Groups

By Melissa Securda

Last week, my blog discussed The Open Standards Consortium for Real Estate (OSCRE) and its global impact, and today we’re going to look at the OSCRE work groups and their progress.

OSCRE is working to promote standards across every sector of the real estate industry.  Establishing interest groups, followed by work groups, enables the organization to focus on specific areas of the real estate industry so that data standards can be developed and meet the needs of the stakeholders within that segment. Each work group ultimately drafts standards that will be published and utilized by market participants to create efficiencies and ultimately profitability.

As mentioned above, an interest group is created to focus on ideas that will then result in a work group. This exchange of ideas results in the development of a business case. The interest group defines the scope and context of a workgroup. Once the workgroup is in place, its progress is monitored by a highly competent and capable project manager.

Currently, the OSCRE workgroups include: Appraisal Institute Workgroup, Commercial Information Exchange, Commercial Property Management, Facilities Management Work Orders, Lease Abstract, Real Property Unique Identifier, Space Classification, Strategy Planning and Metrics. A proposal for a workgroup for Residential Property Information Exchange is currently under review.

Once a workgroup is completed, the next step is a test pilot process. Testing allows users the opportunity to test the standard utilizing the data created by the workgroup. Once the workgroup publishes the results, the objective of the workgroup is complete and the standard is implemented for all members.

The workgroups play a vital role in the organization. Comprised of skilled members of OSCRE and professionals from the real estate industry, these workgroups introduce the standards that will impact all of the stakeholders, not only from within a particular sector, but across the entire spectrum of real estate.

Growing demand for healthcare facilities

A recent report by Healthcare Financial Management Association (HFMA) and GE Healthcare Financial Services found that hospital and health facility construction project costs are rising at a record pace, doubling since 2004 and expected to exceed $60 billion annually by 2010.

The study also says that by the time a healthcare provider's development plan is realized, the facility’s modalities could be outdated. HFMA president Richard Clarke says that consumer needs are also driving the hospital of the future, and healthcare villages – where you can do everything from visit a doctor to visit a gym to enjoy a healthy meal on one campus – are an example of an emerging trend to meet those needs.

The report also found that hospitals are also going green. Not only are many new facilities more energy-efficient, but thanks to their materials and smart designs they’re healthier for physicians, patients and nurses and can lower utility costs by 20 percent to 50 percent.

Yet the luxury of all these advancements doesn’t come without a cost, leaving many hospital executives to question where they will get the funds to compete. Hospitals are looking at a wide variety of financing approaches, from traditional tax-exempt bond issues to private placements, physician joint ventures, third-party developer involvement, and other forms of private funding.

Whatever the decision, according to the report, one thing is clear: either they invest the capital needed or they run the risk of not remaining competitive. What role can commercial real estate investors and developers play in the healthcare sector?

Loan to Let Programs….a Little Sunshine

By Barry Tuman

With the difficulties in the commercial property markets front page news so often these days that professionals in our field have taken to simply reading the funny papers, it is good to know that there are still some bright rays of sunshine. One of these areas is in the UK in the area of “Loan to Let” lending.

This type of loan program is designed specifically to handle a property purchaser who is really an investor, and is simply looking to operate the purchased property (leveraged or geared appropriately through a “Loan to Let”) for a profit. This makes this loan different than a primary home or second home loan where the property will be occupied by the borrower. The subject property that is being collatoralised becomes a rental unit with debt that needs to be repaid, usually from the rental stream.

Typically this type of lending does well when prospective property purchasers decide that the market is not right for a purchase at the time and therefore believe a rental makes more sense. Demand for rentals in the UK seems to be booming at this time with all the inward bound migration from Europe and Asia plus the fact that the property purchase market is going through a search for new inertia and momentum. As a result applications and closings for this type financing seem to be doing very well indeed, even in the down real estate market.

Interestingly, just a few months ago this segment of the market was in a free fall as economics and supply/demand issues were going in the other direction. Some rather substantial “Loan to Let” loan portfolios changed hands at discounts during this period and the proven real estate success law of buy low, sell when the market is high again will again determine how companies stack up regarding returns. These portfolio purchases look like awfully smart buys right now in hindsight with the snapback in vitality for the sector. I will bet on these buyers to lead the returns parade over the next few years.

Here are perhaps the most interesting facts to consider though……some of the same people who were bottom fishing successfully in the “Loan to Let” lending portfolio markets are now buying in most other areas of the commercial property markets in the UK and the EU.

Smart money… Always follow the smart money.

BOMA International’s 7-Point Challenge Gains Momentum

The Building Owners and Managers Association (BOMA) International’s 7-Point Challenge, an innovative energy reduction plan to achieve market transformation in the commercial real estate industry, is gaining momentum as the leading companies and BOMA local associations around the country sign on to endorse the challenge.

BOMA International introduced its Market Transformation Energy Plan, which includes the 7-Point Challenge, to its members in July 2007 as an aggressive but realistic strategy to reduce the use of natural resources, non-renewable energy sources and waste production in commercial buildings. The goals of the plan include decreasing energy consumption by 30 percent across portfolios by 2012; benchmarking energy performance and water usage through the Environmental Protection Agency’s ENERGY STAR® benchmarking tool; and providing education to building owners and operators and others involved in building operations, to ensure that equipment is properly operated and maintained.

Through the 7-Point Challenge, BOMA is working with real estate professionals, government officials at all levels, as well as a myriad of public and private groups to achieve market transformation. Real estate companies and organizations are using the 7-Point Challenge as both a call to action and a template for developing sustainability programs and improving energy performance.

Companies endorsing the challenge include Carr Services, CB Richard Ellis, Colonial Properties Trust, Cousins Properties, Cushman & Wakefield, Glenborough, Hines, LBA Realty, Opus, Parmenter Realty Group, PM Realty Group, Stream Realty Partners, Transwestern and USAA Real Estate Company.

BOMA local associations endorsing the challenge include Austin, Boston, Greater Cleveland, Columbus, Dallas, Denver Metro, Metropolitan Detroit, Houston, Miami-Dade, New Mexico, New York, Oakland-East Bay, Orange County, Orlando and Philadelphia.

The EPA’s ENERGY STAR program has also given the challenge its endorsement.

For more information on the 7-Point Challenge, visit www.boma.org/7pointchallenge.

Data Standardization: A Closer Look at OSCRE

By Melissa Securda

Last week, my blog discussed Data Standards organizations leading the effort to introduce standards to the real estate industry. Today, we’re taking a closer look at OSCRE and its global impact.

The Open Standards Consortium for Real Estate (OSCRE) is working to promote standards across every sector of the real estate industry. OSCRE International is the umbrella body that facilitates global standards development and adoption.

The components of this organization consist of PISCES (Property Information Systems Common Exchange), covering Europe, the Middle East and Africa; OSCRE Americas, covering North and South America; and efforts are underway to create OSCRE Asia Pacific. Establishing interest groups, followed by work groups, enables the organization to focus on specific areas of the real estate industry so that data standards can be developed and meet the needs of the stakeholders within that segment. Each work group drafts standards that will be published and utilized by market participants.

PISCES, also known as OSCRE EMEA, was the first of the regions to be developed. In less than 10 years, it has developed and/or is completing a total of 15 work groups. OSCRE Americas was formed less than five years ago by a group of corporate real estate technology managers and has since formed nine work groups. One workgroup has completed its mission, the Commercial Information Exchange, which addresses the data standards of the brokerage community.

Bruce Kellogg, vice chair of OSCRE Americas (and an ARGUS Software employee), is working with others to create OSCRE Asia Pacific. To date, many discussions have occurred and many associations and corporations have been discussing the establishment of interest groups that would be the first step toward establishing this region.

OSCRE is a driving force behind improved transparency, consistency, and efficiency in the real estate industry. With full cooperation from industry stakeholders, the organization’s efforts will continue to advance in all regions. 

Short Recession, Quick Recovery?

A recent report by CBRE's global chief economist Raymond Torto says that people need to stop asking whether the U.S. is already in or heading into a recession and should start asking whether the financial and credit markets can settle down by mid-year so the economy can get back on track.

Torto says that most economists agree that the first two quarters of 2008 will be slow growth or mild recession, leading to recovery in the second half of the year. But a major financial market meltdown would put the kibosh on a second-half recovery, he notes, adding that scenario seems unlikely.

"While we expect further write-downs in the value of financial and real estate assets and some forced selling of such, we do not expect the failure of a large financial institution, or a further downgrading of the monoline insurers," Torto says. "Rather, we expect the Fed to keep the financial system intact, although banks will need to raise capital for their own balance sheets, thereby leading to selective lending and credit extension."

A Future EU REIT

By Barry Tuman

Professor Piet Eicholtz of the University of Maastricht, along with researcher Nils Kok, presented to the European Commission last month a report entitled “The EU REIT and the Internal Market for Real Estate”.

Commissioned by five respected real estate organisations: the European Landowners association, the European Property Federation, the Royal Institute of Chartered Surveyors, the European Group of Valuers’ Associations and the Urban Land Institute Europe, the report highlights how different the REIT structures are within the EU market, where 13 of the 27 EU member states now have a REIT or comparable structure.

A simple, but telling example of the inconsistencies: in some countries REIT investments are required to be made in urban areas, which are mainly housing, while in another country REIT investing in housing is not permitted. The requirement for the percentage of profits to be distributed as dividends, core to REIT strategy, is also variable between member countries – with requirements ranging anywhere from 0 to 100 percent. There are also issues with capital and investment flows between borders for EU member states, let alone non EU investors which do not line up with EU charter expectations.

The report also made some recommendations – the most interesting being the suggestion of a single set of rules for the entire EU pertaining to REITS. Something else that is bound to cause an interesting discussion is the proposal that EU REITS are managed internally and not externally in order to promote the establishment of consistency of interests between shareholders and the fund management. A recommendation was also made that only closed-end funds should qualify for a future EU REIT status. 

The head of the initiative group for the European Commission expects that the EU REIT will be a known fact within two years. Is this additional oversight or an infusion of additional consistency and transparency? The answer is probably some of each. The development of international real estate standards continues to advance.

Luxury Living in Macau

By Pius Leung

One of the newest and grandest properties under development in Macau is the Buckingham. Soaring 50 stories high, the Buckingham offers extravagant residences close to the airport, ferry terminals, local shopping and restaurant area, international school, stadium, country & golf club etc. Its unique location and height offers panoramic views of the "Cotai Strip" (Venetian, City of Dreams, StudioCity) or the harbor, with iconic glass curtain walls and expansive balconies.

Only 196 units will be available and are priced at HK$ 3400 per square foot. Amenities include facilities of swimming pool, gym, fitness center, health spa, sauna, recreation and private function rooms etc. Residents will enjoy unsurpassed amenities such as 24 hour security and concierge services, unique butler, restaurants, coffee shops, banquet hall and 5-star hotel catering services.

Global investors can purchase luxury condos in Macau and pay the minimum transfer tax, capital gains tax and stamp duty by taking over existing Hong Kong companies that are set up specifically to own Buckingham units.

Heading for the Border

With companies such as Whirlpool, Rubbermaid and Toyota moving their manufacturing operations into Mexico, the country's housing, industrial, retail, and office markets have been ignited.

The Mexican economy has been transformed since the 1980s, primarily because of the North American Free-Trade Agreement (NAFTA). Foreign trade has doubled since the 1980s and is now almost 60 percent of gross domestic product. Additionally, Mexico also is the world’s 5th largest oil producer and a major source of commodities, and the country has benefited from record energy and commodity prices.

The country, which is currently the world’s 13th largest economy, is set to become the world’s 5th largest economy by 2040. Mexico's stable, growing economy has made smaller the gap between a road paved with dirt and a road paved with gold, filling the country with an expanding middle-class.

With 107 million people, Mexico is the world’s 11th largest country in terms of population. Mexico City alone has a population of more than 20 million making it the second largest urban area in the world.

Mexico's labor force is 34.5 million strong, and given the country's demographics, the labor force is young. The average Mexican is 27 years old and more than one-third of the population is 15 years old or younger.

Data Standardization – Part II

By Melissa Securda

Last week, my blog discussed global data standards in the commercial real estate industry.  Today, we’ll take a closer look at three major organizations within the U.S. and beyond. 

The Open Standards Consortium for Real Estate (OSCRE) enables the consistent electronic transfer of information and eliminates the need to send a hard copy or re-enter data. Because it is an open standard, it is available to all. OSCRE is a global organization and includes affiliates PISCES (Property Information Systems Common Exchange Elements) in the U.K. and Europe and OSCRE Americas. A third region, in Asia-Pacific, is being explored. As such, OSCRE helps members work together to develop global standards, which cover the entire spectrum of commercial real estate.

The mortgage industry has been working toward standardization through MISMO, the Mortgage Industry Standards Maintenance Organization, formed by the Mortgage Bankers Association.  MISMO covers both residential and commercial real estate finance and has over 160 subscriber organizations. The organization has created an XML architecture and data dictionary that will enable data sharing among members.

 

The Commercial Appraisal Report Standards project, CARS, of the Appraisal Institute, is defining data standards and working with software developers for the creation of valuation templates to be used by its members and others in the profession. The CARS project team is comprised of members from all aspects of commercial real estate involved with the appraisal process, from service providers to clients.   

While the background, purpose, or membership of these organizations may be different, they all aim to increase transparency, reduce costs and improve accuracy. Next week we will take a closer look at OSCRE.