Page 34 - REALCOMM EDGE-Fall 2017-FINAL

Business SOLUTIONS

Preparing for the New Era of

Mergers and Acquisitions

Alex Stanton
Industry Principal/Commercial
Yardi

n September 2016, real estate became the 11th Global potential impact. In my experience, mergers and acquisitions
Industry Classification Standard (GICS) sector. According to have high potential to benefit shareholders, staff and custom-
Ia press release from MSCI Inc. and S&P Dow Jones Indices, ers of the newly created entity—but only if the organizations
which maintain GICS, the action reflects the “growing impor- involved put the right strategy and assets in place.
tance of real estate in the world’s equity markets” and “the po-
sition of real estate as a distinct Put People First
asset class and a foundational The first key asset that drives
building block of a modern port- success in a newly created real
folio, rather than an alternative.” estate entity is people whose
This designation—the first new aptitude and experience
GICS sector to be created since complement your direction, asset
1999—touched off a series of class and strategy. Whether you’re
rapid and significant changes. privately owned and dreaming
One byproduct of that devel- of being a REIT, planning to open
opment is that real estate is an funds or diversify into a different
increasingly visible asset class. asset class, the right people with
Real estate asset performance the right experience are critical
is no longer blended into a to success.
larger financial picture but is fully Securing and retaining talent
accountable on its own merits. This has prompted real estate isn’t easy. Turnover in the industry, especially at the property
companies to optimize and focus their portfolios by acquiring level, is high, and the specialized skills required for real estate
assets that are critical to their success and shedding operations investment and property management add to the challenge
that don’t align with their strategic direction. For example, of acquiring and retaining staff. Furthermore, family-owned
in October 2016, diversified real estate company Cousins companies have the added challenge of ensuring that their
Properties Incorporated completed the spin-off of Parkway Inc. business endures generational changes. Fortunately, all
into an independent REIT. Eight months later, Canada Pension these factors can be mitigated with proper investments in
Plan Investment Board announced plans to acquire Parkway to recruitment, training and succession planning.
the tune of U.S. $1.2 billion. Meanwhile, Government Properties
Income Trust is moving to acquire First Potomac Realty Trust Enact Proper Processes
for about $1.4 billion. In March 2017, shopping center owner, A second key element for thriving in today’s real estate
operator and developer Regency Centers Corporation merged environment is instituting processes that let your business flex,
with Equity One, Inc. to form a $16 billion company. scale and contract without adversely impacting your team or
These, and other examples, illustrate that properties changing another team you might acquire or join. Publicly traded REITs and
hands is common in this new era and will likely continue. And private owners and operators alike can benefit from documented
such action isn’t exclusively the province of the big players; it’s processes and procedures that streamline auditing, internal
happening with small and mid-size real estate companies as well, operations and external partnerships. Operations most in need of
including family-owned and operated enterprises. rigorous process documentation include accounts payable and
From this new era a key question emerges: are you ready to receivable, legal, budgeting, fixed asset management, vendor
merge or be acquired? Maybe you don’t think your organization onboarding, and investor and management reporting.
will be involved in a merger or acquisition, or maybe you don’t Some companies, especially smaller ones with fewer resources,
want it to happen, but it’s folly to ignore the possibility and might be tempted to forgo the labor involved in documenting

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