Management of Real Estate Companies
Published in Alumni magazine, Dec. 2006
Real estate has been one of the most dynamic sectors of the Argentine economy for the last years. This encouraged Alumni to create an Interest Group bringing together the actors of this industry and launching the First International Program of Management of Real Estate Companies (Programa Internacional de Dirección de Empresas de Real Estate) jointly with IESE.
This is an outstanding sector of Argentine economy that has lately become an important actor within the domestic business market. The internal growth has enlarged the companies’ size and field of action and has increased this business’ attraction and exigencies. In addition, the macroeconomic statistics reaffirm what has been said. The parallel reigning opportunism has spread too much information, which places the advantage on those who are able to analyze and use it properly. Nevertheless, successful real estate management needs more than these three basic rules: “location, location, location”.
It is only logical that this important economic sector is so attractive. This year four realtors traveled to Madrid to gather information to improve the organization of this business, as mentioned in the previous issue of this magazine.
WITNESS CASE
Why Spain? Because Spanish real estate is one of the country’s economy boosters and an international referent. And also because IESE have been teaching a program on real estate management for the last 12 years. “We were interested in getting local teachers of different fields (finance, marketing, costs) involved. We aimed for a totalizing view of the business. We realized that research was fundamental in the IESE program”, explained Mario Gómez (EMBA 95), managing director of Toribio Achával and member of this interest group.
Madrid’s ICRE (International Center for Real Estate) constantly generates information and writes cases and consultancies. “Our contingent traveled to Spain, gathered all the details and designed its own program, adding ingredients from reality. We got teachers involved to write cases”, he says.
The Alumni commitment was such that turned an interest group’s initiative into a program. “One of our goals was to create training alternatives not offered by the market. That is how this program was born. We started our meetings around mid last year, 20 of us participating permanently and about 20 more doing it occasionally”, referred Gómez. The three first objectives were:
- to put together the network of actors of the different stages of the business, so as to improve the way they relate and discuss topics of mutual interest;
- to generate a business climate (because previous surveys clearly asked for this), so we associated companies to get better prices and we benchmarked costs, among other advances; and
- to give training.
We are not satisfied by what the market offers. We worked on putting together something different”, added the realtor.
A PROJECT BECOMES REALITY
This was the origin of the International Real Estate Program, born as an initiative of the Alumni community and intended to connect and relate Alumni engaged in the real estate business.
- To improve the knowledge on real estate and management techniques.
- To improve the decision making skills of the modern developer.
- To give a totalizing view of the real estate companies’ management.
Participating businessmen, executives and professionals were:
- Real estate companies: developers, investors, brokers, commercializers.
- Investors: real estate investment funds, insurance companies and others.
- Financing institutions.
- Consulting companies.
- Professionals: architects, lawyers, notaries public, engineers, auctioneers, etc.
- Public administration officials and directors.
IAE Faculty members who participated:
Pedro Frías EMBA, IAE (IAE Direction and Control Systems Area Professor), Gabriel Noussan, PhD in Business Management, IESE (IAE Finance Area Professor), Martín Zemborain, PhD in Marketing, Columbia University (IAE Commercial Management Area Professor), Julio Sánchez Loppacher, PhD in Management Engineering, Politécnico de Milan IAE (Operations and Technology Area Professor), Lorenzo Preve, PhD in Finance, University of Texas at Austin (IAE Finance Area Professor).
And the invaluable contribution of José Luis Suárez, Management IESE Professor and IESE International Center for Real Estate (ICRE) Director.
Results show success: “It was an incredible feeling: 70 skillful professionals devoting a whole morning to discuss and make critical decisions about my company, which I usually do on my own. It was a unique and unforgettable experience”, underlined Gonzalo Romano, general manager of Kidde Argentina.
This IAE interest group attained a vital goal: gathering the real estate business’ actors with a common shared objective: to add value.
The vision of an expert
José Luis Suárez is a real estate specialist. He is an IESE faculty member and consultant and offered his opinion on this strong business both in Argentina and in Spain.
– “Globalization affects real estate in many ways, one of them being the great global liquidity, all that money going into the real estate business mainly because of the irregular Exchange results and the bonuses handled within the sector during the last years. International investors who manage a globally growing investment portfolio are arriving and this derives in closely related markets. Another effect of globalization is that investment instruments are copied from one region to another. There is a tendency to standardize investment and analysis procedures.”
– Which are the investment levels?
– International investment has increased 30% during the first half year, against the same period of last year. This shows a strong growth of global real estate investment. On the other hand, nothing suggests that this situation may change on the short term. There is a growth trend and we expect a significant increase during the rest of this year and the first half of the next.
– Why are Spanish investors looking into America, other European countries and Assia?
– The Spanish real estate sector has grown a lot, both in activity and in financial capacity and professionalization, thus becoming increasingly international. The trend is usually to invest on development and promotion in underdeveloped countries, in emerging countries. Investment is going to central and eastern Europe and also to some Latin American countries. Investment on properties for rent, that is, actives that generate income, such as shopping centers and offices, is going to developed countries.
– Which is your vision of the Spanish market?
– This specific question about the Spanish market should be answered by business segment. Housing is having an unusually favorable and long cycle. Today, homes built totalize almost as many as in France and Germany together, and three times the amount built in England. It is a high activity level and it is expectable that it will slow down in the immediate future. We also expect that the strong prices increase will come to a stop”.
– What about the Argentine market?
– Housing is 85% of the real estate business and what is going on is important for any country, including Argentina. There is no doubt it will be the most important sector of the business. Lack of land tends to accentuate. I think Argentina is an inhabited country: if anything is in surplus, it is soil. Only in certain parts of Buenos Aires there may be a lack of building space, but this is not the country’s problem”.•