WASHINGTON, DC—A year after CBRE introduced a property management services program expressly for publicly traded REITs, the platform has more than 45 million square feet under management, with a pipeline of opportunities with other REITs. Growing out of a study of third-party property management for REITs that was conducted by David M. Fick at Johns Hopkins University Business School and commissioned by CBRE, the program aims to save real estate trusts up to 62% in onsite management costs and 24% in management fees.

“REITs have property-managed their real estate since 1986, when they got the approval from Congress to manage their real estate,” CBRE's Drew Genova, who heads the program along with his Strategic Account Group colleague Steve Bassett, tells GlobeSt.com. In approaching REIT CEOs with the program's value proposition, “We were just trying to challenge that thinking.”

A Washington, DC-based executive managing director with CBRE, Genova says that he presented the firm's property management experience on behalf of Clarion Partners as an example. “Clarion is an investment money manager that buys real estate; they're not a REIT structure,” he says. “But they still own the real estate, they still have to make the strategic decisions and they still have to asset manage the real estate.

“These are the people who drive how the real estate gets run,” continues Genova. “They made a decision that if it's not a priority in their business model, if something in the model falls from the top 10 to number 11 as a core part of the business, then they immediately look to what can they do to outsource it, what can they do to manage it differently.”

Just as the market capitalization for REITs has grown exponentially over the past three decades, so property management has grown increasingly sophisticated. “When you look at today's perspective compared to yesterday, it's completely different,” Genova says.

From those initial meetings with REIT CEOs, “We got a lot of early interest and a lot of continuing, ongoing interest,” he says. However, he adds, “We have not cracked the nut yet where REITs will send out an RFP every time they buy a property. My goal is for them to do that, the way the rest of the buyers of real estate look at it—not because they have to outsource management, but just to see if there's a more efficient way to operate the real estate versus the way they're doing it.”

But amassing a portfolio of 45 million square feet for a brand-new venture represents a success story. “Some would say that if you spoke to a true REIT purist, they would say, 'well that's anecdotal, they're not outsourcing' and try to caveat it in every way possible,” says Genova. “But I would say that this is the beginning steps of REITs looking at ways to operate real estate more efficiently.”

Sonya Huffman, head of real estate operations for Gramercy Property Trust, a client of the REIT property management platform, offers testimony to the program's success. “CBRE's property management, engineering and transition services supporting roughly 7.0 million square feet was an excellent partner, collaborating with us under a tight time frame, to meet the complex demands associated with the merger of the Chambers Street portfolio,” she says. The merger, which created a $5.8-billion office and industrial net lease REIT, closed this past December.

Instant Insights /

Challenging REITs' Thinking on Property Management

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