The Institute of Asset Management (The IAM) is a UK-based organization, with several chapters here in the U.S that focus on the whole life management of physical assets, ie. Real Estate. I went to the spring meeting of their New York Chapter on April 20th, where there were presentations from:
- Rick Geddes, Director, Program in Infrastructure Policy, Cornell University; he focused on his experience with public-private partnerships and the differences between a funded and financed infrastructure project.
- Stephen McDonagh, Senior Business Development Manager, Amey; his company has a 30 year maintenance contract for the London Tubes and he focused on the key performance metrics they use to evaluate the effectiveness of their maintenance program.
- Roger Prince, Deputy Director for Operations and Capital Program Delivery, The Port Authority of New York and New Jersey; the new Goethals Bridge from New Jersey to Staten Island was a successful privately-developed project for PANYNJ and he walked us through the contract mechanics that ensured the structure continued to function effectively for years to come.
In my quest to better understand asset management functions in the business world, I came upon this organization ahead of their Spring Meeting, and they defined asset management in the following terms:
“Asset management involves the balancing of costs, opportunities, and risks against the desired performance of assets to achieve an organization’s objectives. ”
Further, it clarifies that “An asset is an item, thing or entity that has potential or actual value to an organization. This is deliberately wider than physical assets but these form an important focus for more organizations.”
“Modern society is heavily reliant on physical assets in order to function effectively. Managing assets so they can provide products and services now, and into the future, is a core part of the discipline known as asset management. But assets can be made of anything – a brand, a license, a right of way, a group of companies, opportunities – anything in which you invest to achieve your purpose!”
I found it interesting that in all the website materials, this organization did not particularly highlight real estate as part of their focus (other than logistics assets such as warehouses). Through, immediately I thought the discipline they developed here 100% needs to be adopted and developed by real estate owners and operators.
The organization utilizes the ISO 55000 guide as a worldwide tool for members, both private and public, to use for training in the asset management practice in all industries. The ISO 55000 proceeds to say “Asset management also enables an organization to examine the need for and performance of assets and asset systems at different levels. Additionally, it enables the application of analytical approaches towards managing an asset over the different stages of its life cycle (which can start with the conception of the need for the asset, through to its disposal, and includes the managing of any potential post disposal liabilities)…..asset management is the art and science of making the right decisions and optimizing the delivery of value”.
If I were to simplify this, Asset Managers are the fairy godparents of your assets. They a) take your infrastructure project, product, license or property and figures out what you want to do with it b) wave their business wand and turn it into an asset that’s performing to its highest potential (this, by the way, takes years to do) and, c) when the asset no longer effectively serves its purpose, asset managers condition the asset for another use, re-capitalizes the asset or prepares it for a disposition.
I cannot wait to delve deeper into this topic and evolve the practice of asset management in real estate with this organization.