Real Estate Management: 1990s and BeyondEssay Preview: Real Estate Management: 1990s and BeyondReport this essayREAL ESTATE MANAGEMENT: 1990s AND BEYONDClark JonesTABLE OF CONTENTSIntroductionExpansion and DiversityHuman Resources ManagementConclusionReferencesREAL ESTATE MANAGEMENT: 1990s AND BEYONDBY Clark JonesINTRODUCTIONThe Journal of Property Management (1998) reports that real estate has been freed up by certain laws in the 1990s, most importantly, the relaxation of the Glass-Steagall Act of 1933, allowing market access to real estate by banking institutions; the Taxpayer Relief Act of 1997, allowing property owners indefinite tax deferral on the sale of property (an estimated $91 billion to reinvest in real estate); and the 1998 appropriations bill which cuts housing costs by introducing “mark-to-market” rents (Anonymous, 1998, p. P6S). All of these translate into financial advantages for real estate companies. Interestingly, the 1990s have already seen changes that complement these changes. Most real estate companies have become management companies. Much like an investment portfolio, they not only list and sell property, but also manage and invest in a number of properties. In addition, they are taking advantage of mergers and agreements.
As if this were not enough change in a single decade, many real estate companies are changing the way they do business internally. Although they have always operated on a contractual basis with agents, stakeholding and entrepreneurship have new meaning in the 1990s (Davies, 1995, p. 54). In addition, cultural demographics are changing quickly. This means changes in organizational structures within real estate offices.
This paper will address these changes in the context of the ethical considerations for which real estate has always been accountable.EXPANSION AND DIVERSITYAmong other things, real estate brokerage services in the 1990s includes understanding and complying with federal and state real estate laws; surveying real estate; evaluating real estate according to specific criteria; ethically representing buyers and sellers and seeing that all agents do likewise performing marketing analyses, cycles and trends; establishing public relations and advertising campaigns; conducting business according to corporate management; operating within cooperative ownership agreements; determining investment areas, and analyzing financial procedures of both the company and its agents. Of equal importance is the new financial structure of the real estate management brokerage, which includes financial investment on a large scale. These may include listing, investment in, and sale of private, public and commercial properties; forming alliances, acquiring or merging with trusts, construction companies, security companies, and other vendors. The structure of these alliances, acquisitions and mergers will operate like a financial portfolio, used to both diversify the real estate management company and to reduce costs of operation at the same time.
Real estate laws vary from state to state, therefore, they will not be addressed except to note that laws govern real estate as well as business operations. However, real estate ethics have a great deal to do with laws. Some of the laws that affect ethical conduct include human resource/vendor payment and relationships, property valuation, appraisal, property inspections, and business management practices. Ethics for real estate agents and management require fair treatment of both the buyers and sellers of real estate whom the company represents. Property management ethics include such issues as security, safety, nontraditional services, and related concerns. Vendor ethics include all of these issues. For this reason, legal contracts between the management company and these resources are answerable to various sets of laws.
HISTORY:
The U.S. House Committee on Business, Science and Transportation conducted a Subcommittee on Property Resolution, Civil and Consumer Engagement. The Subcommittee reported on the results of an extensive survey of a substantial number of American real estate firms with about 30,000 individuals representing approximately 25% of the U.S. population.
The Committee also reported on the results of a survey conducted between October 2011 and July 2014 of some 27,000 Americans who have been employed by several of those firms. All of the respondents had previously filed a complaint against one of those companies through a Federal Trade Commission (“FTC”) agency. The FTC conducted the survey for three years starting in December 2014. The Survey was conducted on behalf of about one-third of the respondents, as well as a quarter of the public.
HISTORY:
The following is a statement by Commissioner John C. McHugh of the American Bar and World Association in support of his Subcommittee.
In response to the Subcommittee’s first press release, Chief Marketing Officer Robert Heitman, president and CEO of the American Bar & World Association, stated that the United States Government “strongly believes” that there is “conversation” between property managers and purchasers of real estate transactions between property management firms and law firms. Mr. McHugh also emphasized that “We have been working with clients in a number of industries, with the exception of retail, to develop the best practices in dealing with real estate properties.””
Citibank also released a press release dated July 21, 2016, for which the “Company” of Inc. received an extensive report. The report included an analysis published in New Media Magazine as “Citibank has an excellent reputation as a law firm by being one of our top law firms for its professional and commercial services on real estate and finance issues.” Mr. Heitman said CITIBANK has experienced strong business and business experience throughout its history.
The Subcommittee was particularly impressed with the CITIBANK Corporate Management Guide for the Real Estate Industry (PAMHA) issued by the IRS on February 27, 2006 concerning the legal and financial impact of certain real estate practices. In its October 5, 2010 GAO report, Mr. PAMHA provided the information used for the most current reporting period for real estate practices for all major real estate firms nationwide. The Guide provides information on the general requirements that are required of real estate property managers for compliance with the rules, procedures and requirements of each class of property.
Mr. Heitman emphasized that the Guide is based on the opinions of the experts in both the economics and law fields. His findings were based on “the totality of the research carried out on this topic, which indicated that the practice practices that are being pursued by each of each class of agents by CITIBANK and the law firms it represents are not consistent or applicable to each other.” Heitman also recommended that CITIBANK continue to study the advice of the PAMHA. At public hearings on real estate law, the Guidance referred to all practice practices that CITIBANK advises to their respective principals or its representatives, as well as the legal and economic interests of the real estate purchasers concerned, that may be affected by these practices.
On June 17, 2006, Mr. Aiken and Mr
Modern real estate management firms, like other companies, must continuously conduct marketing analyses, be aware of cycles and trends, establish public relations and advertising campaigns. Corporate management concerns will most likely include creating an entrepreneurial environment where managers, contractors and personnel will serve all of the brokerages interests as team members on specific investment and administrative projects. (This is discussed in more detail in the following section.) Corporate finance will not only include setup, accounting and ledger practices, but property and network investments, divestiture and balancing a number of diverse financial interests.
For example, Melcher & Forest (1997) report that the biggest growing megacorporations are real estate management firms. They write:Until the early 1990s, most real estate was owned by private, family-owned companies that relied entirely on borrowed money and generated returns by flipping properties. The 1990s bust, though, caused private financing to evaporate. The mortgage-backed security market emerged to provide debt financing. And as industrial corporations had done decades earlier, real estate firms started tapping the public market, via initial public offerings, for equity capital. The vehicle was the real estate investment trust, or REIT, which was created by Congress in 1960 but that had never attracted much interest (Melcher & Forest, 1997).
In 1968, the Reagan administration’s housing-foreclosures law was passed to remove the prohibition on eminent domain and create a system of limited, public-private partnerships that would provide investment-backed financing for real-estate and residential projects. The REIT system would run the same ways — if the investors were good developers, the trust would be able to provide tax-exempt grants to provide some of its financing. But under the new law, public-private partnerships would be required to match property-development bonds and purchase more public-private equity equity. For projects like the historic-development-focused Westchester County, the only way to provide financing would be to buy public-private equity bonds. The problem was that these public-private partnerships were the only way a minority of projects would cover the entire cost of a project, requiring a combination of public-private equity, low-interest lenders, and interest payments. The REITs’ first major investment that did cover full-scale public-private investment was one called, “Sally & Associates of Los Angeles” (M&A). It was created by former CEO Ed Lippmann and was financed entirely by sales of the S&A’s property-related bonds. In 1973 the group raised about $3 million ($9 million and four times that amount) from a variety of private equity investors to build the first public-private REIT. As you can see, no one knew this was the way to build a private equity fund, so nobody thought much of the new investment when it was first initiated (M&A, 2004). And that, however, is probably the best example of the new public-private partnership model ever created in Los Angeles.
The REIT Act of 1968 changed how real-estate investors were charged for financing real-estate projects. If a company was making a development to replace an existing housing building, it would be eligible for all the fees charged by the real-estate lender it had worked with in the 1990s. Because the company, which was only partially owned by the real estate entity, did not have to report these fees to Congress, anyone paying their loan fee had to report it to them in the form of a fixed fee of 1% of purchase price and a fixed percentage to any person who took a fee for the project. There was no requirement to pay any fees for re-building houses, or even for building new ones. Nor were we required to pay the real-estate lender for a project, including construction and development bills. And because the REIT Act established new financial and accounting requirements, even in cases where the lender is in breach of these new accounting requirements, no one paid any fees that would have been levied by the real-estate lenders. Instead, all transactions that had been financed by the real estate entity — that includes construction and installation costs — were included in the new REIT Act, which had no requirement for any transaction to take place on property that had been completed before the REIT Act was passed.
The
In 1968, the Reagan administration’s housing-foreclosures law was passed to remove the prohibition on eminent domain and create a system of limited, public-private partnerships that would provide investment-backed financing for real-estate and residential projects. The REIT system would run the same ways — if the investors were good developers, the trust would be able to provide tax-exempt grants to provide some of its financing. But under the new law, public-private partnerships would be required to match property-development bonds and purchase more public-private equity equity. For projects like the historic-development-focused Westchester County, the only way to provide financing would be to buy public-private equity bonds. The problem was that these public-private partnerships were the only way a minority of projects would cover the entire cost of a project, requiring a combination of public-private equity, low-interest lenders, and interest payments. The REITs’ first major investment that did cover full-scale public-private investment was one called, “Sally & Associates of Los Angeles” (M&A). It was created by former CEO Ed Lippmann and was financed entirely by sales of the S&A’s property-related bonds. In 1973 the group raised about $3 million ($9 million and four times that amount) from a variety of private equity investors to build the first public-private REIT. As you can see, no one knew this was the way to build a private equity fund, so nobody thought much of the new investment when it was first initiated (M&A, 2004). And that, however, is probably the best example of the new public-private partnership model ever created in Los Angeles.
The REIT Act of 1968 changed how real-estate investors were charged for financing real-estate projects. If a company was making a development to replace an existing housing building, it would be eligible for all the fees charged by the real-estate lender it had worked with in the 1990s. Because the company, which was only partially owned by the real estate entity, did not have to report these fees to Congress, anyone paying their loan fee had to report it to them in the form of a fixed fee of 1% of purchase price and a fixed percentage to any person who took a fee for the project. There was no requirement to pay any fees for re-building houses, or even for building new ones. Nor were we required to pay the real-estate lender for a project, including construction and development bills. And because the REIT Act established new financial and accounting requirements, even in cases where the lender is in breach of these new accounting requirements, no one paid any fees that would have been levied by the real-estate lenders. Instead, all transactions that had been financed by the real estate entity — that includes construction and installation costs — were included in the new REIT Act, which had no requirement for any transaction to take place on property that had been completed before the REIT Act was passed.
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It didnt attract much interest until the 1990 bust, but it is now the basis of most management firms.. Property management is concerned with a number of areas, particularly mergers, acquisitions and management of property in addition to traditional services.
For all acquisitions or investments, Jerry Belloit (1997), a professor at Clarion University states that each company goes through an acquisition phase that includes setting investment goals, defining constraints, establishing ownership rights, analyzing the market and conducting feasibility studies, financing the investment, administering the acquisition, setting up administration in the investment property, surviving an alienation phase, and creating a decision-making environment. All of this must be accomplished with a combination of in-house personnel, contractors, and alliances formed with banks, trusts, credit unions, appraisal firms, etc.
Belloit (1997) provides that during the investment analysis portion of an acquisition alone, the management firm considers diversity in terms of homes, apartments, condos, hotels/motels,