RICS professional guidance, Europe Real estate …...2016/01/28 · on professional procedure to be followed by members. It is, however, relevant to professional competence to the

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RICS information paper

RICS professional guidance, Europe

Real estate fund, asset and property management: investment services1st edition, January 2016

Real estate fund, assetand propertymanagement:investment servicesRICS information paper, Europe

1st edition, January 2016

Published by the Royal Institution of Chartered Surveyors (RICS)Parliament SquareLondon, SW1P 3ADUKwww.rics.orgNo responsibility for loss or damage caused to any person acting or refraining fromaction as a result of the material included in this publication can be accepted by theauthors or RICS.

ISBN 978 1 78321 119 7

© Royal Institution of Chartered Surveyors (RICS) January 2016. Copyright in all or partof this publication rests with RICS. No part of this work may be reproduced or used inany form or by any means including graphic, electronic, or mechanical, includingphotocopying, recording, taping or web distribution, without the written permission ofRICS or in line with the rules of an existing licence.

Typeset in Great Britain by Columns Design XML Ltd, Reading, Berks

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Printed in Great Britain by Page Bros, Norwich, NorfolkPrinted in Great Britain by Page Bros, Norwich, Norfolk

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Acknowledgments

RICS would like to thank the ad hoc asset management worldregional Europe working group for their contribution to thedevelopment of this publication:

Lead author: Richard G. Ray MRICS

Working group:

Seweryna Afanasjew MRICS, Octava AssetManagement Sp. zo.o.

Paul Bennison FRICS, GLL Real Estate Partners GmbH

Edouard Dor, Royal Institution of Chartered Surveyors (RICS)

Zsolt Kákosy MRICS, CBRE Hungary

Jussi Palmu MRICS, Northern Horizon Capital Oy

Jean-Louis Torres MRICS, AJSL Partners

Florian van Riesenbeck FRICS, Empira Asset Management AG

Real estate fund, asset and property management: investment services

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Contents

Acknowledgments .................................................... iiContents ................................................................... iiiRICS professional and ethical standards................... 1RICS professional guidance ...................................... 21 Introduction ....................................................... 4

1.1 Scope ........................................................ 41.2 Professional objectives, reporting and key

performance indicators (KPIs) ....................4

1.3 Designation of responsibilities – the list ofservices......................................................

4

1.4 Interaction and overlapping of servicesand specialist advice..................................

6

1.5 Fundamental requirements......................... 61.6 Further information ..................................... 6

2 Fund management ........................................... 72.1 Fund creation, strategy and review ............ 72.2 Fund level business plan ............................ 72.3 Fund valuation............................................ 92.4 Shareholder relations.................................. 92.5 Financing.................................................... 92.6 Structuring ................................................. 92.7 Corporate governance and legal

compliance.................................................9

2.8 Board composition and meetings .............. 102.9 Audit .......................................................... 102.10 Leadership ................................................. 102.11 Research.................................................... 10

3 Asset management .......................................... 113.1 Strategy ..................................................... 113.2 Capital transactions.................................... 113.3 Asset plan and budget control ................... 113.4 Reporting ................................................... 113.5 Data management and security ................. 113.6 Tendering and monitoring services............. 12

3.7 Building and tenant supervision ................. 12

3.8 Liquidity and cash management ................ 12

3.9 Bookkeeping services ................................ 12

3.10 Construction and renovation management,and project development ...........................

12

3.11 Letting strategy and services ..................... 13

3.12 Property valuation ...................................... 13

3.13 Insurance coverage.................................... 13

3.14 Claim management .................................... 13

3.15 Compliance................................................ 13

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4 Property management ..................................... 144.1 Management of leases............................... 144.2 Service charge administration .................... 144.3 Discharge and recovery of property and

property related taxes ................................14

4.4 Programmed maintenance ......................... 144.5 Introduction and settlement of insurance

claims and repairs as necessary ................16

4.6 Compliance with health and safetyregulations including fire regulations...........

16

4.7 Lease renewals, renegotiations, surrenderand renewals, extensions...........................

16

4.8 Marketing support...................................... 164.9 Schedules of condition and alterations to

be carried out by the tenant ......................16

4.10 Maintenance of all tenants guarantees....... 174.11 Construction documentation ...................... 174.12 Approval of all invoices payable by the

client ..........................................................17

4.13 Preparation of data for Net OperatingIncome (NOI) projections............................

17

4.14 Management of the security of thebuilding ......................................................

17

4.15 Data room.................................................. 17

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RICS professional and ethical standards

Behaving ethically is at the heart of what it means to be a professional. It is what distinguishes professionals from others inthe marketplace. Having a clear set of professional and ethical standards to guide behaviour gives all those we deal withconfidence in the way we do things.

It is also a changing landscape. What is acceptable behaviour now may not be in the future. So it is sensible for allprofessions to review, from time to time, the kinds of behaviour expected of members. This is particularly true for RICSmembers given the global nature of RICS membership.

This information paper is drawn up in line with the five current RICS ethical standards. For the purpose of this document,they apply to any firm, regardless of whether or not they are RICS regulated and registered. For more information, pleasesee www.rics.org/ethics

Act with integrity

Be honest and straightforward in all that you do.

Always provide a high standard of service

Always ensure your client, or others to whom you have a professional responsibility, receive the best possible advice, supportor performance of the terms of engagement you have agreed to.

Act in a way that promotes trust in the profession and those who work for them.

Act in a manner, both in your professional life and private life, to promote you, your firm or the organisation you work for in aprofessional and positive way.

Treat others with respect

Treat everyone with courtesy, politeness and respect and consider cultural sensitivities and business practices.

Take responsibility

Be accountable for all your actions – don't blame others if things go wrong, and if you suspect something isn't right, beprepared to take action.

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RICS professional guidance

International standardsRICS is at the forefront of developing internationalstandards, working in coalitions with organisations aroundthe globe, acting in the public interest to raise standardsand increase transparency within markets. InternationalProperty Measurement Standards (IPMS – ipmsc.org),International Construction Measurement Standards (ICMS),International Ethics Standards (IES) and others will bepublished and will be mandatory for RICS members. Thisinformation paper links directly to and underpins thesestandards and RICS members are advised to makethemselves aware of the international standards (seewww.rics.org) and the overarching principles with whichthis information paper applies. Members of RICS areuniquely placed in the market by being trained, qualifiedand regulated by working to international standards andcomplying with this information paper.

RICS information papersThis is an information paper. Information papers areintended to provide information and explanation to RICSmembers on specific topics of relevance to the profession.

The function of this paper is not to recommend or adviseon professional procedure to be followed by members. Itis, however, relevant to professional competence to theextent that members should be up-to-date and haveknowledge of information papers within a reasonable timeof their coming into effect.

Members should note that, when an allegation ofprofessional negligence is made against a surveyor, a courtor tribunal may take account of any relevant informationpapers published by RICS in deciding whether or not themember has acted with reasonable competence.

In some cases there may be existing national standardswhich may take precedent over this information paper.National standards can be defined as professionalstandards that are either prescribed in law or federal/locallegislation, or developed in collaboration with other relevantbodies.

This information paper is believed to reflect case law andlegislation applicable at its date of publication. It is themember’s responsibility to establish if any changes in caselaw or legislation after the publication date have an impacton the information in this document.

2 RICS information paper, Europe


Document status definedRICS produces a range of professional standards, guidance and information documents. These have been defined in thetable below. This document is an information paper.

Type of document Definition StatusStandard

International standard An international high-level principle-based standarddeveloped in collaboration with other relevant bodies.

Mandatory. RICS has adoptedthese and they apply to theprofession.

Professional statement

RICS professional statement A document that provides the profession withmandatory requirements in the form of technicalrequirements or conduct rules that members and firmsare expected to adhere to. An RICS professionalstatement sets out the expectations of the profession.RICS-qualified professionals must comply with theprofessional statement applicable to their area ofpractice or be able to explain any departure from it. Therelevant professional statement will be used by RICS andother legal and regulatory authorities in judgingcomplaints and claims against RICS-qualifiedprofessionals.This category may include documents approved by RICSbut created by another professional body/stakeholder,such as industry codes of practice.

Mandatory on the basis of‘comply or explain’.Professional statements setout how the profession isexpected to meet therequirements of theinternational standards.

Guidance and information

RICS guidance note (GN) Document that provides users with recommendations orapproaches for accepted good practice as followed bycompetent and conscientious practitioners.

Recommended best practicebut not deemed by RICS to bein the category of ‘mandatory’for all practitioners.

RICS protocol Information and best practice framework, whichstakeholders may sign up to and comply with, to assistthe operation of the market in the public interest.

Information and/orrecommended best practice.

RICS information paper (IP) Practice-based information that provides users with thelatest technical information, knowledge or commonfindings from regulatory reviews.

Information only.

RICS insights Issues-based input that provides users with the latestinformation. This term encompasses ThoughtLeadership papers, market updates, topical items ofinterest, reports and news alerts.

Information only.

RICS economic/marketreports

A document usually based on a survey of members, or adocument highlighting economic trends.

Information only.

RICS consumer guides A document designed solely for use by consumers,providing some limited technical advice.

Information only

Research An independent peer-reviewed arm’s-length researchdocument designed to inform members, marketprofessionals, end users and other stakeholders.

Information only.


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1 Introduction

1.1 ScopeThe terms ‘fund’, ‘asset’ and ‘property management’ arefrequently used within the real estate industry andparticularly the investment sector as the asset categorybecomes increasingly important to both capital and debtmarkets.

With the evolution of closed and open-ended vehicles, clubdeals between partner investors, joint ventures and mergerand acquisition activities, the terms used to describeproperty investment related activities can often give rise tomisunderstanding and misinterpretation. It should also benoted that across Europe functions are sometimes differentand terms are used in different contexts.

This RICS information paper aims to define more closelythe duties and responsibilities of real estate professionalsoperating in these markets and offer descriptions to ensuretransparency, fluidity and accountability to those involved.

While every care has been given to its production, thispaper is not intended to provide a rigid set of rules as tohow operators structure their businesses or investments. Itis also clear that variations arise across borders, within realestate practitioners, and of course between differentjurisdictions.

1.2 Professional objectives,reporting and key performanceindicators (KPIs)This paper describes the responsibilities of the fundmanager, asset manager and property manager, all ofwhich have the common objectives of ensuring that:

• property assets are operated to the highestprofessional standards, in accordance with bestpractices and prevailing legislation

• income and capital values are protected throughoutthe property investment process, from property levelthrough to that of third party investors in real estate

• development and renovation schemes are undertakenin an optimum manner

• the interests of clients and other stakeholders, inrespect of the properties and their investment vehicles,are maximally protected

• sales and acquisitions can be undertakenprofessionally

• the role of real estate in capital markets is enhancedand liquidity is maximised

• risk management is undertaken at all levels to protectall stakeholders’ interests and to comply withapplicable legislation and principles of good practice

• key performance indicators (KPIs) are applied at alllevels to ensure performance measurement andmonitoring of the fund ensuring that investment andbusiness objectives are attained; and

• reporting lines between the various roles remain clearand that all reports provide comprehensive informationon the fund’s regular performance while maintainingregular communication and full transparency tostakeholders and investors.

Fund, asset and property managers seek to fulfil theseobligations but have distinct and different roles determinedby various circumstances, such as local practice, buildingand fund profile and specific legislation. As such theresponsibilities of each role may vary, but the followingprovides information about and definitions of generallyaccepted terminology.

1.3 Designation ofresponsibilities – the list ofservicesThis list contains essential management services thatcompanies offering real estate fund, asset and propertymanagement services should be able to offer and provide,in a qualified manner, to third parties. This may includeessential services reflecting regular practice within realestate funds and listed commercial property companiesinvesting directly in real estate.

This list of services does not claim to be complete orbinding since specific contractual services and individualsolutions may be insufficiently presented or not presentedat all. Furthermore, clients, investors and tenants may wellprovide individual services within their own companies.Various services may also be outsourced.

The type and scope of the services to be provided willgenerally be adjusted to address the specific instruction,e.g. in the case whereby services are provided to groupcompanies or affiliated companies, dependent on the fundstructure.



5RICS information paper, Europe

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Figure 1: Investment management diagram – property fund structure

Final account procedures

1.4 Interaction and overlappingof services and specialist adviceThe grouping of services under fund, asset and propertymanagement attempts to reflect regular practice anddivision of responsibilities between the specialisms defined.These may vary between the groupings in accordance withlocal practice and service level agreements.

Additionally, certain services may be considered as specialservices, e.g. technical studies, environmentalassessments, schedules of condition, companymanagement, but where these are delegated, suchassignment remains the responsibility of the contractingparty.

1.5 Fundamental requirementsReal estate professionals are required to have recognisedqualifications and in-depth expertise, as well as experiencein the field of real estate generally and fund, asset orproperty management specifically, all of which allow themto meet their challenging responsibilities in compliance withcommercial principles.

The organisational structure of the providers of theseservices should be transparent and service-related, andinclude risk management and compliance protocols.Additionally, all parties must provide professional ITsolutions in the context of comprehensive data anddocument management systems suitable for storing andprocessing investor, client and property-related data in asecure manner.

1.6 Further informationFor the sake of clarity, we would like to emphasise that theterm ‘advice’ as used here is not associated with primaryadvisory services for which a permit, authorisation, licenseor approval is required in the context of the locallegislation, Markets in Financial Instruments Directive(MiFID), stock exchange rules or other.

The classification of services in the list is not binding andshall merely serve as a guideline. The decision as towhether individual services represent basic services orspecial services is taken by the contractual parties in thecontext of service level agreements.



2 Fund management

Fund management is the executive role in propertyinvestment. The fund manager is ultimately responsible toinvestors for the creation, operation, strategy, extension orclosure of the fund. Delegation is made to asset managersand, in turn, property managers.

The fund manager is responsible for the followingprocesses:

2.1 Fund creation, strategy andreviewThe fund manager is responsible for the creation andestablishment of new funds. The fund manager remainsresponsible for monitoring the original fund strategy andbusiness plan and its application during the investmentperiod, continuation going forward and variation as maybecome advisable.

Fund strategy defines the operational and investmentpolicy of the fund. As such it will include all aspects of therisk/return relationship as agreed with the investors. This inturn means asset allocation by geographic area, sector, lotsize and which category of tenants and lease terms areacceptable as well as debt/equity ratios, currencymanagement, financing parameters and the projected lifeof the fund. Funds may be created for the long term byinvesting in non-speculative assets, through to short termventures aimed at higher risk acceptance andconsequently, higher returns.

The fund manager informs and advises the investors onthe continued suitability of declared strategy in light ofchanging market conditions and agreed risk/returnparameters in the context of regular fund reporting.

2.2 Fund level business planThe fund manager is responsible for the preparation of abusiness plan for the fund(s). The purpose of the businessplan is, at the creation of the fund, to outline the fundstrategy primarily in context of:

• the required financial performance

• investment and divestment strategy, i.e. location,timing, size of properties, category of properties, singleor multiple tenant strategy

• risk management structures/tools, with reference tothe Alternative Investment Fund Managers Directive(AIFMD) in the context of fund/risk management

• tax, currency and financing strategies.

During the life of the fund the business plan shouldregularly review the above strategies in light of the real timemarkets and performance of the property assets. Wherenecessary, improvements and or changes would beproposed to the investors.

As part of the business plan the budgets, results andperformance against agreed key performance indicators(KPIs) will be reviewed. This information will be gatheredfrom the asset level business plan and collated, analysedand detailed in the fund level business plan.

Present and future risks should also be highlighted withrecommendations on the appropriate steps. For example,the risk that the rollover schedule of the collective leases inthe fund may create a cash flow issue.

The business plan has an important part in summarisingthe progress and performance to date, setting out thebudgets for the coming year, proposing strategic changesand outlining any risk management measures necessary forthe fund.


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Figure 2: Cash flows



2.3 Fund valuationThe fund Net Asset Value (NAV) is an assessment whichtakes account of underlying property values, as well asother balance sheet elements, principally debt levels, cashat hand, tax liabilities – both actual and postponed,derivatives on interest rates and currency exchange levels,and any other considerations which may impact on NAV.

2.4 Shareholder relationsThe fund manager is solely responsible for relations withand reporting to the investors involved, either withpublically quoted funds, closed or open funds or specialventures, such as club deals, partnerships, etc.

This will be via regular investor updates, organisation ofAnnual or Extraordinary General Meetings, investor groupvisits and committees.

Regular reviews should be held with investors to providethem with information on current market conditions andthe regulatory environment related to their portfolio, assetmanagement initiatives and major transactions within theportfolio.

Dependant on the fund – discretionary or non-discretionary– acquisition and disposal proposals may be discussed, aswell as major issues such as capital expenditure (CAPEX)budget projections, key performance indicators (KPIs)reporting and financial reporting related to debt and debtcovenants, valuations, stock exchange performance inrelation to peer groups, etc.

2.5 FinancingThe fund manager will negotiate the conclusion, renewal orrestructuring of all categories of debt (includingshareholders’ loans), and provide regular reports oncovenant tests such as loan-to-value ratio (LTV), interestcoverage ratio (ICR) and special event clauses.

Financing comprises such services as are required toguarantee secure and reliable financing of the investment(at the property and company level) on the best termsavailable given the funds profile, in consideration of theclient’s requirements regarding capital, financing and,where applicable, fund structure.

This applies throughout the investment period as well asthe expected holding period of individual properties orportfolios. In addition to overall processing, financing alsoincludes ongoing monitoring and control in the context ofloan and credit agreements.

2.6 StructuringStructuring refers to the adoption and adaptation of acorporate structure ensuring accountability, optimumshareholder returns and minimum risk exposure, as well astax structuring to enhance investor level returns whileremaining tax compliant.

It also involves the establishment of statutes ensuring thatall operations are in accordance with agreed guidelines.

The structure should be capable of minimising failures inone part of the portfolio with minimum collateral damage toother parts of the fund and its equity holders, withparticular respect where applicable to cross-collateralisation of debt on fund assets, as may be requiredand negotiated by financiers.

2.7 Corporate governance andlegal complianceIn a general sense the fund manager will ensure that theoperation of the fund is in accordance with establishedprinciples of corporate governance, listing requirements inthe case of quoted funds, as well as being compliant withthe statutes, as may be amended at shareholder meetings.

The fund manager has first instance responsibility forensuring compliance with legal, capital market regulations,including anti-money laundering measures. Theresponsibility also includes the adoption of specific internalrisk management procedures. This is to protect, as fully aspossible, the investors and those involved with theoperation from any losses or damages that may beincurred – through, e.g. reputation and non-compliance –setting out a clear risk profile.

2.8 Board composition andmeetingsFund directors, to whom the fund manager reports, maybe members of the board or they may occupy otherfunctions within a larger investment group. In the case ofindependent funds, they may be appointed directly, inwhich case they are usually proposed by the fund managerto the shareholders. Directors may also be co-opted by theexisting board.

The selection proposal and selection of a board ofdirectors, who may be executive or non-executive (in whichcase they rely on the advice of the fund manager), willrequire board members to have sufficient knowledge aswell as a mix of specialisms to undertake the managementof the fund, undertake performance reviews and act on thebest interests of the shareholders.


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Selection is to be compliant with all relevant jurisdictions,both fund and building related.

The board may resolve to create smaller committees forfunctions such as audit, remuneration and valuation andthe fund manager may be called upon to adviseaccordingly.

The fund manager is responsible for the preparation ofboard meetings, as well as the Annual General Meetings(AGMs) or Extraordinary General Meetings (EGMs). Thismay be outsourced to a corporate manager.

2.9 AuditThe tendering and appointment of auditors, subject toAnnual General Meetings (AGMs) approval as may benecessary. The fund manager should ensure that alldocumentation is available to both internal and externalauditors and that a fair and true position is provided tothem. This includes a review of audit findings anddiligence, inspection and communication of final auditreport.

2.10 LeadershipIt is important to establish leadership to the entireinvestment process and assign responsibilities to thoseinvolved in the operation and administration of both thefund and the property portfolio.

The fund manager will endeavour to create an effectivefund team ensuring clear communication of objectives,limitations, responsibilities and authority to team members.

2.11 ResearchThe fund manager is responsible for the provision ofresearch documentation which identifies trends, risks andopportunities. The research should be presented to theBoard or Investment Committee, allowing them to fullyappreciate the terms under which the fund is operating,and adapt the investment strategy as necessary.

The research will include property market trends wheredata is often supplied by the asset manager as well asfiscal, corporate, environmental and planning changeswhere specialist advice is often sought. Advice on debtstructuring and trends as well as the suitability of enteringinto derivative contracts for interest rates and currencyexchange risks is often supplied by specialised corporatefinance teams.

Depending on the funds, research may be sourced at localasset management level with appropriate advice.



3 Asset management

Asset management refers to the strategic and operationalmanagement of all measures affecting risk and return atthe property and portfolio level in relation to the entire lifecycle of the property/properties.

Where a number of properties are under the control of anasset manager the term portfolio manager is sometimesused.

Individual services may be rendered at both the propertyand the company levels.

3.1 StrategyThe asset management strategy comprises the formulationand regular review of the main guidelines of the asset planand consultation regarding the defined investment policyand business plan with the fund manager. The planning,preparation and implementation is carried out both at theportfolio and the property level, depending on the nature ofthe assignment.

3.2 Capital transactionsThese are services that are provided in relation to the saleand purchase of properties, either as direct or indirecttransactions, in order to successfully complete on the basisof defined investment criteria.

Capital transactions also include services associated withthe structured sale of properties and/or portfolios from thereal estate under management in coordination with theclient.

The primary responsibilities of the sales/purchase servicesare the preparation, support and control of the disposalprocess in the context of the selected marketing strategyand objectives (e.g. multi-tier tendering procedure). Thisincludes the selection and instruction of external agentsand service providers. This service includes all monitoringand control up until the point when the sale and purchaseagreement is concluded and as necessary until any post-transaction obligations are fulfilled.

The service typically includes the organisation andimplementation of systematic due diligence by means of adata room and the negotiation and responsibility up to theclosing of the transaction by a purchase agreement, aswell as the management of post-transaction obligationsdefined under the sale and purchase agreement.

3.3 Asset plan and budgetcontrolThe asset manager should prepare a detailed economicpresentation of all relevant liquidity and performanceprojections, together with the derivation and approval ofbudgets, taking into account the applicable propertyportfolio strategies.

Aside from drawing up the asset plan and theaccompanying budget plan, this service focuses onongoing control and analysis, especially in compliance withthe applicable economic parameters and requirements.

3.4 ReportingThe asset manager is responsible for providing detailedwritten processing, analysis and reporting of the financialposition and ongoing developments in respect to theperiod under review as agreed with the client (report).

The descriptive presentation and analysis of the financialperformance applies to both property and portfolio levels.Reporting can be broken down according to groups ofaddressees (internal/external, authorities, etc.) and mayfocus on different areas dependent on the client, such asspecific key performance indicators (KPIs) or covenants.

Reporting will include a comparison of past performanceagainst previous asset plans and explanation of variationsarising.

The asset manager will report on the competitive positionof properties and portfolios within their relevant marketsand opportunities and threats arising from changingcircumstances based on market research. It will includechanges in fiscal, planning and environmental, constructionand health and safety standards which may impact on theasset plan.

3.5 Data management andsecurityThis relates to the services required to ensure expert andtransparent recording, availability, processing, storage andarchiving of relevant property-related data.

It includes the diligent treatment and protection of suchdata in compliance with the client requirements, applicablestatutory provisions and other regulations. Data are


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typically recorded and processed with the help ofstandardised software systems made by suitable suppliers.

Where necessary due to specific client requirements,specific software may be used and external softwareservice providers engaged. Dependent on the nature of anassignment the asset manager may host the data or,where, for example, data is hosted by the propertymanager, corporate manager or other parties, ensure thatthe above requirements are met.

3.6 Tendering and monitoringservicesThe asset manager is responsible for the selection,commissioning, monitoring and control of external serviceproviders whose complementary services are required toensure comprehensive management of the properties.

Such services typically relate to property management,facility management and project management as well asservices associated with tax and legal advice, letting andmarketing services, architectural and engineering services,and promotion and communication services.

In the case of new developments the asset manager isresponsible for the instruction of professional partiesinvolved in the commissioning of the building.

3.7 Building and tenantsupervisionSeparate from administrative tasks, the asset manager isrequired to undertake regular on-site inspections of theproperties and to ensure regular contact with thecommissioned service providers and key tenants. The aimis to identify potentials or risks for its value as well as forexisting tenancy agreements.

The asset manager is also responsible for initiating anyappropriate meeting related to the sustainability of thebuilding, to negotiate any tenant demand arising during thelease period and to ensure that any appropriate data isprovided by the tenant. If the tenant is authorised to dosome works to modify the building, the asset manager isresponsible for the provision of the documentation.

The asset manager is responsible for commissioning anyreports which may secure or improve the value of theproperty such as tax, environmental, planning, technicaloperation or measurement surveys.

The asset manager is also in charge of analysis at fundperformance level and to identify any value added by themodification of lease terms, easements, party wallarrangements, third party agreements including publicauthorities and other aspects relating to the ownershipinterest.

It should be noted that this service explicitly does not referto general property management services.

3.8 Liquidity and cashmanagementThe asset manager is required to monitor long-termsolvency throughout the entire planning period at theproperty and, dependent on the nature of the assignment,the owning company.

Aside from liquidity planning, ongoing recording, control ofincoming/outgoing funds and liquidity management, thistask also includes analysis and reporting.

Part of the asset manager’s responsibilities in this matter isthe monitoring of appropriate Powers of Attorney and banktransfer authority for the parties involved and any approvalthresholds. The asset manager shall also ensure thatreported cash flows are in line with physical changes onbank accounts.

3.9 Bookkeeping servicesThese services include creating and maintaining theaccounting procedures and systems in accordance withthe principles of proper accounting and the applicablestatutory provisions. This includes the presentation ofongoing payment transactions and groundwork for/supportin the preparation of individual and consolidated financialstatements pursuant to domestic and InternationalFinancial Reporting Standards (IFRS).

Bookkeeping services tasks comprise activities that aretypically performed by financial accountants.

3.10 Construction andrenovation management, andproject developmentConstruction management relates to ongoing renovation,adaptation and extension as well as new build projects. Itaims to ensure planning, implementation and control ofconstruction measures in compliance with contractualdeadlines, costs and quality requirements in order toguarantee best use and delivery on time, to agreedbudgets.

Aside from commercial considerations these services shallbe provided pursuant to the client’s and regulator’srequirements in relation to aesthetic, energy, environmentaland social considerations.

Services can be broken down according to the followingkey contents: preparation of market analyses, initiation ofmeasures relating to project implementation and the



coordination and monitoring of contract and performance-consistent project implementation.

3.11 Letting strategy andservicesThese are services required to achieve the optimum lettingposition for a property taking account of the underlyingspace utilisation plan, tenant mix and quality of covenants.

Aside from the preparation of marketing concepts and theselection and instruction of suitable letting agents andletting coordination, key services include the organisationof site inspections, preparation of offers, conduct ofnegotiations through to conclusion of leases andmonitoring of post-transactions obligations, includingtransfer of the rented space, and documentation.

3.12 Property valuationThe asset manager will support individual property orportfolio valuations for accounting, tax, loan covenant orother purposes including regulatory or contractual issues orenvisaged investment, capital expenditure (CAPEX) anddisposal decisions.

Key services relate to the preparation, monitoring andcontrol of valuations. Valuations are generally performed byexternal experts, at least in respect to the properties undermanagement.

It should be noted that in cases where valuation is carriedout by the asset manager this fact needs to be madetransparent to the ownership and potential conflicts ofinterest need to be closely observed.

3.13 Insurance coverageThe asset manager will oversee the periodic review of theinsurance coverage on the property to ensure thatcoverage is at all times appropriate, economic and inconformity with fund rules, client requirements and that allclaims are fully recovered through the managing agent.

Insurance coverage also accounts for specific tenantactivities and if these give rise to additional coveragerequirements, ensures that the additional premiums arerecovered.

3.14 Claim managementThis relates to the administration of claims arising againstor by the property including construction guarantees,insurance policies, claims arising under the leases or otherthird party claims generally.

3.15 ComplianceThe asset manager has a duty to ensure that the propertyis at all times owned, operated and occupied in line withdefined standards of conformity, whether these are definedby the client, regulatory and legal authorities or otherstakeholders. Any necessary permits or practicestatements are to be fully respected and any deviationsfrom this position indicated with proposals for theirresolution.


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4 Property management

’A property manager operates a real estate propertyfor a fee often on behalf of a landlord. The propertymanager will commonly assist with services whichinclude: meeting an owner’s investment objectives,maintaining detailed tenancy records, ensuring leaseterms are complied with, including rent and operatingexpenses collection, service charges annual rendering,tenant liaison on a day-to-day basis, meeting statutoryobligations, maintaining a proper building conditionand operating property on a sustainable basis’.

Reference: Commercial property management inEngland and Wales, RICS guidance note, 2nd edition(2011)

A property manager could assist the asset manager forlease renewals and management of works on the building.

4.1 Management of leasesManagement of leases comprises the following:

• collection of rents, taxes and service charges dueunder the lease agreements, supervision andenforcement of all obligations of the tenants under thelease agreements and commencement of litigationagainst tenants

• responsibility for the daily routine work in connectionwith tenants requests including all types of tenantissues, solving tenants’ problems and dealing with anycomplaints

• maintaining regular contact with tenants, conductingregular talks with the tenants and providing minutes ofmeetings

• updating of (electronic) files regarding tenants whichwill include corporate name and address, the premisesleased and occupied, dates of the entry into force andexpiry of the lease, annual rents, security deposits andany special conditions of the lease agreement.

4.2 Service chargeadministrationThe property manager is responsible for the administrationof service charges (note: in some countries this includesservice charge prepayments, including annual servicecharge reconciliation) in accordance with the leaseagreements and statutory provisions, ensuring that allrecoverable sums are duly paid.

Service charge administration also involves monitoring ofservice charge budgets to ensure that monthly costs are in

line with the asset plan, the periodic tendering of contractsrelating to the buildings operation to ensure best valueoperation of the building, and the maintenance of fullrecords to provide both owners and tenants with allnecessary documentation, accounting for VAT on servicecharges to allow tenants to recover as appropriate.

4.3 Discharge and recovery ofproperty and property relatedtaxesThe property manager should ensure receipt and approvalfor payment of all property related taxes and recovery fromtenants in accordance with the lease agreements andstatutory provisions.

4.4 Programmed maintenanceThe property manager is responsible for ensuring that allregular maintenance checks prescribed by law or otherpublic regulation or lease agreements are carried out byapproved service companies. This includes:

• supervision of the technical operation of the buildingand handling of operational issues in the building

• regular reviewing of the condition of the building andits technical facilities, coordination and supervision ofinspections

• monitoring the performance of tenants regardingcleaning, sanitation and other operational engineeringservices under the lease agreement

• supervision of the common areas of the building, aswell as access to private areas in accordance withlease and statutory regulations and the maintenanceof common areas, where applicable

• mandating and supervising emergency repairs incases of eminent danger and reporting to the assetmanager

• maintaining documentation of the building’s energyand water consumption and proposals to optimiseusage where necessary, as well as obeying publicenergy efficiency demands, where applicable.



15RICS information paper, Europe

rics.orgFinal account procedures

Figure 3: Operational relationship

4.5 Introduction and settlementof insurance claims and repairsas necessaryThe introduction and administration of insurance claims fordamage occurring to the property and recovery of sumsinsured through loss adjusters and third party insuranceclaims.

Management of tenants’ insurance coverageresponsibilities under the terms of the leases to ensure thattenants’ insurance policies are compliant with the leaserequirements and to ensure appropriate tenants’ insuranceclaims management.

Periodic reviews of reinstatement valuations to ensure theappropriateness of properties’ insurance cover.

In some countries construction and technical warrantiesare covered by insurance policies against defects, inaddition to guarantees given under the constructioncontracts and legislation. In these cases the propertymanager would generally ensure that defects arehighlighted and any claims are fully pursued.

4.6 Compliance with health andsafety regulations including fireregulationsDependent on local legislation and regulations, the propertymanager should obtain all fire and working regulationspermits ensuring the implementation as prescribed, as wellas performing statutory inspections.

4.7 Lease renewals,renegotiations, surrender andrenewals, extensionsThe property manager is responsible for bringing to theclient’s attention all matters relating to the letting position ofthe building and key lease dates, including those definedby landlord and tenant legislation, by maintaining regularongoing contact with the occupiers. A list of key contactsis to be compiled for communication to the client.

Depending on the nature of the instruction, the categoryand size of property managed and local practice, theproperty manager may be responsible for undertakinglease renewals, renegotiations, surrenders and areaextensions or variations in the best interest of the clientand in accordance with instructions and authority granted.This is normally authorised, instructed and controlled bythe asset manager.

In cases where tenant negotiations are undertaken by theasset manager or other party, the property manager shallprovide all support and advice to ensure that both incomeand value are fully protected.

The property manager will immediately inform the client ofany conflictual issues arising in respect of the instructionand any other operations.

Organisational structures of service providers, along withlocal practice, may have impacts on the division of tasks.

4.8 Marketing supportThe property manager may provide specialised marketing,promotional and event management services in liaison withthe owner, tenant association and the other stakeholders.This applies mainly in situations where the building has ahigh level of contact with the general public, in particularretail and the leisure assets.

A separate marketing budget may be established.

4.9 Schedules of condition andalterations to be carried out bythe tenantThe property manager is responsible for undertaking orarranging ingoing and outgoing schedules of condition inaccordance with the lease and assessment of dilapidationson departure.

This includes:

• documentation and supervision of all works andalterations carried out by the tenant as allowed underthe lease contract, assessment of works andmodifications proposed by the tenants

• consultation with technical engineers and fireauthorities as appropriate and approval or otherwise,including conditions, of all works proposed prior totheir being undertaking, with engineering drawings andspecifications, supervision of works and alterations incompliance with the lease agreements, verification thatthe works do not cause any inconvenience or distressto other occupiers and third parties in the building andthe compatibility with the building technical systems

• obtaining from the tenant all documentation relating tothe works, e.g. as-built drawings, health, safety,security and environmental (HSSE) documents.



4.10 Maintenance of all tenantsguaranteesIt is important for the property manager to undertakeregular reviews of all guarantees provided by tenants,bank, parent company or other, to ensure that obligationsunder the lease are guaranteed in accordance with itsterms. Where required, tenant deposits must be kept inseparate bank accounts.

4.11 ConstructiondocumentationThe property manager’s role includes the maintenance ofall technical plans and documents relating to the buildingas part of the data room, updating as changes are made.

The manager shall ensure that existing building warrantiesprovided by construction companies are enforced and thatclaims are properly and efficiently managed.

4.12 Approval of all invoicespayable by the clientThe property manager should have in place a process forthe review and approval of all invoices payable by the clientand confirmation as to their treatment as non-recoverable,insurance claim, service charge issue or otherwiseexcluding direct owner’s cost such as letting fees or lawfees. Depending on the nature of the instruction, theproperty manager should arrange either direct payment ofinvoices or forward them to the asset manager or anotherparty for approval and/or payment.

4.13 Preparation of data for netoperating income (NOI)projectionsOnly property level outgoings, including annual budget, areprepared for net operating income (NOI) projections by theproperty manager. Income is taken on a case by case

basis under the responsibility of the asset manager.However, the property manager may prepare appropriatedata for rental and service charge income based on inplace lease agreements.

Depending on the nature of the instruction origination ofcash flow projections relating to the property includingincome flow, unrecoverable cost, maintenance and capitalexpenditure (CAPEX) schedule, etc. will be submitted tothe asset manager or another party undertaking thefinancial planning for the owner.

4.14 Management of thesecurity of the buildingThis includes security personnel, closed-circuit television(CCTV) systems and lock systems, as well as initiation andreview of all security systems and companies employed toprovide such services in liaison with tenant requirementsand insurance provisions.

4.15 Data roomDepending on the nature of the instruction, the propertymanager will be responsible for the preparation anduploading of documents into a permanent data room,accessible by the asset manager or another party onbehalf of the owner.

The data room should contain all relevant details,principally legal, technical and accounting documentsrelating to the asset.


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JANUARY 2016/RICS/INFORMATION PAPER rics.org

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RICS professional guidance, Europe Real estate …...2016/01/28 · on professional procedure to be followed by members. It is, however, relevant to professional competence to the