Interview / article for the 7th Anniversary issue. – “A Tryst with Experts”, for IIM Shillong, NIveshak Magazine, Finance and Investment Club.
September 3rd, 2015
1. You had a long career in Real Estate Asset Management & Private Equity. Starting with the basic’s, what actually is the Real Estate Asset Management Business?
[Arjun Dosaj}: Real Estate Asset Management in my experience is fundamentally about preserving and creating incremental value of assets under management. Traditionally it involves “end-to-end management of assets” including leasing, maintenance, branding, reporting, review and disposition. Asset managers are single-minded about driving capital values and relentless about maximizing asset income for their owners while keep a control on operating costs. Asset management is needed to address ongoing issues like design, building features (including eco-friendly, elderly friendly concerns), tenant mix and profile, repositioning &branding, consumer marketing, e-commerce and addressing and maximizing on consumer buying habits and trends.
2. What according to you are the various drivers that create value in the Asset management business?
[Arjun Dosaj]: At a broad level, the drivers of value creation in Asset Management business can be classified into two: Strategic and Operational. Strategic asset management in the current scenario includes creating a new brand for the asset/ re-vitalizing an existing brand, embracing Sustainability, asset re-positioning (partial or total), conversion/change of use of the asset, etc. Some initiatives seek to streamline processes more efficiently while others attempt to be more effective.
From an Operational perspective the output of asset management is typically a function of many drivers. The variables are rental receipts, service charges, occupancy levels, revenue per sq ft, maintenance costs etc. interact to produce a certain output being the operating income. By fine-tuning the variables to optimal levels the most desirable output i.e. operating income can be delivered which would greatly enhance the value of the asset.
3. From the various projects executed can you please quote us a few examples so that we can learn from examples of Asset management business?
[Arjun Dosaj]: There was a Retail project that was asset managedby us in Seoul, Korea, It was a building built in the 1970’s, the asset was a typical strata-titled (many owners) local shopping mall targeting the mid to mid-low market with limited success. It was however located in the heart of an important shopping district with a Mass Rapid Train station below (Metro). The under-managed property had occupancy of less than 50%. The building under our management underwent a major retrofitting and was re-positioned into a vibrant fashion lifestyle and retail mall attracting international brands with the first ever H&M store in Korea as the anchor client. Efficient integration over the retail floors increased total leasable area and transformed it into the most sought-after mall that achieved a pre-commitment rate of close to 100% prior to the opening of the mall appealing the younger generation. This project was subsequently sold with our investors making a 30% IRR in a 3 year period.
4. Moving forward to India, How can REITS bring along a structural change in the Indian Real Estate space and what do you think governments approach towards implementing it should be?
[Arjun Dosaj]: Real Estate Investment Trusts (REIT’s) would be new to India but are not new to the world. There are several established markets for REIT’s such as the USA, Japan, Hong Kong, Singapore, etc. hence the Indian Governments approach should be to study the best practices from the existing countries and put in place the required regime and laws which would manage the Indian REIT’s effectively rather than re-invent the wheel. The Government should also engage with the various countries regulators and see what changes they are introducing to further enhance the REIT regimes as they are many years ahead of India and have learnt through their mistakes.
REIT’s give the ability to the common man to own shares in a multi-million dollar Real Estate asset while securing a decent divided return. Hence if one could not afford to buy a building due to the huge ticket size the investor may be able to buy shares in a REIT which owns several buildings. REIT’s also provide a venue to developers, funds and investors to exit their assets hence creating liquidity in the respective markets. Stable REIT’s also act as a haven for investments for Pension Funds, Insurance Funds and generally investors who like stable returns as REIT’s are supposed to distribute most of their income by law as dividend to investors.
REIT’s will give the Indian Real Estate industry more depth, stability, liquidity, enhanced Governance and Controls as well as more credibility.
5. You have spent a couple of years in India as well as work in Singapore and in addition managed assets inSingapore, Hong Kong, China, Korea, Japan, Malaysia, Thailand, Vietnam & the Maldives. From a real-estate asset management industry perspective what differences have found and what is a good example of Asset Management activities & principles which have left a big impression on you?
[Arjun Dosaj]: The disciple of Asset Management extends beyond Real Estate and is applicable to any business & industry whether for profit, non-profit or within the Government sector. The best example I can quote of imbibing the true principles of Asset Management is the country which I live and work in – Singapore. Singapore just 50 years ago was a third world country with no natural resources, a small land mass compared to its neighbors like Malaysia, fishing villages & swamps were part of the landscape, no bank balance, a small population, and in other words virtually nothing as a start point and with all odds of success stacked against it.
The true grit of the pioneering founders & leadership of Singapore, A clear Vision, relentless execution, principles of servitude & team work, meritocracy and principles of harmonious living with religious tolerance for all religions have brought Singapore to a first world developed economy in short timeframe. In my view the Singapore Government are world class asset managers who are continually thinking 10 – 20 years ahead and shaping the country in a futuristic direction. The price of Real Estate has gone up several 100 times since Singapore’s birth and the only reason that has happened is because in Singapore everything works – Governance, Political system, Legal system, Safety & Hygiene, skilled & hard working citizens, trade unions which work with and not against the business and a Government which is pro-business but also pro-citizens.
There are plenty of lessons which can be learnt from the success of Singapore which apply to developing and developed economies. Now putting on my Real Estate hat if one had a country as progressive as Singapore attracting global wealth & investment the price of Real Estate would continue to grow – that in a nut shell if the job of good Asset manager – “preserve & create incremental value”.
6. Please share some insightful career guidance tips so that our readers can learn from your established and diverse career.
[Arjun Dosaj]: I have crafted my career as such so that I would get the benefit & experience of numerous industries – Hospitality, Financial Services, Banking, BPO, Process Re-engineering, Real Estate Asset Management & Private Equity. Perhaps one may call me a “jack of all trades and a master of none” but to my mind I view any business situation / complexity with multiple lens as I have the benefit of multi-industry experiences and hence my situation analysis & proposed solutions are far more powerful and robust as compared to someone who does not have the benefit of the exposure that I have had
There are a few tips which I subscribe to myself but they are easier said than done as it takes time to find out ones true calling.
If you can find work that you love you will never feel that you are working as it will be a joy to be at work. Don’t fret over the money you are making or not making, if there is genuine love & passion in your work the money will come. Experiment with your career and try different things as it takes time for one to know what one really likes. Take risks especially when you are younger – you will learn and grown from them. It is also very critical to remember that you work with ‘people’ and having ‘people’ skills is a must as you cannot carry the baton alone.
Most importantly If you think you can do something and everybody thinks you can’t, just believe in yourself – and YOU WILL ACHIEVE IT!
Managing Partner & CEO
Avista Asset Management Pte. Ltd.