The Lemon
"We could never get that excited about REITs [investing in technology]," says Steve Sakwa, analyst with Merrill Lynch & Co., Inc. "We never wrote lots of fluffy stuff about what was happening. We're not saying, 'we told you so,' but now companies are taking write-offs that are affecting earnings to some degree."
Making Lemonade
But not all companies see write-offs as the end of the world. After taking nearly $65 million in write-offs against its technology investments, General Growth Properties, Inc. remains a believer in the power of technology.
"We still feel very strongly that what we have done [with our tech initiatives] has been the right thing," says chief executive officer John Bucksbaum. "We've improved our malls and ultimately this will improve the performance of the retailers in our centers. And that technology will play a very large part in increasing productivity, not only for us as owners but for retailers as well."
General Growth Properties' malls are wired with broadband technology that enable retailers to upgrade systems such as distance learning, in-store cameras and inventory control systems.
General Growth Properties is also incorporating the latest technology in its own business practices. "We are big believers in what technology can add to the ongoing operations of the company itself. And again, the expectation is that it will raise productivity and efficiency amongst our own people," Bucksbaum says.
The company continues to pursue technologies to enhance lease documentation, architectural drawings, accounting and other operational systems.
Lemonade, Straight Up
"What gets me excited about technology and real estate is the possibility of performance improvement using web-based technology," says Joseph Rubin, director of Ernst & Young's Real Estate eBusiness Solutions Group. "[The excitement] is not in making investments in tech ventures, but using the technology to run the existing business and make them more efficient and more profitable."
Web-based technology can be used for property and facilities management, procurement, leasing and more. "There are many opportunities to move the processes in the real estate business online and the answer will be different for every company. The whole story here is really curing 'points of pain' in your business and different companies have pain in different places. Therefore, different companies will have different priorities," Rubin says.
Regardless, as long as real estate remains a people, data and paper intensive business there will be a need for technology, according to Rubin. "You have a lot of people and a lot of data in an environment that is right for improvement and efficiency. It's about managing data in your business operations and making it not only accessible but actionable so you can use that data to make decisions to improve your business in ways you couldn't do before," he says.
Forced Access Denied
In July, the real estate industry scored a victory when Massachusetts Superior Court Justice Mitchell Sikora ruled forced entry by telecommunications companies in commercial or residential buildings to be unconstitutional. The ruling recognized property owners' constitutional rights to choose the telecommunications providers best equipped to service their tenants. The Real Access Alliance, of which NAREIT is an active member, has been fighting for such a ruling for some time in order to ensure the best possible service for tenants.
The Massachusetts Superior Court decision found that a state regulation giving all telecommunications companies free access to buildings violated both the Massachusetts and U.S. Constitutions. However, the Massachusetts Department of Telecommunications and Energy as well as the lobbying group Smart Buildings Policy Project appealed the ruling.
Successful Screening
"Resident screening can raise occupancy, lower bad debt, and avoid lawsuits…The fact that so many public real estate companies use screening services suggest they work," says Lee Schalop, analyst, Banc of America Securities, commenting on the success of SafeRent.com. Archstone Communities, Inc. and AvalonBay Communities, Inc. are investors in the web-based tenant screening company. |
|
"The Real Access Alliance will coordinate with the Greater Boston Real Estate Board to sustain the Superior Court's decision on appeal," according to NAREIT's senior vice president and general counsel Tony Edwards. "We will continue to work with policymakers to expedite advanced telecom services to tenants without resorting to unconstitutional measures."
Although there will be more disputes with the telecommunications companies concerning forced access, the real estate industry is confident that the interests of owners and tenants will both be met. "The real estate industry has undertaken a number of measures focused on the availability and quality of telecom services and will continue to do so in the future," Edwards says. A January 2001 survey provided for the Real Access Alliance by Knowledge Systems & Research, Inc. indicates that 94 percent of tenants are satisfied with the speed and quality of their telecommunications service, confirming the marketplace is working to meet consumer needs.
