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Just as real estate brokers have a fiduciary duty to clients in many cases , trusts also often enlist the help of a representative to act in their best interests . Considering the complexity involved in financial assets of all kinds , the value held by these fiduciaries is difficult to ascertain exactly . But looking at some of the largest corporate entities , the total assets under management quickly climbs into the astronomical . The three largest firms — Morgan Stanley Wealth Management ($ 1.24 trillion ), Bank of America GWIM ($ 1.2 trillion ), and J . P . Morgan Private Bank ($ 677 billion ) — account for more than $ 3 trillion . The top 10 firms account for $ 5.2 trillion of value held by fiduciaries . Within that massive amount of holdings , real estate — and specifically commercial real estate — will be a significant category of wealth assets . The types of CRE assets are similar to the average investor , including shopping centers , office , industrial , multifamily , and land . Leasehold / lease fee and subsurface rights ( such as mineral and gas rights ) are also common targets .
Fiduciaries cannot be experts in everything , so they will need assistance in maintaining their commercial investment real estate portfolio .
A simple way to define a fiduciary is a person or entity that acts on behalf of another person or entity , putting those interests ahead of the fiduciary ’ s . These representatives have a duty to preserve good faith and trust , meaning fiduciaries are bound both legally and ethically to act in the other ’ s best interests at all times .
Fiduciaries cannot be experts in everything , so they will need assistance in maintaining their commercial investment real estate portfolio . Here is where opportunities arise for knowledgeable , professional CRE experts in helping with :
• Acquisitions : Real estate holdings can play a key role in diversifying a portfolio , so acquiring new investmentgrade real estate is a major part of large trusts .
• Dispositions : Fiduciaries will also be looking to move on from properties that may have run through their life cycles . Trusts also may decide to go in different directions for long-term investment goals , leading to the disposition of some real estate assets .
• Exchanges : 1031 exchanges have been a popular option for trusts , so identifying opportunities and facilitating these exchanges are skills CRE professionals can offer .
• Portfolio Asset Management : Many large trusts are established with real estate as part of the overall holdings , which requires professionals who can handle the asset management of exiting real estate , including periodic value and holding analysis .
• Refinancing : Owning any real estate for a period of time means that refinancing may be advantageous .
• Leasing : For assets currently in a holding , leasing services are required , so CRE professionals who know local markets and can connect owners with tenants are valuable .
While the types of fiduciaries include individual trustees , corporate trustees , agents for the trustee , and executors , they may need to network with related professionals like attorneys , accountants , and financial advisers . But those in commercial real estate holdings can provide essential services to the asset managers and property managers . The asset manager and property manager will work together to maximize value for their client . While these relationships will vary for each specific case , primary duties of the asset manager include :
• Overseeing due diligence during property acquisition process .
• Securing appropriate financing as needed .
• Creating and implementing a marketing strategy .
• Establishing each real estate asset ’ s investment strategy .
• Managing the buildup of management of financial reserves .
• Regularly reviewing each asset ’ s performance within the entire portfolio and making recommendations on retention , disposition , or repurposing .
The property manager , meanwhile , handles these responsibilities :
• Initial enforcement of lease terms between tenant and landlord .
• Renting and leasing .
• Maintaining and repairing the property and facilities .
• Collecting rents and paying operational expenses .
• Overseeing physical risk management of the property .
• Addressing and correcting tenant issues .
• Informing the asset manager of any property issues that may impact overall performance .
Considering the duties for each role , the asset and property managers are indispensable to another . A strong working
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE FALL 2022