REAL ESTATE

Treat real estate like
cash, says consultant

REAL ESTATE is often a
corporation’s most valuable
asset and should be manag-
ed, traded and enhanced like
cash and inventory, says
David G. Ellis, Vice-Presi-
dent and Manager, Royal
LePage Real Estate Con-
sulting Services.

“‘Many corporations are
realizing their real estate
holdings can be utilized to
their corporate financial ad-
vantage. For example, equity
in real estate, which often
goes unnoticed because of
Standard accounting treat-
ments, can be used to boost
cash flow, increase asset
values, raise capital, stave
off unwanted takeovers, or,
conversely, make a company
more attractive as a take-
over target,” says Ellis, a
featured author in the 1989
Royal LePage Market
Survey.

“Failure te recognize a

Fleal estate sales

HOME BUYING activity in
Canada ranges from sluggish
- to exceptionally strong.

And although many of the
more active markets have
seen price increases moder-
ate slightly, no area has ex-
perienced declining house
prices in the past year.

According to the most re-
cent

issue of the Royal

property’s potential as a
cash and revenue generator
ean significantly understate
the value of the real estate
asset and result in substan-
tial understatement of the
worth of a company’s asset
base. This can have a
depressing impact on share
price, corporate credit rating
er the ability to borrow
funds. At its worst, it can
lead to corporate takeovers
which have asset stripping as
their main purpose,”’ says
Ellis.

Ellis says the first step in
recognizing corporate prop-
erty value is to achitc: 2 an
awareness of what is owned
as well as its true value. In
the majority of instances,
this task is best performed
by an asset management/
opportunity assessment.

After preparing an inven-
tory of all properties in the
portfolio, says Ellis, the

LePage Survey of Canadian
House Prices, with only one
or two exceptions, resale
housing markets in most
centres are experiencing
healthy levels of demand.
“‘Vancouver, Toronto,
and many southern Ontario
centres continue to have the
strongest markets, both in
terms of unit sales and price

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asset management team can
implement a plan of action
that reflects the immediacy
of the problem, together
with the company’s policy
goals and objectives.

The resulting actions may
include disposition of un-
wanted real estate, or, alter-
natively, redevelopment
which taps unused or under-
developed coverage potential
which can be built out, sold,
leased or transferred. Alter-
natively, says Ellis, refinanc-
ing of the asset, based on its
increased value, can be a
way of raising capital
without giving up control.

A fourth option, he says,
is to spin off real estate
assets into a limited partner-
ship, or unitized real estate
fund, thereby generating
capital and importing the
true value of the property
into the corporate balance
sheet.

variable

increases,’" comments Gino
Romanese, Executive Vice
President of Royal LePage
Residential Real Estate Ser-
vices. ‘Alberta markets have
held up well, despite recent
uncertainties about oil
prices. Although sales activi-
ty in cities like Montreal,
Ottawa, Winnipeg, Regina
is down.”’

Robert Hartmang

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