In 2019 and the years leading up, the explosion of “Anything as a Service” has touched almost every industry in some way or another. Gone are the days of buying Photoshop and being done with it – it’s been an online service suite for a number of years. Movies and TV have the streaming giants, Office and productivity software are, of course, monthly staples, and even security and infrastructure offerings are moving towards the model.
The rise in popularity makes sense in today’s digital age, and probably would have always been the state of affairs had the technology existed to allow it from the start. Why present your customers a high barrier to entry (high one-time purchase, year apart updates) when you can give them easy access for a low monthly fee and frequent tune ups? The internet birthed the concept for software originally, and has since sat back and marveled as its influence spread into traditionally non-tech spaces.
Real estate has not been blind to the As A Service takeover to be sure, but certainly slow on the uptake. We’re just starting to see asset management, one of the key bottlenecks for growing and seasoned investors alike, starting to break on to the scene and alleviate that pressure point.
AMaaS Key Points
So what is real estate asset management as a service (AMaaS) and why should sponsors consider it? Simply put, AMaaS allows sponsors/investors to leverage an offering firm’s existing management team, and therefore realize three major benefits:
1. Cost Savings
Let’s start with the bottom line, shall we? In considering asset management for their existing portfolios, investors and sponsors will invariably weigh the cost of different asset management solutions. During a sponsor’s early days, when there are very few properties owned, asset managing one’s own real estate is seemingly the cheapest solution – the only cost, of course, is the opportunity cost of time.
However, once a firm grows to two, three, four and more properties, or even just one large project, the daily, weekly, and quarterly workload associated with performing all ownership-level responsibilities starts to become overwhelming. At this point there’s two options: hire an in-house staff to asset manage on your behalf, or utilize an Asset Management as a Service company.
AMaaS companies have the upper hand in this comparison, as they charge for their services based on a percentage of the property’s income. If the property does great, the fee is bigger but so is the ability to pay. Compare this to a staff, whose salary remains fixed regardless, and you can start to see why the service firm presents less risk. And of course, third party service firms aren’t paid benefits, overtime, and incur no employer liability.
2. Focused Operation
Real estate Asset Management as a Service firms, at their core, provide the same benefit to their customers as all other XaaS companies: allow the customers to focus on what they want to do, and let the service firm handle the bulk.
For sponsors, this works the same way. Most sponsors primarily enjoy, and often got into the business because of doing deals. The act itself of finding a new opportunity, gathering the necessary parties and executing on the business plan to bring a new investment into the fold is where a sponsor often brings the most value and gets to express their entrepreneurism at the highest capacity.
AMaaS firms allow sponsors to focus on looking ahead, while the service firm handles the deals already won. That’s not to say that an asset management firm gives sponsors free reign to be lazy with their owned properties – quite the opposite. A good AMaaS firm gives sponsors the workforce to handle all the tasks required to pull off great hands-on asset management, while relieving them of actually having to do each task themselves.
In short, AMaaS lets sponsors dictate which way they want the ship to point, and the asset management firm steers the wheel. The sponsors are freed up from having to manually raise the sails themselves, and can instead look out at the horizon.
3. Institutional Quality
Most small to mid-size sponsor firms simply don’t have the resources or manpower to create well designed and institutional quality deliverables for every property for every month and quarter of the year. The task alone is daunting. But daunting as it may be, the partners and investors who have sizable capital invested in any given project will require these documents anyway.
This can lead to sponsors pushing out incorrect, untimely, or just plain sloppy reporting, naturally turning off investors who otherwise could be placing their capital with a number of other firms. A quality image and reputation is ever important to real estate sponsors, and leveraging an asset management as a service company can often be the secret tool in the tool belt. A good AMaaS firm has the team and platform behind them, and can provide perfected reports, financials, and so on on a guaranteed schedule.
With all the many benefits that the As A Service paradigm brings to asset management, it makes sense why many sponsors are turning to the service every day.
A Note on Sapphire
We’d be remiss, of course, not to mention our own offering at this point. Sapphire is a full suite Real Estate Asset Management as a Service company, and we are proud to work alongside some of the best sponsors in the business.
Our work comes with a quality-assured guarantee: you will not find more hands-on asset managers in the business. We take every property we partner on as if it were our own, and push them to their highest profit and quality levels. If you want to leverage AMaaS for your company, you can reach us here or give us a call at 212-655-0539.
