The asset manager's objective is to do everything in his power to enhance the value and optimize the profitability of the real estate assets he manages. To achieve this, they need to know all the latest real estate, financial, technical and legal data.
Certain Key Performance Indicators (KPIs) are key to monitoring asset performance and facilitating decision-making. We have listed a few examples of KPIs that asset managers need to monitor on a day-to-day basis, and put into perspective with their investment strategies.
Performance and profitability KPIs :
- IRR (Internal Rate of Return): Indicator of the profitability of a real estate transaction. It's a calculation that determines whether an investment is worthwhile, depending on the economic situation. It is used to evaluate the intrinsic yield of an operation, taking into account the time factor. This indicator can be used to compare different types of assets.
- Rental yield: Ratio expressed in %, calculated by dividing the monthly rental income (excluding charges) by the purchase price of the property.
- Capitalization rate: Rental yield determined by the market. It is mainly used to calculate the market value of assets, and corresponds to the quotient between the rent and the market value of the asset. Conversely, it can be used to determine an asset's market value on the basis of a given rent (face value or market value). A higher rate may indicate a potentially more attractive return, often associated with greater risk.
- Take-up : All completed transactions expressed in m².
Tenant occupancy and management KPIs :
- Vacancy rate : Ratio representing the proportion of vacant properties in surface area of an asset or portfolio available for rental.
- Financial vacancy rate Total of rents and estimated vacancy at rental value.
- Average length of tenancy (ALT ): Measures tenant stability by calculating the average length of time a property remains rented.
- WALT/WALB: A way of calculating the residual lease term in relation to the break or end date of the lease, taking into account the amount of rent. It is used to measure the rental risk of current leases.
- WALT (Weighted Average Lease Term): Weighted Average Lease Term. The indicator calculates the lease term at the end of the contract.
- WALB (Weight Average Lease Break): Average remaining lease term to break date. The indicator calculates the remaining duration of the lease until the next break date.
KPIs for revenue and budget management :
- ERV (Estimative Rentable Value): Value at which a property could be rented. The actual rent received is often compared with the theoretical rent at market value. This market rental value is calculated to obtain the financial vacancy rate.
- Gross operating income (GO I): Total rental income before deduction of expenses. It is a key indicator of the financial performance of the asset portfolio.
- Net operating income (NOI): This is obtained by subtracting operating expenses (taxes, insurance, maintenance, etc.) from GOI. This KPI reflects the net return on assets.
- Payment recovery rate: The asset manager is responsible for managing and controlling payments, and can set up a payment schedule to guarantee payment of overdue items.
- Rate of support measures: Measure of commercial gestures, specific to each asset manager, granted to lessors: early availability, rent relief, deferment of charges, contribution to works, etc.
- Management costs: Costs associated with the day-to-day management of assets. It is a ratio of the cost of assets as a percentage of total assets.
- Net cash flow: this KPI measures the liquidity generated by real estate investments after deducting financial expenses, loan repayments and taxes for the company carrying the assets.
- Budget realization rate: The asset manager is responsible for drawing up and optimizing budgets. Throughout the year, he monitors progress and organizes budget updates.
