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Planning for the ‘New Normal’ through Portfolio Assessments

by Ralf Nielsen | August 17, 2020

Achieving success of any kind is based on setting a goal and executing a plan. This is especially true when it comes to maintaining and operating multiple capital assets. As we start the process to recover economically from the effects of the pandemic, it is a critical time for public sector owners to align their capital assets to ensure core community needs and services are met.

Even today, many public sector services are closed or operating at a limited capacity. Owners are concerned about the financial sustainability of their operations while still looking to achieve their development goals. Portfolio assessment services offer a strategic approach to addressing these concerns. By taking the time to understand real estate market demographics and property strategies, owners can confidently develop and/or adjust a comprehensive strategic asset management plan.

How Do Portfolio Assessments Work?

A portfolio assessment leads owners through a review and prioritization of their built and natural assets to determine the current state, and desired outcome, for each. Asset prioritization has five main categories:

  1. Hold and maintain – keeping possession of the asset and continuing to maintain it
  2. Hold and expand or enhance – keeping possession of the asset and expanding the facility and/or services offered
  3. Repurpose, redevelop or regenerate – repurposing or redeveloping the asset to regenerate community interest or a need for services
  4. Decommission, demolish and rebuild – keeping possession of the asset but demolishing and rebuilding the asset from the ground up
  5. Release and sell – selling the asset

To create a customized strategy, portfolio reviews and assessments are tailored to an owner’s specific needs, objectives and target service levels. In our current pandemic climate, that might include short-term recovery and adaptation plans, physical distancing directives, space/facility re-allocation and identification and disposal of surplus assets. These service levels are explored below.

To create a customized strategy, portfolio reviews and assessments are tailored to an owner’s specific needs, objectives and target service levels.

Short-Term: the cash flow crunch

The COVID-19 pandemic response has left many municipal facilities closed to the public, with staff unable to provide community services. This has affected many municipal programming, service and revenue streams. In response, some municipalities have conducted rapid, critical reviews of their capital and operating expenditures across all owned facilities, infrastructure, and real estate land assets – identifying immediate opportunities to quickly dispose of surplus assets and repurpose or entertain leasing opportunities to drive revenues. At the same time, they’re drawing on capital reserves to address immediate service and employment concerns. The initiation of small-scale projects that get staff back to work, alongside fit-ups for emergency services/shelters and housing, are key priorities that will likely continue throughout the remainder of 2020.

While these measures may solve short-term issues, owners also need to consider delivering on their core service goals to achieve long-term financial sustainability. Moving too quickly to rationalize assets to solve immediate cash flow challenges could come at the expense of the ability to replenish capital reserves and achieve consistent service levels.

Mid-Term: shifting demand and needs

Mindful of longer-term objectives, a two- to four-year timeframe can offer views on where services can respond to emerging community needs and changing demands. Take, for example, the asset portfolio of a college or university. With many classes expected to move online this Fall, investments in distance learning technology are well underway. This shift triggers the institution to take stock of its space, building and land requirements. Gauging demand from faculties/schools and supporting services allows the institution to reassess its capital plan. Larger institutions (and large portfolio owners) are assessing what adjustments they need to make to support future physical distancing and public health directives. They are modeling various scenarios to identify cost-saving opportunities or shifts. Universities, colleges and provincial/federal governments are in a unique position to consider reallocating assets and reviewing innovative models such as co-working spaces/hubs to provide space to their users and/or employees.

Long-Term: sustainability and resilience

Determining the long view on asset needs and capital requirements presents opportunities to achieve financial sustainability, economic resilience and adaptation to the changing climate. Owners are contemplating larger scale projects that integrate services offered by natural assets or leveraging limited funds by attracting partners to achieve longer term solutions (e.g. flood risk management or affordable housing). COVID-19 has reminded us of the delicate balance between our natural environment and our human health. Achieving long-term resilience as a community is fully dependent upon our ability to manage our impacts on the planet and other species. This is supported by our investments in health, wellness, clean air, clean water and productive soils.

The public sector serves the common good. Their shared goal is to support and deliver quality facilities and infrastructure to meet community needs. By investing in a portfolio assessment, owners gain a clear view of all their capital and natural assets, revenue streams and development plans. Professional advisors enable owners to navigate the critical decisions required to align their service goals and plan for a sustainable future. As municipalities, school boards, healthcare agencies and other public sector organizations manage the impact of the pandemic, they can leverage a portfolio assessment to build a solid foundation for the future while navigating the ambiguity of an emerging ‘new normal’.