Charting the Unknown: Knowledge is Key

July 22, 2013
Asset planning for disaster-prone regions.

An important part of Sandy recovery is an understanding of what must be considered to effectively restore properties and lives in a proper and cost-effective manner.

How we can think about our assets more effectively? Our vision should be longer than the present and our recovery methodologies must try as best as possible to address the uncertainties of the future.

How to Plan for Tomorrow
The desire to create and implement a post-Sandy strategic asset plan must depend upon strong asset knowledge. That knowledge informs our asset decisions. In simple terms, asset knowledge means knowing what you own, why you own it, what it is doing for you now, and what it could do for you in the future.

When a disaster such as Superstorm Sandy strikes, you will have to choose among these alternatives: repair, replace, remodel, reconstruct, or retire. Asset knowledge will help you do this in an effective and timely manner. It should include these aspects:

What you own: This is a comprehensive concept that includes location of the asset and jurisdictional information, as well as more micro aspects such as the configuration of the space and the nameplate on the boiler. It can be quite detailed (there are more than a dozen parameters needed to describe an electric motor, for example), but does not have to be. You only need enough detail to support your decisions.

This information must be developed within a taxonomy to be accessible and useful. It should include information on the criticality of the assets. Asset information will normally be developed over time and few organizations have what they need now to properly do what they actually want to.

Why you own it: This may provide useful information when deciding what to do next. Not all of the things we own are critical to our success. The asset may have been acquired as part of a package or on speculation.

What it’s doing now: This deals with how it’s performing, what it’s contributing and what its current value is as it relates to operational contribution, current dollar value, and effective life remaining. Realize that value is measured both directly and indirectly. Any asset may be part of a larger system or portfolio, and its value may come from the portfolio. Risks, liabilities and opportunities are part of the current assessment. Will repair and replacement be an opportunity to improve efficiency?

What it can do for you in the future: The only element of certainty about the future is change. Change is constant. Our buildings, neighborhoods, and economy are changing. A plan that includes future options for an asset will provide guidance when opportunities for remodeling or reconstruction are presented. An important question to ask is whether the function and use of a given building will change.

Responding with Asset Planning
When the next disaster strikes, these plans become critical in accomplishing your recovery goals. Determine what your likely response will be in the event of another superstorm. For example:

  1. If the goal is to get the building up and running after a disaster, criticality information is essential. Can you get by without a second elevator, domestic hot water, or other amenities or services?

  2. Perhaps the easiest response to disaster is “like for like” replacement. I say perhaps because in normal times this is easy, but in a disaster, when many buildings need new boilers, this may not be possible. A short-term solution using the next best alternative is likely to be costly in the long run.

  3. The next level is to replace with something more effective and efficient. This is an opportunity to accomplish those options specified in a Level III energy audit, for instance. It is likely that any significant asset has deficiencies, code violations, or other issues. Is now the time to address these?

  4. If the space itself needs to be reconstructed, this is time to think about more efficient allocation and utilization. New office concepts, new levels of density, longer hours of operation, and security demands may require reconfiguration. Do you want more open or flexible offices, a building within a building, or high-tech access controls? Along with space configuration goes lighting and HVAC.

  5. Is it time to change function or use? Does your plan show an opportunity to convert an office or retail space to residential? This depends on your assessment of the building, neighborhood, economy, and other factors. Alternatively, perhaps this is the time to sell the asset.

Asset information includes location and jurisdiction, which may determine aid for reconstruction or codes applied to reconstruction. The asset, particularly if it is an urban building, may be “grandfathered” in a number of ways and losing that status may change what can be done. For example, a restaurant may need to make its kitchen ADA-compliant – which is the decision criteria on a space.

At the very least, all strategic real estate asset plans must also consider comprehensive stakeholder involvement, asset interrelationships from equipment up to the city or regional level, the culture of the organization, resources available for implementation of the plan, and the length of time for implementation.

Jack Nyman is the executive director of Baruch College’s Steven L. Newman Real Estate Institute. He has served as vice chair of the executive board of the Urban Green Council since 2009. 

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