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The Business Case for “Living Asset” Management

Benefiting Organizations and Their People

As published in Expert Business Advice

By

Scott L. Girard, president

LandEconics, Inc.

Everyone these days talks about sustainability.  Indeed, many corporations and jurisdictional agencies demand sustainability in structures, processes, and even landscapes.  The real challenge in business though, is convincing the unconvinced management team that sustainability goes well beyond the usual emotional “feel good” response to the issue, and indeed makes good business sense in ways that will add significant value to the bottom line.

 

So, what is “living asset” management and why is it important?  Why is it more important than it has ever been before?  Why do we need to focus on it?

 

Most of us are familiar with the term “asset management.”  It generally deals with the management of collective investment instruments such as stocks, bonds, and mutual funds.  In the area of facilities management, it involves decision-making focused on the highest value strategies for the use and care of corporate assets – taking into account the respective lifecycles of the assets.

 

So, just what are “living assets?”  Simply put – living assets are trees, shrubs, and other vegetation purchased and placed on a piece of real estate.  When cared for and nurtured properly, their value increases significantly over time. For example, it is not uncommon for that tree you planted five-years ago for $65, to cost five times that amount ($325) to replace it with a like-sized specimen today…and that is just one tree.  Often an asset management firm will help clients by laying out clearly defined steps to enhance performance and reduce costs.   The same is true when dealing with living assets.

Old Growth

Photo Credit: Nicholas_T; Flikr

It is a fiscal fact that life-cycle costs for landscape maintenance far exceed design fees and installation costs.  Too often companies are shocked to learn the costs associated with maintaining their newly completed landscaping.  At LandEconics we employ applied economics as a design tool that provides a window into projected annual maintenance costs.  This provides pre-emptive protection for our client’s capital investment in landscape features, thereby preventing the costly cycle of reactive maintenance – even before the design is complete.

 

At LandEconics we believe that sound financial decision making goes well beyond simply calculating and reviewing the ROI of a sustainable landscape.  Since financial resources are finite, prudent fiduciary responsibility dictates that a complete understanding of a project’s investment be reviewed in terms of the highest and best use of those financial resources.  This requires an even deeper understanding of financial ‘lingo’ including the calculation of net present value (NPV) and internal rate of return (IRR) of any potential investment or expenditure in order to ensure maximum return on the investment.

 

Our premise is that our country is in a period of rapid change.  Change is all around us – in our political system, in our economic system, in our institutional relationships, in technology, in public attitudes, in our client’s expectations.  Those responsible for landscape sustainability and management must now think about themselves differently.  At LandEconics we are mindful of, and fully embrace the fact that what we decide today will have significant and long lasting consequences, both in terms financial and environmental results for our clients and their living assets.

 

The private sector uses all manner of tools to evaluate their financial health because they worry about the bottom line, they worry about margins, they worry about how much money they have to run their business, and they worry about how much profit they are going to make.  And increasingly, the same can be said for the public sector.

 

As ‘living asset” managers, we are constantly engaged in helping our clients understand the horticultural requirements of their specific landscape, thus enabling them to make informed financial decisions, and eliminate wastefulness  through innovative landscape design and maintenance strategies.  We provide tools that will serve to maximize the cost-effectiveness and sustainability of a landscape management program, ensuring that initial capital investments do indeed pay-off over the lifecycle of the landscape.  As such, saving our client’s money without compromising the creativity, appearance, viability, and sustainability of their “living assets” is our stated Mission at LandEconics.

 

We have proven time and again that “Green” principles of sustainability become dramatically relevant when tied to the financial results driven by cost-effective living asset management.  In the process of doing so, we have seen a vast number of the “unconvinced” become convinced  that sustainable landscapes do indeed make good business sense in ways that add significant value to the bottom line.

Investors vs. Users

Property Management & Facilities Management

Differing Goals; Same Outcome With “Living Asset” Management!

Jim Ricker, Vice President, Corporate Services with CresaPartners, wrote an article about the differences between property management and facilities management.  He stated that the former work for investors who own real estate for the cash flow from operating income and for the gain in value during their ownership term”, while the latter work for “the users of real estate who either own or lease their properties”.

Mr. Ricker outlines the goals of each group as being prioritized in opposite order from one another:

Investors:

  1. Income – maximize income from operations
  2. Value – increase the value of the property
  3. Customer relations – maintain tenant relations to help maximize occupancy and cash flow
  4. Operations – efficiently maintain the property in order to achieve the first three goals

Users:

  1. Operations – maintain the property in support of the resident business units, with an emphasis on ensuring that assets reach their useful lives and that interruptions to the business units are eliminated
  2. Customer relations – ensure that services are cost-effective and geared toward supporting the business units
  3. Value – maintain the value of the property in the event that it becomes surplus and available for disposition
  4. Income – not a priority, unless subletting of surplus space is involved

Now, here’s the Good News for both groups:  Properly managing the “Living Assets” on a campus will payoff in each area!

(I’ll present these in alphabetical order)

Outcomes of “Living Asset” Management
  • Customer relations – The landscape serves to establish the “first impression” of a property.  It also provides a setting for workers to be rejuvenated, either by enjoying the outdoors, or simply by looking out a window.  By implementing a living asset management program, owners can be assured that these benefits accrue in an efficient, cost-effective manner.
  • Income – When the horticultural requirements of the landscape are optimized to be in harmony with the budgetary requirements of the organization, the waste is eliminated, and the landscape can thrive without requiring an inordinate expenditure each year.
  • Operations – Ongoing operational costs are simply a reality when it comes to maintaining the grounds of a property.  But, these can (and should) be done with an understanding of what specifically is driving the costs.  With illumination, wise decision-making is made possible, and the organization reaps the benefits.  With proper planning, the initial capital investment in the landscape can grow into a mature setting – reaching its full life expectancy (rather than struggling for survival, or worse yet, being butchered and having its life cut short by overly zealous, but uninformed maintenance personnel).
  • Value – with the proper “Living Asset” management, the landscape’s value increases over time as it grows and matures, providing a beautiful setting that can be enjoyed and appreciated by all.

There’s a whole lot more to “Greening-Up” your property management company or facilities management department than merely installing energy efficient appliances and light bulbs, purchasing “green energy” from your local utility company, and using green cleaning products!  If you’re serious about it, take a look at your landscape – it will look green, and save you greenbacks if you take the LandEconics™ approach to managing your “Living Assets”.

Management Suite

Graphic by Leo Reynolds from Flickr

What is Landscape Architecture?

Hear what the Brits are saying – they “get it”!

From the website “I want to be a landscape architect” by The Landscape Institute, supported by CABE Space (The Commission for Architecture and the Built Environment).

Kudos to these folks!  Want to be:
  • Green?
  • Inspired?
  • Innovative?
  • Influential?
  • Creative?
  • Sustainable?
  • Playful?
  • Technical?
  • Visionary?
Then visit their website to learn more about this wonderful profession!