Adam Mitchell, Asset Management
Graduating from the Sauder School of Business with a specialization in Real Estate in 2007, Adam Mitchell has assumed various roles in the Vancouver’s real estate industry, including commercial mortgage underwriting at CareVest Capital, as well as an analyst role at Canadian Horizons Investment Group. He is currently a Manager, Investment Management at Bentall Kennedy, overseeing acquisitions and asset management activity for various funds, including the company’s largest fund, Prime Canadian. Outside of work, Adam is also the President of the Young Leader’s Group of the Urban Land Institute (ULI), and can usually be found doing something active outside when not in the office.
Q: In a nutshell, what is asset management? How do asset and portfolio management work together, and how do they differ?
Adam: At the most fundamental level, asset management is acting as the owner/investor’s representative to all external parties involved with a real estate asset in order to achieve the owner/investors return expectations. The goals of the owner/investor will vary (ie. aggressive value-add versus conservative fiduciary), but ultimately it is the asset manager’s responsibility to implement and oversee the strategy. This differs from Portfolio Management in that the Portfolio Manager will work with the owner/investor to shape the strategy, but the Asset Manager will implement it through acquisition/dispositions and ongoing management.
Q: What was your first exposure to real estate finance (then asset management in particular), and what inspired you to pursue it as a career path?
Adam: My first exposure to real estate finance, beyond what is taught at UBC, was at my first real estate specific job as a commercial mortgage underwriter. At the time, we were completing 1st and 2nd mortgage financing for a variety of development projects and buildings across BC and Alberta. In a perfect world, the borrower completes the project and pays the financing back, however in the event they do not and default on the loan, the company would eventually gain control of the project or building as a way of recouping the loan amount. Once the asset came back, the goal was to sell the project or building as soon as possible as holding real estate was not the core business. Through that process, I was exposed to asset management as a way to maximize the value of an asset over as short a period as possible, in order to sell it. What eventually attracted me to asset management was seeing just how real the value-add could be on some of these projects and that there were tangible results to the decisions being made.
Q: What are some important factors to consider in evaluating the investment potential of a property? Are these generally the same across different asset management companies?
Adam: I think the goal of evaluating potential investments is the same across asset management companies, that being targeting investment opportunities that meet the return expectations of the investors. However, the path to actually acquiring those assets varies from group to group. In my opinion, the most important factor when evaluating new investments is the ability to recognize and quantify the risks involved, and where those risks cannot be quantified today, have mechanisms in place that can at least box them in going forward.
Q: How much of a finance background do you really need to do well in asset management? Are there additional certifications/credentials that would likely be considered an asset for a student pursuing this career stream?
Adam: You definitely need a good understanding of most financial concepts taught in the general Sauder undergrad courses as well as the real estate specific courses. The most frequent analysis involves IRR or Yield trade-offs between leasing or capital decisions. I don’t think that additional certifications or credentials are required, however there are a few that help, such as the CFA or CPA designations. These can give you a better understanding of how to value or analyze company cash flows, which helps when making decisions related to major leases. As an example, if I am approving a new lease and recommending that the landlord spend additional capital on the space to make it more appealing to the tenant, I want to know that the tenant’s business is stable and they won’t default on the lease anytime soon, or else I’ve spent a bunch of the landlords money on improvements that may not be relevant to another tenant.
Q: How transferable are real estate finance skills/knowledge when pursuing other investment careers (for example, capital markets) and vice versa?
Adam: To start with, in order to make strategic buy/sell recommendations, you need to have a sense of where macro and micro economic trends are at. Knowing what industry sectors may be at risk under certain economic conditions is important. That goes beyond just real estate. I also think the discipline of proper due diligence, whether it be vetting new tenants or capital improvement options, is transferable to most investment careers. The same goes for cash flow analysis. A building cash flow is generally laid out very similar to a company’s cash flow. Being able to read what is happening in those numbers and relating them back to the underlying model assumptions is a fairly universal skill.
Q: What would you say are the most useful classes or extra-curricular activities that really prepared you well for asset management? If you could go back and redo your undergraduate degree, would you have done anything differently?
Adam: There weren’t any specific real estate asset management courses when I went to Sauder, so while the real estate classes are important to understand the generally industry, the most useful were the Economic, Accounting, and Finance classes taken in years 1 and 2. Asset management in real estate seems to be one of those professions that you need to learn your way into, meaning that experience working with properties is really the main thing. That doesn’t always mean from an investment background either. Lots of asset managers come from a leasing or property management background as well. If I had to do a few course differently, I think I would have switched out a few for New Business Development and Transportation/Logistics. Anything that helps you understand the business cycle better is definitely useful.