ASSESSMENT OF THE MANAGEMENT OF THE CORPORATE REAL ESTATE OF SELECTED NIGERIAN UNIVERSITIES

ASSESSMENT OF THE MANAGEMENT OF THE CORPORATE REAL ESTATE OF SELECTED NIGERIAN UNIVERSITIES ABSTRACT Njungbwen, E. and Anih, P. C. Department of Estate Management, Faculty of Environmental Studies, University of Uyo, P.M.B. 1017, Uyo, Akwa Ibom State, Nigeria. njungbwenernest@gmail.com 08033534001 This research was an assessment of buildings and lands of selected federal universities in Nigeria that are not primarily in the real estate business. An investigation into the current management practices, priorities, planning horizons, motivations and attitudes of managers of these real estates was conducted by way of an in depth survey of senior corporate real estate executives in the institutions. In this research, the cross-sectional study design was applied. This was done in combination with purposive sampling technique. That is to say only universities with dependable funding sources for example federal universities, universities with sizeable quantity of corporate real estate and located within the south eastern region were sampled. Six universities were purposively sampled from the 36 federal universities in Nigeria for this research. Three data collection instruments were applied in this research and these included interview schedule, physical inspection and questionnaires. The managers of the university corporate real estate were selected within each university for interview, assessing their knowledge based on their being involved in the corporate real estate decisions and strategies in their institutions. The data collected for this study was coded and summarized through the use of the Windows XP software. The results of the research showed that despite the hugh amount of money purported by government to have invested in university education, the university real estate was largely under-managed. About 75% of the Heads of Departments and corporate real estate executives on the university campuses visited had not heard of Corporate Real Estate management in the course of their work and study in the university system. Again about 75% of the corporate real estate executives in the selected universities were of the view that the universities did not have a formally and well organized corporate Real Estate Unit. In this case, the various offices and activities associated with management of the university campus in the various universities were not coordinated to ensure that their decisions and actions were geared towards achieving the university goals. INTRODUCTION Real estate is the fifth corporate resource besides Capital, People, Technology and Information, but seems to be forgotten. Real Estate is an asset of strategic importance, representing a significant proportion of total assets and is the second most expensive cost after labour. Based on latest estimates it seems that Real Estate (at market values) represent, an average, around 20-30% of total assets in the United States of America and 30-35% in the United Kingdom, in Western Europe these figures might be in general even a bit higher, (Luokko, 2004). A Corporate Real Estate (CRE) portfolio can be viewed from three perspectives: 1) as a financial asset of the corporation; 2) as a real estate market asset; and 3) as an operational asset (factor of production). A significant number of corporations deal with each of these perspectives separately and rarely seek to manage all of them together for the greater good of the organization, (Varcoe, 2000). Globalization of business operations and other competitive pressures are driving business organizations and universities to compete in an ever more competitive, rapidly changing and global environment. These external pressures and changes in the business environment and increasing demands for greater performance are forcing corporations to pay attention to noncore operations in addition to core businesses. Especially the demands to increase efficiency and effectiveness either economical or organizational perspective, have driven businesses to concentrate also to their support resources, such as real estate and facilities management. The demand for more efficient utilization of space and higher workplace productivity has led to businesses adopting a range of strategies for managing their facilities. The emergence of Corporate Real Estate Management (CREM) as a distinct discipline has supported this drive and the search for strategies aimed at enhancing the value of real estate assets and facility related services to the core business. CRE, according to Zeckhauser and Silverman (1983) is defined as the land and buildings owned by companies not primarily in the real estate business. This follows the line of thought that CREM concerns the management of buildings and parcel of land at the disposal of private and public organizations that are not primarily in the real estate business (Bon, 1994). When government creates universities, she takes some initial steps to appoint Vice-Chancellors and empower them to develop basic infrastructure to put the university into operation, establish faculties, departments and various units and employ staff for the smooth take off of the university. All these basic structures put in place are geared towards ensuring that the goals for the establishment of the university are accomplished. This research has investigated into how the university management of each university carried out the management of its real estate. It investigated into the existence of appropriate units that are saddled with the responsibility to develop and manage real estate in the university and how these units managed the corporate real estate of the university. NJAFE VOL. 12 No. 1, 2016 24

As the institutions expand the development of infrastructure/ real estate for usage by the university and acquisition of other assets are regular activities, it becomes necessary to know whether the development and management of these infrastructures/real estates are often done with the view to support the goals of the universities or done for the sake of it. Most often it is not clear as to how the activities of the physical planning directorate and the works department are associated and coordinated for the accomplishment of the university goals. The aim of this research is to investigate corporate real estate management decisions and actions taken by the physical planning and the works department and to find out how these decisions are linked to the accomplishment of the corporate goal of the university. RESEARCH METHODS In this research, the cross-sectional study design was applied. This design is best suited to studies aimed at finding out the prevalence of a phenomenon, situation, problem, attitude or issue, by taking a cross section of the population, (Babbie 1989). This was done in combination with purposive sampling technique. That is to say that only universities with dependable funding sources for example federal universities, universities with sizeable quantity of corporate real estate and located within the south eastern region were chosen for use as samples in this research. A sample of 6 universities was purposively selected from among the 36 federal universities in Nigeria for this research. These are the Federal Universities found in the South Eastern part of Nigeria. The universities comprised University of Portharcourt, University of Calabar, University of Uyo, Federal University of Technology, Owerri, Michael Okpara University of Agriculture, Umudike and Nnamdi Azikiwe University, Awka. Three data collection instruments were applied in this research and these included interview schedule, physical inspection and questionnaire. The interview schedule developed and used for this study covered several themes including the following: Background information, corporate real estate unit objectives and strategy which comprised inventory of real estate, assets and real estate decision-making and corporate real estate management practice in the universities. Then managers of the universities corporate real estate were selected within each university for interview, assessing their knowledge based on their being involved in the corporate real estate decisions and strategies in their institutions. The Director of Physical Planning and or the Director of Works of the various federal universities were the respondents of the research. Overall, the volume of data that were collected in the research was based on the strict willingness of the corporate real estate managers (the Director of Physical Planning and or the Director of works of the various federal Universities) and users (the Heads of Departments of the Faculties where contact lecturer colleagues were found in the selected universities) to participate in the study. This approach was chosen because the Heads of Departments were custodians of the University s real estate and assets under their respective Departments and was in the right position to speak on behalf of their students and staff. Universities that were selected were to meet the below conditions (i) Be a federal university (ii) Have one major funding source (iii) Must have been in existence for at least ten (10) years to develop substantial real estate. The data collected for this study were coded and summarized through the use of the Windows XP software. Tables were then extracted from the summarized data showing the frequency and percentage of occurrences of certain activities as these relate to corporate real estate management practices in federal Universities in Nigeria. This led to the production of Pie charts and Bar graphs for the study where it was necessary. Relative Importance Index was applied in some aspects of the study to show the issues on which respondents had strong opinions on than others. RESULTS AND DISCUSSION Majority of the staff, students and corporate real estate executives on the university campuses visited had not heard of Corporate Real Estate Management in the course of their work/study in the university system. This constituted about 75% of the respondents. Thus, there was need for sensitization of the people on the concept of CREM, its principles and strategies and what public and private organizations stand to benefit by adopting CREM and its strategies in the management of their real estate. Majority of the corporate real estate executives in the selected universities were of the view that the Universities did not have a formally and well organized corporate Real Estate Unit. This was the view of about 75% of the respondents and this was because almost all of the units in the universities dealing with the real estate of the institutions were significantly segregated from one another. This could be justified by the fact that in almost all the universities the physical planning directorate was segregated from the works department, another unit was responsible for the management of the university guest house, management of lecture halls and other open spaces were under the management of the directorate of General Administration and in some universities a different directorate was responsible for the housing of staff. NJAFE VOL. 12 No. 1, 2016 25

The respondents from the universities were of the opinion that the university land and buildings were being managed by the works department. This constituted 100% of the responses from the respondents. The Department of Works and Physical Planning Directorate of the universities investigated had been on ground for the past 20-30 years. The universities had less than 50 staff working in both units. This constituted about 62.5% of the responses from the respondents. The real estate unit was structured as more or less a decentralized Department of the University. This was the view of 100% of the respondents. The Department of works was well separated from the directorate of physical planning and the general administration which was responsible for allocation and renting of halls for different functions had no linkage with the works Department. Furthermore, the unit responsible for the management of university quest house and the board of surveys had no connection with either the department of works or the directorate of physical planning. Thus, the various offices and activities associated with management of the university campus in the various universities were not coordinated to ensure that their decisions and actions were geared towards achieving the university goals. This was not a good practice in the management of the university real estate. CREM principles and practice require that centralized corporate real estate units be establish in the university campuses through which the university real estate is managed. All the respondents did not know exactly what the title of the corporate real estate unit head was or should be. This emanated from the fact that there was not a single unit responsible for the management of the land and buildings of the university. Some of the respondents said the corporate real estate unit head should be the Director of Works, others said it should be the Director of Physical Planning while others were undecided. Obviously, such a manager should either be a Corporate Real Estate Manager or a Facility Manager. Fig. 1 shows the communication channel through which the real estate unit reports to the Vice Chancellor. From Fig. 1, the communication channel through which the real estate unit reports to the Vice Chancellor was through the DVC Administration. This constituted about 62.5% of the respondents. It was reported by many physical planning directors that many instances occurred where their directorate reported directly to the office of the Vice Chancellor. Also, it was reported that many instances also occurred where the Board of Survey reported to the University Governing Council through the Vice Chancellor without necessarily passing through the Deputy Vice Chancellor Administration. Though the real estate units were structured / organized as decentralized departments of the University, all the corporate real estate executives in the selected universities affirmed that the basis on which the universities organized their real estate activities was Cost Centre within the operating division in the universities. This constituted 100% of the responses from the respondents. This was in order because public universities only receive a lump sum of money from the Federal Government from which various expenditure items are made. Hence, money was received and spent and no revenue was generated from the various projects on which the money was spent. Table 1 below shows rationale for managing the real estate as a cost center. Table 1: Rationale for Managing Real Estate as Cost Centre Ease of Use 0 0 1 5 2 8 33 4.13 1 To facilitate cost recovery through cost of goods sold (for university s main product) 6 2 0 0 0 8 10 1.25 7 Real estate units are not sufficiently profitable by nature 1 2 3 2 0 8 22 2.75 4 Shortages of management expertise/manpower to manage for profit 1 3 1 2 1 8 23 2.88 3 Equal allocation of real estate expense across line operations (through overheads 0 4 2 2 0 8 22 2.75 4 The university is not in the real estate business 5 0 2 0 1 8 16 2.00 6 Top Management Resistance 0 0 2 4 2 8 32 4.00 2 While managing the real estate (land and buildings) as a Cost Centre, the corporate real estate executives considered ease of use and top management resistance to manage for profit as the most powerful basic rationales or motivations behind this approach. This was as shown in Figure 1 above. Majority of the universities neither maintained a real property inventory nor a separate real Property Management Information System (i.e. MIS). This constituted about 75% of the respondents. See Figure 2 below: University of Calabar was in the process to establish her asset register during the data collection phase of this research. This is absolutely unacceptable in corporate real estate management practice because this means that the corporate real estate executive was managing what he or she did not know its quantity, quality and overall value. It can be inferred from here that such a university campus manager is not managing anything as he may not be in a position to give precise information on the state of affairs concerning the real estate of the university. This amounts to poor management of the university assets. NJAFE VOL. 12 No. 1, 2016 26

Fig. 1: Communication Channel through which Real Estate Unit Reports. Fig. 2: Maintenance of inventory of Real Estate Assets All the corporate real estate executives in the universities visited agreed with the primary advantages advanced for developing and operating an inventory or MIS for their university s real estate (land and buildings). The primary advantages included the fact that it allows the university to keep track of details of its real estate, Form of Good Housekeeping, ensure & Control Misappropriation etc as indicated in Table 2 below. Legal Requirement was the weakest advantage advanced for developing and operating an inventory or MIS for their university s real estate (land and buildings). Table 2: Primary advantage for developing an inventory it is a Legal requirement for corporate organizations 0 2 0 3 3 8 31 3.88 8 it is a form of good housekeeping 0 1 0 3 4 8 34 4.25 1 it allows the university to keep track of details of its real estate 0 1 0 3 4 8 34 4.25 1 to ensure control and prevent misappropriation of the facility 0 1 0 3 4 8 34 4.25 1 it also keeps track of the correct value of real estate 0 1 0 3 4 8 34 4.25 1 It can be used to generate accurate, complete and customized Reports that suit the needs of management 0 1 0 3 4 8 34 4.25 1 Aid in Capital Budgeting 0 1 0 3 4 8 34 4.25 1 Majority of the corporate real estate executives in the universities visited agreed with most of the points advanced as the primary barrier for not developing and operating an inventory or MIS for their university s real estate (land and buildings). This was as shown in Table 3 below. However, difficulty to effect change in the university was the strongest barrier limiting the development of an inventory system in the university system. Table 3: Primary Barrier for Developing an Inventory Inadequate Funding 1 1 1 4 1 8 27 3.38 7 Inadequate Manpower 0 1 1 4 2 8 31 3.88 2 difficult to effect change in University 0 0 2 4 2 8 32 4.00 1 Not Cost Justifiable 1 1 1 5 0 8 26 3.25 8 not enough power is vested in real estate function 0 0 1 7 0 8 31 3.88 2 Real Estate Responsibilities is too Decentralized 0 2 1 4 1 8 28 3.50 6 resistance to new procedures or methodology by real estate staff 3 1 1 3 0 8 20 2.50 9 real estate staff are unfamiliar with available inventory/mis systems for real estate 0 1 2 4 1 8 29 3.63 5 Top Management Cannot be Convinced 0 1 1 5 1 8 30 3.75 4 The views of the corporate real estate executives in the universities were sought on Real Estate Decision-making issues and the results were as shown in Table 4 next page. NJAFE VOL. 12 No. 1, 2016 27

Table 4: Real estate decision-making Real estate management is not important because the university s core business activity is not real estate. 4 2 0 0 2 8 18 2.25 9 Uncertainty and unpredictability of future real estate markets, economic conditions, and university space needs greatly reduce my capacity to effect optimal real estate (land and buildings) solutions. 0 0 1 5 2 8 33 4.13 1 Diversifying real estate portfolios (by lease/own ratios, lease term maturation, capital financing vehicle, etc) can significantly reduce financial risk. 0 0 0 7 1 8 33 4.13 1 I have regular exposure to, and a firm understanding of, overall corporate strategic plans and objectives from which to base real estate decisions. 3 2 1 2 0 8 18 2.25 9 Future flexibility (in terms of commitments, location, building design and use, etc.) is a top priority in evaluating real estate (land and buildings) alternatives. 1 0 0 7 0 8 29 3.63 4 I do not have sufficient information or methodology available to clearly evaluate the physical performance or use effectiveness of my buildings. 1 0 0 7 0 8 29 3.63 4 Real estate (land and buildings) decision-making, on average, plays a critical part in the overall performance of my University. 1 1 0 5 1 8 28 3.50 6 Real estate (land and buildings) decision-making is an integral part of corporate strategic planning.corporate Stategic Planning 1 1 2 2 2 8 27 3.38 7 Responsibility for real estate (land and buildings) assets are delegated too far down in my university. 0 1 0 5 2 8 32 4.00 3 The President or CEO or VC usually gets involved in corporate real estate decisions. 1 2 0 4 1 8 26 3.25 8 From Table 4, it can be seen that some of the priority areas in which decision making was serious by the corporate real estate executives were uncertainty and unpredictability of future real estate markets, economic conditions, and university space needs which greatly reduced the capacity of the real estate executive to effect optimal real estate (land and buildings) solutions and diversifying real estate portfolios (by lease/own ratios, lease term maturation, capital financing vehicle, etc) which can significantly reduce financial risk. However, the area in which decision making was least by the corporate real estate executives were the facts that Real estate management was not important because the university s core business activity was not real estate and the disagreement on the fact that the corporate real estate executives had regular exposure to, and a firm understanding of, overall corporate strategic plans and objectives from which to base real estate decisions. The next issue the investigation sought to establish was the involvement of the Vice Chancellor in corporate real estate (land and buildings) decision as shown in See Fig. 3. From Fig. 3, the analysis of the data showed that the VC often participated in corporate real estate (land and buildings) decision. This constituted about 37.5% of the respondents. The study also sought to establish the authority in the university that had the final decision on real estate (land and buildings) financing shown in Fig. 4.. Fig. 3: Participation in Real Estate Decision-Making by VC. Fig. 4: Final Decision on Real Estate Financing NJAFE VOL. 12 No. 1, 2016 28

Fig. 4 reveals that final decision on real estate (land and buildings) financing was made by the university Governing Council. This constituted about 75% of the respondents. The agreement level of corporate real estate executives in the universities with some CRE statements were as shown on Table 5. Table 5: Agreement Level Items 1 2 3 4 5 TOTAL The transparency of CRE (occupancy) costs is very important 0.00% 0.00% 0.00% 62.50% 37.50% 100.00% Every university should have detailed and up-todate information on CRE which enables her to get information and conduct analysis for each 0.00% 0.00% 0.00% 25.00% 75.00% 100.00% property separately Integration of CRE information systems with corporate information systems is very important. 0.00% 0.00% 0.00% 75.00% 25.00% 100.00% We know quite exactly what the yield of our properties is 62.50% 12.50% 0.00% 12.50% 12.50% 100.00% We know quite exactly what the market yield of similar properties is 0.00% 50.00% 25.00% 12.50% 12.50% 100.00% In our university market value of RE is followed regularly 25.00% 62.50% 0.00% 0.00% 12.50% 100.00% In our university value in use of RE is followed regularly 0.00% 87.50% 0.00% 0.00% 12.50% 100.00% Every university should know (at least roughly) the market value of RE 0.00% 12.50% 0.00% 12.50% 75.00% 100.00% Every university should know (at least roughly) the value in use of RE 0.00% 12.50% 0.00% 12.50% 75.00% 100.00% From Table 5, it can be seen that the corporate real estate executives in the universities largely agreed that the transparency of CRE (occupancy) costs is very important, Every university should have detailed and up-to-date information on CRE which enables her to get information and conduct analysis for each property separately, Integration of CRE information systems with corporate information systems was very important, Every university should know (at least roughly) the market value of RE and every university should know (at least roughly) the value in use of RE. However, they disagreed with the fact that they knew quite exactly what the yield of their properties were, quite exactly what the market yield of similar properties were, market value of RE was followed regularly and value in use of RE was followed regularly. This was because almost all the selected universities had not carried out valuation of their university real estates. The Ranking of importance of real estate activities in the Universities were as shown on Table 6. On ranking the importance of real estate activities in the University campuses, it was found as revealed by Table 6 above that all the real estate activities in the Universities were important. The most important real estate activities in the university campuses were Construction and Development as Real Estate Function, Lease-Buy Decision-Making as a Real Estate Function and Negotiations as a Real Estate Function. However, the existence of the real estate department was considered as the least important activity of the universities. This was really strange to the world of corporate real estate management because no real estate department in any organization implies the absence of real estate practice in that organization. The study on the success of the current corporate real estate management (CREM) system in the universities was as revealed by Fig 7. Fig. 7: Success of the current CREM system Fig.8: Reactions on the need for improvement on the current real estate system NJAFE VOL. 12 No. 1, 2016 29

Table 6: Ranking of importance of real estate activities in the Universities Rank the Importance of Real Estate Department 1 2 1 3 1 8 25 3.13 8 Rank the Planning of Additional Capacity as a Real Estate Function 0 0 3 4 1 8 30 3.75 4 Rank Finance and Budget Analysis as a Real Estate Function 1 1 2 3 1 8 26 3.25 7 Rank Property Appraisal and Market Analysis as a Real Estate Function 2 0 2 0 4 8 28 3.50 5 Rank Real Estate Construction and Development as Real Estate Function 0 0 1 4 3 8 34 4.25 1 Rank Lease-Buy Decision-Making as a Real Estate Function 0 0 2 2 4 8 34 4.25 1 Rank Redeployment as a Real Estate Function 0 1 3 3 1 8 28 3.50 5 Rank Negotiations as a Real Estate Function 0 0 2 4 2 8 32 4.00 3 Fig. 7 reveals that the success of the current corporate real estate management (CREM) system in the universities was average. This constituted about 50% of the respondents. The views of majority, of the corporate real estate executives in the universities as to whether the current real estate system in Nigerian universities required improvement was as revealed by Fig. 8. Figure 8 reveals that the respondents personally believed that the current real estate system requires improvement. This constituted 80% of the respondents. The responses from the corporate real estate executives in the universities, on the urgency of change on return on investment of real estate were also sought for and the results were as shown in Table 9. Table 9: Statement of urgency Increase Return on Investment of Real Estate 3 1 1 1 2 8 22 2.75 6 Enhance Return on the Value of Fixed Assets 2 1 2 3 0 8 22 2.75 6 Reduce or Limit Occupancy Cost 2 0 1 5 0 8 25 3.13 5 Respond more Quickly and Effectively to Situational Factors 0 0 1 5 2 8 33 4.13 1 Change the Management Reporting level 0 2 1 4 1 8 28 3.50 3 Increase the Communication between the Management and the Property managers 0 1 2 3 2 8 30 3.75 2 Decrease the Utilization of Outside Property Consultant 1 0 3 4 0 8 26 3.25 4 It can be seen from Table 9 above that increase of return on investment of real estate and enhancement of return on the value of fixed assets were the least urgent issues the university management were ready to get involved in. This could be because of reluctance to do so or lack of knowledge on how to effectively do that. This is a serious matter today in the university system in Nigeria as Federal Government wants federal universities to also be financially autonomous- to raise their own funds and spend it the way they want. CONCLUSION Universities, both the private and public corporate organizations in Nigeria and indeed Africa are encouraged to embrace Corporate Real Estate Management practice for the management of their real estate. This is the curtain edge best practice for CREM today. RECOMMENDATION Formerly organized and centralized corporate real estate units should be established in all corporate organizations, public institutions and universities in Nigeria/Africa. Decentralized units should be discouraged. This is because all efforts/decisions need to be coordinated and geared toward achieving the organizational goals and centralized system can best achieve this. All corporate real estate units should be headed by a corporate real estate manager and/or a facility manager. People from other disciplines who may be called upon to head such a unit must have NJAFE VOL. 12 No. 1, 2016 30

received education and training in one way or the other in CREM or Facility Management (FM). The CRE manager should be an indispensible member of the board of directors of the management team. The corporate real estate manager solves organizational problems through corporate real estate solutions. In his absence, such corporate real estate solution may not be taken into consideration and this can bring huge loss or waste to the organization. REFERENCES Babbie, E. 1989. The Practice of Social Research, California, Wadesworth Publishing Company. Bon, R. 1994. Ten Principles of Corporate Real Estate Management, Facilities, 12(5): 9-10. Luokko, A. 2004 Competitive Advantage from Operational Corporate Real Estate Disposals. International Journal of Strategic Property Management, 8(1):11-24. Varcoe, B. 2000. A process for the portfolio management of real estate assets Journal of Corporate Real Estate, 2(2):113-122 Zeckhauser, S. and Silverman, R. 1983. Rediscovering your company's real estate, Harvard Business Review, 61 (1): 111-117 NJAFE VOL. 12 No. 1, 2016 31