On the spot where the NDSM shipyard once flourished, De IJ-Kantine restaurant is now one of the hot spots of Amsterdam (North). For Ralf de Graaf of Confia and Marcel Smulders of SGS Search, it is the perfect location to discuss the new standard in real estate management commissioned by OVG Real Estate and established in recent years, under the motto ‘hungry for more’.
About half-way through our meal, a door on the other side of the restaurant bangs shut loudly due to a draught. De Graaf and Smulders both look up to see what is going on and whether help is required; the only people to do so in the large space. ‘Well, we are true service providers,’ laughs De Graaf. ‘Doers. Entrepreneurs. And certainly service providers.’ Smulders: ‘That is part of both SGS Search and Confia’s DNA.’
Founded in 2007, Confia (‘trust’ in Papiamento) positioned itself as a ‘specialist in real estate process management and outsourcing’. According to De Graaf, the Confia IT backbone is the trump card: an IT platform that brings together all management information in respect of the technical, administrative and commercial aspects. Confia manages real estate portfolios (office, retail and residential) worth around € 2 billion and according to its own estimations, saves its clients at least 25% to 30% on management costs annually.
While real estate management is Confia’s core business, it is a relatively new area of business for versatile SGS Search. The mission of the engineering consultancy, founded by Anne-Marie Rakhorst in 1994, is ‘to make the built environment better, safer and more sustainable’. Its scope includes asbestos management, construction management, energy efficiency audits and consultancy – as well as technical services. In July 2014, SGS Search became part of SGS, a global leader in the field of inspection, management, analysis and certification.
And now real estate management as well. Why?
Smulders: ‘We have already been providing the due diligence component in the sales and acquisition of buildings and portfolios for years. Subsequently, we did not utilise the wealth of information that this produced. That is to say, until 2013; when OVG Real Estate commissioned us to provide technical management of the buildings in their portfolio in addition to the due diligence aspects. We did so and were hungry for more.’
De Graaf: ‘Specifically, it involved the Cobra portfolio of 56,000 m² that OVG Real Estate and Goldman Sachs took over from CBRE GI in a joint venture. While SGS Search took on technical management of the seven buildings, including Vivaldi Offices I & II in Amsterdam, Alexanderhof and Alexanderpoort in Rotterdam and Binnenhof in ’s-Hertogenbosch, Confia was tasked with administrative management. That partnership worked exceptionally well.’
Smulders: ‘It was a classic case of one plus one equals…. five. That was also reflected in the profit that was achieved when OVG Real Estate and Goldman Sachs sold the Cobra portfolio to NSI in October. At that time, OVG Real Estate itself referred to ‘optimising the portfolio through a client-focused approach’. In just two years, all buildings were made ‘healthier and more sustainable’. And thanks to renewal of around thirty percent of all contracts, vacancy in the portfolio was reduced to just three percent.’
De Graaf; ‘The magic word is ‘tenant satisfaction’, and with our joint approach we were able to make an impressive contribution in this case.’
The Cobra portfolio brought Confia and SGS Search together. Had you worked together previously?
Smulders: ‘Yes, but not as intensively. We simply clicked. There was great respect for one another’s specific knowledge, expertise, added value and entrepreneurship from the start.’ De Graaf: ‘One thing led to another. And hopefully that will continue, because as real estate management providers with complementary competencies, we would like to work together more frequently in future.’
Did you consider formalising your partnership in the shape of a joint venture?
Smulders: ‘We intentionally did not do that. You only achieve optimal results in the form of maximum tenant satisfaction if you are independent and able to keep one another focused. In the case of the Cobra portfolio, OVG Asset Management Nederland handled the asset management. We certainly have no intention of taking on that element of real estate management ourselves. A matter of ‘let the cobbler stick to his last’, with all three parties working together intensively and each excelling in their own area of expertise. That way, the end result is substantially greater than the sum of its parts.’
De Graaf: ‘The crux of the real estate management we offer together is that the satisfaction of tenants rather than clients is the starting point. Ultimately, with satisfied clients as a result, because they see their real estate rising in value thanks to lower turnover and a higher level of occupancy by satisfied tenants.’
Smulders: ‘It is very simple: when your boiler breaks down at home, you want an engineer on your doorstep within ten minutes to remedy the problem. It should be the same with an office. A defective barrier, a leaking toilet, a lift that is out of order… The problem needs to be resolved as quickly as possible, otherwise it costs the tenant money. Thanks to our combined efforts and with the Confia IT backbone serving as an efficient platform, we succeeded admirably with the Cobra portfolio.’
You have had a great deal of interaction in recent years. Was it always just in relation to OVG and the Cobra portfolio?
De Graaf: ‘Not at all, you gradually get to know one another well and enquire about one another’s home life and you chat about shared interests. However, we are both somewhat workaholic, so the conversation soon turns to work.’
Smulders: ‘For example, the survey conducted biannually amongst all tenants. In addition, we invested a great deal of time and effort on issues with remote meter readings in relation to the IT platform. Following on from that, we also questioned the fact that, as a rule, billing for service charges only takes place 6 months to a year and a half following the end of the rental year. You can avoid the dissatisfaction that arises all too often because a tenant has long forgotten about the blocked toilet or defective lift, by invoicing for service charges two or even four times during the course of the year, and by discussing these. That is ambitious, I know, but when you genuinely strive for tenant satisfaction, it is something worth aspiring to.’
NSI is going to manage the buildings in the Cobra portfolio itself. Was that the signal for Confia and SGS Search to disengage immediately?
De Graaf: ‘No. That which you start full of passion, you must also finish with passion. That is what we did, we transferred everything efficiently, even though that is not always customary in this sector. With our new standard in the field of real estate management, we want to distinguish ourselves in a market that is evolving rapidly. The days of doing the minimum to get by are over. There is an increasing number of players in the market armed with a vision, ambition and funds, and there are many buildings with which something needs to be done urgently, or they will remain vacant irretrievably – if that is not already the case.’
Smulders: ‘With the Cobra portfolio, we had an opportunity to demonstrate that efficient real estate management can add value for user and owner. We are confident that we can make a difference with this approach. Going forward, our strategy is to offer a practical, attractive option for real estate owners, with vision and ambition.’
What is your favourite building in the Cobra portfolio?
De Graaf: ‘Vivaldi I. Because my career started there in 1990 with EY. I recall thinking: wow, this is a huge building. Until Vivaldi II went up beside it a few years later… Vivaldi I is now rented out by Spaces.’
Smulders: ‘Olympic Plaza. I like the place and that type of building appeals to me. You can do a great deal with it and get a great deal out of it.’
In your view, what is the most surprising recent development in the world of real estate?
De Graaf; ‘The growing gap between privileged and underprivileged areas. That gap appears to be getting bigger, not just between cities, but particularly within cities.’
Smulders: ‘Let me think. I am not that easily surprised. It is remarkable that there is still such an incredible amount of money available and that the keen interest in Dutch real estate from abroad continues unabated.’
Photos: Cees de Geus
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