Imagine this scenario:  As an accomplished real estate professional who oversaw the LEED and ENERGY STAR certifications of several assets in your portfolio, you size up the market and make the decision to sell a concentrated group of assets.  You are confident in the asset value created through the operational efficiencies and market positioning inherent to the LEED and ENERGY STAR rating programs.

With visions of a superior year-end bonus on the horizon, you call in the investment sales team and proudly tell stories of achieving LEED Silver at one asset, a LEED Gold rating at the adjacent building, and ENERGY STAR scores of 80+ for the entire portfolio.

In what seems like a blink of the eye the team secures a serious buyer, both parties negotiate deep into the weekend, and emerge with a signed term sheet.  Due diligence is well underway when the phone rings……

The voice on the other end sounds grim, “Hi… we have a problem.  We can’t locate your buildings on GBIG or on the USGBC’s website… can’t determine for certain if they are LEED certified.  As for these claims of energy efficiency through ENERGY STAR program, can’t find these buildings on that list either.”

Then the caller drops the bomb, “This is counter to the term sheet we signed last month… and no confirmation is a definite deal breaker.  I think it’s best to meet about this material breach ASAP.  Time is short… this doesn’t look good.”

The line goes dead, and your mind is racing to figure out a way to revive the deal.  You’ve been around the block enough times to know any negative blip is either a) very bad, b) very very bad, or c) worse… take your pick.

You’re about to get re-traded, a value cramdown of untold magnitude.  All your hard work over the years is on the line. There goes the bonus – the trip to Paris, the new Audi, the backyard jacuzzi…

Surely there is some mistake!

What Building Are We Talking About?

Confusion on basic asset information is increasingly common in the information age.  Inaccuracy and lack of clarity is an avoidable risk, the roots of which span somewhere between inattention to the importance of these details through to downright neglect.

A few small mistakes can lead to one large headache and jeopardize a major payday.  In this instance, it started with a minor misunderstanding on square footage in one place, missing address information in another, inaccurate information on building type in a third data repository, and general inattention to detail all around.

In the Information Age it’s critical for all stakeholders to agree, with advanced specificity, on the fundamentals of location, asset size, and building attributes.  Interestingly, accurately defining and describing a building’s location is a non-trivial problem.  This difficulty is apparent when matching assets across different data sets contained in separate information systems, all with varying user applications.

Capital market professionals rely on data for a large number of activities during loan underwriting, acquisition/disposition activities, and valuation assignments.  Providing consistent, accurate data to all stakeholders positions a company to gain market recognition for key asset attributes while minimizing lost opportunity costs.

Beyond the fundamental step of assuring sound data, a broader solution to precisely defining asset location lies in the creation of a global unique building identifier. This identifier, which can be attached to every asset, should be geospatial in nature, multi-dimension in design, and open source in application.  Four variables comprise the solution:

x = latitude

y = longitude

z = height / floor within the building

t = time of the observation or event

The real estate industry stands to benefit immensely from the application and widespread adoption of a global unique building identifier.  Whole sectors that would experience immediate efficiency gains include:

1. Mortgage lenders
•    origination
•    servicing

2. Software applications
•    property management
•    financial reporting

3. Municipal governments
•    energy benchmarking
•    building permits
•    tax assessment

4. Building rating organizations
•    LEED
•    ENERGY STAR

5. Search engines
•    Google
•    Bing

6. Government services / portfolio management
•    Police / Fire
•    Schools

Eliminate Risk

While a global unique building identifier is a great idea whose time has come, a definitive schema remains somewhat elusive over the short term.  This void cannot last much longer and a unique building ID is on the horizon.  User uptick will take time, likely a full real estate market cycle.

Until a global unique building ID achieves widespread implementation, owners are faced with a set of avoidable risks.  Here’s what you can do:

• Review internal management and reporting systems for asset data completeness, accuracy and consistency.
• Verify external databases contain valid address information including street address, city, and zip code.  Databases include ENERGY STAR and LEED, municipal benchmark programs, loan servicing firms, and government agencies.
•  Consistently display proper gross square feet on company websites, marketing materials, and financial disclosures.
•  Provide accurate information to data service companies.

Importantly, building data is the market’s understanding and interpretation of your asset. Providing high-quality location and building attribute data serves rapidly evolving capital market information needs, and is in a company’s best financial interest.

Just like an individual’s credit score, accurate information on location, size, amenities and attributes serves to support asset risk assessments and resultant market value. Given the rapid growth of information availability, building owners bear the brunt of downside risk based on incomplete, poor quality data… and there is little upside left in opacity.

Ultimately, building data is your responsibility… and the market is a dispassionate judge of its quality, accuracy, and completeness.