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  • Writer's pictureFrançois Père

Maintenance and service contracts: a value creation lever for Asset and Property?

Updated: Sep 11, 2023


What if we finally consider service and maintenance contracts as structuring? The days when the asset manager refused to take an interest in the contracts in his office building seem to have passed... This is what we found in the crosstalk between Nicolas Loiseau (Managing Director at SEFAL Property) and Romain Ruby (Asset Manager at ASGARD Group).


Contrats de maintenance et de service : levier de création de valeur pour Asset et Property ?

First, it is the content of the expected services that is at stake. Service companies now offer very detailed ranges of services, and it is necessary to know how to adapt the services to the expectations of the occupants.

"You must never forget what the purpose of the contract is and why you are putting it in place. So, you always must think about the services you need, the level of quality you want to put in place, and the expectations and needs occupants of the building. All of this is done solely in the interest of the occupants of the building and to maintain the value and upkeep of the building and its amenities." says Nicolas Loiseau.
Romain Ruby adds "we work a lot in the first and second suburbs of Paris, where there is a lot of competition. When we market, tenants will look, of course, at the target rent, but will look behind the expense budget. And a building which has a charge of €30 per square meter or €50, that changes a lot of things. I manage to have a coherent rent that is a little higher and I have a budget of charges that is better controlled, while having benefits which are better."

Because the subject is to get what you pay for, Nicolas Loiseau tells us:

“There was a time when we had a single message to reduce the charges on buildings. I think there will still be a strong demand these days with the economic context, from owners and tenants alike. But there is also quality, and today, tenants choose buildings for a certain level of services, and therefore a standard of quality. You constantly have to balance between price and quality of service."

So when should you review your contracts? There is a great temptation to do so upon acquisition, when structuring the deal. This is Romain Ruby's point of view:

“There is a lot of work done during the acquisition of the assets. During the due diligence period, we do a big audit of what happened in the past of the building, the expense budgets, the CAPEX plan. .. And depending on the quality of the management or the previous data, either we keep the contracts that are in progress, which is what we like to do by the way, or we see that the charges are three times higher than what we know in relation to this type of building, and there we put out calls for tenders."

Nicolas Loiseau is more nuanced:

"You have to know your building well, the type of equipment or the type of services you want to put in place. And that requires a little perspective. At SEFAL, we never launch a call for offers when you take a building under management. We always leave the contracts in place for the building in the current year, and we wait to know the building, its equipment and its occupants well to be sure that the services will be really adapted to the building and the expectations of the occupants."

In short, deepen the analysis of needs before finding yourself blocked by a contract.

"You have to be very specific in the list of expected services, continues Nicolas Loiseau. My advice to young PMs is: First think about the needs, take a step back and be sure to know your building well, for me. And above all, read the contract carefully before signing it. Because once it's signed, you're committed."


Driving the quality of service, the central issue...


In fact, it is the whole balance between costs and quality of service that must be systematically challenged. And judging the quality of a service is sometimes difficult. Not to mention that the services are more and more innovative.

"At Sefal, says Nicolas Loiseau, the managers who take care of the provision of services are curious and they keep themselves very informed of what is being done today on the buildings. They go looking for new service providers, new services. On technical maintenance, more than on the equipment, it is on the technologies that it evolves. But what changes is that we are setting up clearer partnerships, we have standard contracts with a much more structured process."

Thus, at Asgard, tendering and CCTP processes inspired by works contracts are systematized for maintenance.



Quality of service but above all... quality of data


This innovation in contracts, we see it appear in the content of the service, but also in the management of quality. Data feedback becomes crucial, for regulatory reasons, but also for decision-making. This is what Nicolas Loiseau says:

"A few years ago, Full FM contracts with a single facility were the only ones to produce unified technical data. Today we have very modern tools that allow us to pilot much more easily than we used to before, at least for service providers. Digital tools that allow us to monitor all preventive maintenance and corrective maintenance on buildings when we have separate contracts. A real time saver!"

For his part, Romain Ruby emphasizes that beyond the quality of the data, the ease of analysis is crucial for him:

“On the asset side, what is very important is always to obtain the right information, and in a transparent and consolidated form. We make decisions based on an enormous mass of data from the PM, but this data is not "make sense to us only in a concentrated form. Having smart data simplified is what allows me to make good decisions, especially on the sales part."

Yes, contracts become a key element to create value. Position services and services as close as possible to customer requests, challenge their achievement. This is what Romain Ruby summarizes:

"With good contracts, I have a budget of expenses which is better controlled, while of course having services which are also better. This is where we will create value and we will have a competitive advantage by relationship to the market."

 

Find Nicolas Loiseau's interview here :



Find Romain Ruby's interview here :





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