Gerald Eve software takes on rating management
Copyright: David Lawson
First published: Property Week Feb 2008
Rating could never be considered among the most glamorous areas of the property industry. Nor is it particularly lucrative, with razor-thin margins compared with spectacular agency commissions. But when markets dive, as could easily happen this year, income from endless battles over the minutia of rateable values keeps many a consultancy ticking over. A shake-up by the Valuation Office stripped away this comfort blanket, however, restricting scope for the appeals which normally fill the five year gaps between each revaluation.
Gerald Eve, one of the sector giants, caught an early sign of which way the wind was blowing and reset its sails accordingly. Instead of relying solely on fees from squabbles with the VO, it invested more than £1m in new software which could handle the complete day-to-day burden of paying bills and checking rebates. More than 10,000 properties are now being handled by RPMS [Rates Payment Management Service] for big names like BP and KFC, which have totally outsourced rating management. The figures could soar, as the government seems determined to ignore industry protests and re-introduce 100% rating on empty property.
This will draw landlords into the equation. They normally have little interest in rate bills but as markets slow and voids increase the implications will begin to bite. For instance, a warehouse normally considered a safe supplier of £2m annual rent could quickly turn into a £1m rating liability.
Big investors are already sitting down to discuss the impact with rating consultants, as few have the in-house expertise to handle something normally been left to occupiers. But many newcomers who have swarmed into property over the last few years could be caught napping. Even major occupiers are realising they may be better off handing over the whole task to experts rather than face the extra burden An organisation with 100 properties can expect to deal with approximately 1,250 business rating tasks a year, says Gerald Eve partner Keith Norman. Many lose out because they adopt a line of least resistance, settling bills or paying fines when deadlines are missed.
The software, which has been designed to track and automate all these processes in exchange for a monthly fee, is claimed to save around 100 days a year for clients’ finance teams. But developing a system to handle routine payments was only one part of the task. It also had to provide analysis which would track anomalies. Within a short time, the new software revealed clients were forking out vast amounts which took no account of factors such as relocations, voids and renovations. Norman says that in three years it has won more than £60m in refunds.
Rating is set to become even more complex with the introduction of local supplements for business improvement districts and infrastructure, which could vary widely from council to council. This will impose even bigger burdens on already overstretched finance departments. Add the threat of empty rates and increasing pressure to squeeze maximum value from business assets during a downturn and the concept of outsourcing could finally take off for both occupiers and investors.
Technology was at the heart of the decision by Spirit Group to outsource rating on its 2,000 pubs, according to estates manager Peter Charnley. The firm had been considering contracting out for some time but a look at Gerald Eve’s system clinched the decision. Spirit had a backlog of final demands from various local authorities demanding immediate payment of six months’ rates, which was a significant financial burden for a single month. Gerald Eve persuaded councils to restore monthly instalments. As a bonus, in the first month of auditing past bills, it secured almost £1.2m of refunds.
Global tax audits by AEC America
A surge in cross-border property investment has left finance directors in the dark about what they are paying in property taxes. A Canadian firm aims to fill the gap by promoting its software in Europe. Local consultants can handle the wide variety of taxes in each country but finance directors need a central point to analyse a whole international portfolio, says Keith Norman of Gerald Eve, which is promoting the system among its clients for AEC America.
A head office manager can track tax bills on individual properties via the internet, using measures such as such as value per sq ft, per room or per unit. They can also look at historic trends and check the status of any appeals, says David Wilkes, president of AEC America.Reports include satellite maps, photographs and other data, providing a ‘virtual’ site visit – a huge advantage for investors with major cross-border portfolios but limited staff and resources. The system also provides currency conversions and language translation.
Equally important, managers can provide tax reports for each asset and location, including graphs and charts which can be used for analysis by other departments within a company. The system can also hold information such as local laws, important filing dates, tax rates, appeal procedures and valuation standards across the globe, as well as the names of regional managers, municipal officials and local tax experts.