1

CoRE Fundamentals

An Academic Lecture Series From CoreNet Global

2

Corporate Real Estate (CRE): What’s It All About?

3

What is Corporate Real Estate?

BALANCE SHEET ASSET

MARKET ASSET

ORGANIZATIONAL ASSET

A corporation's real estate, comprised of its land, buildings, and work environments, can be a powerful resource of strategic value.

4

• Describe the structure of the real estate organization

• Identify key activities associated with corporate real estate operations

• Describe the internal relationship between the corporation and CRE management

• Identify the three stratifications of the CRE executive’s corporate role in fulfilling his or her departmental objectives

• Characterize key aspects of the CRE executive’s role in fulfilling the strategic objectives of the company as a whole

Learning Objectives

5

The Broad Expanse of CRE

Energy Manufacturing

Public Sector

Consulting

Healthcare

Agriculture Retail Transport

ation

Hospitality Research Finance Technolog

y

Telecommunications

Can You Think of Others?

6

The CRE Business World

Business Units(BU)

CORPORATIONKey ObjectivesBusiness Plans

Metrics

Support Functions

CRE Mission: CRE Department ManagementPortfolio ManagementStrategic Performance Management

7

CRE Management

Organization Management

Portfolio Management

Performance Management

8

CRE Functional Management

Corporate Real Estate Activities

Transactions Leases Facilities Manageme

nt

9

Organization ManagementPortfolio ManagementPerformance Management

10

Organization Management

Department Management

Functional Management

11

Department Management

Head of CRE or Head of Strategy

Customer Relations

Client Relationship Manager

Client Relationship Manager

Portfolio Strategist

Outsourced Service Liaison

Share- holders

Business Units(BU)

CRE Organization and Staffing

12

CRE Department Management

Financial Management

Organization & Staffing

Legal andContractin

g

Project Manageme

nt

Outsourcin

g Manageme

nt

13

• Benchmarking

• Scenario cash flow analysis

• Occupancy and cost measurement

• Year-to-year comparisons

• Location-to-location comparisons

• Comparisons to market norms

• Laddering leasehold maturities

Project Management

14

Financial Management

Increasingly, a company's real estate portfolio is viewed as a strategic asset that can make or break a company's anticipated financial performance.  Perhaps most important, CRE has a demonstrated impact upon the company's Return on Investment and shareholder value.

15

Assemble and coordinate various CRE in-house and outsourced specialist resources responsible for:

Outsourcing Management

Strategy & Portfolio Planning

Design & Construction

Workplace Strategy & Planning

Operational Strategies

• Establish project objectives and facilities requirements• Budget Development – capital and operating• Solutions Options and Site Selection Development• Decision Support and Approval Process• Project Delivery

16

Legal and Contracting

Key components:

• Selection criteria• Written, measurable

directives• Leveraged agreements• Performance reviews

17

• Local knowledge

• Space expectations and requirements

• Negotiating incentives and infrastructure

• Trends in the real estate markets

• Competitors/Neighbors

• Suppliers

Location / Site Selection

18

Location and Site Selection

19

Organization ManagementPortfolio ManagementPerformance Management

20

Workplace Strategy

Outsourcing

Portfolio Optimization

Financial Performance

Portfolio Management

21

Workplace Strategy

The profession of corporate real estate and workplace encompasses

business strategy for successful companies - that is,

• How and where people work,

• How it affects people, productivity, profit,

• And increasingly important - the planet.

22

Outsourcing

Sample Deliverable

Strategic(In-House)

Operational(Outsourced)

CRE Jobs

CRE Careers

REAL ESTATE

HOLDINGS

23

CRE & Service Providers

Internal CRE Team

Level of Responsibility Real Estate Service Provider

Relationships with business units (BU) and senior management

ENTERPRISE STRATEGY Strategy Support:•Compliance•Policy Governance

Works with ServiceProvider to translatecorporate and BU strategy to real estate and developprocesses for the delivery of services

STRATEGY TRANSLATION Strategy Support:•Performance management•Strategic Sourcing•Portfolio optimization•Lease renewals•Disposition strategies•Programming standards•Capital budget development•D&I financing alternatives

Oversight of serviceprovider and internaldelivery teams

TACTICAL EXECUTION Tactical implementation:•Transaction management•Lease administration•Project management•Contract/Vendor management

•Facilities management

24

Portfolio Optimization and Balanced Scorecard

Customer Financial

Employee Growth and Development

Internal Business Processes

25

Portfolio Optimization

CRE Function Success Measure

Growth Phase

High Growth

Steady State Downturn

Customer Service Time-to-Market

Sourcing & Lease Administration Cost per SF or M2

Space Management SF or M2 per Person Alternative Workplace Cost per Person Occupancy Cost Reduction

% Occupancy Cost-to-Revenue

26

• Demand forecasting

• Utilization and occupancy metrics

• Sub-portfolio and cluster analysis

• Supply and gap analysis

• Market analysis

• Financial analysis

Portfolio Management Analysis

27

Occupancy cost indicators

Book values – to – market value relationships

Balance sheet impacts

Income statement impacts

Cash flow impacts

Investment ratios

Share value impacts

GAAP impacts

Carbon Footprint

Financial Performance

28

Organization Management

Portfolio Management

Performance Management

29

Enterprise Alignment

Balanced scorecard

Strategic CRE Planning

Sustainability

Performance Management

30

Enterprise Alignment

Business Units

(BU)

CORPORATION

Key ObjectivesBusiness Plans

Metrics

Support Functions

CRE RoleCRE Functions

DefineRequirements

Evaluate Existing Facilities

Integrate Market

Opportunities

MeasurePerformance

31

Strategic Planning

Technology

CRETeam

CorporateDirection

Business Unit/Functional Unit Needs

BusinessCompetition

InfrastructureOptions

GovernmentRegulations/ Codes/

Environmental

CRE Trends& Benchmarks

HR

32

Portfolio

Financial

OccupancyWorkspace

Location

CRE Planning

Property• How much should we own

versus lease? • How much space do we

have?• Do we have enough space –

how much will we need in the future?

Financial• What are our cost structures? • What is our optimal financial

structure?

Location• Are we in the right location?• What are the labor pools,

economic incentives, transportation costs, access to suppliers

Space• Are we in the right type of

building?• What functionality, vacancies,

material handling• Constraints?

33

Strategic planning generates the right amount of space at the right time… the rewards are:

• Reduced • Occupancy costs• Energy costs

• Improved space utilization• Reduction in amount of surplus space• Office alternatives• Space standards• Leveraged resources

• Improved work/life balance for • Talent attraction • Retention

Space and Occupancy

34

CRE Planning Goals

Reduce headcount

• Reduce occupancy costs

• Highest and best use analysis

• Economic development incentives

• Alternative work place strategies

• Sustainability strategies

• Use of alliances

• Assess non-core functions

• Outsource using alliance management

Lower cost structureImprove operating marginsReduce Infrastructure

Improve Operating ProcessMinimize Infrastructure

BUSINESS STRATEGIES CRE PLAN

35

Align Goals and Strategies

• Rigorous lease vs. buy analysis

• Use technology to replace/minimize space

• Environmental risk

• Promote virtual entities

• More customer face time through virtual office

• Restructure distribution networks

• Site selection to gain competitive advantage... location, cost, capability

Create operating flexibilityBuild flexible infrastructure

Higher market penetrationNew market opportunities

Reduce headcount

BUSINESS STRATEGIES CRE PLAN

36

Sustainability

Source: George Gosieski © 2007

Enterprise

BusinessContinuity

NGOMonitoring

SocialInfluences

Land-useBiodiversity

ManagementCompliance

PeerPressure

ConsumerBehavior

Public Sector Activity

InvestorActivism

WorkforceTrends

WaterEffluent

Transportation

EnergyEmissions

MaterialWaste

37

• Know what you have, know what you want

• Stay up-to-date with the market activity - Continuous education and networking

• Keep real estate strategy in mind – it provides goals and parameters

• When you have the chance, seize opportunities

• Keep track of the situation

• Communicate, communicate, communicate

CRE Success Factors

38

CRE Communications

CLIENT RELATIONSHIPSCommunicating and building

relationships with business units

CRE ACTIONSMaking recommendations to management and providing

rationale for decisions

39

• Benchmarking

• Scenario cash flow analysis

• Occupancy and cost measurement

• Year-to-year comparisons

• Location-to-location comparisons

• Comparisons to market norms

• Laddering leasehold maturities

Technology Support

40

What questions can we answer for you?

Additional Corporate Real Estate Resource: www.corenetglobal.org

Thank you for your time and attention