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Cost Reduction Strategies Taskforce

Presenters:

Lynn Kious, Johnson ControlsJeri Ballard, Shell Real Estate

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Cost Reduction Strategies

MISSION At the Portfolio Level, develop strategies that integrate Real Estate, Operations,

Projects, Sustainability and utilization to meet cost savings targets/objectives.

SCOPE OF TASKFORCE Low hanging fruit is gone, we are now into 2-3 years of cost savings initiatives - What

is next/now what? How can we learn from each other?

GOALS Develop a base of case study examples of cost savings initiative that have been

successful (implemented)

Develop a list of recommended performance measurements and KPIs Whats new? Innovative Ideas?

OBJECTIVES Case Studies / Best Practice Sharing Interviews Article Editorial / Whitepaper Presentations Virtual / Webinars or In-person

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Cost Reduction Strategies

COMMITTEE Lynn Kious, Johnson Controls Chair Jeri Ballard, Shell Co-Chair Andrew Hallissey, CB Richard Ellis Mark Schleyer, AT&T Grant Rockwell, Kaiser Permanente Chris Landers, Fischer Company

MEETINGS 1st Tuesday of Month 10:30am (Pacific Time)

DELIVERABLES Innovative idea sharing Real-world case studies with results

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Rebecca Shirey, Herman Miller Sholem Prasow, Teknion Stephanie Leta, Jones Lange LaSalle Sandy Heistand, Advent Software Craig Hendrickson, CB Richard Ellis

Discussion forums White papers

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Cost Reduction Strategy Leveraging LEED

EBOM 2009High ROI and Short Paybacks Possible

LEED for Existing Buildings:

Operations and Maintenance 2009targeted at greening the worlds

existing stock of buildings

LEED EBOM demonstrated to: Reduce energy and water costs on

an ROI basis for individual

buildings Attract LEED-seeking tenants Increase rents

Source: Sholem Prasow, Teknion

Energy Conservation

Measure

Capital

Cost

Annual

Energy and

Water Cost

Savings

Light Fixtures 43,100 11,320

Occupancy Sensors 14,200 14,365

Day-Lighting sensors 11,500 3,893

Low-Flow Fixtures 27,909 11,622

Re-Commissioning 35,071 57,568

Total 304,291 98,768

Approximate EBOM

Certification Costs

25,000

ROI examples: hard savings vs soft costs

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Cost Reduction Strategy Leveraging

LEED EBOM 2009

Further savings possible through synergies in a portfolioenvironment

Object of this CoreNet study to identify the added benefits ofmanaging the entire portfolio synergistically

Impact of USGBCs Portfolio Strategy (to be launched in2010)

Volume LEED certification to streamline process and reducecosts

Benefits of hard and soft district energy programs Streamlining policies and procedures across multiple facilities

Results expected ready for presentation by CoreNet GlobalFall Summit

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Portfolio Knowledge is the Key to

Cost Reduction

Bearing:

1) Strategic

2) Non-Strategic Short Term

3) Surplus

Operational Requirements:

1) Preferred Term

2) Flexibility Needed

3) Risk Tolerance

Financial Impacts:1) Balance Sheet Considerations

2) Tax Treatment

3) Use of Proceeds (Debt Reduction/Reinvestment/StockRepurchase)

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Pursue Multiple Cost Drivers

But Understand Which Ones Really Matter

Total Cost of Occupancy

Location:

Drives the overall cost per sqft

Country, city, and sub-market

Urban versus suburban

Quality of building (class A, B, or C)

Space:

Total number of people accommodated

Size of offices, workstations, amenitiesand special use spaces (sqft perperson)

Dynamic sharing ratios, unassignedworkspace and home working policies

Ability to efficiently space plan the floors

Amount of vacant space in the portfolio

Services:

Consistent global standards and servicelevels

Leverage goods and servicespurchased

Capex versus opex tradeoffs

Higher density and utilization =increased wear and tear

Holding:

Lease versus Own

Legal Entity

Tax Treatments

Exit strategy drives holding strategy

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Speed of delivery

$Impact

High

Low

1 year 5 year

Location change- countryImproved dynamic

sharing

Location change -city

FM Service levels

Location change- City vs Urban

Demand management

Outsourcing

RebidContracts

Biggest Opportunities are not Short-term