Healey & Baker/
Kofod-Jensen & Bach- Nielsen
Real estate partnering
Presentation To
Dansk Facilities Management - Netværk
January 2002 January 2002
By
Simon O’Reilly & Lau Melchiorsen
• Transactions 60% 30%
• Asset Management 30% 20%
• Strategy 5% 25%
• General Management 5% 25%
Current
Source: IDRC CRE 2000
Future
Corporate Real Estate Executive’s Time
Allocation
Austria Belgium Bulgaria Channel Is.
Czech Rep.
Denmark Egypt Finland France Germany Greece Hungary Ireland Israel Italy Lebanon Lithuania
Luxembourg Netherlands Norway Poland Portugal Romania Russia Saudi Arabia Scotland Slovakia South Africa Spain Sweden Switzerland Turkey UAE
United Kingdom
Beirut
Abu Dhabi Kuwait Tel Aviv
Dubai Cape Town
Port Elizabeth
Durban Johannesburg Empangeni
Healey & Baker Office Associate Office
H&B EMEA Office Locations
• Appraisal
• Tax Consulting
• Valuation Consulting
• Underwriting/Due Diligence
• Facilities Management
• Property Management
• Project Management
• Agency Leasing
Valuation Advisory Services
Asset Services
• Commercial
• Industrial
• Retail
• Investment Brokerage Services
• Lease and Portfolio Administration
•Transaction Management &
Implementation
•Secondment
•Benchmarking Corporate Services
•Corporate Advisory and Finance
•Acquisitions
•Dispositions Financial Services
Financial Consulting
• Strategic Planning
• Location & Occupancy Studies Advisory Services
Research Services
Global Capabilities
• Sale/Leaseback Structures
• Market Segmentation
• Demographic Information
• Economic Trends and Forecasts
• Labor Market Analysis
• Industry Trends & Statistics
£0
£5,000,000
£10,000,000
£15,000,000
£20,000,000
£25,000,000
£30,000,000
£35,000,000
£40,000,000
£45,000,000
£50,000,000
1 2
Pegasus Sector 3 Pegasus Sector 1 Broadoak
Lancaster House (F/H) The Forum Unit B2 Midgehall Court Unit B3 Midgehall Court Headland House St Johns Park
STATUS QUO COLO CATION NPC £46.1M
NPC £34.2M
NET PRESE NT COST CASH FL OW CO MPARISO N OF OCCUPANCY
NPC £18.8M
NPC £18.8M
NPC £16.6M
NPC £21.1M
STATUS QUO
COLO CATION
SCENARIO I SCENARIO II SCENARIO III
£0
£5,000,000
£10,000,000
£15,000,000
£20,000,000
£25,000,000
1 2 3 4
Pegasus Sector 3 Pegasus Sector 1 Broadoak
Lancaster House (F/H) The Forum
Unit B2 Midgehall Court Unit B3 Midgehall Court Headland House St Johns Park NET PRESE NT COST BALANCE SHE ET COMPARISON
StrategicAnalysis:
NPC Valuation of Existing Leases
Cost of Consolidation into Purpose Built HQ
Balance Sheet:
Status Quo versus Lease restructuring options /
effect on Balance Sheet
Best Practice - Strategic
Advisory
Experience
• Experience of more than 200 strategic alliance & preferred vendor relationships worldwide
• Corporate Strategy & Financial Services
• Space utilisation - Strategic Benchmarking Club - Intra-company and intra-industry comparison - Identify priority areas for savings and
affect change
Person Sq ft
Cost
25 1 s qft
£7473
£2 4. 94
Efficiency Efficiency Triangle Triangle
Total Facilities Cost as a % of Revenue = 4.27%
The Workplace
• The function of real estate and facilities is to provide a working environment that enables the current workforce and attracts new employees
• Challenge the use of space: ‘alternative officing’
• A ‘business improvement strategy’ that enables the adoption of practical and flexible working solutions
• An infrastructure to support and encourage a team-based culture
match the needs of the business…
flexibility…employer of choice!
Metrics
• Total facilities ‘cost silos’
• Square feet per person
• $/£ cost per person
• Total cost per square foot
• Facilities as a % of revenue
• Headcount attrition
• Space standards and workplace policy
Silo Type Description Property Cost Rent
Insurance Property Tax Rent Receipts Sub-Let Income
Depreciation Depreciation on Loan Equipment Depreciation Property and
Leasehold improvements Capital Leasehold amortaztion Utilities Electricity
Water/Sewer Gas/Oil
Maintenance Equipment Maintenance and Supplies
Building Maintenance and Supplies Ground Maintenance
Security Security Services and Supplies Janitorial Salaries/Contract
Supplies/Monitoring
Cafeteria Cafeteria
Moves Moves and rearrangements (Churn) Compensation Salaries of facilities managers and
team including pension, car allowance, travel, training etc General
Services Printing/Reproduction Fright and Couriers
Photocopies/Rent/Repair/
Maintenance Other Costs Professional Fees
Lobbying expenses misc.
Excluded:- Telecom costs
Car Fleet
Total facility ‘cost silos’
The Value Management Process
Stage 1 Stage 2 Stage 3
Identification /Appraisal Implementation Monitoring
Risk Appraisal
Produce SLA for best value
Procure Service
Establish output
KPI’s
Establish audit regime
Monitor performance
Monitor success of
policy Obtain Occupant Feedback Identify
zero-base policy
Technology Platforms
Web Based Financial Platforms
Adding value
Reducing COST/RISK
Basic Lease Management
Customer focus leading to tenant retention and income
Property review to reveal hidden values/key money Disposing of non-producing
units
Improving productivity by releasing management, staff
and other ressources
Managing space and sales units more efficiently
Reducing risk through planning and market research
Benchmarking occupancy costs against sales etc.
Monitoring and reducing total occupancy costs
Lease management
Lease Management
FM Case Study - EMC2
• 22 Locations across EMEA
• 250,000 sq. ft
• 3 full time employees
• Single point of contact locally and centrally
• Control space utilisation in line with Corporate Standards
• Control costs with itimised monthly budgets and benchmarking
• Competitively bid all services
Fabric Maintenance M&E Maintenance Cleaning
Health & Safety Moves & Changes
Courier Catering Signage
Space Planning Security/ Reception
FM Case Study - Lucent
Implementation first totally web-based financial and purchasing system
Consolidated several call centres into one central environment, established KPIs
Establishment of a European-wide service level agreement
Re-tendered the cleaning contract
Saved approx. £100k per annum by bringing onto payroll previously contracted positions
6 million sq. ft
17 countries
102 properties
138 employees
FM Case Study - Lucent
• Facility planning including financial forecasting and space planning
• Project Management including construction, design and site supervision
• Supervision and organisation of churn
• Mechanical & Electrical maintenance for HVAC and power
• Help Desk for tracking and logging of requests
• Contract management for catering, vending, cleaning,
• Landscaping, post room, security services and reprographics..
• Energy Management
• Health & Safety
• Reception & Switchboard
• Financial Reporting
Client European CRE “partnering with”
SHAREHOLDER VALUE Business Units
Corporate Goals Current
Requirements Existing Assets HR / IT
The Workplace
The Market Cycle Properties Landlords Government Incentives Tota Occupancy Cost Brokers
INTERNAL EXTERNAL
Pressures Pressures
Real Estate Group Global Corporate Services CLIENT
Partnering - CRE/Business Units/
Global Real Estate Consultants
Freehold/Leasehold Occupation
FM Services
Development Opportunities Life Cycle Replacement
Property + Asset Management
Existing Organisation Single Source Supply
Full/Efficient Pricing of Transfer
Leaseholds/Freeholds Continuous Improvement
Regime
SLAs KPIs PMSs Condition Surveys/Efficient
Pricing of Risk Transfer
Determining Partnership Spirit
Creation of Database and Portfolio Business Plan
Flexible Occupation Improved P&L/BS
Capital Release Risk Transfer Better Service Delivery
Cost Certainty
Shared Upsides
Focus on Core Business
Intelligent Client Function
Execution of Business Plan
Partnering - Risk Transfer
Comparison: FRI S&L vs REP
FRI Sale & Leaseback
• Accommodation Only
• Upward only & market rent review
• Tenant bears some
repair/dilapidation risks
• Services not related to performance
• Break clause - penalty payable
• Tenant does not benefit from growth
• Little risk transfer
Real Estate Partnership
• Fully serviced offices
• Unitary payment - index linked to RPI or earnings
• Based on life cycle costing - fixed in real terms at start
• Unitary payment based on performance and availability
• Flexibility without payment
• Formula for sharing capital gains
• Significant risk transfer
Strategic Advice
BUSINESS DRIVERS/MEASURES H&B PERFORMANCE
350,000 m² UK / retail freeholds Maximum cash receipt
Retain flexibility Transaction speed
Partnership approach Maximum cash receipt Retain flexibility
Transaction speed Partnership approach
Extensive list of bidders totalling £5 billion
£348 million sales price compared to
£ 300 million target
Fixed rental uplifts over 25 years Flexibility at years 5 and 10 on 30%
rental value
Corporate Clients
Healey & Baker/
Kofod-Jensen & Bach- Nielsen
Real estate partnering
Presentation To
Dansk Facilities Management - Netværk
January 2002 January 2002
By
Simon O’Reilly & Lau Melchiorsen
