Think now about attending IAMC’s Fall 2009 Professional Forum in Minneapolis-St. Paul, Minnesota, entitled "Corporate Real Estate's Impact on the Balance Sheet."

Because corporate expenses and capital spending occasionally exceed operating revenue, large companies use short-term credit to bridge the gap. But the most common short-term credit sources, commercial paper and bank credit lines, have both been impaired. The federal government now supports the commercial paper market, but banks have been slow to fully resume lending. With borrowing made difficult by the credit crunch, companies need to drastically pare expenditures.

The chief financial officer (CFO) is at the crux of many of the company’s problems in this downturn, including dealing with diminished revenue, cost inertia and credit starvation. A white paper prepared by the consultancy Deloitte entitled "Panic, Turmoil and Rescues: Now What? A CFO Perspective from Deloitte" recommends five courses of action: "conserve cash and control costs, diversify the sources of capital and establish new credit lines, secure receivables and supply chains, seek out strategic assets, and consider a new capital mix."

The Deloitte report suggests, "In larger companies, crisis can provide a burning platform to drive an enterprise-wide cost reduction initiative that exploits synergies across functions and product lines." This seems to be less a statement of what’s possible than a procedural recommendation that could apply to the CFO as well as other management areas including corporate real estate. In simple English it means this: Take advantage of the fear and uncertainty generated by the company’s difficult circumstances to recommend and make high value, politically difficult changes that would not be possible in normal times. Pres. Obama’s Chief of Staff Rahm Emanuel said it this way, "Never let a good crisis go to waste." But take the concept as a potential opportunity to watch for, not as a provocation to ruthless action.

Following are some tactics, mostly well known by corporate real estate organizations, for cutting costs and keeping cash in the company accounts for higher value uses. Many of these will be discussed at the Minneapolis-St. Paul Professional Forum.

Blend & Extend Leasing Strategies. Most real estate professionals are familiar with the blend and extend concept, but for those who are not, here’s a simple explanation articulated on officesearchtoronto.com:

Let’s imagine a 15,000-square-foot company has two and a half years left on its office lease, and is paying $30 per square foot, in a market where the rental rate for a new lease has dropped to $25. Using simple math, if that tenant extended its lease for an additional two and a half years at $25 then the new average, or blended, rental rate would be $27.50. This would represent an immediate reduction of close to $100,000 spread over the original two and a half years.

For tenants, blend and extend may be indicated when they need a cash savings now, are satisfied with the currently leased space and the local market has a high and rising vacancy rate. Keith Zimmerman writes, "Blend-and-extend transactions allow a tenant to combine costs associated with the existing lease with current market rates over an extended new period. The result: an immediately lowered rental rate." One IAMC Active member reports in an IAMC LinkedIn Group discussion that his department has scoured all leases "expiring between 2009 and 2013 for blend and extend opportunities."

In general, companies leasing new space are looking for major rent reductions compared to prior years. Some have boiled this down to something of a policy. In an example from IAMC LinkedIn, a real estate manager at one Fortune-50 corporation reports, "For lease negotiations, we seek an average of 30 percent cost reduction due to economic climate, our financial standing, and to take advantage of real estate submarket conditions."

Leasing excess space occasionally is used to reduce the carrying cost of a property until it can be disposed. In normal times, companies prefer not to lease surplus facilities because of the wear and tear tenants can inflict on them. Here’s a case in point from IAMC LinkedIn: "Typically [the company] has not wanted to enter into short-term leases for our surplus properties marketed for sale. Recently, however, I have done a few one-year deals or MTM [month to month] with six months notice. These deals have allowed us to significantly reduce security, utility and other holding costs. When we find a buyer, we will either assign the short-term lease or set closing to be co-terminus with the lease."

There are other leasing-related methods for saving cash that have received less press of late. Lease audits can identify costly errors in computing lease payments and escalations. Terminating leases for un-needed space may be the thing to do, but can prove expensive or out of the question when the landlord has weak prospects for a follow-on tenant. Subleasing the space depends first on finding interested tenant prospects, which have become hard to find as the recession deepens.

Closing facilities and merging their operations into nearby space held by the company can reap big cost savings. An IAMC LinkedIn entry says, "[we’re] highlighting consolidation opportunities even if it is not necessarily popular with the business units." Another entry notes, "We are closing offices of less than 2500 sq. ft. while encouraging small office locations to work remotely, from home, or from company-controlled locations." Along these lines, one IAMC Active member explained that when looking for space company policy is to employ the following sequence: (1) use a company-owned facility, (2) use a company-financed facility, (3) use a company-occupied (leased) facility, and then (4) look outside of the company for the required space.

In today’s financial environment, a company may have space to sell, a willing buyer, an agreed-upon price, but fail to deal the property because external financing cannot be found. Banks are leery of commercial real estate lending right now. They have money to let, but may require extra qualification steps that bring deals down.

Sale-leaseback financing is getting lots of attention. An Active member notes on IAMC LinkedIn that "We are also analyzing sale & leaseback opportunities to raise cash." A quick scan of Google News on the term "sale-leaseback" turned up the following companies that have transacted or are considering this move: HSBC, Southwest Airlines, New York Times, Office Depot, TierOne Networks and Federal Signal.

But sale-leasebacks can be difficult to pull off these days and present risks to both seller and buyer. Dees Stribling writes in Commercial Property News, "there are hints that as the recession grinds on, companies will once again look to monetize their physical assets through sale-leasebacks, provided investors can be found with ready cash and an interest in long-term real estate holdings." Stribling asks, "But are there enough qualified buyers to satisfy companies looking to sell and then lease back their assets? The answer, like the answer to many questions in this tough economy, is maybe." The reason for the qualified response is that the transaction can turn sour and become financially threatening for either or both parties. The article quotes Maureen Ehrenberg of Expense Management Solutions, Inc., as saying, "A sale leaseback does pose some risks potentially to both parties, and in this market a buyer default could cause major disruption to a corporate occupier. Conversely, a seller default could present serious pain to an investor. A sale leaseback is a viable option for monetizing corporate real estate assets, but it’s a calculated risk, and both parties must do their due diligence."

One IAMC member notes on IAMC LinkedIn that he’s using seller financing to get deals done without banks. But this depends on the selling company’s willingness to provide the loan, which would be a controversial piece of business for many industrial firms.

For more financing insights, check out the recent poll of IAMC active members for this Project Finance column in Site Selection, and watch for Gary Weiss’s column on sale-leasebacks in a special advertising section of the magazine’s May issue.

Some energy conservation tactics require small investments and have short pay-back periods. An IAMC LinkedIn discussant writes, "One of the things that can be done, and also be socially responsible, is to take a real deep look at energy conservation. While most solutions offer paybacks in the range of 2-5 years, we have some alternatives with a 100 percent [annual] return on investment. You can get your return in 12 months or less, and then all savings after that are gravy!"

Other LinkedIn offerings along these lines include "Bulk buy power; bid that." and "Add solar."

Most companies already have outsourced most of the functions and work that can be done effectively by a service provider. However, their work could be reviewed and evaluated with them to identify new synergistic savings, if they exist. In some cases, the work should be put out for re-bidding.

Large industrial companies pay huge sums in real estate property taxes on hundreds if not thousands of facilities. Companies that do not routinely monitor and double-check their tax bills may be overpaying because the sums are incorrectly computed or the company no longer owns the properties on which the tax is assessed.

Another savings could be accomplished by checking and confirming the depreciation periods for tenant improvements and equipment for which the corporate real estate group is responsible. Faster depreciation shields more income from taxation and reduces the corporate income tax bill. If the company mistakenly uses depreciation periods that are longer than legally necessary, it will lose income to taxes. So, checking the depreciation periods could result in a savings for the company.

Unclaimed, unutilized and expired state and municipal location incentives represent another potential source of corporate cash savings. States report that tax and other incentives granted to companies to locate within their borders often are not fully used or are allowed to expire. Documenting what incentives the company has been given and taking steps to qualify for and collect them could be worth millions of dollars to a large company.

The foregoing is just a sampling of the topics that will be discussed in Minneapolis that could help you cut costs, eliminate or delay payments and generate revenue for your company during this business downturn. Some of these will be presented through paid speakers, others through workshops and some through discussion-format programs. But you’ll learn even more about each of these topics as you talk about them informally with your peers between and after the sessions.

Begin now to make your case for attending the Minneapolis-St. Paul Professional Forum. Start talking to your boss about what will be presented there. The cost of attendance could be a high-value investment for you and your company.