|
|
|
Daily Briefings
Tuesday, March 16, 2004
GENERAL SESSION “Corporate Real Estate: Changing the Frame” – Julie Benezet, Business Growth Consulting
"Extreme leadership" is the term Benezet coined to describe what was needed to achieve results in her role at Amazon. This included tolerance of ambiguity-the marketplace is increasingly global, digital and transparent; business cycles are compressed compared to those of just a few years ago; and senior management is increasingly sensitive to costs and financial matters. How people work in the dot-com, digital world requires a new understanding of people and how to make them feel valued, Benezet noted. Workers increasingly feel like independent contractors, and organizational change is a constant. And new communication skills, or the "extreme ability to communicate," round out the leadership requirements she discussed at the general session. One reality that did not change in the dot-com arena was real estate's importance to the company's bottom line. "Real estate is the least flexible, third most expensive item on the balance sheet," Benezet related, and getting the CFO to commit to a lease was no less difficult in the dot-com context. The real estate function found itself in the position of having to make decisions about the company's business plan before the business people had figured it out. Central to making this work was having the authority to approve the capital budget as it related to real estate and putting in place the structure for getting real estate transactions approved when she needed them approved. "You have to get control of these whether you are with a legacy or manufacturing company or you're with a scrappy, young technology company," Benezet related. The latter requirement was achieved by building a network of allies who appreciated the importance of the real estate function. A second strategy was the formation of a real estate SWAT team. This involved convening managers from every department with a stake in a real estate transaction, from legal to human resources to IT. Weekly meetings were structured such that Benezet got the approval needed to proceed with a project without lengthy waiting times or other hurdles. "We had to keep the traffic moving," she said. At the end of the day, Benezet's team delivered the facilities needed-3.5 million sq. ft. of facilities-in the time they were needed without cost overruns. That space doubled in time under a no less frenetic business model. After leaving Amazon, Benezet says she took some time to thank some service providers with whom she had worked and had neglected to thank for the pressure she had exerted on them. It turns out they enjoyed the pace and the work, and many of them have since adopted the lessons they learned working with Amazon.com as best practices. — Mark Arend
WORKSHOP T1 “Creating Value Through Lease Management” – Karen McClellan, Schneider Electric
Dmitry Dukhan, Cardinal Health Inc. Chris Adams and Fran Saele, CB Richard Ellis
Can you easily obtain portfolio information to develop a strategic plan? Could you gain efficiencies if you better understood the details of your portfolio?
These were just two of the questions asked – and answered – during a Tuesday afternoon workshop of the Industrial Asset Management Council. Karen McClellan, corporate real estate manager for Schneider Electric, said that gaining a better understanding of Schneider's property portfolio enabled her to trim $1.5 million in real estate costs in the current fiscal year. "Of the $51 million Schneider spends on real estate costs this year, the largest cost, at $22 million, is spent on our leases," said McClellan. "By turning our real estate group into a proactive group targeting cost reductions, we were able to deliver considerable value to the corporation." McClellan said her group focused on four key tactics: standardizing field office space standards; consolidating and subleasing space; taking advantage of a soft market to renegotiate longer terms at lower rates; and outsourcing real estate management to a third-party service provider. Dmitry Dukhan, director of real estate administration for Cardinal Health Inc., said that his company was able to achieve more than $6 million in cost savings by applying new principles and methods of lease management. "Lease cost is a high cost to any company," said Dukhan. "If we manage this properly, we will save the company millions and millions of dollars. Our company has a very demanding environment. It is not a company of second chances." By prioritizing strategic goals and streamlining data collection and analysis, Cardinal Health was able to experience $1.7 million in cash and cost-avoidance savings; $3.2 million in reduced lease cost obligations over the next three years; and $1.2 million in productivity savings with thousands of hours redeployed. Schneider and Cardinal both used CB Richard Ellis to provide lease management consulting and corporate real estate advisory services. CB was represented on the panel discussion by Chris Adams, senior managing director of global corporate services, and Fran Saele, managing director of portfolio management. — Ron Starner
SPECIAL SESSION T3 “McClintock/Rio Salado Parkway Brownfields Redevelopment Area” – Phil Lagas, Brown and Caldwell Tempe Brownfield Growing Greener By the Day
Phil Lagas, vice president for environmental engineering firm Brown and Caldwell, has been a key participant in that process since 1998. On Tuesday, March 16, in a sterling presentation to the IAMC Forum, he explained how the City of Tempe, developer Miravista Holdings, the U.S. Environmental Protection Agency and the Arizona Department of Environmental Quality have collaborated to bring 220 acres, more than 95 parcels and the majority of more than 140 landowners to the table. Now the property – adjacent to a major freeway interchange, the newly developed property around Tempe Lake and the 40,000 students of Arizona State University – is in the midst of conversion from brownfield to thriving commercial, office and retail complex. At one time, a football stadium was going to be built on the site, backed by some $20 million in state funding. But the city was also looking to develop a lake in its center, and, having to choose one of the two projects, went with the lake. The first step in dealing with the site, Lagas explained, is getting past the stigma and superficial appearance. Landfills and salvage "look horrible, but from an environmental standpoint, they're easy to deal with," he said. Making them even easier was the fact that most of the fill was primarily construction debris, poured into the pits remaining from decades of aggregate mining and processing operations. Not only is methane at a minimum, but debris landfills, once remediated and compacted, are much easier locations on which to build. But there were technical and regulatory hurdles. "These landfills were all closed prior to 1993," said Lagas. "So if you re-open one of these landfills, the regulatory agency will try to institute the most recent regulations on you. So we have to do this in a manner that we can argue to the state, and get them to agree, that we're not re-opening the landfills." Helping that cause was the fact that the properties on top of the fills had been sold and built on over the years prior to 1993, with little controls and maintenance in place. "If we can get this all into one site," Lagas described the pitch, "we can actually get ourselves into a situation where we really control what happens to the landfills in the future." The really daunting challenge was getting the site deleted from Superfund status, so that brownfield redevelopment funds could be accessed. With the help of the city and the state environmental agency, that deletion finally was achieved in May 2003. Now, through both brownfield and HUD sources, the redevelopment funding totals some $6 million. And the project is backed by crucial environmental insurance products from AIG, with the liability residing with the developer and a five-year time limit. The policy essentially receives all the grant and loan money and pays the contractors working on the site. Helping both the remediation effort and the property's marketing to potential tenants is the placement of all property information and updates on a GIS database, which Lagas said cost about $50,000 up front. Also helping to entice those prospects will be incentives and infrastructure improvements from the City of Tempe. Today, site inspection and owner/operator interviews have been conducted on almost 40 percent of the parcels. Next comes environmental work toward a "no further action" determination, geotechnical work (deep dynamic compaction, injection grouting and remedial grading) and final property redevelopment. In the end, all the participants in Tempe have called as much on their civic conscience as their professional savvy in pushing the project forward. "Everybody thought this was the right thing to do." said Lagas, "So it happened. We really had to stick with it to make it work. The only reason we did it for so long is that it is a really cool project. It's one of those sites that, when we get it done, everybody's going to recognize as a fantastic achievement." — Adam Bruns
Return to: Daily Briefings
|
|
|
