1. CoRE Fundamentals An Academic Lecture Series From CoreNet Global 1

2. 2 Corporate Real Estate (CRE): What’s It All About?

3. 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 4 Learning Objectives

5. 5 The Broad Expanse of CRE EnergyManufacturingPublic Sector Consulting HealthcareAgricultureRetailTransportation HospitalityResearchFinanceTechnology Telecommunications Can You Think of Others?

6. 6 The CRE Business World Business Units (BU) Business Units (BU) CORPORATION Key Objectives Business Plans Metrics CORPORATION Key Objectives Business Plans Metrics Support Functions CRE Mission: CRE Department Management Portfolio Management Strategic Performance Management CRE Mission: CRE Department Management Portfolio Management Strategic Performance Management

7. 7 CRE Management

8. 8 CRE Functional Management Corporate Real Estate Activities TransactionsLeasesFacilitiesManagement

9. 9

10. Department Management Functional Management Department Management Functional Management 10

11. 11 Department Management Share- holders Busines s Units (BU) Busines s Units (BU) CRE Organization and Staffing

12. 12 CRE Department Management Financial Management Organization & Staffing Organization Legal and Contracting Project Management Outsourcing Management Outsourcing Management

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 Benchmarking Scenario cash flow analysis Occupancy and cost measurement Year-to-year comparisons Location-to-location comparisons Comparisons to market norms Laddering leasehold maturities 13 Project Management

14. 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: 15 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. 16 Legal and Contracting Key components: Selection criteria Written, measurable directives Leveraged agreements Performance reviews 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 Local knowledge Space expectations and requirements Negotiating incentives and infrastructure Trends in the real estate markets Competitors/Neighbors Suppliers 17 Location / Site Selection

18. 18 Location and Site Selection Commitment Financial DecisionsBuy vs. Lease, Incentives Search, Selection Geographical Target AreasSite Specific Criteria Problem/Need/Assessment Example: ExpansionStrategy, Goals, Objectives, Policies

19. 19

20. Workplace Strategy Outsourcing Portfolio Optimization Financial Performance Workplace Strategy Outsourcing Portfolio Optimization Financial Performance 20

21. 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. 22 Outsourcing Sample Deliverable Strategic (In-House) Operational (Outsourced) CRE Jobs CRE Careers REAL ESTATE HOLDINGS

23. 23 CRE & Service Providers Internal CRE Team Level of ResponsibilityReal Estate Service Provider Relationships with business units (BU) and senior management ENTERPRISE STRATEGYStrategy Support: Compliance Policy Governance Works with Service Provider to translate corporate and BU strategy to real estate and develop processes for the delivery of services STRATEGY TRANSLATIONStrategy Support: Performance management Strategic Sourcing Portfolio optimization Lease renewals Disposition strategies Programming standards Capital budget development D&I financing alternatives Oversight of service provider and internal delivery teams TACTICAL EXECUTIONTactical implementation: Transaction management Lease administration Project management Contract/Vendor management Facilities management

24. 24 Portfolio Optimization and Balanced Scorecard CustomerFinancial Employee Growth and Development Internal Business Processes

25. 25 Portfolio Optimization CRE FunctionSuccess Measure Growth Phase High Growth Steady State Downturn Customer Service Time-to-Market  Sourcing & Lease Administration Cost per SF or M 2  Space Management SF or M 2 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 Demand forecasting Utilization and occupancy metrics Sub-portfolio and cluster analysis Supply and gap analysis Market analysis Financial analysis 26 Portfolio Management Analysis

27. Occupancy cost indicatorsBook values – to – market value relationshipsBalance sheet impactsIncome statement impactsCash flow impactsInvestment ratiosShare value impactsGAAP impactsCarbon Footprint 27 Financial Performance

28. Organization Management Portfolio Management Performance Management 28

29. Enterprise Alignment Balanced scorecard Strategic CRE Planning Sustainability Enterprise Alignment Balanced scorecard Strategic CRE Planning Sustainability 29

30. 30 Enterprise Alignment Busines s Units (BU) Busines s Units (BU) CORPORATION Key Objectives Business Plans Metrics CORPORATION Key Objectives Business Plans Metrics Support Functions CRE Role CRE Functions Define Requirements Define Requirements Evaluate Existing Facilities Integrate Market Opportunities Integrate Market Opportunities Measure Performance Measure Performance

31. 31 Strategic Planning Technology CRE Team CRE Team Corporate Direction Corporate Direction Business Unit/ Functional Unit Needs Business Unit/ Functional Unit Needs Business Competition Business Competition Infrastructure Options Infrastructure Options Government Regulations/ Codes/ Environmental Government Regulations/ Codes/ Environmental CRE Trends & Benchmarks CRE Trends & Benchmarks HR

32. Portfolio FinancialOccupancyWorkspaceLocation 32 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 33 Space and Occupancy

34. 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 structure Improve operating margins Reduce Infrastructure Improve Operating Process Minimize Infrastructure BUSINESS STRATEGIES CRE PLAN

35. 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 flexibility Build flexible infrastructure Higher market penetration New market opportunities Reduce headcount BUSINESS STRATEGIES CRE PLAN

36. 36 Sustainability Source: George Gosieski © 2007 Enterprise Business Continuity NGO Monitoring Social Influences Land-use Biodiversity Management Compliance Peer Pressure Consumer Behavior Public Sector Activity Investor Activism Workforce Trends Water Effluent Transportation Energy Emissions Material Waste

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 37 CRE Success Factors

38. 38 CRE Communications CLIENT RELATIONSHIPS Communicating and building relationships with business units CRE ACTIONS Making 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 Benchmarking Scenario cash flow analysis Occupancy and cost measurement Year-to-year comparisons Location-to-location comparisons Comparisons to market norms Laddering leasehold maturities 39 Technology Support

40. What questions can we answer for you? Additional Corporate Real Estate Resource: www.corenetglobal.org www.corenetglobal.org 40 Thank you for your time and attention