1. The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator. Real Estate Leasing: Lessons Learned Greg Ewig Director of Real Estate Services Office of the Chancellor

2. Slide 2 Overview New Items Authority to lease Where are our leases? Typical lease costs – Metro and Outstate Approvals Leases and the Allocation Framework Lessons Final Thoughts

3. Slide 3 New items 2009 Legislative Session – –requesting explicit statutory leasing authority –Ease private – public partnerships Leasing Procedures –Updated to reflect the new statutory scheme Accounting / ISRS Lease Screen –Scheduled to roll out April 1 Forms –New Facilities Use agreement (off campus)

4. Slide 4 Authority to Lease Current: Minn. Stat. §136F.06, under general powers of the Board Have used Minn. Stat. §16B.24 for guidance Proposed: §136F.60, Subd. 6 and 7 (new)

5. The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator. Where are our leased locations?

6. Slide 6 Current Snapshot 50 campuses lease off-campus About 100 active off-campus leases Range in size from 25 sf to 101,000 sq. ft. Large land leases in outstate campuses International leases in England (castle) and Germany

7. Slide 7 Typical Lease Costs Periodic Costs Rent ($10-$13 psf/net for office) Operating Expenses (real estate taxes, insurance, utilities) ($5 - $10 psf+ office) One Time Costs Tenant improvements (including telecommunications) Furniture, fixture, equipment

8. Slide 8 Leasing in Current Environment Vacancy is up Landlords are nervous BUT: asking rents and operating costs aren’t going down (yet) Outstate market is generally down – Fargo/Moorhead is unusual (energy price spike in late 2008 helped North Dakota economy)

9. Slide 9 Approvals Board of Trustees Facilities Agreements that exceed $2,000,000 (including options to renew) Vice Chancellor – Chief Financial Officer All Facilities Agreements with terms that: a) exceed five (5) years or b) the total value exceeds $100,000. Maximum: 20-year total term off campus

10. Slide 10 Leases and the Allocation Framework Off campus leases are recognized in the allocation framework if they meet the following 3 criteria: 1. $100,000 or greater 2. Instructional focus 3. With a party other than ourselves or one of our foundations However -- Moratorium effective FY2008 on recognizing any new leases. The lease recognition in the framework will end in FY2011.

11. Slide 11 General Lessons Generally Involve the OOC early and often for larger leases 5 years or longer or over $100,000 require OOC approval Leases over $2 million requires Board approval Off Campus Give yourself enough time (1 year is optimal for leases of space greater than 5,000 sq. ft.) Goal should be a self-sustaining lease – revenue should cover the costs of the space and labor Should be deals out there

12. Slide 12 Final Thoughts If a lease is onerous, open up negotiations Market has not bottomed out yet Termination right – it’s a very powerful thing We are still considered a good credit tenant