SR Inc. to Convene Corporate/Commercial Real Estate Executives and Drive an Industry Closer to Greater Sustainability

November 12, 2011

The Sustainability Roundtable, Inc. (SR Inc.), the for-profit, shared cost research and consulting firm will bring together corporate/commercial real estate executives and sustainability professionals who represent over 60 member-client organizations at SR Inc.’s Third Annual Summit entitled, “The Change Driving Sustainability” on November 30th and December 1st at the St. Regis Hotel in Washington D.C.

This invitation only two-day event will feature: sustainability excellence award winners; presentations and case studies of SR Inc.’s 2011 Research Program; panel discussions with Federal agency representatives; and, facilitated sessions to develop SR Inc.’s 2012 Research Program.

Management Best Practice Sessions will include:

Portfolio-wide Sustainability Strategies: What strategies do Real Estate Executives use to resource and create sustainable value. (Includes Innovative Finance for Energy Efficiency)

Benchmarking Sustainability: What sustainability KPIs should Leaders adopt and what are the relevant performance benchmarks.

Sustainable Leased Space: How Leaders move to more sustainable leased space? How Tenants and Landlords systematically implement green leases and what provisions in RFPs, LOIs and Leases are used.

Alternative Workplace Strategies: What AWS strategies are successfully adopted to increase productivity and how can landlord’s best respond.

Working with the Federal Government: What are the best sustainability resources available within the Federal Government and how can Real Estate Executives partner with them.

The collaboration of SR Inc.’s member-clients supported by SR Inc.’s analysts, researchers, consultants and advisors is rapidly driving the real estate industry toward greater sustainability with breakthrough management best practices about ‘what works’ to apply the principles of sustainable real estate strategies across a portfolio that reduce operating expenses/occupancy costs; enhance enterprise/asset value; and align with organizations’ commitment to the environment.

If you would like to learn more about SR Inc.’s Annual Summit III or how SR Inc.’s resources and implementation guidance could help you drive your organization closer to sustainability, contact SR Inc.’s Larry Simpson, Executive Vice President – Advisory Services at larrysimpson@sustainround.com.

(The author is Larry Simpson, Executive Vice President, Advisory Services, Sustainability Roundtable, Inc. Additional posts can be found in SR Inc.’s Forum found at http://www.sustainround.com/aboutst/blog/)

 

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It’s not Rocket Science or Brain Surgery, its Corporate Real Estate Budgeting for Greater Sustainable Outcomes

August 22, 2011

Summertime, right? Time for vacation with family and to regroup before the blur of activity in the post-Labor Day fourth quarter? Wrong.

For most of you, the month of August is about hungering down in a conference room converted, “war room” with co-workers crunching numbers to prepare your real estate budget for departmental and corporate approval.

As you know, the budgeting season can be a tedious process to track down information, project internal charge-back costs to offset expenses, calculate macro interest rates, collect data from various systems and sources, and project/reconcile budget-to-actuals.

But, you don’t have to go visit a rocket scientist or ask a brain surgeon to know we are still amidst difficult financial times for most companies and budgeting is getting more and more difficult. The challenges you face are how to reduce operating expenses and enhance asset/enterprise value. But, now you’re being asked more and more to align the real estate portfolio with corporate environmental goals while achieving an acceptable rate of return.

How are you going to do find monies in your budget to create a sustainability strategy with so much less? The Sustainability Roundtable, Inc. (SR Inc.) and their most recent research just might have some of the answers.

SR Inc., in their report, “Allocating Resources for Sustainable Outcomes” found that:

  • Sustainability upgrades can have a substantial impact on the enterprise bottom-line to reduce operating and maintenance costs, mitigate carbon impact, improve employee productivity and increase asset value.
  • Capital allocations to improve indoor environmental quality can be more cost-effective and create greater enterprise value than energy conservation and efficiency investments.
  • Determining the relevant metrics and qualifying some sustainability key performance indicators (KPI) is difficult but methods are emerging measure intangible benefits.
  • Base financial models such as simple payback and ROI are inadequate to assess the real costs and benefits of most sustainability projects.
  • Energy performance can be benchmarked, monitored and evaluated, and therefore energy efficiency upgrades are high-priority for innovative finance programs.

But, you don’t own all of your facilities and have little control on the pass through expenses from your landlords in your current lease. SR Inc. has conducted some breakthrough research in a report entitled, “More Sustainable Leased Space,” where the adoption of ‘green lease’ language and other measures can help you achieve greater sustainability and reduce occupancy expenses. The research found:

  • To overcome conflicting priorities and the barriers that hinder the move to more sustainable leased space, leading companies develop a strong business case aligned with corporate goals, conduct total lifecycle accounting, adopt “green” leases, and gather data for sustainability KPIs to benchmark internally and externally.
  • Many corporate tenants pursue LEED-CI or BREEAM interiors to reinforce credibility, provide brand recognition and engage employees/clients. To avoid administrative burdens of formal certification but still obtain the benefits, some choose to ‘design to LEED-CI’ but not certify.
  • To achieve cost-effective sustainable leased space and certification, CRE leaders give preference to those buildings that are ENERGY STAR rated or whose landlord has demonstrated a commitment to sustainability.

SR Inc.’s Vice President of Research and Consulting, Irina Mladenova claims, “overestimating certification costs and setting unrealistically high hurdle rates based on a simple payback analysis are typically the biggest barriers in the move towards more sustainable leased space. When real estate executives hire consultants to lower the documentation and filing cost but do not overpay them and when a life-cycle cost analysis rather than a simple payback analysis is used to establish hurdle rates, the additional costs to achieving green building certification is in fact far less (0-2%) than many real estate professionals assume. And, there is an increasing recognition that green buildings result in significant, yet hard to quantify, health and productivity benefits.”

The challenge to find monies in your budget for sustainable real estate is no longer a cost benefit trade-off. The budgeting process may be arduous but, there is clear evidence that you can achieve a more sustainable real estate portfolio by allocating resources where they will have the greatest impact and implement initiatives that are more about changing behavior than being capital intensive. And, besides, budgeting for sustainable outcomes is a heck of lot easier than rocket science and brain surgery.

If you would like to learn more about how you can create a budget with greater sustainable outcomes you can download SR Inc.’s research: “More Sustainable Leased Space,” (http://sustainround.com/research/leasedSpace.php);  and for a copy of “Allocating Resources for Sustainable Outcomes” please contact Larry Simpson, EVP of Advisory Services at larrysimpson@sustainround.com.

(The author is Larry Simpson, Executive Vice President, Sustainability Roundtable, Inc.  who can be reached at larrysimpson@sustainround.com. Additional posts can be found in SR Inc.’s Forum found at http://www.sustainround.com/forum/ )


Creating Enterprise Value through Sustainable Real Estate Strategies

February 3, 2011

Sustainable corporate real estate strategies:

– reduce operational and occupancy costs through energy efficiency and space optimization, AND

– avoid customer, employee, environmental and regulatory risk, AND

– align portfolio management with an organization’s overall objectives.

Sustainable development, which has been defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs,” is a policy objective and global megatrend that companies must align with to create enterprise value.

The hallmark of corporate sustainability excellence is inclusion in the Dow Jones Sustainability Index (DJSI). The DJSI recognizes that “corporate sustainability is attractive to investors because it aims to increase long-term shareholder value. Since corporate sustainability performance can now be financially quantified, they now have an investable corporate sustainability concept. Second, sustainability leaders are increasingly expected to show superior performance and favorable risk/return profiles. A growing number of investors are convinced that sustainability is a catalyst for enlightened and disciplined management, and thus, a crucial success factor.”

DJSI recognition does not necessarily require a sustainable corporate real estate strategy, but those organizations that proactively incorporate the principles of sustainability into managing their portfolio of leased and owned facilities can make significant contributions to their organization’s overall enhanced value.

The challenge for the corporate real estate and facilities professional is made a bit easier when senior management fully embraces the principles of sustainability and is willing to make the necessary investment that achieves an acceptable internal rate of return. 

The way real estate strategies play a major role to create enterprise value is best highlighted in the Sustainability Roundtable, Inc.’s (SR Inc.) “2010 Corporate Real Estate Management Best Practice Guidebook” which reports the following best practices they originally researched from leading corporations:

  • Portfolio-wide sustainable real estate strategy is an essential component of a corporate response to the sustainability megatrend.
  • Leading real estate executives align with corporate strategy to establish a vision of sustainable real estate; implement effective governance; guidance; short-, medium- and long- term goals; and demand accountability for results.
  • Executives can create sustainable efficiency and value by developing and implementing portfolio-wide initiatives to improve portfolio performance and increase asset value.

Going forward, innovative real estate professionals are being increasingly recognized for taking the lead to exceed goals. To be successful they must implement proven sustainable real estate strategies that: compliment the corporate vision; anticipate long-term environmental impact; meet shareholder demand for financial returns; foster customer loyalty for company products and services; set high standards for the corporate code of conduct; and, maintain employee affinity and job satisfaction.

Michael Gresty, SR Inc’s EVP of Research and Consulting, observes that “today, the corporate real estate function is often by default the internal champion of sustainability initiatives. CRE teams can now do more to secure C-suite buy-in that enables them to maximize value creation rather than simply minimize costs. CRE is experiencing a metamorphosis to become a new source of value and risk management.”

Sustainability is no longer just “a good idea” or “the right thing to do,” sustainability is now an investable strategy as sustainable real estate portfolio management has become an important element in creating benefits for companies and their investors. As the sustainable enterprise value creation dynamic expands, it will have an even more profound effect on improving individual and corporate financial performance, the global economy, and environmental stewardship.

(The post was originally published in the Sustainability Roundtable’s blog found at http://www.sustainround.com/forum/SOR/ and was republished with permission by the author, Larry Simpson, Executive Vice President, Sustainability Roundtable, Inc.)


Larry Simpson, Publisher of the CRE3 Forum, to Become Executive Vice President of the Sustainability Roundtable, Inc.

January 7, 2011

I’m writing to inform you that I have accepted an offer to become an Executive Vice President with the Sustainability Roundtable (SR Inc.) effective Monday, January 10th.

Over the past year, I’ve published numerous posts about industry best practices as the founding Principal of CRE3 Consulting and publisher of  “The CRE3 Forum.” Throughout that time I’ve come to realize three important things:

  1. There is a profound convergence occurring in the corporate real estate industry bringing together a greater sense of importance on the impact real estate has to achieve corporate financial performance;
  2. The road to a company’s/organization’s profitability is paved by reducing operating expenses through a reduction in occupancy costs; and, most importantly,
  3. Companies have a developed a greater desire to become stewards of the environment and achieve sustainability by operating their facilities more efficiently.

In the CRE3 Forum’s most read post in 2010 entitled, “Green is the New Black…Sustainability Comes to Corporate Real Estate,” I cited a recent UN Global Compact-Accenture CEO Study, “93% of CEOs believe that sustainability issues will be critical to the future of their business and 96% of CEOs believe that sustainability issues should be fully integrated into the strategy and operations of a company.”

The Sustainability Roundtable (www.sustainround.com) was created in response to this significant business trend to provide subscription research, consulting and information services on best practices in more sustainable business. I am confident SR Inc. will become an important resource creating the thought leadership that will move our industry to realize the business benefits of ‘greening’ a real estate portfolio.

In the coming weeks I will post my new contact details, provide more information about SR Inc. and relate how I may assist you in your efforts to participate in the sustainability movement. Operating sustainable facilities represent a new way of doing business and, while it does not guarantee success, CRE organizations that fail to pursue it will be left behind. Said another way, embracing sustainability to manage corporate real estate is no longer an option, it’s an imperative because after all, “green is the new black.”

Your friend in corporate real estate,

Larry Simpson

Publisher, CRE3 Forum

NOTE: The CRE3 Forum will remain accessible in the coming months and I reserve the right to submit additional posts in this Forum. However, I encourage to learn more about the Sustainability Roundtable by visiting their website, www.sustainround.com and reading their thought leadership blog found at http://www.sustainround.com/forum/SOR/


Looking Back at the Top CRE3 Forum Posts in 2010

December 20, 2010

As 2010 draws to a close we want to provide a list of CRE3 Forum’s Top Posts of the year based on page views of our readers.

As you will see they fall into a few key themes of:

  • The impact corporate real estate has on company financial performance
  • Move to sustainability being integrated into CRE strategy
  • Role information systems play to support CRE department objectives

We hope you will take a look at the past posts and use some of the highlighted “best practices” as you prepare your department to support your organization in 2011 and beyond.

The Impact of Real Estate on Corporate Assets and Financial Performance

“The More Things Change in the CRE Industry…” Evolving Trends in the Coming Decade

“GREEN is the New BLACK”…Sustainability Comes to Corporate Real Estate

The Convergence in Corporate Real Estate

How Corporate Real Estate Can Boost Your Company’s Share Price

Solutions to Manage an International Corporate Real Estate Portfolio

Leased corporate real estate portfolios to be overhauled by new accounting standards

Tomorrow’s ‘Workplace of the future’ Impact on Today’s CRE Strategy

Budgeting Season Fodder – Preparing Your CRE Portfolio and Your Department for Performance Measurement in 2011

2010 Midterm Election Results Impact on the Economy and Corporate Real Estate

“You Don’t Pay For What You Don’t Use” — Strategies to address the efficiency, economics and environmental sustainability of your real estate portfolio

Corporate Real Estate Benchmarking White Paper NOW AVAILABLE

Are You Ready? The Role of Information Systems to Develop a CRE Strategy and Support Your Organization

“CRE Information System Tools are Cool but Data Integrity and Business Processes Rule”

Best wishes for a joyous holiday season and the hope for a personally and professionally prosperous New Year!!!


“The More Things Change in the CRE Industry…” Evolving Trends in the Coming Decade

December 9, 2010

As the first decade in the 21st century draws to a close the “CRE3 Forum” offers some insight on trends and changes the corporate real estate industry might anticipate in the coming decade.

While it is likely many of the cited dynamics will occur, some may not and others will emerge but, the most important thing to consider for you as a CRE professional is that change in our industry will happen and it’s your job and responsibility to find out how it will affect your organization. It is more likely there will be a convergence of trends creating complex issues that will impact your role to deliver efficient facilities in the right place at the right time at the right cost.

The companies of which you are employed are counting on you to be the subject matter expert on corporate real estate ready to anticipate and act on the inevitable changes associated with occupancy costs, sustainability and technology among others that are coming in the next few years. Read the rest of this entry »


The Impact of Real Estate on Corporate Assets and Financial Performance

November 19, 2010

Who says corporate real estate doesn’t deserve more care, attention and a strategic management approach?

For some time now you may have heard CRE consultants and service/technology providers refer to corporate real estate as the “2nd or 3rd largest asset on a company’s balance sheet” to justify the need for value-add advisory services, energy efficiency initiatives or investment in technology.

But, until now, have you ever really looked at the details? The facts will alarm you and quite likely challenge you to take a closer look at your own assets to see how they might be managed more effectively.

Below is a chart highlighting the real estate value of 11 companies in the “Fortune 500” (#1 – #10 and #500 as a comparison) listing them based on the percentage of net assets (less depreciation and operating expense) of their ‘Property Plant and Equipment’ (PP&E) on total assets. The source information was gathered through an informal review of the balance sheets of these company’s 10-K SEC filings for 2009.

FORTUNE 500 – Ranking Based on Percentage of Net Property Plant and Equipment Assets
Fortune 500 Ranking*   All Figures Stated in Millions+        
Rank* Company       Property, Plant and Equipment (PP&E)
Revenue+ Profit+ TL Assets+ % of Total Net PP&E+ MSF
3 Chevron $163,527 $10,483 $164,621 58.60% $96,468  
1 Wal-Mart Stores $408,214 $14,335 $170,706 58.31% $99,544 959.67
6 ConocoPhillips $139,515 $4,858 $152,588 57.48% $87,708  
2 Exxon Mobil $284,650 $19,280 $228,052 53.21% $121,346  
7 AT&T $123,018 $12,535 $268,752 37.24% $100,093  
500 Blockbuster $4,162 -$558 $1,538 16.19% $249 20.05
8 Ford Motor $118,308 $2,717 $197,890 12.43% $24,596  
10 Hewlett-Packard $114,552 $7,660 $114,799 9.81% $11,262 77.00
4 General Electric $156,779 $11,025 $781,818 8.85% $69,212  
5 Bank of America $150,450 $6,276 $2,223,299 0.70% $15,500 125.60
9 J.P. Morgan Chase $115,632 $11,728 $2,031,989 0.55% $11,118 80.60

While real estate does not formally appear in the financial statements as its own line item, it is included in the PP&E section which refers to fixed assets, also known as non-current assets (financial institutions refer to PP&E as Premises). These are items of value which the organization has bought and will use for an extended period of time. PP&E fixed assets normally include: land and buildings; motor vehicles; furniture; office equipment; computers; fixtures/fittings; and plant machinery and often receive favorable tax treatment (depreciation allowance) over short-term assets.

Our hypothesis is that a company can create a significant impact to its financial performance and enhance total assets when they:

  • Reduce operating expenses through lower occupancy cost initiatives;
  • Decrease the size of the CRE portfolio through collocation, space efficiency, use of alternative workplace strategies and dispose of non-core assets; and,
  • Gain greater energy efficiency of facilities through effective sustainability initiatives.

Read the rest of this entry »