T

ony Miele's job could be compared to that of the captain of a supertanker making a U-turn in a swiftly moving river.
        Ontario Realty Corporation (ORC) for generations has served as the Canadian province's property asset management arm, an agency charged with owning and operating facilities in which government ministries and agencies administer their programs and services.
        ORC would rarely have been pointed to as a model of innovation or efficiency for most of its existence. But Tony Miele, winner of a Site Selection Corporate Real Estate Leadership Award for 2001, is working to change that. Miele's mission is to turn ORC from a bureaucratic property owner into a manager of strategic assets.
        In many cases, managing those assets means disposing of them, because administering government programs can be accomplished without actually owning the buildings in which the agencies are housed. Introducing corporate real estate best practices from private-sector organizations is a central component of Miele's strategy.
        Another is recognizing a key difference between private- and public-sector organizations, which is the stak eholders -- be they profit-driven shareholders on the private side or taxpayers seeking value for the revenue they generate on the public side.
        Site Selection Editor Mark Arend met with Miele at ORC's offices in June.

        Site Selection: Congratulations on winning a Site Selection Corporate Real Estate Leadership Award in May.

        Tony N. Miele: We appreciate the opportunity to participate in this process, which was a milestone in the corporation's life. We've made a lot of changes, and this will help propel ORC to being a benchmark in public institutional real estate in Canada. Being recognized by a magazine such as yours tells me that we're doing something right.

        SS: What do you consider to be the chief differences between public-sector property management and private-sector managers?

        TNM: The main difference between the private and public sector role is that we are not driven by profit as our primary objective. Our primary objective has to do with customer service and client service as it relates to the government. We provide the facilities for the government. We try to match the needs and wants of the government in terms of delivering social programs with facilities. It has to do with allowing the government of Ontario to deliver its programs through facilities -- it's isn't really about making money.
        In terms of how we structure the organization, we abide by the same principles and business models the private sector uses, which we should do in order to bring value back to our taxpayers. All companies in the public sector should strive for that. We try to employ the best principles from private-sector and public-sector industry together. It's a compilation of both types of structures and motives and objectives so they come together in one objective, which is to make our owner -- the government of Ontario -- satisfied with our performance.

"We have a lot of masters, and
we have to be cognizant of
what they want."

        SS: Describe the assets you oversee.

        TNM: Ontario Realty Corporation is foremost a management company. We are the agent for the government of Ontario. ORC holds no assets within its corporation; it's basically a corporate real estate manager for the government. Title is held in the government. We oversee and manage in excess of 6,000 buildings -- about 52 million square feet [4.8 million sq. m.] -- from office buildings to health labs to Ministry of Natural Resource fire attack bases. And we have an enormous amount of land, probably within our direct control 40,000 to 50,000 acres [16,200 to 20,000 hectares] of developable land throughout Ontario.
        The corporation's mandate is to rationalize the government's inventory. If you look at the inventory of what we own as a government, you can ask, "How much of it do we truly need to own?" And you sell off things you don't need. The capital that is generated from the sales is extra cash for the government, which is used to pay off Ontario's debt or social programs or what have you. But the main focus of ORC is to rationalize this giant portfolio and match it with what the government truly needs. You don't need bricks and mortar to govern. Isn't your money as a government or a shareholder better spent on human resources, research and development and programs than it is building office towers and changing carpets every five years?
        We also take care of all of the construction management for the province, we do the capital repair works in the office buildings, we build the courthouses and jails -- all the capital construction for the government of Ontario. We are not a construction company, but rather a strategic manager, so we outsource the capital work, and we act as the owner's representative. We also do the leasing, using brokers for that and for sales.

        SS: That's a tall order. In the private sector, some organizations struggle with just knowing what's in their portfolio, let alone managing the assets.

        TNM: When that happens, there's nothing there to incentivize people to ask about the benefit of ownership to the corporation or to government. [The owners] have no idea how much the assets are really worth to them. Unfortunately, they often find out through desperation, such as when they need capital. What I'm trying to achieve at ORC is that by making the corporation a benchmark on how you behave in private- and public-sector real estate, it shouldn't be desperation that dictates whether or not you own assets. It should be sound business principles that drive return to the shareholder. So we are very proactive. We have one of the largest portfolios in the country, so we have to be proactive. The goal is to rationalize the inventory to achieve market value and optimize the value for the shareholders by selling off things you don't need. What you keep better be in a state that allows you to deliver the program. It takes a lot of drive to keep people focused on that.

TONY MIELE TITLE: President and Chief Executive Officer of Ontario Realty Corporation (www.orc.on.ca), Toronto, Ont. RESPONSIBILITIES: Miele, appointed in April 1999, leads ORC's transition from a government entity charged with owning and operating capital assets to a leaner, more customer-centered organization focused on strategic management of assets. BACKGROUND: Prior to assuming the president and CEO role, Miele was ORC's vice president, special projects, real estate. Before joining ORC, he worked in the federal government's Canada Lands Company Ltd., CN (Canadian National Railroad) Real Estate, Morgan Financial Corp. and The Goldman Group.

        SS: What has been the biggest change at ORC since you arrived in April 1999?

        TNM: The fundamental change since I came in here is that at that time, ORC was basically a service provider. It did everything itself. Now, we are a strategic manager. We went from about 1,000 people to about 250 in about a year. And we brought in new, private-sector professionals and some public-sector professionals.
        That was the most difficult task in the sense that people don't like to see huge change in the organization. In reality, for an organization to survive --whether a monopoly or not -- you have to structure it in such a way that it's competitive. You have to act that way, because there is an opportunity cost of not doing so. You owe it to your taxpayer and your shareholder. My shareholder is the taxpayer, and by virtue of that we are very public in what we do. I have to act in a transparent manner and be accountable.

        SS: In what other ways do your constituents affect your strategy planning?

        TNM: My client, which is my owner, is the Ontario government, which is represented to us through a Ministry called Management Board Secretariat -- that's the operational side of the government. My customers are the tenants in the buildings. Then there are the rest of my stakeholders, which are the client Ministries, the taxpayer on the street, the local municipalities, including the city councils and the mayors, environmental groups and advocates of certain industries, our third-party service providers and the media. We are always under scrutiny. We pride ourselves on being an open organization, so the media ensures -- by virtue of asking a lot of questions through our politicians about our activities -- that openness and transparency will stay in place. And we have 103 ridings, or districts, which are represented by 103 members of provincial parliament, who represent each local area.
        So on a daily basis we get a lot calls and a lot of issues to deal with that are driven from this list of our constituents. We are under a tremendous amount of scrutiny and get a tremendous amount of input from the stakeholders, all of whom have a say in what we do. There is a host of conflicting agendas on a daily basis. We are continually balancing profit motive with social responsibility. We have to find the happy median, understanding we are accountable to the taxpayers who want to get the greatest amount of value for their sites, whether it's leasing, sales or building new product.
        Therein lies the difference in the way we think relative to the private sector. Shareholders have one motive, which is profit. Here, we might have 200 different motives, all of which need to be balanced while keeping in mind the value of the taxpayers' assets. We're heavily into issues management every day and understanding the politics of the environment -- not just centrally here in Toronto, but also in small town Ontario. We have a lot of masters, and we have to be cognizant of what they want.

        SS: What are the leadership attributes that are most valuable in your role as head of ORC?

        TNM: Persistence and dedication, an understanding and acceptance of public life -- doing something for the public. Leadership entails inspiring people who deal with a host of issues, not just telling them what to do. It's inspiring your staff to look at the problems and find an equitable solution that doesn't get you in trouble or in hot water because the press is on you.
        So besides changing the culture here, I'm allowing people to foster their own growth professionally, which to me is what leadership is all about in business, whether in public sector or private sector.

        SS: What are the two biggest challenges you have overcome in this role?

        TNM: Changing the culture is certainly one of them. Inspiring people to believe that change is good and showing them how is Number One. The second is getting buy-in from all my constituents outside [ORC]. There were a lot of people who had a lot of different reasons for this not to happen, which was not for the greater public good. We have to look at the government of Ontario as a whole and determine what's good for that, not for one constituent or another.

        SS: Private-sector managers face a similar challenge, which is working closely with the business units while simultaneously executing the organization's strategy with respect to property assets.

        TNM: Exactly. You're privy to relationships with clients and customers. I've made linkages into their performance assessments -- we've recently completed a month of objectives setting for the corporation and for each unit. Everybody in this company owns a piece of that objective, part of which is to increase and improve our client customer service. So we have changed how the organization runs and is structured, and we've put in place measurement systems and incentive programs to entice them to [meet objectives]. This helps us identify where there are gaps in the company in terms of service, and we can monitor that now.

        SS: And how is external client satisfaction monitored?

        TNM: We issue a series of questionnaires, some of which are being readied for distribution right now. We've done surveys here in the past, but the more rigorous ones we are creating now are many times greater in detail than those of previous years.

        SS: About half of ORC's portfolio is outsourced to ProFac Facilities Management Services, a third-party provider. How was that vendor chosen, and what performance measurements are in place?

        TNM: ProFac bid for the contract following a tender put out by the corporation and the government just as I was coming into ORC. ProFac won the bid competitively against some other large facility managers. [ProFac manages about 30 million sq. ft. (2.8 million sq. m.) of ORC properties in the Greater Toronto Area and Southwest Ontario.] They have in place some key performance indicators, and we monitor their performance through various surveys to ensure customer satisfaction and we audit the contract side of the business as it relates to procurement and how they proceed through our lease renewals. We have facility managers here that monitor ProFac in terms of performance against their contract. The facility managers who used to manage buildings now, in essence, manage a contract and become the project manager on behalf of the government. There is a clause in the contract whereby for every dollar they save me -- the government -- they share in that. It's an incentive for them to decrease costs.

        SS: Are there plans to expand ProFac's contract to include assets in other parts of Ontario?

        TNM: We are looking at whether or not it makes sense to outsource the Northern and Eastern Ontario portfolio, but we have not completed the analysis yet. We continuously look at all service delivery as to whether or not we're getting value for money, so we're looking at that.

        SS: How are environmental review matters handled with respect to property disposition?

       
TNM: We handle that here at ORC. There is environmental legislation we must adhere to, given that we are the agent for the government. Stringent rules ensure that proper procedures are followed in everything we do, from building buildings to selling off assets. Nothing gets sold without an environmental review. The government follows the laws, and more importantly, we practice good environmental stewardship and the policies of the company.

        SS: What goals have you put in place for the next year or so?

        TNM: Improving customer satisfaction and client-owner satisfaction as well are always high on the agenda. We plan to expand our level of services throughout the government. And we must finish the restructuring of the corporation, which is a lot of work. What's really important is continually reviewing the entire portfolio with a view of optimizing the value for the government. Meeting these goals will keep us busy for the entire year.

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