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EATTLE — Operating in the “post-New Economy” era of corporate downsizing and declining profits, real estate executives face a huge challenge — maximizing real estate’s value while contributing to next quarter’s bottom line.
And, oh, by the way, their bosses declare by edict, do this while keeping space commitments at a minimum, locate facilities in the best labor markets, negotiate the best incentives deals, and simultaneously manage expansions and consolidations in different markets.
Does this sound like your job? If so, then you’re not alone. The past 12 months have been among the most challenging ever for corporate real estate professionals. Following the largest peacetime economic expansion in history, real estate leaders last year grappled with the fallout of the dot-com boom and bust, orders from on high to consolidate and downsize, and the downward momentum of Wall Street.
Despite the economic slowdown, a number of companies still managed to announce record-breaking expansion projects (as you will read in the examples to follow). At the helm of the ship navigating these turbulent waters are the captains of real estate — the corporate real estate executives who must satisfy the space needs of their companies while making wise investments.
Site Selection honored the “best of the best” in the profession when the magazine presented the annual Corporate Real Estate Leadership Awards on May 13 at the Pacific Northwest World Congress of the International Development Research Council (IDRC), the world’s preeminent corporate real estate association.
The winners clearly demonstrated that the best leaders in the industry don’t merely respond to change; they drive change throughout their organization. True leaders aren’t content to maintain the status quo. Instead, they challenge conventional ways of thinking and create new business models that make their companies more competitive.
Here are their stories:
Gerald Behn and Barbara Moore
NCR Corp.
The senior management of NCR Corp. last year adopted a global realignment program that affects 700 corporate locations in 70 countries. The goals? Provide NCR with workplaces in the best strategic locations to drive growth and profitability; provide work processes and practices that promote speed, efficiency, effectiveness and worker satisfaction; and provide work strategies that minimize cost and reduce company-wide real estate operating expenses by 20 percent.
The program was conceived and developed by Gerald Behn, vice president of corporate real estate for NCR, and his colleague Barbara Moore, global portfolio director.
“This is the purest form of corporate real estate leadership that I can think of,” says Scott B. Epling, director of dispositions for NCR Corporate Real Estate. “They (Behn and Moore) have put in literally hundreds and hundreds of hours in planning this global program. Their combined strategic thinking will drive literally millions of dollars of savings and shareholder value for many years to come.”
The overall program was designed by Behn and Moore to be a business unit-driven strategy rather than corporate real estate driven. “Gerry and Barbara’s strategic planning has demonstrated to the senior NCR and business unit leaders that through an effective, global real estate strategy, they can be more competitive and profitable globally. This is a very thoroughly planned and forward-thinking form of ‘right-sizing’ and will contribute very visibly to the bottom line,” adds Epling, who nominated Dayton, Ohio-based Behn and Moore for the award.
The right-sizing strategy uses third-party experts in alternative officing. The program aims to improve profitability through increased worker satisfaction, reduce employee turnover and churn costs, showcase NCR’s applied technology in the workplace and reduce real estate costs.
David Jarman
PricewaterhouseCoopers
As managing director of global occupancy for PricewaterhouseCoopers from his office in Tampa, Fla., David Jarman makes the decisions that affect 30 million sq. ft. (2.79 million sq. m.) of office space around the world.
Not content to merely manage that inventory, Jarman last year issued a straightforward challenge to his team — drive down the operational cost of real estate — and he gave them a game plan to do it. He implemented key occupancy metrics for all domestic and international locations, including occupancy costs as a percentage of revenue and occupancy costs per seat. He established baseline guidelines for each country, and he created biannual meetings with property leaders to exchange information on processes and best practices.
By developing more open and flexible use of space, changing the way space is allocated and encouraging partners to “reverse hotel,” Jarman and his team reduced overall project costs by $500 per PwC employee in 2000. Jarman also oversaw the completion of 11 new global workplace projects totaling 1 million sq. ft. (93,000 sq. m.) last year in the United States.
“David has a continual focus on best practices within the industry,” noted Ann Duncan of CLW Real Estate Services Group in Tampa and Elaine Melanides of Jones Lang LaSalle in Chicago in their nomination of Jarman. “He spends considerable time and energy focusing on new ways to improve service delivery and is constantly pushing his team to the cutting edge.”
Richard Kriva
Motorola
When Richard Kriva assumed the post of vice president of global real estate and development for Motorola in Schaumburg, Ill., last year, the department was aligned by sector and region, creating redundancy in reporting. Within three months, however, Kriva managed to reposition and realign all real estate activity reporting through the sector facility leaders.
Now, for the first time in the company’s history, there is a precise accounting of every one of Motorola’s 700 properties, totaling more than $1 billion in annual operating costs, around the world through global real estate reviews.
After just one year, redundancy in the real estate work force at Motorola has been reduced by 20 percent, and a company-wide operation cost reduction program has delivered $50 million in real savings. By 2003, Motorola’s Breakaway Workplace Strategy — founded by Kriva — is expected to save the company $300 million in annual real estate operating costs.
“Through the emphasis on our Breakaway Workplace Strategy, Rick has reached out and is touching all of the 140,000 Motorolans by offering them the tools to work from wherever it is convenient,” says Jason Larry, manager of the Breakaway program. “In his own team, Rick has made the workplace a well-oiled production machine by offering employees the opportunity to run their own business within his group and empower his employees to make their own decisions of how, where and when to work. Rick’s team of professionals can turn around leases, negotiate real estate deals and deliver on construction projects faster and more efficiently than any team I have ever seen.”
Raymond Meglio
The Thomson Corp.
By almost any measure of activity, Raymond Meglio enjoyed a busy year in 2000. As vice president of real estate for The Thomson Corp. in Stamford, Conn., he oversaw a U.S. property portfolio that grew from 9 million sq. ft. (837,000 sq. m.) in 550 locations in 1999 to 14 million sq. ft. (1.3 million sq. m.) in 953 locations in 2000, representing increases of 55 percent and 73 percent, respectively.
In addition, the $6 billion media, information and education empire acquired Harcourt Brace and Prometric in 2000, and Meglio’s considerable experience in corporate real estate came to the forefront in both. Globally, Meglio’s corporate real estate initiatives achieved more than $70 million in direct savings and cost avoidance in 2000.
“Considering Thomson’s dynamic and rapidly changing business environment, where corporate merger and acquisitions are so prevalent, it has provided corporate real estate the opportunity to demonstrate its highly technical and analytical disciplines,” notes Jeff Garibaldi, president of The Garibaldi Group, in his nomination of Meglio. “Ray’s CRE team has been involved in the evaluation phase of all merger and acquisition activities and analysis.”
Nominated by seven people in corporate and commercial real estate, Meglio received strong endorsements from service providers including Cushman & Wakefield, Ernst & Young and Royal LePage Commercial in Toronto. These service providers worked with Meglio as he handled all of the real estate issues created by some 40 corporate acquisitions totaling $4.9 billion.
G. Trex Morris
Ernst & Young
In his role as national director of Ernst & Young’s global real estate portfolio, G. Trex Morris helped make his firm one of Fortune Magazine’s “100 Best Companies to Work For” for two consecutive years. Also identified as one of the “100 Best Places to Work” by Computer Magazine, Ernst & Young incorporates innovation and e-business strategies into its workplace model.
Based in Atlanta, Morris oversees leasing, project management, forecasting, financial reporting, benchmarking and strategic planning for all Ernst & Young properties. His team’s innovations in 2000 included the development of a web-based invoice as a project management tool, a new lease audit process and an interactive notes-based project approval process.
“Trex has achieved a proper balance of centralized control by working closely with the individual area practice leaders for strategy development, project approval and implementation,” says Frank Mann, executive vice president of Jones Lang LaSalle in Atlanta. “As a result of this interactive process, corporate real estate’s standing in the firm is one of the highest that Jones Lang LaSalle has identified in our client base.”
Mann notes that Morris “greatly influenced business unit involvement in developing area (regional) strategic plans.” Under his leadership, the Ernst & Young real estate group provides periodic market reports that assess the current state of the real estate market, review key metrics for each office, review options that may be nearing (expansion, contraction or renewal), and identify both short-term and long-term activities.
“This results in a consistent delivery of services, a marriage of external providers and internal real estate managers that work very well together,” says Mann.
Tom Quinn and Ken Philbrick
Lockheed Martin
It’s hard to imagine any two real estate executives confronting a bigger challenge than the one dealt to Tom Quinn and Ken Philbrick in the late 1990s. Faced with the need to consolidate its vast brick-and-mortar operations in the era of defense contractor downsizing, Lockheed Martin turned to the only two people it could find to head the effort: Quinn, who ran a small operations management company for Martin Marietta, and Philbrick, who ran a small real estate unit for Lockheed.
That merger of minds resulted in a new entity known as LMC Properties Inc. in Baltimore, Md., the brainchild of Quinn, now its president, and Philbrick (left), its executive vice president. By the end of 2000, the company had achieved its goal of reducing its footprint from 100 million sq. ft. (9.3 million sq. m.) to 75 million sq. ft. (6.975 million sq. m.) and generating $1.013 billion in net proceeds from the sale of disposition properties.
Those proceeds reduced the debt load and funded roughly one-third of the corporation’s overall capital budget of $600 million per year over the last three years. In addition, future dispositions of excess inventory are expected to produce another $800 million in revenues.
“From near the edge of oblivion with a stock price of $16, the newly consolidated corporation has fought its way back,” says Jeff Troan, director of real estate for Lockheed Martin’s Orlando Central Park in Orlando, Fla. “We are now looking forward to a record year, with a stock price approaching $40 and steadily increasing liquidity.”
Without the infusion of cash generated by the corporation created by Quinn and Philbrick, Lockheed Martin would not be in the competitive position it’s in today. “Investment in new markets and products would have been starved, and the resulting entity would have been much less a player in the new defense technology industry,” notes Troan.
P. Brooks Warren
WorldCom
When your company prides itself on delivering information quickly, the speed with which you make real estate decisions is even more crucial. No one in the industry does that any better than P. Brooks Warren, vice president of real estate and facilities management for WorldCom in Clinton, Miss.
Consider Warren’s Project LightSpeed, a landmark design/build initiative launched in the past six months. Leveraging the Internet to achieve a national technical facility rollout in record time and under budget, Project LightSpeed encompasses the simultaneous creation of 13 network information centers (NICs) for WorldCom.
The NICs are state-of-the-art technical centers totaling 1.3 million sq. ft. (120,900 sq. m.) at 13 sites. Normally it would take 18 to 24 months to go from initial site evaluation to revenue-ready status. By delegating to partners who share his philosophy for quality, speed and efficiency, Warren reduced that cycle to only nine months in several locations.
In addition to the 13 new NICs, Warren continues to oversee the following WorldCom expansions: 600,000 sq. ft. (55,800 sq. m.) in Northern Virginia; 372,000 sq. ft. (34,596 sq. m.) in St. Louis; 188,000 sq. ft. (17,484 sq. m.) in Richardson, Texas; and 240,000 sq. ft. (22,320 sq. m.) in Alpharetta, Ga.
Warren also added value to WorldCom by engineering the purchase of a 540-acre (216-hectare) tract for a new corporate campus in Loudoun County, Va. Though some people questioned the wisdom of that purchase at the time, today the land is valued at almost four times what it was worth then.
William L. Yontz
Capital One Services Inc.
“Bill Yontz is accustomed to life in the fast lane,” says Eric Thorpe, director of corporate real estate for Capital One Services Inc. “As a race car driver and enthusiast, Bill often times can be found running at speeds of over 100 miles an hour — both at work and at play.”
Lately, Yontz must feel as though his foot at Capital One remains stuck on the throttle. Last year the company announced one of the largest capital investment projects in America. Stretching across three counties in the Greater Richmond area, the financial services giant embarked on a $700 million, 8,000-employee expansion. At the center of it all, coordinating the entire project, is Yontz, vice president of corporate real estate for Capital One at the company headquarters in Falls Church, Va.
In the three years Yontz has been at Capital One, the number of employees increased 233 percent to its current headcount of 20,000. Yontz manages a portfolio of more than 5 million sq. ft. (465,000 sq. m.), which increased 22 percent in 2000. He also spearheaded efforts to expand the company into new markets in France and Canada.
While Yontz’s contributions to Capital One are detailed in Site Selection’s Cover Story in this (July 2001) issue, here’s one key measure of his value: In 2000, Yontz set out to reduce his company’s real estate operating budget by $8 million. He easily surpassed that goal.
“CRE realized budget reductions of 6.5 percent ($12.3 million) by exploring smarter business practices, reviewing vendor relationships and improving the efficiency of everyday operations,” notes Thorpe.
Simple things. But simple things produce best practices — and make Yontz one of the best of the best.
