Determining whether to shed or redevelop surplus property assets — and when to take

The productive small-group dynamic of IAMC Professional Forums was in clear evidence during the peer-to-peer and other sessions, where both speaking and listening were easy to do.

action — is front and center in the minds of IAMC's active members. Two-thirds of those attending peer-to-peer discussions Monday afternoon at IAMC's Fall Professional Forum chose "asset disposition" as the discussion in which to participate.
   Corporate real estate executives from about two dozen companies, most with international holdings, met to hear each other's perspectives on what drives their strategies for dealing with surplus properties, how to value them and where to find the expertise in the service provider and economic development communities. The corporate executives then met with service providers and economic developers in attendance to articulate the areas they most need advice in and to seek creative solutions to what can be a complex task.

   Active members agreed that the best place to start is to know the motive behind the strategy — is it to get non-performing assets off the balance sheet quickly (time), or is it to improve the bottom line by extracting more revenue from it (value)? Knowing the answer will determine two key factors: what will happen to the property and who will be involved. On this point, the service providers and economic developers recommend convening a meeting early on with all interested parties, from the corporation to the community to economic developers and service providers, so that everyone is on the same page. Taking a silo approach to working with these players only delays resolution.
   Expertise is certainly in demand where accounting for properties related to M&A activity is concerned, because ascertaining value is so important to determining a strategy, especially if a property is found to have negative value. Similarly, a property may be found to have hidden value that an objective third party with the gift of creative thinking can identify. It may be that an apparent cost center is a profit center in disguise.
   For those deciding to hold on to a surplus property and redevelop it, figuring out the

Rick Little of Weyerhaeuser Corp. makes an observation as Charles Waltz of BASF Corp. looks on.

role of the corporate real estate unit is a priority. Is the unit now in the development business, or is that function turned over to a service provider? How are revenues shared once the property is developed and in use again? How is liability shared or allocated? How are development budgets monitored to stay on track? One company puts an internal engineer on site to keep the developer accountable — and within budget.

   Involving the community — including utilities, economic developers and educational entities — can go a long way to putting the property to its best use for all involved. One way to do this is to donate a facility and/or associated equipment to a university or some other beneficiary. The best advice offered here was to make that decision early to avoid tax and valuation issues later. Donating property has enormous potential for generating goodwill in the community, which may be of more value ultimately than merely disposing of the assets at fire sale prices.
   Disposing of assets offshore can be particularly vexing for IAMC corporate members, because different legal structures and valuation practices are at work. This is a key business opportunity for service providers who can make that process seamless for the corporate client. One service provider related a recent case where local teams were established in four European countries that mirror a team that would do the same work for the client in the U.S. Drawing on local expertise and delivering the same results the client could expect in his home market expedited the process enormously.
   Still another area the service providers and economic developers can play a key role is in sorting out environmental issues, including permitting and the transfer of permits to new owners.
   In all cases, early communication among all parties is central to putting surplus property back to work or off the books. Figuring out who to include in that communication is critical, so corporate real estate directors are advised to choose wisely from the pool of service providers, developers and others with an interest in the property. Once they are in place, key questions will be answered, not the least of which is whether a property's life cycle is complete or if it has just begun.