An Outsourcing Whopper: BLJC, Royal Bank Sign Five-Year $1.36 Billion RE Management Pact
In a whopper of an outsourcing deal considered Canada's largest ever, Brookfield LePage Johnson Controls (BLJC at www.bljc.ca) has signed a US$1.36 billion, five-year agreement to manage the Canadian real estate operations of Royal Bank Financial Group (RBFG at www.royalbank.com).
Royal Bank's focus on core competencies and the company's move to cut real estate costs spurred the agreement, RBFG officials explained as the pact was announced.
"This agreement is important for all of our stakeholders," said Peter Currie, Royal Bank chief financial officer and vice chairman. "[It] reflects our focus on improving core operations and managing cost-effectively while treating employees fairly."
BLJC Executive Vice President Gord Hicks asserted, "This is the largest corporate real estate operations outsourcing initiative in Canadian history. This contract will pave the way for other organizations to embrace this as a viable solution to focus on core business activities while reducing cost and improving services at the same time."
Under the agreement, BLJC will provide real estate operations services for some 1,500 Royal Bank Canadian facilities spanning more than 15 million sq. ft. (1.35 million sq. m.) of space. That portfolio includes more than 1,300 leased and owned Royal Bank branches located from Newfoundland to British Columbia. Under the progressive outsourcing agreement with Royal Bank, BLJC will be responsible for managing an annual budget of $272 million in handling RBFG real estate functions that include operations management, project management, transaction management and support services.
The agreement includes what officials for both companies call "cost-saving guarantees." If targets for service level improvement are met over the initial five-year contract, the agreement may be extended for an additional six years, they said. The agreement goes into effect on July 1, 2000.
The RBFG/BLJC pact may follow the modus operandi of the best outsourcing alliances by providing service that's seamless. But the deal creates circumstances that are far less seamless, at least for the moment, for the some 100 Royal Bank real estate employees whose jobs are affected by the BLJC agreement. Those 100 displaced Royal Bank real estate workers aren't totally left out in the cold, however.
At the agreement's announcement, officials from both companies noted that Royal Bank's affected real estate employees will be offered "career opportunities" at Brookfield LePage Johnson Controls "to ensure that there is minimum service disruption."
The monster deal certainly validates the market savvy of creating Brookfield LePage Johnson Controls, which was established in 1992 as a joint venture between Brookfield Properties and Johnson Controls World Services Ltd. to provide integrated facility management services in Canada.
That alliance brought together parties that, along with their related companies, manage, operate and/or maintain more than 1 billion sq. ft. (90 million sq. m.) of worldwide facilities.
Toronto-headquartered Brookfield LePage Johnson Controls has more than 1,100 employees in offices throughout Canada, with major clients including Canada Post Corp., Nortel Networks, and Public Works & Government Services Canada.
Even so, the BLJC organization gets a huge bottom-line spike from garnering the Canadian real estate work for Montreal-based Royal Bank, which has 50,000 employees serving 10 million customers in 30 countries.
In fact, the Royal Bank agreement in one fell swoop increases the total portfolio of Canadian facilities under BLJC's management by a substantial 40 percent. With the activation of the RBFG pact, the space under Brookfield LePage Johnson Controls management will total of 52 million sq. ft. (4.68 million sq. m.).
"We are proud of the evolution of our business venture with BLJC and its ability to service our Canadian client base as a single-source provider of integrated facility management, and brokerage services," said Mike Lamach, vice president and general manager for Johnson Controls Integrated Facility Management, Commercial North America.
"The size and scope of the Royal Bank Contract," Lamach noted, "makes significant impact on Integrated Facility Management's overall business capacity for providing a broader service offering to support our clients' evolving business requirements."
©2000 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.