Strategies for Real Estate

A primer on various real estate activities

Prashant DasPartner

ObjectiveIntroductionPART-I: Corporate Real Estate StrategiesPART-II: Service Provider Strategies PART-III: Real Estate Company strategies

PART-ICorporate Real Estate

• Real estate owned by corporate has traditionally been one of the largest asset components.

• Annual spending on a company’s real estate may vary from two to more than 10 percent of the total revenue

CRE: The Finance’s view

Why is Finance team interested?

• Savings on all other fronts of business such as sourcing, business process redesign etc have been extracted already

• CFO’s role has expanded up to the level of strategic planning

Typical Corporate Strategies

• Integration of real estate and

corporate strategy

• Leveraging technology

• Outsourcing real estate

• Centralizing Real Estate Functions

Cornell Balanced Real Estate Assessment model (COBRA)

Business functions

Types of CRE

Administrative Executive offices, general office, supporting office

Manufacturing Fabrication, assembly, processing, refining

Utilities Electricity generation, transmission, telecommunications, cable lines, microwave stations

Extraction Mines

Agriculture Farmland, timberland

Distribution Warehouse, ports, pipelines

Retailing Retail space, office, wholesale marts

The model considers the following attributes •Community Impact, •Architectural Branding, •Building Adaptability, •Defined Boundaries, •Regional Economic Volatility . •Net Income Per Employee (“NIPE”)

Uncertainty Analyses, Risk-Reward Analyses Monte Carlo Analysis

PART-IIService Provider Strategies

Strategic Approach

• Needs assessment• Specification of service offering• Compensation arrangements and

pricing level• Market segment coverage—

geography, property type, scale, financing form, etc.

• Form of work product deliverable

Service Provider Strategies

Competitive Differentiation• Cost• Service• Expertise• Market coverage• Prestige• Strength (deep pockets)• Risk allocation between client and service

provider• One-stop shopping• Scale/Size• Focus/Specialization 

Service Provider Strategies

Initiative to Stimulate Demand• General—i.e., You should invest in real estate because . . .• Service—i.e., You should have an independent due-

diligence analysis because . . .• Type of service provider—i.e., You should retain a firm

with these qualifications . . .• Specific company—i.e., You should work with our

company because . . .• Transaction—i.e., You should retain us for this specific

transaction because . . .• Contract terms—i.e., You should retain us to provide

these services on these terms because . . .• Ongoing support—i.e., You can count on us to help you on

an ongoing basis . . .

PART-III Development Company Strategies

Need for a Real Estate (Development) Company to strategize

• Changing Economic and Real Estate Environments: A looming shift between phases of the real estate

• Changes in Ownership and/or Leadership: Either an orderly or traumatic shift in key leadership

• Mergers and Acquisitions: Every aspect of a company’s strategy

• Tremendous Growth: Complete structure of the organization

• Challenges to Growth: Reposition, expansion, diversification, or rationalization

• Legacy Vision: desire to create a long-term vision and lasting legacy for good and bad times

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