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Governor McDonnell: “We must provide better services to the people of Virginia at a cheaper cost.” April 15, 2010 PowerPoint Presentation
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Governor McDonnell: “We must provide better services to the people of Virginia at a cheaper cost.” April 15, 2010 - PowerPoint PPT Presentation


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CB RICHARD ELLIS. Presented to:. The Commonwealth of Virginia Governor’s Commission on Government Reform & Restructuring - Simplification & Operations Committee Monday, July 12, 2010. Governor McDonnell: “We must provide better services to the people of Virginia at a cheaper cost.”

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CB RICHARD ELLIS

Presented to:

The Commonwealth of Virginia

Governor’s Commission on Government Reform & Restructuring - Simplification & Operations Committee

Monday, July 12, 2010

Governor McDonnell:

“We must provide better services to the people of Virginia at a cheaper cost.”

April 15, 2010

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Our delivery model is based on providing integrated, efficient solutions and global client satisfaction

  • Property and Facilities Management2.2 B sq. ft., $20B in controlled spend,7,000+ FM professionals worldwide
  • Project Management 2,900+ professionals, 30,000 projects annually
  • Transaction Management 2+ B sq. ft. managed, 7,000+ brokers worldwide in over 400 markets
  • Portfolio Administration250 professionals in US, 75,000+ leases maintained
  • Valuation and Advisory109,125 assignments

CBRE is a Fortune 500 Global Commercial Real Estate Company

  • CBRE’S Presence in VA
  • 361 Employees; 6 Offices
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Public Institutions and Education GroupHow we serve our clients

  • Strategic Planning/Business Case Development (focus on cost savings, revenue generation, asset reuse, etc.)
  • Portfolio Management
        • Portfolios (full range of services for leased and owned portfolios)
        • Government centers and facilities)
        • Public private partnerships
        • Joint ventures, ground leases, alternative financing structures
    • Facilities Management
    • Sustainability / “GreenGov” / Energy Savings
    • Strategic Sourcing to Maximize Leverage in Purchasing
    • Other CBRE Resources and Services, including:
      • Land Reuse, Economic Development Consulting, Development (Trammel Crow), Project Management, Lease Administration, Sale-Leasebacks, etc.
partial client list
Partial Client List

CBRE has met the needs of over 125 government and public sector clients.

Federal Bureau of Investigation

Federal Emergency Management Agency

General Services Administration

Los Angeles Unified School District

Miami - Dade County Police Department

United States Army Corps of Engineers

United States Air Force

Social Security Administration

State of Arizona

State of California

State of Texas

United States Courts

United States Postal Service

American Postal Workers Union

Commonwealth of Pennsylvania

Department of Homeland Security

Environmental Protection Agency

Federal Aviation Administration

American Red Cross

Atlanta Public Schools

City of Los Angeles

City of Phoenix

Commonwealth of Virginia

Department of Education

Department of State

Embassy of France

commonwealth of virginia
Commonwealth of Virginia

Real Estate Holdings

  • Over 360,000 acres of land in over 1,000 locations
  • 13,000 owned buildings and 117 million sf of space
  • 1,500 leases for 14.5 million sf with $140 million of annual rent
  • 7 million sf of leased office space
  • Annual transaction volume of 300-400 (leases, easements, purchases, sales)
commonwealth of virginia8
Commonwealth of Virginia

Statewide portfolio strategy in 2003 to improve operations

Challenge:

CB Richard Ellis retained to provide consulting services for an operational review and recommendations for improvements to the Commonwealth of Virginia for managing its diverse portfolio of real property assets statewide.

  • Solution:
  • CBRE developed an initial plan designed to demonstrate opportunities for cost savings and improved operations that included:
    • Assessment of the adequacy of the current database
    • Identification of best practices related to portfolio management
    • Review of the leased/owned portfolio statewide, to identify transactions, consolidations, collocations, etc. that would reduce costs
    • Review of agency mission and needs
    • Financial analysis that identified the potential for cost savings in the portfolio.
    • CBRE subsequently retained to perform portfolio management services
commonwealth of virginia9
Commonwealth of Virginia

Background

  • DRES was formed in 2005 to meet the challenge of establishing and operating a unified real estate portfolio management program, with the following enterprise-wide goals:
    • Increase co-location and bargaining power
    • Decrease total and per-person space allocations
    • Reduce total costs
    • Maintain agency security and operational needs
commonwealth of virginia10
Commonwealth of Virginia

2003-2010 Timeline

YearSFTransactions

2003 N/A N/A

2004 168,405 7

2005 630,692 47

2006 746,540 76

2007 535,415 64

2008 785,571 37

2009 556,330 61

2010 503,083 30

2003 CBRE awarded strategic planning contract

2004 CBRE awarded contract for portfolio and transaction management

2008 Contract rebid and awarded to CBRE

2009 Contract renewed with 1 year extension

commonwealth of virginia11
Commonwealth of Virginia

Case Study: Forest Office Park

Challenge:

Four Commonwealth of Virginia agencies occupied space in Forest Office Park in different buildings owned by the same entity. Each had a separate lease with varying rental rates, lease expirations, tenant improvement packages, etc.

  • Solution:
  • CBRE bundled the individual leases into a total 100,000 SF requirement, negotiating a lease that dramatically reduced the individual agency’s cost and provided the agencies with tenant improvement allowances
  • Provisions included predetermined favorable expansion opportunities to accommodate other state agencies, but also allows for contraction rights in future years
  • Two additional agencies have relocated to Forest Office Park as a result of favorable economics and two existing divisions have expanded
  • Overall savings of $1,154,500
commonwealth of virginia12
Commonwealth of Virginia

Case Study: Perimeter Center Co-location

Challenge:

Three agencies located in a building that had poor building systems. Governor’s Office directed DRES to vacate building. The DHP was approached by their landlord about a possible buyout to clear way for new Fortune 500 firm. Agencies each had important requirements including high parking ratios and large hearing and conference facilities.

  • Solution:
  • CBRE developed competitive RFP process, conducted in-depth investigations of several alternative buildings, and negotiated over $1 million buyout for DHP to fund their relocation
  • Ten Year, Eight Month Lease – first 7.5 months rent abated and $300,000 rent abatement in the 60th and 61st lease months for 154,222 SF
  • Negotiated a $3,650,000 total tenant improvement allowance including refurbishment allowance in year 5
  • Overall savings of $8,197,500
commonwealth of virginia13
Commonwealth of Virginia

CBRE’s Value Add from 2003-2010

  • CBRE completed 322 transactions resulting in:
  • Overall Cost Savings: $31,840,900
  • Overall Cost Avoidance: $23,612,500
  • $55,453,400
    • Cost Savings: Occupancy cost of existing space reduced
    • Cost Avoidance: Occupancy cost increase avoided
  • Savings/Avoidance as %
  • of Total Lease Contract Value: 20.9%
    • Total Lease Contract Value: $265,842,900
facilities management

SAMPLE CLIENTS

  • FM SCOPE
  • Building Management
  • Operations & Maintenance
  • Energy Management
  • Health, Safety, Security & Environmental (HSSE)
  • Critical Environments/Facilities
  • Supply Chain/Procurement
  • Office Services
  • FM APPROACH
  • Economies of scale – global leverage and procurement
  • Cost-savings management solutions
  • Enable client to focus on core business
  • Global coverage, consistency, and integration
  • Risk mitigation and continuity planning
  • Continual process improvements
Facilities Management
energy management

SAMPLE CLIENTS

  • ENERGY SCOPE
  • Supply and demand side energy management
  • Energy and water efficiency
  • Resource conservation
  • Indoor environment quality
  • Site and building ecology
  • Training and communications programs
  • ENERGY APPROACH
  • Largest global energy management: 420 MSF Total Energy Space Managed, including 16,450 Locations Managed
  • $2.5 B in annual cost of energy managed (including $1.5M electrical) drives economies of scale:
    • Supply Side Purchasing: 3-8 % utilities cost savings
    • Operations & Maintenance Initiatives: 5-25 % utilities cost savings
    • Bill Management & Auditing: 2-5 % utilities cost savings
    • Energy & Retrofits: 10-40 % utilities cost savings
  • 70 Energy Professionals and 33 Green Knights
  • Energy Star Training Program (4,000 staff trained)
  • Over 160 MSF of Energy Star labeled buildings managed
Energy Management
facilities management clients
Facilities Management Clients
  • 15 million SF
  • 2,000 sites
  • US only
  • FM, PjM, TM, LA, SP
  • 50,000 sites
  • 60 countries
  • FM
  • 20 million SF
  • 92 sites
  • FM
  • 36.4 million SF
  • 697 sites
  • FM, TM, SP
  • 55 million SF
  • EMEA, APAC, LA
  • FM, PjM, TM, SP
  • 11 largest owned assets in EMEA
  • 9 countries
  • FM
  • 6.6 million SF
  • 132 sites
  • FM, PjM
  • 6.5 million SF
  • 160 sites globally
  • FM, PjM, TM, LA, SP
  • 40 million SF
  • 50,000 acres
  • FM, PjM, TM, LA, SP
  • 10 million SF
  • US only
  • FM
  • 7 million SF
  • 210 sites
  • 31 countries
  • TM,SP,PjM

Legend:

TM: Transaction Management

FM: Facility Management

PJM: Project Management

SP: Strategic Planning

LA: Lease Administration

operating expense savings initiatives

12-18%

Savings

Operating Expense Savings Initiatives

Savings Levers to Achieve

Run Rate Reduction

  • Utilities
  • Supply side: bundle portfolio, secure energy partner
  • Demand side: purchasing leverage, consumption reduction
  • Service Contracts
  • Rebid contracts
  • Consolidate vendors
  • Bulk purchasing of goods & services
  • Repairs & Maintenance
  • Implement work order system & other technology solutions
  • Perform scheduled preventive maintenance & utilize best practices
  • Payroll
  • Payroll review
  • Leveraging employees for other CBRE assignments
  • Employee strategy determined by client
  • ***Many state real estate departments have already implemented operating expense reduction initiatives. But there still may be plenty of savings opportunities to capture

Operating Expenses

cbre offers effective energy management sustainability solutions
CBRE offers effective Energy Management & Sustainability Solutions
  • CBRE has benchmarked and surveyed more Energy Star & LEED certified properties than any real estate provider
  • CBRE maintains a centralized, client focused Energy Resource Center
  • Benefits of ERC Incorporation
    • Supply side purchasing: 3–8% utilities cost savings
    • Operations & maintenance initiatives: 5–15% utility cost savings
    • Bill management and auditing: 2–5% utility cost savings
    • Energy & water retrofits: 10–40% utility cost savings
    • Sustainability: GHG, resource efficiency, recycling.
in 2009 cbre was selected to manage 40m sf for the ontario realty corporation
In 2009, CBRE was selected to manage 40m SF for the Ontario Realty Corporation

Select Account Initiatives

  • CBRE was selected via a competitive bid process to provide integrated real estate services 
  • CBRE to manage ORC's O&M spend of $309M annually as well as $145M in annual capital expenditure
  • CBRE’s Insight technology platform to integrate CMMS, Asset Management, Portfolio Optimization, Space Management, Project and Portfolio Management technology solutions
  • CBRE value proposition: Accountability, Risk Mitigation and providing a Strategic Focus
  • Key drivers for ORC included delivering value for money in all services, leveraging 3rd party resources, and developing a Sustainability and Energy Management program
  • Managed space includes Courthouses, Detention Centers, Critical Facilities, Laboratory, Hospitals, Office, Residential and Retail

QUICK FACTS

Contract Length: 10 years

Size: 40 MSF in approximately 2,000 buildings and 50,000 acres across Ontario.

Geography: Canada

Services: Facilities and Land Management, Asset Management, Project Management, Portfolio Administration and Transaction Management Services

how can the commonwealth evaluate opportunities for cost savings in its owned portfolio
How can the Commonwealth evaluate opportunities for cost savings in its owned portfolio?
  • Real estate & facilities diagnostic
    • Establish objectives
    • Collect data (facilities spend, capital program, facilities department organization, select management interviews)
    • Site visits & peer interviews
    • Develop solutions
    • Test solutions against goals and objectives
    • Draft business case with costs, timing, risks, etc.
recommendations to commission
Recommendations to Commission
  • Engage private sector to assist in facilities management
    • Establish FM performance metrics (costs, employees, response times)
    • Space optimization and consolidation of owned portfolio space
    • Alternative workplace solutions - flexible shifts/work from home
    • Economies of scale in procurement and service contracts
    • Utilize technology
    • Energy management audits
      • Implement no cost/low cost initiatives
      • Sustainability initiatives
    • Implement best practices
  • Continue driving savings in leased portfolio
    • Identify sale/leaseback opportunities
    • Monetization of surplus property through disposition
    • Blend/extend and other lease renegotiation opportunities
    • Consolidate as appropriate back office functions across departments
      • Identify and eliminate redundant back office functions (e.g. call centers, accounting hubs, etc.) and excess space devoted to those activities.
    • Review portfolio space devoted to storing excess furniture, office supplies, computers, phone systems and other workplace supplies for efficiencies