Cuyahoga County Real Estate Portfolio Strategic Management Consulting Services Phase III Deliverable: Strategy and Acti

1. Cuyahoga County Real Estate Portfolio Strategic Management Consulting Services Phase III Deliverable: Strategy and Action Plan December 28, 2011 Outline DRAFT

2. Background and Project Context 1 • Engagement was conducted over the span of 90 days • Expert professionals from 6 different firms, resulting in a team of over 20 people • Allegro Realty Advisors (ARA) – Commercial Real Estate • Vocon Design (VD) – Architecture, Programming, Space Design • G. Stephens Inc. (GSI) - Project, Construction Management • Integrated Engineering Consultants (IEC) – Mechanical Engineering • Graelic (G) – Parking Structure and Systems • Grubb & Ellis (GE) – Commercial Real Estate • RFP’s project scope addressed 60 properties • Toured and assessed over 7 million square feet of real estate • Interviewed over 50 people • Leveraged County staff expertise • Conducted work sessions with County working group(s) • Engagement work was segregated into 3 Phases • Current State Assessment of Portfolio and Organization • Future State Assessment of Portfolio and Organization • Strategy and Action Plan for Portfolio and Organization

3. Phase I - Current State Assessment • Utilization Assessment (ARA/VD) • Conducted property tours, surveys and interviews to understand headcount and departmental programming for each location • Identified utilization and vacancy • Financial Assessment (ARA) • Developed 10, 20 year financial models, based on multiple assumptions (lease costs, operating expenses, security, inflation), BOMA standards • Identified estimated 10 and 20 year costs • Mechanical Assessment (IEC) • Toured and assessed HVAC systems in owned properties • Identified deferred maintenance and critical issues • Broker Opinion of Value (ARA/GE) • Conducted market valuation analyses on each property and lease • Estimated owned property values and leases under or over market • Existing Condition Assessment (GSI) • Toured and assessed general conditions within owned properties (finishes, flooring, lighting, restrooms, façade, roof, wear and tear) • Identified deferred maintenance • Lease Abstract Assessment (ARA) • Abstracted all leases and corresponding amendments, renewals • Identified accurate square footages, rents, critical dates • Parking Structure Assessment (G) • Toured all parking structures and lots • Identified issues related to deferred maintenance and any opportunities • Employee Interviews/Surveys (ARA) • Interviewed and surveyed County employees within real estate function • Identified existing perceptions around people, process, technology and benchmarking 2

4. Phase II - Future State Assessment 3 • Programming Requirements (VD) • Leveraged interviews and surveys from Phase I, developing programming framework • Followed up and refined future needs with directors and chiefs of staff to understand departmental organization structure and services • Identified strategic planning and operational initiatives already under study by departments: Family Justice Center, Emergency Operations Center, re-programming the Mt. Pleasant Neighborhood Family Service Center, and others • Developed detail regarding public access and interface requirements for individual departments as a criteria for future space requirements • Identified opportunities for shared spaces in a consolidated facility: training and conference rooms, copy rooms, break spaces • Proposed uniform space standards for workstations and offices, promoting flexible and efficient future workspace • County Interviews (ARA) • Contacted over 20 counties, external validation • Secured insight into their real estate, 4 threads (People, Process, Technology, Benchmarks) • Specific concepts included: • Strategic Direction • Departmental Interaction • Space Planning • Construction Management • Site Selection • Financing and Capital Management • Organizational Structure • Administrative Processes • Cost Management and Benchmarking • Information Technology • Excess Facility Management • Transaction Management • Facility Operations • Property Management

5. Phase III - Strategy and Action Plan 4 • Organization • People • Process • Technology • Benchmarks • Portfolio • Invest • Hold • Divest

6. Phase III - Strategy and Action PlanOrganization - PEOPLE 5 • Develop a real estate committee comprised of the real estate function and other organizational/departmental heads • Imparts strategy across organization and builds consensus • Review and approve requested moves • Leverage outside real estate expertise (brokerage, facilities management, project management, custodial) to augment in-house skills and capacity

7. Phase III - Strategy and Action PlanOrganization - PROCESS 6 • Inventory all County properties over the course of the next year • Consolidate all real estate decision making (hospitals, libraries, agencies, boards, parks) • Expertise, collocation opportunities, financial savings, strategy alignment • Develop capital and deferred maintenance plan for owned properties • Mandatory annual $0.25 per square foot reserve across entire portfolio • Improved Lease Administration • File management (rent commencement memos, abstracts with critical dates and key data, signed leases) • Track all real estate costs through real estate function utilizing cost centers by building • Live P&L; allocate costs to respective departments • Standardize furniture systems, finishes • Procurement leverage, move and reconfiguration efficiencies • Formalize real estate need/project request process and forms

8. Phase III - Strategy and Action PlanOrganization - TECHNOLOGY 7 • Evaluate portfolio management software • Track facility management work orders, time and costs • Utilization • CAD file management • Lease administration/critical dates • Lease management • Capital planning • Inventory tracking (phones, furniture, computers) • Project management • Utility management

9. Phase III - Strategy and Action PlanOrganization - BENCHMARKS 8 • Critical to develop a Benchmark System • Measures continual improvement • Drives year-over-year performance • Assists by creating a decision making framework • Bang for our Buck • How do we define “Bang” • Concept of Triple Bottom Line • Impact to Cuyahoga County (Employees, Finances) • Impact to Community (Economic Development, Jobs Created, Re-Investment) • Impact to Environment (Carbon Foot Print, LEED Initiatives)

10. Phase III - Strategy and Action PlanOrganization - BENCHMARKS 9

11. Phase III - Strategy and Action PlanPortfolio – Key Storylines & Assumptions 10 • Recommended action plan has 5 key storylines • Disposition of un-needed, un-strategic, unsupportive assets • Focus on creating space at Justice Center and associated buildings • Realigned, consolidated Health and Human Services footprint • Consolidated Administration Complex • Consolidated Storage Complex • Recommended action plan is based on assumptions • Relied on static information that can change tomorrow • Depended on historical financial data and market experience to make forward looking projections, 10, 20 years out (10-15 variables in each model, 60+ models) • Occupancy cost run rates • Proceeds from sales • Future rent rates • Always work to make conservative assumptions, but things can change • Disclosure of findings/recommendations could materially impact any projections

12. Phase III - Strategy and Action PlanPortfolio See Appendix I 11 • Developed a qualitative framework for decision making • Based on team expertise, County feedback, data collected in Phases I and II • Stayed away from using a scoring system or weighted average due to subjectivity issues and potential manipulation • Framework was based on three key threads • Programming: how well programming requirements were met in current building • Financial Impact: if estimated financial savings/gains could be realized by moving • Portfolio Leverage/Special Use: could function be consolidated elsewhere • Each property was qualitatively assessed based on these concepts and classified as Invest, Hold or Divest • Invest: Programmatically, financially, and/or strategically makes sense to keep • Divest: Does not programmatically, financially and/or strategically make sense to keep • Hold: In between Invest and Divest, uncertainty remains

13. Phase III - Strategy and Action PlanPortfolio See Appendix I 12 Three examples of framework in action… • Justice Center - Invest • Currently meeting programming requirements, not much excess space, but the property supports the function that is housed there - Invest • Savings or gains could not be realized by moving - Invest • Property cannot be easily consolidated elsewhere within the portfolio - Invest • Admin Building - Divest • Currently does not meet programming requirements, not much excess space, but the property does not support the function that is housed there - Divest • Savings or gains could be realized by moving - Divest • Property can be easily consolidated elsewhere in portfolio - Divest • Marion Building – Hold • Currently meets programming requirements, excess vacant space - Invest • Savings or gains could be realized by moving - Divest • Property cannot be easily consolidated elsewhere in portfolio - Invest

14. Phase III - Strategy and Action PlanPortfolio 22 of 66 properties were categorized as an INVESTopportunity Total 10 Year Present Value Savings = $-35.0MM Key Drivers of Negative Savings: Consolidated Admin Complex Consolidated Storage Complex Future Savings will come from: -Restructured NFSC Leases -CMSD Storage Opportunity 13 INVEST • Justice Center, Jail I & II • Huntington Garage • Juvenile Justice Center • Old Courthouse • Croton Based Correctional Facility • Animal Shelter • Whiskey Island • Soldiers and Sailors Monument • NFSCs • Lorain/West Shore • Fulton/Old Brooklyn • Mt. Pleasant • Southgate • Quincy • Jane Edna Hunter • Medical Examiner Building • Board of Elections Building • Virgil E. Brown Building • Emergency Operations Center • Family Justice Center • Consolidated Admin Complex (85.77%) • Consolidated Storage Complex (14.23%)

15. Phase III - Strategy and Action PlanPortfolio 22 of 66 properties were categorized as a HOLD opportunity Total 10 Year Present Value Savings = $0.0MM Future Savings will come from: Consolidated Maintenance Yards Divestiture of Marion and Courthouse Square 14 HOLD • Bridge Garage • York Road Yard • Metzenbaum Building, 3343 Community College • Employment Connection • 11811 Shaker Blvd. • 21100 Southgate Blvd. • 5361 Pearl Rd. • 6600 Lexington Ave • 12100 Snow Rd. • 5069 Great Northern Blvd. • Parking Leases around HHS facilities • Solid Waste District, 4750 East 131st • County Airport • Courthouse Square • Marion Building • Central Services, 1642 Lakeside • Brookpark Garage

16. Phase III - Strategy and Action PlanPortfolio 22 of 66 properties were categorized as a DIVESTopportunity Total 10 Year Present Value Savings = $91.0MM Key Drivers of Positive Savings: Administration Complex Ameritrust Complex Sterling Building Old Juvenile Court Complex Reserve Square 15 DIVEST • Ameritrust Complex (23.06%) • Old Juvenile Court Complex (7.59%) • Administration Building (30.77%) • Cuyahoga County Archives (2.59%) • Miles Road Yard (0.32%) • Whitlatch Building (2.07%) • Auto Title Building (4.64%) • Hamilton Garage (0.19%) • Glenville NFSC (0.15%) • Fitch Road Yard (0.43%) • BOE Storage, 1858 East 40(2.93%) • Sterling Building,1255 Euclid (8.02%) • Reserve Square, 1701 East 12 (5.72%) • Storage, 2344 Canal (0.41%) • Public Defender, 1849 Prospect (2.55%) • Public Works Building (3.20%) • VSC, 1835 Prospect Ave (2.30%) • Storage, 3615 Superior Ave • 323 Lakeside Avenue (0.95%) • 4115 Bridge (0.65%) • West 4th Street Storage (0.18%) • PA, Branchton Storage (0.08%)

17. Executive Summary & Next Steps • Executive Summary • Smaller, less expensive and more efficient real estate portfolio that helps the County to continue its mission • Cascading assumptions, 5%-10% margin of error • Next Steps • Large portion of plan is dependent on the Consolidated Administrative Complex project (lease renewals, restructurings) • Need to begin in January to realize completed transformation by 2014 • Start renegotiating leases • Start site selection process See Appendix II 16

18. Appendix I: Building by Building Strategy 17

19. Appendix II:2012 – 2014 Implementation Timeline 18