SEPTEMBER - 2023CIOAPPLICATIONS.COM8CXO InsightsIN MY VIEWPart 1: Understanding the finer points of real estate dispositionIn the first installment of our Q&A series with Savills Head of Dispositions for North America, Gerard Staudt explains the key drivers of a successful corporate real estate disposition strategy. All companies should evaluate their real estate portfolio at regular intervals and conduct in-depth analyses to ensure that the space they occupy or own is still supporting business operations and growth. In addition to looking at the current state of their real estate needs, companies should conduct forward-looking forecasts, to ensure that their portfolio will not lead to any unforeseen cost run-ups. When it comes time to shed some space, it will pay to have on hand a well-formulated acquisition and disposition strategy that can respond quickly in a dynamic market. Q. Why is it so important that dispositions move quickly? Gerard Staudt: The cost of holding onto surplus property is higher than the cost of letting it go for less. It's not that hard to get to the right answer in a week, as opposed to a year, if you approach it differently from a normal long-term lease transaction. More than anything, it's about setting realistic expectations. Then, it's about being creative so as not to lose a deal while continuing to market the property, instead of getting entrenched in closing a particular deal, in a series of exclusive negotiations. Keep marketing and bringing in alternatives. It's not a deal until the check is cashed. If you work with a broker who doesn't focus uniquely on dispositions, you're likely find the broker's focus is diluted. Most will do both acquisitions and dispositions, and those brokers naturally focus on the more lucrative area of acquisitions. Most of the time, they set a price for dispositions that is too high. The client's expectations are thus set too high, so they wind up sitting on excess property for too long. If a property is priced wrong or not consistently marketed, a transaction can take a year to three years, instead of two months to a year. I never want a client to sit on anything for 12 months. And I do whatever it takes to keep the transaction moving. For one client, the purchasers' appraiser called and asked to see the building the next day. So, I cleared my calendar, got on a plane, and met the appraiser there to make sure it went well. Sometimes, working on a disposition in a tight time frame can be so detailed it's painful. It takes relentless, direct, consistent, friendly persistence. And, an uncanny ability to pull information out of people. Earning trust is the key. Q. What is your secret to accelerating a disposition transaction? A: We plan on bringing in additional buyers/sublessors. We focus on the details ­ we interview the local brokers and select the one that we feel were best-suited to the deal. If necessary, we will figure out an alternative broker compensation model to even out the incentive. It takes an incredibly detailed analysis of the market and creative approaches to closing the deal. Then, we manage the listing very closely to accelerate the sale. If one potential deal isn't likely to happen, we ask "What's the next plan?" By keeping alternatives coming in until the deal closes and check clears, we accelerate the closing, which is the best way to maximize a company's return on a disposition. We keep on marketing, and don't take it off the market without a solid nonrefundable deposit.Also, we anticipate problems, which for me, comes from 30 years' experience, from mistakes as well as successes. The way you speed up the process is to approach marketing a disposition by thinking like a purchaser ­ if they will want to see inspection reports, as the seller, you need to do the inspection in advance and be prepared to share it with serious buyers, rather than the normal sequence of waiting until near the end of the negotiations and allow the purchaser do it. If we know of a problem, we don't hide it, we put it on the flyer up front. Just remember, if we had three bids on a property and we picked the best offer, and then the purchaser discovers something negative, we have just given that party the leverage to negotiate down the price -- after the other purchasers have gone away. My motto is, No surprises. DISPOSITION REAL ESTATE: WHAT IS IT AND WHAT YOU NEED TO KNOWGerard J. StaudtAN INTERVIEW WITH GERARD J. STAUDT, SENIOR MANAGING DIRECTOR, HEAD OF DISPOSITIONS, NORTH AMERICA, SAVILLS NORTH AMERICA
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