SEPTEMBER - 2023CIOAPPLICATIONS.COM9Q. How important is due diligence in a disposition?A. As a former in-house broker within big corporations, I've had the good fortune to have been surrounded by lawyers whose job it was to keep me safe. One thing I make sure to do is to get input from a client's human resources, security, legal, finance and other departments, in addition to real estate. I like to create an approval team of all stakeholders so no one is surprised or raises objections at the last minute. I like to keep communication lines open. Q. How much information do you share with the properties' landlords? A. We like to involve the landlord up front. This helps gain trust from the landlord, and you're transparent, you're likely to secure faster approval of a new subtenant or replacement client. An effective disposition process is not just about focus and marketing, it's also about creating approval team, doing due diligence, building trust within the market ­ the landlord, the potential customers, contractors, etc. We even pull title reports in advance, and disclose any issues with the building or mechanicals that needs addressing. We build that right into the marketing. Q. What are some common pitfalls in handling dispositions? A. It's important to know both the worst and best possible terms and price that the market has accepted for similar properties. Often, those surveying and valuing the property aren't given the context behind the disposal lease or sale by the vendor/client. If a company wants to lease or sell a property quickly, the price may be very different than if they were prepared to wait for the long-term.Not doing all the upfront homework research, not keeping stakeholders in the loop, not thinking like a purchaser ­ if any of these goes awry, it can eat up valuable time. It costs a little more upfront to do the due diligence, but it saves money in the end.I don't like to be surprised, so I don't avoid problems. I like to find the problems first, let everyone know about it up front, and keep everyone up to speed. People need to know what they're buying, or the deal could die in the end. Anticipating problems shortens the time frame of the sale. We have a high level of confidence that we'll make our target number because we do our homework. The biggest thing that kills a deal is a surprise, either a lower price than expected for seller, or costly site issues for buyer. We have done this for years. We commit to setting expectations ­ for example, we aim to sell within 20% of our asking price -- timing is more important than pricing. It's a balancing act. We will enter an incentive program to put our fees at risk to provide assurance to the client that we have priced it appropriately. It gives us an incentive to help the client move the transaction quickly, instead of continuing to bleed dollars by letting it sit on the market. Keywords:· Sales leaseback· Equity participation· Control in real estate· Acquisition and disposition· Excess real estatePart 2: Are real estate dispositions part of your annual business strategy?In the second installment of our Q&A series with Savills Head of Dispositions for North America, Gerard Staudt talks about incorporating real estate dispositions as part of a company's overall business 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. Businesses with real estate portfolios should always have dispositions as part of their business strategy, aligning real estate planning with the mid- to long-term business planning. A good real estate plan will balance acquisition and disposition in order to control the amount of P&L assets tied to surplus real estate that doesn't support the company's growth plans.Q. What are the key steps in real estate1. Provide detailed review of local and global objectives, and each site's assets and issues 2. Deliver market data from all qualified resources and brokers 3. Analyze and prioritize direct real estate comps on location and property condition 4. Establish expectations of timing, price, cost, and financial outcomes 5. Develop creative strategies to meet corporate and field objectives 6. Identify targeted principals, buyers and users 7. Execute strategic marketing campaign 8. Facilitate negotiations between the principals 9. Complete project documentation 10. Quantify hard savings results. Not doing all the upfront homework research, not keeping stakeholders in the loop, not thinking like a purchaser ­ if any of these goes awry, it can eat up valuable time. It costs a little more upfront to do the due diligence, but it saves money in the end
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