Signing on the Digital Line

The corporate real estate executive faces a fragmented world when attempting to identify technology useful in the leasing and acquisition/disposition process.

According to Kenneth Kahn, managing director of strategic integration services for GVA Williams, there are scores of companies and close to 100 programs in the marketplace?some Web-enabled, some not?that address particular parts of the process.

While the development of electronic tools in this area is well under way, there is no industry consensus on which are the best to use. Much of this software remains in the form of client server packages rather than being on the Web, and the struggle to come up with a system that can integrate the entire process through a single Web-enabled platform remains incomplete.

Current transaction management software can be divided into a number of distinct categories, which have a considerable amount of overlap. There are online listing services. There are software applications for RFP generation and platforms through which proposals and leases can be compared. There is software to facilitate the due diligence process. There are systems for online lease negotiation, others for financial analysis and still others for the generation of lease or acquisition/disposition documents. Finally, there is software capable of transferring transaction records into a lease and/or property management system. The good news is that most of this software is user-friendly, utilizing Microsoft Word or Excel as a generating platform and customizing templates needed for particular stages of the process. Some require the user to create their own templates.

At the front end are LoopNet Inc. and CoStar Group Inc., the two online listing giants that track and post available commercial real estate market by market, submarket by submarket, street by street. They are rapidly becoming a standard part of how both the corporate real estate professional and the broker study the market. They have made the search much faster and far more transparent.

Both LoopNet and CoStar, as well as their smaller competitors, are supply driven. There are also at least three platforms?LeasePilot, Protegic Inc. and Netstruxr Inc.?that start with the demand side, with the would-be tenant or buyer posting their needs. "The initial phase of finding space particular to your needs in a given market is one of the most time-consuming phases of the entire (leasing or acquisition) process," noted Jack Seifrick, executive vice president & COO of Workplace USA Inc., the mother company of LeasePilot. "To help deal with that, we've populated LeasePilot with all the basic facts of each market, including address and square footage of each building. With a five-minute exercise, the would-be tenant or buyer can input his needs in terms of location, square footage and so on."

From there, landlords in the market receive e-mail letting them know of the corporation's search. They can click "yes" if interested, and then receive an electronic form into which they can upload information on the available property, including floor plans and photos. Netstruxr and Protegic use a similar system. These platforms result in the landlords and brokers doing the footwork and corporate real estate executives winding up with the information they need.

"It also allows suppliers of space to be more creative," pointed out Robert Patterson, senior vice president of corporate real estate for BankAmerica Corp., which uses Netstruxr. "For example, say you're looking for space in Kansas City. Under the old model, you'd look in Kansas City. But maybe someone in Wichita has property that matches your needs. Using the old model, he'd never even know what we were looking for or even that we were looking."

All three of these systems also provide the landlord or broker with the opportunity to electronically (or otherwise) submit an RFP.

Once a suitable property is identified, Peracon Inc. steps in. "We enable the second part of the process," explained Johan Fatemi, COO of Peracon. "We address a narrow market niche: the distribution, via the Web, of due diligence for investment sales and corporate real estate transactions."

The Peracon platform allows for the secure transmission of information?including environmental and engineering reports, historical financial statements and cash-flow projections?to the potential buyer or lessee. An executive summary prepared in PowerPoint with audio overlay and a virtual walkthrough feature describes each property. In effect, Peracon does away with the necessity of having to deal with brokers one at a time and eliminates the time and cost associated with the traditional book. In the little over a year since its founding, Peracon has assisted in the sale or leasing of some 60 properties for 30 different companies. The average deal size has been $10 million.

There are other firms, such as J.D. Edwards & Co., the 25-year-old granddaddy of software companies, with its roots in financial analysis, that can provide server packages able to store due diligence information, along with other programs capable of projecting 10-year-forward cash flows for revenue-producing buildings.





Lease Comparison

The corporate search for space usually results, particularly now during a tenant's market, in a number of competing possibilities. At least three Excel-based software packages?Lease Cost Solutions Inc.'s LseMod, ProCalc Inc.'s Tenant Rep Package and Tenantreps.net's Swiftcalc?have been designed to aid the corporate real estate professional in comparing the strengths and weaknesses of each possible lease. "Our lease analysis offers lease versus lease and lease versus buy for both international and domestic transactions, as well as before and after tax comparisons," explained Jim Duport, president of Lease Cost Solutions Inc., who worked as a corporate real estate manager for 18 years prior to founding his company.

LseMod automatically creates reports on profit and loss, net present value, cash flow and a one-page management summary comparing alternative and "what-if" scenarios. Lease Cost also has another software program, SpacePro, that helps calculate corporate needs, given the number of workers and the type of work involved.

ProCalc allows comparison of as many as eight different scenarios on one page, or an unlimited number of deals on multiple pages. The user can compare eight different buildings or the same building eight different ways.

"I use it to analyze various properties I'm going to lease or sublease," reported Tom Randazzo, manager of corporate real estate for National Semiconductor Corp., who uses LseMod. "When we go into a particular market, I get various proposals and feed them into LseMod. It allows me to compare apples with apples." He added that he liked the ability to detach any and all parts of the analysis and e-mail it to various departments?finance, the comptroller's office or the department that is actually going to use the space. "It provides you with financial reports and color charts that compare properties in all sorts of ways. It's very impressive when you send it to a senior executive."

"Before we used LseMod we had to roll our own with each deal," said Walt Spevak, senior director of corporate real estate at Autodesk Inc., a software developer and manufacturer. Spevak oversees 95 facilities around the world totaling 1.2 million square feet. "Now I can just plug in new information and within minutes have a new lease analysis."

Swiftcalc, the youngest of the competing lease analysis software packages, was launched in April 2001 by Cleveland-based Tenantreps.net. John Tobin, founder & president of Tenantreps.net claims that Swiftcalc can do all that LseMod and ProCalc can but at a much lower cost. While LseMod licenses its programs for between $1,475 and $1,570 and ProCalc charges an even steeper $2,650, Swiftcalc can be installed for $389. Swiftcalc's challenge in breaking into the corporate real estate market, according to Tobin, is its affordability. "Most of our customers are smaller firms," he said. "It works just as well for larger corporations, but we're underpriced. Most corporations think they have to pay more."

Once the decision is made to go with a particular lease or acquisition, the border between lease transaction, lease administration and portfolio management software becomes fluid. Both VirtualPremise Inc. and Cerebis L.L.C., for example, allow the corporate user to negotiate lease terms with landlords and brokers in cyberspace and leaves an electronic record of each step at the end of the process. "It allows you to take 20, 30, 40 transactions together and look at the bottle necks and improve on the process," said Derek Anderson, executive vice president of VirtualPremise. After the lease is signed, VirtualPremise has the capacity to send notifications of renewals, expirations, options and rent bumps for the entire corporate portfolio.

With VirtualPremise also offering project management software, its ability to connect leasing transaction and portfolio management appealed to Ford Motor Land Services Corp. when the real estate arm of the auto giant decided to use VirtualPremise for its entire global portfolio in September 2001. "Ford Land wanted a single project management and collaboration tool that could be used by the entire organization and drive processes, no matter the size or scope of the project," said Sean McCourt, chairman & CEO. "Our early results have been very promising, and we continue to see VirtualPremise used in a number of different ways."



One Platform

McCourt's desire for a single platform that can unify the leasing and acquisition/disposition process (and go beyond) is a common one among corporate real estate executives and commercial real estate professionals. There are at least three major efforts under way to create an end-to-end workflow platform for leasing, sales and disposition molded to corporate needs. Netstruxr Inc. and Workplace USA Inc.'s LeasePilot are up and running, while Project Octane, a technology consortium consisting of some of the nation's leading commercial real estate service firms, is still busy working to develop WorkplaceIQ, which it hopes will become the industry platform for commercial real estate transactions.

Founded in November 1999 and backed by a number of major multinationals, including International Business Machines Corp., Bank of America, The Prudential Insurance Co. of America, Duke Energy Corp. and Enron Corp., Netstruxr provides the online means to identify available property, negotiate and close a lease or sales transaction. Using the platform is free for both the corporate real estate professional and the landlord or broker. Once the deal is completed, Netstruxr takes a commission of 1.5 percent, lower than most brokers. As of early 2002, 30 corporations were using the platform, as well as thousands of landlords, and 288 acquisitions and 292 dispositions were being negotiated.

"There's two real value propositions," said Mike Baumann, executive vice president & general manager of Netstruxr. "The first is liquidity. We're helping to create a competitive market for the corporate client; it's really a reverse auction. Secondly, we provide an excellent management tool that allows you to follow the entire process through to end."

"In the current soft market, we've been using Netstruxr in the renewal process to compare the space and terms we have with possible alternatives," reported Patterson. "Because posting on Netstruxr is anonymous, we've had landlords offer us a better deal than they were offering us for a renewal."

LeasePilot, although similar in function to Netstruxr, comes out of a very different history. It was developed by Workplace USA Inc., a 14-year-old, Dallas-based real estate firm that specializes in serivng the corporate client. While LeasePilot can be licensed as software, its primary use so far is by Workplace USA's clients.

"We'd been looking for three years at technology tools that would help facilitate our end-to-end business model. There was technology out there, but it all focused on one silo," said Seifrick. "We couldn't find a tool that managed the whole thing from start to finish, something that included the entire leasing process and helped with project management as well. So we formed a division, Workplace Exchange, and we built the system ourselves. LeasePilot is a home-grown product that has been self-financed. There's no pressure to sell it as a tool in the marketplace. That's given us the leisure to develop it carefully and keep building and adjusting it even as we use it."

Meanwhile, Project Octane?a consortium of commercial real estate service firms consisting of CB Richard Ellis Services Inc., Insignia/ESG Inc., Jones Lang LaSalle Inc. and Trammell Crow Co.?is busy working to develop WorkplaceIQ. When completed, WorkplaceIQ will integrate the management of acquisition/disposition and leasing processes, as well as construction and fit-out projects. While it was supposed to be rolled out commercially in May 2001, WorkplaceIQ remains in the beta stage.

"Online transactions are still in the very early stages of development," summed up Tom Wenkstern, senior managing director with Insignia/ESG. "People have a lot of ideas about where they want to go, but just how we'll get there remains to be seen."

One thing, however, does seem certain: Technology is providing the means by which the historically fragmented leasing and acquisition/disposition process can be pulled together through use of the Web to save corporate real estate divisions time and money.