Cost Reduction Strategies Taskforce

Presenters: Lynn Kious, Johnson Controls Jeri Ballard, Shell Real Estate

Cost Reduction Strategies

MISSION
At the Portfolio Level, develop strategies that integrate Real Estate, Operations, Projects, Sustainability and utilization to meet cost savings targets/objectives.

SCOPE OF TASKFORCE
Low hanging fruit is gone, we are now into 2-3 years of cost savings initiatives - What is next/now what? How can we learn from each other?

GOALS
Develop a base of case study examples of cost savings initiative that have been successful (implemented) Develop a list of recommended performance measurements and KPIs Whats new? Innovative Ideas?

OBJECTIVES
Case Studies / Best Practice Sharing Interviews Article Editorial / Whitepaper Presentations Virtual / Webinars or In-person
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Cost Reduction Strategies

COMMITTEE
Lynn Kious, Johnson Controls Chair Jeri Ballard, Shell Co-Chair Andrew Hallissey, CB Richard Ellis Mark Schleyer, AT&T Grant Rockwell, Kaiser Permanente Chris Landers, Fischer Company Rebecca Shirey, Herman Miller Sholem Prasow, Teknion Stephanie Leta, Jones Lange LaSalle Sandy Heistand, Advent Software Craig Hendrickson, CB Richard Ellis

MEETINGS
1st Tuesday of Month 10:30am (Pacific Time)

DELIVERABLES
Innovative idea sharing Real-world case studies with results Discussion forums White papers

Cost Reduction Strategy Leveraging LEED EBOM 2009

High ROI and Short Paybacks Possible
ROI examples: hard savings vs soft costs Energy Conservation Measure Capital Cost Annual Energy and Water Cost Savings 11,320 14,365 3,893 11,622 57,568

LEED for Existing Buildings: Operations and Maintenance 2009 targeted at greening the worlds existing stock of buildings LEED EBOM demonstrated to: Reduce energy and water costs on an ROI basis for individual buildings Attract LEED-seeking tenants Increase rents

Light Fixtures Occupancy Sensors Day-Lighting sensors Low-Flow Fixtures Re-Commissioning

43,100 14,200 11,500 27,909 35,071

Total Approximate EBOM Certification Costs

304,291 25,000

98,768 Source: Sholem Prasow, Teknion

Cost Reduction Strategy Leveraging LEED EBOM 2009

Further savings possible through synergies in a portfolio environment Object of this CoreNet study to identify the added benefits of managing the entire portfolio synergistically
Impact of USGBCs Portfolio Strategy (to be launched in 2010)
Volume LEED certification to streamline process and reduce costs Benefits of hard and soft district energy programs Streamlining policies and procedures across multiple facilities

Results expected ready for presentation by CoreNet Global Fall Summit

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Portfolio Knowledge is the Key to Cost Reduction

Bearing: 1) Strategic 2) Non-Strategic Short Term 3) Surplus

Operational Requirements: 1) Preferred Term 2) Flexibility Needed 3) Risk Tolerance

Financial Impacts: 1) Balance Sheet Considerations 2) Tax Treatment 3) Use of Proceeds (Debt Reduction/Reinvestment/Stock Repurchase)
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Pursue Multiple Cost Drivers But Understand Which Ones Really Matter
Total Cost of Occupancy
Location:
Drives the overall cost per sqft Country, city, and sub-market Urban versus suburban Quality of building (class A, B, or C)

Space:
Total number of people accommodated Size of offices, workstations, amenities and special use spaces (sqft per person) Dynamic sharing ratios, unassigned workspace and home working policies

Services:

Holding:

Consistent global standards and service Lease versus Own levels Leverage goods and services purchased Capex versus opex tradeoffs Exit strategy drives holding strategy Legal Entity Tax Treatments

Higher density and utilization = Ability to efficiently space plan the floors increased wear and tear Amount of vacant space in the portfolio

Biggest Opportunities are not Short-term

High Demand management Improved dynamic sharing Outsourcing Location change - country

$ Impact

Rebid Contracts FM Service levels Low 1 year

Location change city Location change - City vs Urban

Speed of delivery

5 year