Journal of Corporate Real Estate

Corporate real estate management at Aventis

Christian Kühni Björn Christmann
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Christian Kühni Björn Christmann, (2004),"Corporate real estate management at Aventis", Journal of Corporate Real Estate, Vol. 6 Iss 3
pp. 265 - 277
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Corporate real estate management
at Aventis
Christian Kühni* and Björn Christmann**
Received (in revised form): 17th February, 2004
Aventis Real Estate GmbH & Co. KG, Im Nassauer Hof 3, 65795 Hattersheim am
Main, Germany; Tel: *⫹49 (0) 69 3 05-2 47 10, **⫹49 (0) 69 3 05-2 47 11;
Fax: *⫹49 (0)69 3 05-2 47 13, **⫹49 (0)69 3 05-2 47 13;
e-mail: *Christian.Kuehni@aventis.com, **Bjoern.Christmann@aventis.com
Downloaded by La Trobe University At 10:50 21 June 2016 (PT)
Christian Kühni trained and qualified as a
‘Diplom-Kaufmann’ (Master’s degree equivalent
in business administration) at major Swiss
banks. From 1980 to 1983 he worked as
Treasurer and Controller of BP Oil International
Ltd in Zurich and London. This was followed
by two years as an analyst for a private
equity investor in London. Christian thereafter
managed the representative office of the Royal
Trust Bank Switzerland in Toronto for a number
of years. As Managing Director at ABB Credit
BV in Amsterdam and Zurich, he was respon-
sible for cross-border leasing business until
1993. From 1993 to 1998 Christian was Head of
Project Development and Promotion at ABB
Immobilien AG, Zurich. He has been Managing
Director of Aventis Real Estate since 1998. In
this capacity he is responsible as Global Head of
Real Estate for the Aventis Group’s entire real
estate business.
Björn Christmann studied economics at the
University of Karlsruhe. After qualifying from
university as a ‘Diplom-Wirtschaftsingenieur’
(Master’s degree equivalent in industrial en-
gineering) he joined Hoechst AG as assistant to
the Head of Corporate Real Estate Management
in 1998. From 1999 until 2000 he worked as
assistant to the Managing Director of Aventis
Real Estate. Following his studies at the
European Business School, where he qualified
as a real estate economist, he assumed
Journal of Corporate Real Estate Volume 6 Number 3
responsibility for the ‘Group Property Projects’
sector at Aventis Real Estate from 2000 onward.
In this capacity he is responsible for implemen-
tation of real estate transactions at Aventis
affiliates around the world.
ABSTRACT
Corporate real estate management (CREM) is
the most important minor matter in non-
property companies. Therefore CREM must
commit to and deliver significant financial
results in order to improve core business com-
petitiveness. Ultimate valid criteria for suc-
cess are contributions to earnings per share
(EPS) and free cash flow. Pragmatic ‘on-
site’ solutions are required by business units
within their planning horizons, thus speed is
key to success. This Aventis Real Estate
case study presents an example of how a
‘non-core activity’ has become an ‘other-core
activity’ within a globally operating phar-
maceutical company. This paper demonstrates
how measurable results can be repetitively
delivered with a lean team and optimised
financial deployment.
Keywords: centralised corporate real
estate management, local delivery of
services, real estate inventory taking,
Journal of Corporate Real Estate
occupancy cost optimisation, divest- Vol. 6 No. 3, 2004, pp. 265–277.
䉷Henry Stewart Publications,
ment, ‘on-site’ project management 1463–001X
Page 265
 Corporate real estate management at Aventis
THE AVENTIS GROUP
From traditional chemical group to
research-intensive pharmaceutical
company
Historical development
The Aventis Group was formed in
December 1999 by the merger of the
German company Hoechst AG and the
French company Rôhône-Poulenc SA.
Both companies take pride in long and
successful company histories, each of
which extends back well into the
19th century. The merger created
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one of the world’s leading life
sciences companies with a distinct
American/European corporate culture,
rather than a French/German one.
Aventis sold off its agro business in 2001
to concentrate exclusively on its
pharmaceutical business. During the
course of this strategic repositioning, the
group divested itself of numerous business
activities, especially in the traditional
chemical and industrial sectors, which are
not part of the core business.
Today Aventis focuses on three core
businesses: prescription drugs (Aventis
Pharma), human vaccines (Aventis Pas-
teur) and animal health (Merial, a 50 per
cent joint venture with Merck).
The main objective is to achieve product
leadership in several specific areas, includ-
ing allergies, cardiology, diabetes, oncology
and osteoporosis. To that end, the following
strategies have been defined:
• Forming alliances
• In-licensing products
• Reinforcing sales efforts
• Increasing US market share
• Recruiting and retaining the best scien-
tists
Internally, Aventis is organised around
four business functions: Drug Innovation
Page 266
& Approval (research and development),
Commercial Operations (sales and market-
ing), Industrial Operations (manufacturing)
and Corporate Activities.
Facts and figures
At the end of 2002, Aventis employed
78,000 people, 20,000 of whom were
pharmaceutical/medical sales representa-
tives. Throughout more than 100 countries,
the group generated sales of c20.6bn, two-
thirds of which came from the USA, Japan,
France and Germany. The company posted
a net income of c2.1bn after taxes. R&D
costs were c3.4bn in 2002. Aventis SA is
traded on the Paris, Frankfurt and New
York stock exchanges and is one of the
world’s leading pharmaceutical companies,
with total assets of c31.1bn and an actual
market capitalisation of c50bn. For this
reason, financial reports adhere not only to
the provisions of local commercial law, but
also to French and US GAAP. The amount
of real estate-related information required
by Form 20-F, which must be submitted in
compliance with US Securities and Ex-
change Commission (SEC) guidelines, has
significantly increased over the past three
years. This trend is expected to continue,
particularly in view of the Sarbanes-Oxley
Act passed into law by the US Congress in
2002. The Sarbanes-Oxley Act aims to
restore public confidence in financial
accounting systems. It calls for closer
integration of corporate real estate manage-
ment in financial reporting.
REAL ESTATE
Assets worth e10bn in over 100
countries
Real estate represents 45 per cent of
fixed assets
The historical acquisition value of land,
buildings and equipment reported by

Aventis SA
Strasbourg
98.04%
Hoechst AG
Limited partner
Frankfurt am Main
100% 100%
Aventis Real Estate Aventis Real Estate
1
Management GmbH GmbH & Co. KG
Hattersheim am Main Hattersheim am Main
Unlimited partner
Advisory Board: Aventis Group Chief Financial Officer (CFO), Group Treasurer,
Representative Corporate Legal, Representative Corporate Tax
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Aventis for 2002 is c9.4bn; the book
value is about c4.5bn. Operating lease
commitments are c1.3bn. In view of
these figures, the real estate portfolio’s
cost-effectiveness and investment value is
obvious.1
Strategic products and markets
determine location
Aventis owns property in more than 100
countries around the world, whereby the
highest concentrations are in France, the
USA, Germany, Great Britain, Italy and
Japan. This geographic distribution of real
estate is driven by site-specific con-
siderations, which are important for
strategic pharmaceutical products and
markets. Due to production facility re-
quirements and distribution networks,
plant sites are generally located outside
large metropolitan centres.
Property utilisation mainly takes the
form of laboratory, production and
warehouse facilities, most of which are
company-owned, and office space, which
is usually leased to maintain flexi-
bility. Whereas office and laboratory
space is constantly expanding, production
facilities and warehouse space are being
reduced in connection with site con-
solidations, productivity increases and
outsourcing.
Kühni and Christmann
Figure 1 ARE
integration within
the Aventis Group
Project management
Aventis Group portfolio
Land development
own portfolio
CREM from 1998 to today: History of
a dynamic development
From ‘non core’ to ‘other core’ activity
Concentration on the present day core
business led Hoechst AG to set up a separate
company to handle real estate, which is
not required for business operations. In-
fraServ GmbH & Co. Grundstcksentwick-
lungs KG was entered into the commercial
register in January, 1997. It was later re-
named AREATIS Immobilien GmbH &
Co. KG and is known today as Aventis Real
Estate GmbH & Co. KG (ARE) (Figure 1).
ARE has been classified by Aventis as an
‘Other Core Activity’ since 2002. ‘Other
core’ is an internal definition used by
Aventis in distinguishing between ‘core
business’, ‘other core business’ and ‘non-
core business’.
Sale of property not required for
business operations
Originally, ARE’s function was to bundle
a total of 8 million square metres of real
estate, which was not needed for busi-
ness operations, into large, contiguous,
unused parcels of land, to develop the
marketability of those parcels and then to
sell them. As part of the programme to
divest real estate management for property
not required by business operations, the
Page 267
 Corporate real estate management at Aventis
two housing companies ‘Hoechst Bauen
& Wohnen’ and ‘Wohnungsbau Hoechst’
were placed under ARE control.
The first significant divestment occurred
in 1998 when the Hoechst housing com-
panies sold 9,100 company-owned apart-
ments to the Deutsche Bank Group. In less
than 90 days, this transaction was con-
cluded not only successfully, but also in
record time (in comparison, many other
housing company divestments took years to
conclude). Keys to this success were, on the
one hand, the property for sale (a well-
maintained housing portfolio with long-
term tenants situated mainly in attractive
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locations in the Rhine-Main region) and
on the other hand, extremely detailed due
diligence records, which were made avail-
able to interested parties 24 hours a day in
three separate data rooms. This transac-
tion’s successful execution demonstrated
the value of close cooperation within the
project team, good preparation and strict
adherence to action plans, drawn up at the
start of a project.
Building on this success, another 25
large-scale real estate sales were made in
Europe following the same formula. Many
of these transactions involved properties
that were unusual for the market, eg the
Jahrhunderthalle (a major concert hall
in the Rhine-Main region), guesthouses,
turn-of-the-century villas, empty office
buildings and ‘orphan sites’, ie abandoned
production facilities. It was this string of
operations which brought ARE to the
attention of corporate management in Paris
and Frankfurt.
Based on the success of these divestment
transactions, ARE was assigned the task of
locating a new headquarters for the Aventis
Group.
Planning and realisation of corporate
headquarters in just 286 days
In February 1999, the new top manage-
ment at Aventis decided to establish its
Page 268
new corporate headquarters in Strasbourg.
The deadline for the move-in was set for
October 1999. Since Strasbourg’s available
office space proved inadequate to meet
the specification calling for ‘all employees
under one roof’, it was decided to erect
a new building together with a general
contractor and investor. The new head
office was ready for occupancy in record
time: planning and realisation was com-
pleted in just nine months. Representing
a total investment volume of c28m,
where 50 per cent was been spent on
‘state-of-the-art’ IT solutions, the new
corporate headquarters provides office
space for up to 200 employees. A
nine-year lease was signed for the build-
ing, whereby Aventis can exercise an
annual special right of cancellation after
the end of the third year. The success of
this project was a decisive factor in the
company’s decision to designate ARE as
a Centre of Real Estate Excellence and
since then it has carried responsibility for
the group’s global real estate portfolio.
AVENTIS REAL ESTATE (ARE)
Integration within the Aventis Group
ARE is a legally independent company
integrated into Corporate Finance &
Treasury (CFT), which is part of the
Finance Family within the Aventis Group
(see Figure 2).
This integration is based on an asset-
oriented understanding of real estate and
on the close relationships between real
estate and finance business activities,
which result from it. Due to the Aventis
Group’s good ratings (A⫹ positive out-
look) and to the fact that the debt-equity
ratio has diminished significantly in recent
years, real estate is not used in refinancing
transactions. For this reason, sale and lease
back transactions were not performed in
the past.

Group Treasurer
Special
Projects
Treasury
Controlling
Bank Cash
Benefits
Financing & Management
Subsidiary Finance & Treasury
Coordination Systems
Control over the ARE business
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management takes the form of an advisory
board consisting of the Group Chief
Financial Officer (CFO), the Group
Treasurer and a representative from
Corporate Legal and Corporate Tax.
Concerning day-to-day business matters,
the Managing Director of ARE reports to
the Group Treasurer in Strasbourg.
Weekly CFT staff management meetings
serve in this context as a management tool
and communications platform.
Centralised CREM
Within the Aventis Group, ARE operates
as a Centre of Real Estate Excellence.
The centralised organisational structure is
particularly advantageous in view of the
strict separation of real estate operations
from the core business, which allows
for the ongoing development of inde-
pendent, property-oriented core com-
petence through the coordinated efforts of
specialised experts and managers.2 ARE is
solely responsible for the business results it
produces.
Charges based on typical market fees
As a profit centre, ARE plays the role of
an external consultant, supporting group
companies in property-related questions
on competitively priced success fee-based
structures. Despite strong demand, the
Kühni and Christmann
Figure 2 ARE
integration within
CFT
Administrative
Assistant
Money
Corporate Aventis
Markets &
Finance Financial Real Estate
Products
range of services provided by ARE within
the corporation is not offered externally at
the present time.
Profit centre orientation
Aventis benefits from the profit centre
organisation versus a traditional cost al-
location approach using the cost centre
concept, especially by transferring cost
and results accountability to ARE. This
has a positive effect on the profitability of
services offered as well as on customer
focus in real estate management. The
main advantage for Aventis Group com-
panies is that they incur costs only when
they make use of the services ARE offer.
This market mechanism creates a situa-
tion where group companies request only
necessary and economically sound services
from ARE and only for limited periods
of time, which translates into increased
cost awareness and ultimately, cost reduc-
tions.
Simple organisation structure with
two business areas
ARE consists of two business areas and a
support area. The Project Development
business area operates as a property owner,
developing and selling off its own land
holdings, ie land that is on ARE books. The
Project Management business area is a
service provider, handling the complete
Page 269
 Corporate real estate management at Aventis
Figure 3 ARE
organisation
Project Development
Aventis Real Estate
portfolio
• Land re-zoning
• Land sales
• Hereditary building
right management
• Internal property
register handling
Income:
proceeds from sales
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real estate portfolio of the Aventis Group.
ARE has its own finance and accounting
department, which supports both business
areas, fulfilling commercial and tax require-
ments and performing the reporting func-
tion within the group (see Figure 3).
Outsourcing external know-how
ARE intends to stay lean and flexible.
With a current staff of 14 associates who
participate in a profit-sharing programme,
the organisation focuses primarily on
project management and supervision.
Depending on the level of project activity,
ARE regularly draws on the know-how
of external resources. This outsourcing of
services necessitates continuous attention
to relationships with suitable service
providers. To this end, a database with
2,500 pre-selected suppliers has been
established over the course of six years.
The suppliers’ database is regularly up-
dated and coordinated with Aventis’
purchase department.
Four main activities — one objective
Tasks and mission of ARE
ARE’s main tasks are the development
and sale of property not required for
Page 270
Management
Finance &
Project Management Accounting
Aventis Group Aventis Real Estate
portfolio portfolio
• Property leases • Accounting
• Property sales • Controlling
• Property acquisitions • Reporting
• Inventory taking • Contract
• Occupancy cost processing
management
Income:
consulting fees
business operations, as well as supporting
group companies in conducting real estate
transactions, collecting and analysing real
estate inventory data and optimising oc-
cupancy costs. ARE’s prime directive in
this context is to achieve the objectives
set down by the advisory board, which
are aligned with the objectives of the
‘Aventis Finance Family’.
Project development of land not
required for business operations
The ARE real estate portfolio consists of
large, contiguous and undeveloped parcels
of land, which are located exclusively in
Germany, concentrated mainly in three
different regions: 50 per cent Rhine-
Main, 30 per cent Bavaria, 20 per cent
Rhine-Ruhr. The reason for this large
inventory of property not needed for
business operations is connected to the
business strategy formerly pursued by
Hoechst AG: land was purchased to
accommodate potential plant expansions
and associated residential development for
the housing companies.
The main task in the Project
Development sector is to develop and
subsequently sell off ARE’s own land
holdings. In the Rhine-Main region

alone, Aventis Real Estate is currently
developing approximately 1.5 million
square metres of land.
Preparation of legally binding land
development plans
The development process generally ends
with the submission of a legally binding
land development plan. Specific tasks in-
volve the development of urban land use
planning concepts in close cooperation
with planning officials. Apart from the
attractiveness of the parcel of land itself,
factors leading to success include a detailed
knowledge of public planning law and
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associated procedures, an understanding of
public and private interests along with their
respective willingness to compromise, as
well as the perseverance to follow through
with these activities in a systematic way
over extended periods of time.
No participation in project
implementation
In the subsequent marketing phase, par-
cels of land in various levels of develop-
ment are sold off to investors. Over the
past five years, more than 3 million square
metres of land area were sold. ARE
does not undertake additional develop-
ment steps such as building construction,
nor does it speculate with market risk in
the sense of attempting to increase invest-
ment value by retaining these parcels of
land for longer periods of time. Revenue
from sale of land represents a primary
source of income for ARE.
Given the size and deversity of ARE’s
land portfolio, it may take years to dispose
of all the heterogeneous excess sites. Once
the surplus portfolio is exhaused, opera-
tions can be ceased.
In addition, the Project Development
group manages several hundred rental,
lease and hereditary building right con-
tracts and maintains the internal land
register. To accomplish this task, an
Kühni and Christmann
internal GIS (Grundstücks-Informations-
System) database is being installed. This
property information system is designed
to store all relevant information about
ARE land holdings.
Project management and global centre
of excellence
Project management represents ARE’s
second source of income. In its function
as a Global Centre of Excellence, ARE
delivers a wide range of CREM services
to more than 450 group companies
worldwide. The spectrum comprises sales
and acquisitions (a sales volume of 1
million square metres of building areas
was posted from 1998 to 2003), leasing
(with a leasing volume to date of
approximately 200,000 square metres) and
occupancy cost reduction programmes as
well as location search and space and
workplace planning.
The focus of these activities involves
the creation of project teams, the selection
of external consultants and the preparation
of action plans, along with the monitoring
and control of real estate processes and
projects at the local level. The group
companies benefit from this professional
in-house support, especially since ARE is
a partner that shares the same corporate
goals.
In forming the project teams, coordina-
tion between the internal organisation and
external service providers is of crucial
importance. This requires both a detailed
knowledge of business processes and
management structures and an accurate
assessment of the outsourcing partner’s
capabilities.
Conducting ‘beauty contests’
ARE selects external consultants by means
of a standard selection process (a so-called
‘beauty contest’). ARE defines the tasks to
be performed and forwards these speci-
fications along with strict deadlines to
Page 271
 Corporate real estate management at Aventis
Figure 4 Typical Steering committee
project organisation
Project management
Aventis
Real Estate
Support Support Support
function function function
pre-selected applicants. On the basis of
the bidding documents, applicants present
their proposals together with binding fee
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schedules. Although this procedure is not
always the applicants’ favoured approach,
it carries the following benefits for Aven-
tis:
• Presentation of multiple solutions
• Verification and comparison of quality
and price
• Opportunity to check applicants’ per-
formance level and ability to meet
deadlines
• Increased transparency relative to
know-how and project implementation
skills of various suppliers
At the same time, applicants benefit from
the fairness of this selection process.
Conducting reverse auctions
In the search for new means of improving
efficiency and transparency, ARE plans to
use the ‘reverse auction’ procedure, which
is already in use by Aventis Global
Purchasing (annual purchasing volume
c6bn). The first step of this internet-based
process comprises evaluating potential
candidates for a given contract. In the
second step, suitable companies submit
initial bids based on specifications pre-
pared by Aventis. If several suppliers
qualify, a reverse e-auction is conducted
via the internet.
Page 272
Goals & guidelines
Process implementation & control
Preparation Execution Follow-up
Support
function
This procedure, which takes about 30
minutes, lets participating companies sub-
mit their bids via the internet and allows
them to monitor the relative position of
their bids vs competitors on their com-
puter screens in real time. The end of the
auction marks the definitive conclusion of
negotiations and the contract is awarded.
There are usually no follow-up negotia-
tions.
Practical three-phase support for local
real estate transactions
Process organisation flow generally fol-
lows the diagram in Figure 3. The steer-
ing committee, which comprises senior
local management from Aventis Group
companies, establishes the strategic project
goals. Subsequently, ARE takes charge of
forming the project team, drawing up the
action plan and preparing the project
budget (Figure 4). As project managers,
ARE monitors the adherence to quality
requirements, deadlines and cost projec-
tions, then reports back to the steering
committee.
Project management phases
The basic layout of the project manage-
ment process can be broken down into
three phases: preparation, execution and
follow-up. The most important of these is
the one that requires the greatest invest-
ment in time, the preparation phase. This
is crucial for the smooth execution of the

Preparation
• identifying needs • negotiating
• setting objectives
• coordinating internal & • closing
external support
functions • providing
• organising tenders for
selecting external
support
• setting up action plans
& milestones
• preparing transaction
documentation & due
diligence
• preparing budgets &
authorisations
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transaction and for the overall success of
the project. This phase includes:
• Defining goals by mutual agreement
with the customer
• Conducting the bidding process and
selecting external service providers
• Managing the project team
• Establishing action plans
• Preparing due diligence records
• Preparing the project budget and in-
ternal approval processes
The execution phase, ie negotiation and
closure, is handled by ARE and the local
project team. Most decisions are taken
directly by the project team. Depending
on the scale of the transaction, authorisa-
tion by a higher-level board may be
required.
In the follow-up phase, a complete
project review is conducted and results are
evaluated. All project participants take
part in this debriefing. This phase of the
project is extremely important: key find-
ings are exchanged throughout the Aven-
tis Group on a worldwide basis and
Kühni and Christmann
Figure 5 Project
Execution Follow-up
phases
• benchmarking
transactions results
• administration
transactions of files
management
information
promote continuous process improve-
ment. ARE records the results obtained
by external service providers in an
in-house information system.
The individual project phases and
their respective tasks are summarised in
Figure 5.
Checklists as a guide
ARE has prepared detailed process des-
criptions for real estate acquisition, divest-
ment, leasing and letting, based on
Sarbanes-Oxley 404 instructions. In addi-
tion, checklists for all project phases have
been made available to group companies
as an online help tool (see Figure 6). The
aim is to offer a guide for local employees
to follow, so they can make all prepara-
tions necessary for a given transaction in
advance and thus accelerate the transac-
tion process.
Responsibility for real estate processes,
approvals and reporting
ARE’s responsibilities and areas of
authority are listed in the Global
Authorisation Policy (Management
Page 273
 Corporate real estate management at Aventis

Figure 6 Example Sample Checklist ‘Real Estate Data’

of a checklist
1 Environment/Vicinity
1.1 Geographic location map
1.2 Public transportation map (eg bus, metro)
1.3 Road map
1.4 Vicinity map (eg neighbouring buildings)
1.5 District zoning map
1.6 District development plan

2 Site (Land area)

2.1 Aerial photo
2.2 Site plan to scale including infrastructure
2.3 Servitudes table and map
2.4 Zoning right
2.5 Usage reserve
2.6 Restrictions
2.7 Ownership (register copies)
2.8 Leasehold/Hereditary building right agreement (if any)
2.9 Liens (if any)
2.10 Copy of purchase contract
2.11 Contamination survey for ground
2.12 History (previous owners etc.)
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3 Buildings
3.1 Photos
3.2 Perspectives
3.3 Copy of construction permit(s)
3.4 Floor plans indicating usage and sqm (horizontal)
3.5 Section plan (vertical)
3.6 Contamination survey for buildings (asbestos etc.)
3.7 Technical survey for buildings
(statics, heating, cooling, elevators, kitchens, facade, roof, toilets cabling etc.)
3.8 Permissions (fire brigade, health department, elevators, etc.)
3.9 Lease contracts
3.10 Other contracts (suppliers etc.)
3.11 Infrastructure table and map
3.12 Investments and fixtures list
3.13 Insurance policies indicating value and coverage
3.14 a) Rent calculation table
b) Fixed asset costs table (depreciation, administration, tax, insurance, capitalisable maintenance)
c) Operating costs table (energy, contamination, cleaning, security, maintenance and repairs)
3.15 Facility management table (services provided and intervals)
3.16 Table of necessary investments (indicating defects and costs)
3.17 Mortgages and other financings table
3.18 Pending legal cases list
3.19 Construction date and history
3.20 Restrictions (eg monument protection, copyrights, architect, usage etc.)
3.21 Building valuation survey/appraisal

4 Other Information
4.1 Market survey
4.2 Market contacts/penetration/listing so far
4.3 Commitments (eg intermediary, agents etc.)

1st priority information

Board), Capital Approval Request porate Environmental, Health &

(Corporate Controlling), the Corporate Safety).
Finance & Treasury Approval Guidelines These internal finance-related
& Responsibilities (CFT), the Lease vs guidelines call for ARE involvement in all
Buy Guidelines (Corporate Controlling real estate transactions from the earliest
& CFT) and the Global EHS possible stage. Transactions in excess of
Acquisition/Divestiture Standard (Cor- c2m require a detailed evaluation by

Page 274

ARE before they can be submitted to the
relevant decision-making committee.
There are no strict company-wide
guidelines with respect to workplace size
or furnishing/equipment standards. These
issues, which are highly dependent on
local conditions and external regulations,
are handled by group companies in each
country on their own authority. ARE
supports local management in these mat-
ters with benchmarks and best practice
guidelines.
Global real estate inventory taking and
occupancy cost management
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In December 2002, the decision was
taken to collect the most important real
estate data on a corporate level as a
qualitative and quantitative supplement to
the balance sheet data covering land,
property and equipment as well as operat-
ing lease costs.
In order to collect these data, ARE
developed the RETOC (Real Estate
Inventory Taking and Occupancy Cost
Management) database.
The underlying aim in implement-
ing this database is to increase the
transparency of real estate inventories and
the associated occupancy costs. ARE did
not develop a completely new defini-
tion of occupancy costs from scratch,
but chose instead to adopt a slightly
modified version of the OPD (Occupiers
Property Databank) guidelines developed
by the UK organisation, IPD. Occupancy
costs are classified into the following
categories:
• Building occupation expenses
• Building adaption and equipment ex-
penses
• Building operation expenses
• Building management expenses
Using these data, ARE will work together
with Aventis Global Purchasing and pur-
Kühni and Christmann
chasing groups (‘spend teams’), which
have been created to handle individual
purchasing items, to identify and exploit
cost reduction opportunities.
The first phase of the RETOC project
(Figure 7) will be implemented in the
four key countries, the USA, France,
Germany and Japan. Canada, Great
Britain, Spain and Italy will follow in a
second phase.
Intra-company leasing
Since ARE does not own the real estate
required for business operations, it can-
not invoice intra-company leasing charges
(at market rates). Corporate Real Estate
Management is of the opinion that in-
ternal leasing would be quite beneficial,
especially because this would force the
business units to exercise better discipline
with regard to space utilisation.
ARE website
External and internal customers have
access to important information concern-
ing ARE on their website (www.aventis-
real-estate.com, see Figure 8), which
also provides details about current (and
completed) projects from the project
development and project management
business areas. Not many non-property
companies display detailed information
on ongoing and past internal projects to
third parties.
CONCLUSIONS
Importance of CREM to
non-property companies
Aventis is a company focused on R&D,
production and marketing of phar-
maceutical products. In this respect, real
estate plays only a ‘major supporting role’.
Nonetheless, (real estate) costs must be
rendered transparent and subjected to
strict controls, also in the profitable
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 Corporate real estate management at Aventis

Figure 7 RETOC:
Sample occupancy
costs measurement

DRAFT
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Figure 8 ARE
website

Page 276

and highly competitive pharmaceutical
market. In order to improve core business
competitiveness in a sustainable fashion,
an effective CREM must commit to and
deliver a significant financial contribu-
tion.
Only practical, results-oriented
approaches count
CREM will gain acceptance within the
Aventis Group only when measurable
results are achieved. Valid criteria for
success include free cash flow and earn-
ings per share (EPS). Further discussions
on the subject of real estate are necessary,
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but the pursuit of perfection must not be
allowed to hinder pragmatic solutions.
Speed as the key to success
Real estate time scales must be adapted to
fit those of the core business. Today’s
business plans in the pharmaceuticals sec-
tor generally cover timeframes of no more
than three years. The challenge, then, for
other core businesses in particular, is to
Kühni and Christmann
deliver measurable results in this short
time.
Staying small and strong
Constant change demands the ability to
react and adapt quickly. Therefore, ARE
intends to hold its fixed costs as low as
possible. Aventis has designed its CREM
strategy to meet the demand with a small
core team that assumes total responsibility
for this business activity. Services required
to support this function are outsourced for
maximum flexibility, which necessitates
a clear understanding of supply chain
management.
REFERENCES
(1) Aventis (2003) ‘Geschäfts und
Finanzbericht Aventis 2002’ Aventis,
Strasbourg, p.119.
(2) Schäfers, W. (1998) ‘Organisatorische
Ausrichtung im Immobilienmanagement’,
in Schulte, K.-W. and Schäfers, W. (eds)
‘Handbuch Corporate Real Estate
Management’, Rudolf Müller, Cologne,
pp. 259–266.
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 This article has been cited by:

1. Georg StadlhoferReality Consult GmbH, Frankfurt, Germany. 2010. Corporate real estate performance. Journal of Corporate
Real Estate 12:2, 96-116. [Abstract] [Full Text] [PDF]
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