Volume Disposal Guide 2012

EMEA GLOBAL CORPORATE SERVICES
TRANSACTION MANAGEMENT, VOLUME DISPOSALS GUIDE
Page 1
GLOBAL CORPORATE SERVICES
TRANSACTION MANAGEMENT
VOLUME DISPOSALS GUIDE

For more information on this topic please contact the authors of the report:
Christian Farmer
Senior Director
Global Corporate Services
t: +44 (0)20 7182 2000
e: christian.farmer@cbre.com
Steve Cholerton
Associate Director
Global Corporate Services
t: +44 20 7182 3518
e: steve.cholerton@cbre.com
CBRE
St Martin’s Court
10 Paternoster Row
London EC4M 7HP

Page 3
EXECUTIVE SUMMARY
A large scale disposal programme can be a daunting proposition. Its processes touch a wide range of activities and it
is easy to lose focus on the key areas that can deliver value creation and cost mitigation.
This reference document is designed as a “one stop shop” to equip Disposal Managers with the necessary tools and
processes to help them navigate through what can be a tortuous road to successfully manage and execute a volume
disposal programme.
There are eight key areas which need to be addressed:
1. Engagement and Transition
Upon engagement it is fundamental that a transition
timeline is established to allow the service provider
to assess the portfolio for opportunities and agree an
appropriate delivery structure.
2. Disposal Process
Clear governance with all parties understanding their roles
and responsibilities is essential. If this element is ignored,
the energies and focus of the entire team is dissipated
resulting in lost deals and lower cost savings.
3. Technology and Data
Robust, accurate property and lease data are critical to the
success of a volume disposal programme as they drive
greater efficiencies throughout the whole process. Both
proprietary and best-in-class technology platforms can
facilitate better quality and accessibility of data.
4. Reporting
Better technology also yields better reporting which can
be both bespoke and automated to suit requirements.
Requirements must be defined at the outset thereby
ensuring visibility is maximized and the approval process is
streamlined.
5. Provisioning
This can be one of the first elements of the program which
the real estate team must agree and CBRE’s involvement
can vary from company to company. Broker opinions on
recovery prospects must be coordinated and the provision
often acts as a baseline for savings calculations.
6. Estates Management
An effective Estates Management function is a hugely
important element of the disposal process. A good
Estates Manager will smooth the wheels of the disposal
programme, close liaison and integration between the
disposal and estates function is vital.
7. Use of Agents
The strategy for agent engagement is determined by the
size and spread of the portfolio and reporting lines must be
clear. Diligent management and motivation of the agents is
fundamental to success and any disposal is dependent on
their effectiveness.
8. Disposal Strategies
There are a wide range of strategies and their tactical
execution that can be pursued. These range from a
straightforward letting or sale through to complex portfolio
wide asset swaps. Whilst this document does not examine
the different merits and approaches of each potential
disposal strategy, it does highlight them as the checklist of
opportunities to follow.

Page 4
VOLUME DISPOSALS WHAT ARE VOLUME DISPOSALS?
As companies adjust to changes resulting from mergers,
acquisitions and challenging trading environments, the need
to dispose of surplus properties is often required. The scale
will vary according to the individual circumstances and size
of the organisation, but for the purposes of this paper we are
assuming an excess of 50 properties are surplus to requirement
and require disposing.
Whilst this paper is focused on “conventional” disposals i.e.
sub-lettings, surrenders and assignments, it should be noted
that larger portfolio deals such as portfolio asset and liability
have (PAL) deals, whereby the entire surplus portfolio is
disposed of rather than individual property disposals, could
also be an option in some cases. For further information please
consult the Corporate Strategies team within GCS who can
provide mor detailed advice.
Where a company wishes to implement a volume disposal
programme or inherits such a situation, it is often faced with not
only multiple properties, but also disposing agents, markets,
and landlords. There is however only one objective, which is
to successfully dispose of the surplus accommodation whilst
maximising potential savings. Given the multiple issues facing
the Corporate Real Estate Executive charged with disposing of
the surplus portfolio, it can be difficult to focus on where the real
opportunities for value creation and cost savings exist.
The question is therefore posed –
What should the Real Estate Executive do and how can
CBRE help?
From our wide experience in dealing with such disposal
programmes we believe there are eight key areas which need to
be addressed:
1 Engagement and Transition .....page 4
2 Disposal Process .....page 5
3 Technology and Data .....page 6
4 Reporting .....page 9
5 Provisioning .....page 12
6 Estate Management .....page 15
7 Use of Agents .....page 16
8 Disposal Strategies .....page 18
This paper is intended to provide clarity on the issues faced
by the disposal team and offer guidance on how to structure a
disposal programme to ensure efficiencies and opportunities to
achieve a successful conclusion to the process are maximised.
ENGAGEMENT AND TRANSITION
At the point a company acknowledges a requirement exists to
dispose of a volume of surplus space or assets, it is important
that the internal real estate team is able to clearly define the
objectives they hope to achieve through any disposal activity.
These objectives and how they are measured will act as the
principal indicators of success and will therefore shape and
influence the approach taken to initiate any program of disposal.
Key measures of success can vary from company to company
but typically one can expect the following to be reasonably high
on the list;
• Matching or saving against provision
• Saving against total liability
• Number of disposals
• Total space (sqft) disposed
• Run rate savings
The aspired targets above can often be set against an annual
plan and therefore any positive variance (i.e. beating the targets)
will be considered a success.
When the decision is taken to outsource the responsibility to
manage a volume disposal programme one of the first actions is
to develop a road map to allow a comprehensive engagement
of the service provider, which will include both a transitional and
transformational phase.
The starting point for any road mapping or strategic formulation
is the provision of property portfolio data which may lay either
with the client, the previous incumbent or both. Good quality,
consolidated data is not something many occupiers can boast,
especially those operating under a decentralised Corporate Real
Estate model, but the data collection itself will be part of the initial
transition phase. The importance of robust data is discussed
later and remains a common theme throughout the whole
disposal process.
The road map will include a carefully considered programme
to lock in achievable timing of the various phases as well as
attributing ownership to respective stake holders, often through
process documents such as RACI charts (acronym derived from
4 key responsibilities typically used: Responsible, Accountable,
Consulted and Informed).
It is also important to clearly identify the key stakeholders within
both the client organisation and CBRE.
The remuneration structure will need to be agreed quickly and
understood by all parties
Whilst a timeframe will need to be adhered to it is clear that
certain individual disposals can be completed immediately if all
relevant information is available and it does not undermine any
wider strategic plan.

Page 5
DISPOSAL PROCESS
• Every process will need to be amended to the bespoke needs of the client
• The process binds the functions together and ensures all act as a cohesive and collaborative unit
• A clear process helps highlight and therefore aids the resolution of blockages and inefficiencies
• A clear and defined process drives efficiencies
• Recognise the role of the Transaction Manager is often one of a Project Manager rather than leasing expert.



























































 































 
 
 
 
 
















The disposal process in such circumstances is frequently multi-faceted and complicated. It is in this section we have highlighted
the key work flows and responsibilities for this to be used as a base template for subsequent refinement and amendment
depending on the individual circumstances and requirements of the client.
Example: Disposal Workflow Process
The above illustrates in a simplified form the basic process often encountered in the disposal of a property. It is important to ensure
there is clarity around the roles and responsibilities of the entire team. Representing the disposal process in such a manner puts
definition and structure around the subject which will significantly improve the efficiency and smooth running of the process.
It is therfore important that all involved have a full understanding of the process and where necessary training is delivered.
This simplified process can be elaborated upon to produce a bespoke model to meet the individual needs of the client. Once the
bespoke process is agreed the process flow chart can be amended so that it highlights each participant’s role in individual “swim
lanes”.
* Lease = all relevant legal documents

Page 6
TECHNOLOGY AND DATA
• Accuracy and completeness of data is supremely
important
• Robust data drives efficiencies in tactical delivery and
operational reporting
• Client data frequently is imperfect
• Common technology platforms streamline and centralise
portfolio analysis, management information and reporting
• Governance around maintaining accuracy of data is
imperative
• Recommend lease / document audit and verification
We have found that in order to first ascertain the scale, size
and liability of any vacant portfolio it is critical to have robust
and accurate property data. Typically the more centralised
organisations have reliable data but the more de-centralised
sometimes struggle as the control of real estate is so
segmented at both country and even business level.
Certainly companies that have been active in the M&A arena
tend to rely on the newly founded business units being
autonomous in the short-term until real estate data can be
consolidated.
One strong recommendation, if there are concerns over the
reliability of the core data, as part of a data cleansing exercise
a lease abstracting program is undertaken. This will at least
provide certainty over the contractual liabilities and critical
dates.
Information required
For the volume disposal programs which we manage, at the
point of instruction the following information should be supplied
by the client:
• Leases
• Sub-leases
• Lease abstracts
• Title Deeds for freeholds
• Schedules of Condition
• Licenses for Alterations
• Lease amendments/side letters
• Rent review memorandums
• Rating re-evaluations
• Measurement surveys
• Any pertinent correspondence between landlord and
tenant inc contact details
• Service charge budgets and reconciliations
• Planning documentation, i.e. change of use
• Full break down of operating/lease costs with latest
invoices where relevant
• Detailed floor plans
• Building specifications/drawings, i.e. M&E capacity etc.
• Energy Performance Certificates (EPCs)
• Dilapidations assessments/provisions
*N.B. If CBRE is involved in provisioning then all operating
costs and expenses will already be supplied.
Many companies will already have a lease administration
system in place for which access can be provided or the data
may be migrated to a new system if part of a wider estate
management contract. In any event, the fundamental message
is that the accuracy of the data contained therein will have a
significant bearing on the success of any disposal programme.
Once accurate, clean data has been provided then a disposal
programme can really begin in earnest through the calculation
of respective provisions and the formulation of a strategy at a
site and regional level.
Given the huge volume of documentation that needs to flow
between both internal and external decision makers, it is
important to create a common portal which allows for both the
upload and download of property-related files. For many CBRE
clients, this portal is ‘Sharepoint’, a web-based tool which can
be accessed from any internet linked location and allows real-
time transfer of documents to an e-database.
The key functionality and benefits include:
• Scorecard and KPI reporting for the account
• ‘Work in Progress’ lists, tracking and charting tools
• Document repository for sharing, viewing and editing
• Flexible security structure to enable service line and client
views
• Client and CBRE announcements and blogs
• Playbooks and tool links
• Contacts and calendar

Page 7
Example: Technology platform interfaces

Page 8
Example: Quarterly Management Reporting
It is common for portfolio wide reports to be generated on a
quarterly basis and the charts above are a typical example of
the output submitted to the client.
Management reporting has been drastically improved
over recent years through the implementation of bespoke
technology which allows for an increased level of detailed
analysis by more efficient means and this is covered in the next
section.

Page 9
REPORTING
• Must meet the needs of both the tactical delivery of the
disposal team and wider client management information
requirements
• Agree reporting requirements at outset
• Giving ownership and responsibility to brokers on site as
reporting binds them into the team
• Automation ensures focus for disposal team remains on
delivering results not reports
• Town Hall meetings are highly effective at disseminating
information and aiding collaboration and cross fertilisation
of ideas and experiences
• Standardisation of reports and authorisations maximises
consistency and efficiency
Clear concise and relevant reporting which provides not just
the Corporate Real Estate Team with information they require
but also stakeholders in the wider business the information and
data they require is a key element to ensure the smooth running
of any disposal programme.
Information is required on both the macro and micro scale,
providing updates and information on both a portfolio wide
basis and individual property basis. The manner in which the
information is formally disseminated will be via typically written
reports, meetings and a tracker detailing the status of all
projects in the programme.
Agree the Client’s Requirements
It is important to discuss with the client at the outset and
understand their needs and expectations. We recommend at
the initial stages of any disposals programme meetings are held
fortnightly, once established these can be moved to monthly.
Initially it is inevitable that the focus of such meetings will drill
into the detail however, the ambition should be that the monthly
meetings become high level and more generic where general
trends, issues, initiatives and the key projects are discussed.
It is important to recognise that some properties will be
unlettable and whilst efforts must be made to remedy the
situation, the disposal team should not waste time and resource
trying to crack an unbreakable nut when other more productive
avenues are available. This needs to be recognised by all
parties in the reporting process.
Work in Progress Schedule
As properties are marketed, the Transaction Manager should
report on marketing activity through constant communication
with appointed brokers which is then collated and issued
through a tracker or Work in Progress schedule.
Where an approach that is more integrated with the Estates
Management Function is available, a tool such as Transaction
Insight can be used. This is effectively a one-stop shop for any
information related to a specific transaction or project. It can be
engineered to meet different client requirements and also take
uploads from other client databases or systems. All transaction
data, comments, deals status and milestones are updated in
real-time and can be seen by anyone who has access. A link
to Microsoft outlook allows emails, reminders and reports to
also be sent directly from it. The reporting functionality can
create dashboards and graphics, which can be sent directly to
clients, providing an instant snap-shot of progress against the
provision, metrics by space and cost etc.
Example: Transaction Insight Front page
Where it is not possible to fully integrate the Transaction
Management and Estate Management functions it is possible to
use SharePoint, Insight or iShare platforms and the tracker will
provide individual real time updates for both agent and client.
Technology in this field is continuously changing and advice
should be sought from CBRE’s GCS Technology team.
The tracker should be the central plank upon which all reporting
is undertaken. It is the central tool which will be used to
manage the disposals process and report updates to the
clients. It should contain information which both the agent and
client wish to update and use.

Page 10
Strategic Disposal Report
Prior to any marketing activity, each property to be disposed of
will require a disposal report. This should give the client clear
comment and advice on the disposal strategy for any particular
property and will also include detail on the following;
• The property to be disposed of
• The wider market and particular sub market relevant to this
property
• Lease terms (if leasehold) with particular attention to the
alienation provisions
• Value – rental/freehold
• Incentives required to successfully dispose of the
accommodation
• Marketing void
• Marketing costs and timing
• An outline of the refurbishment works required to
successfully dispose of the space, together with a high
level estimate of costs
• Disposal strategy highlighting the marketing programme
and cost required to successfully complete the exercise
• Commentary on likely tenants/purchasers and how these
will be directed to and secured
• Recommendation
The report should include a picture of the property, floor plans
a high-level description of its layout, specification and a plan
detailing its location within the wider geographic area and as
such can be used as a standalone document. It is important
that the disposal strategy recommended in the report is
discussed and approved prior to the broker being formally
instructed to commence with disposing of the property.
Once a deal has been negotiated, client approval must be
sought and the format of these management recommendations
or business cases vary greatly depending on the size or tenure
of property, level of exposure and client specific requirements.
We have found that one key metric is how the deal compares to
the provision and this is the basis upon which many real estate
managers are measured. It is common to provide a summary
of the property, history of the negotiation, financial analysis and
a clear recommendation why management should approve the
deal.
Transaction Authorisation Form
In order to ensure the quick approval of potential transactions,
it is important to ensure the right information is presented in a
precise and clear manner.
Where there are lots of relatively small deals, these need to be
processed quickly and efficiently. The process should become
a conveyor belt.
We have found that the following form works well, it gives the
client a concise overview of the situation, the financial impact,
the rationale for doing the deal and a recommendation.
Whilst none of the information contained in the Transaction
Authorisation Form should be a surprise to either client or
agent, it provides the mechanism for a definitive approval for
the deal which can be executed quickly.

Page 11
Example: Transaction Authorisation Form
Approval Process
Each company uses its own approval process for Real Estate
decisions and the number of approvers in these chains can
often vary depending on the degree of centralisation, structure
and hierarchy as well as value of a particular transaction or
action.
Clearly, anything that can be done to streamline this client
process will be benefitial as it reduces any delay to decision
making and this can be achieved through various means.
It is important that the relevant decision makers are known
up front to allow any pre-communication to flow through and
those with delegated authority can be kept informed, thereby
minimizing the impact of any complex recommendations.
Understanding a client’s internal processes and associated
timing can help set expectations with landlords and tenants
alike thus reducing the risk of losing deals through missed
deadlines etc.
Another prerequisite for a successful deal completion is a clear
understanding of a client’s legal organisation and any partners
- i.e. who will draft a new sublease? Subject to the country and
legal set-up this could be a responsibility of the in-house lawyer
or an external partner, it is not commonplace for companies
to employ in-house lawyers who are qualified to advise on
property specialist matters.
Management Information
As mentioned previously, management reporting has been
drastically improved over recent years and the examples on
page 10 illustrate best practice for account level reporting.
The frequency is driven by the client’s requirements, but
quarterly reporting is common and the metrics reported are
the same as those recognised as the principal indicators of
success and can be expanded to include the following;
• Matching or saving against provision
• Saving against total liability
• Number of disposals
• Value – rental/freehold
• Total space (sqft) disposed
• Run rate savings
• Dilapidations – savings against landlord claims
• Freehold sales – saving against NBV
• Value to fee ratios
Town Hall Meetings
The use of Town Hall style quarterly meetings attended by client
and disposal team (both central account team and brokers) are
a highly effective tool for reporting progress, discussing issues
and cementing a collaborative approach to the programme. To
maintain focus give careful thought to the invitee list to ensure
the most relevant people attend.

Page 12
PROVISIONING
• Frequently used to measure transactions
• Assesses outstanding financial liability
• Governed by Accounting Standards
• A provision is required if:
- Present obligation has arisen as a result of a past
event,
- Payment is probable (‘more likely than not’) and
- The amount can be estimated reliably
• Client CRE team typically calculates provision
• Service Provider usually limited to providing supporting
data
• The total provision available should be managed as a
whole either at a global or regional level
• Frequency of updating provisions linked to size and relative
importance to the portfolio
Provisions frequently govern the parameters of any disposal
deal. If the proposed disposal does not beat the provision it will
be more difficult to justify and will be subject to increase rigor
and scrutiny in terms of any approval. Provisions are also often
used to measure the performance of the disposal team and
as a consequence these issues need to be fully understood
and correctly implemented. The provision for a certain property
will reduce over time as the remaining term diminishes and
therefore the number to beat, through disposal activity, is an
ever-moving target.
When calculating provisions it is vital realistic/achievable
assumptions are used, as provisions frequently form the basis
of many disposal decisions. The use of “best case” and “worst
case” scenarios can help manage client expectations.
Financial accounting rules require a company to review its
operating data periodically and ensure that appropriate
recognition criteria and measurement bases are applied to
balance sheet provisions, contingent liabilities and contingent
assets and that sufficient information is disclosed in the notes
to the financial statements to enable users to understand their
nature, timing and amount.
These rules vary slightly between US ‘Generally Accepted
Accounting Principles’ (US GAAP) and ‘International Financial
Reporting Standards’ (IFRS) and the term “reserve” is often
interchanged with provision but in this paper we will refer to
‘provisions’ and adhere to the IAS definition, “a liability of
uncertain timing or amount.”. Ref: IAS 37.10
It is important to note that under International Accounting
Standard 37 (IAS 37) – Provisions, Contingent Liabilities and
Contingent Assets:
An entity must recognise a provision if, and only if: [IAS 37.14]
• A present obligation (legal or constructive) has arisen as a
result of a past event,
• Payment is probable (‘more likely than not’), and
• The amount can be estimated reliably.
Provisions frequently govern the parameters of any disposal
deal. If the proposed disposal does not beat the provision it will
be more difficult to justify and will be subject to increase rigor
and scrutiny in terms of any approval. Provisions are also often
used to measure the performance of the disposal team and as
a consequence these issues need to be fully understood and
correctly implemented.
In Real Estate terms this places an obligation on the CRE
function to make a true and fair assessment of the liabilities
arising from their vacant portfolio, including both freehold and
leasehold properties. A prerequisite for the initiation of this
exercise is reliable baseline operating costs usually provided by
the finance organisation. (See Data and Technology Section).
Assuming robust financial and contractual information can be
supplied, an initial provision for each vacant property can then
be calculated taking into consideration both the actual costs
and the timing, i.e. when the lease expires or if a break option
exists.
Although the calculation of this baseline provision is usually
undertaken by a combination of the finance and estates
management teams, CBRE has in some cases been able
to assist in the development of the cash flows to support
this process. It is also useful to note that provisions may be
calculated on a NPV or a non-discounted cash basis in either
local currency or the currency of the company’s home country,
but this is determined by whether it reports in accordance with
IFRS or US GAAP.
In accordance with IAS37, “Where the effect of the time value
of money is material, the amount of a provision should be the
present value of the expenditures expected to be required
to settle the obligation. Because of the time value of money,
provisions relating to cash outflows that arise soon after the
reporting period are more onerous than those where outflows
of the same amount arise later. Provisions are therefore
discounted, where the effect is material.” [IAS 37.46]
Those companies reporting in line with US GAAP generally do
not apply any discounting.

Page 13
A sample of a generic cash flow to track a provision can be found underneath:
Information Required
When creating the initial provision it is important to ensure
all relevant costs have been considered and these typically
include;
Costs
• Base rent
• Property tax, i.e. UK business rates
• Landlord service charge
• Insurance, both landlord and tenant
• Utilities
• Management & maintenance cost, i.e. FM and property
managementy
• Depreciation or asset write off
• Contractual penalties, i.e. for operating a break option
• Any known one-time costs
• Dilapidation assessments
Lease Docs
• Lease/s and sublease/s
• Rent review memorandums
• Deeds of Variation or lease amendments
The majority of the above costs are known but dilapidations
are always an estimation and not truly defined until lease end.
The detail and granularity required will determine whether a
simple rate per sqft/sqm is sufficient or if it is more appropriate
to undertake a detailed assessment of this liability, including
instructing a surveyor to make a physical inspection and
prepare a provision report etc.
Our experience tells us that at a minimum, companies look
to their Real Estate partner to provide formal Broker Opinion
of Values (BOVs) which are then taken to complete the initial
provisions by factoring in any income recovery, should the
advice be that the property is capable of being let or sold.
Broker Opinions of Value (BOVs)
Whilst the actual BOV can take many formats (see Appendix I),
we have found that typical broker assumptions will refer to the
following:
• Void period to finding a (sub)tenant
• Letting strategy, whole vs. single floors etc
• Achievable base rent per sqft/sqm
• Rent free period or equivalent incentive, i.e. capital
contribution
• Recommended refurbishment works
• Rates revaluation, if applicable
• Likely caps, i.e. service charge
• Rent reviews or indexation
• Value of leaving current fit-out including furniture
• Rent reviews or indexation
• Value of leaving current fit-out including furniture
• Separation costs
• Service charge budget, i.e. multi-tenant building
• Marketing costs
• Broker, legal and landlord fees

Page 14
However, some of the above will have to be provided by the
estates management team, such as the service charge budget
etc.
One key to ensuring the BOV assumptions reflect the most
achievable scenario is to make available both a copy of the
lease and abstract thereby highlighting any onerous lease
clauses which could have a material impact on the lettability
of the vacant space. This can include alienation clauses
which preclude the tenant from subletting or assigning on a
certain basis or requiring landlord’s consent. For example,
it is common to find clauses in Dutch leases which stipulate
the tenant must always remain in physical occupation thereby
resulting in making it difficult not only to dispose but also to
vacate the space in the first instance.
Often, when dealing with large vacant portfolios, companies
have found it beneficial to initially apply certain rules, such
as assuming no income recovery at sites with less than two
years remaining on the lease, however, the long-term objective
is always to define the most accurate provision as soon as
possible.
Freeholds
When making an assessment of the disposal prospects for
a freehold building, it is important that the broker is informed
whether a company is prepared to sell below the Net Book
Value as this can have a material impact of the sale proceeds
and timing.
The corporate Accounting Team will need to calculate the
depreciation; asset write offs and book values that may be
required in assessing any freehold disposals.
From the point a property becomes vacant and an associated
provision is created, it is unusual to witness much change in
the operating costs unless for example a rent review increases
the rent or some major repair works are required. However, the
income recovery assumptions can vary as supply and demand
flex in each market.
Provision Process Efficiency
Calculating provisions is a time consuming process and we
recommend that the core disposal team’s focus should remain
on just that – disposing of the surplus space and identifying that
elusive tenant and the Corporate Account Team focus on the
calculation of provisions using data provided by the disposing
agent.
In terms of how frequently provisions need to be updated,
a balance needs to be struck to ensure that the provision is
not out of date and thereby stopping a potential deal, but are
not completed so frequently so that provisioning becomes a
dominant exercise in the disposal process.
We have found it useful to rank the importance and size of an
individual property in terms of its provision and focus on the
large properties. The 80:20 rule with 80% of the value being
held by 20% of the properties is often a useful guide. Best
practice dictates that the most significant property provisions
should be reassessed monthly whilst the reminder of smaller
properties should be updated quarterly. However, please note
that under IAS 37.59, “Provisions shall be reviewed at the end
of each reporting period and adjusted to reflect the current best
estimate.” This means that the frequency by which the Real
Estate managers must update each provision is determined by
the company’s reporting period. This can be quarterly or even
annually but as recommended above, monthly updates will
ensure greater accuracy, especially in turbulent markets.
Ultimately it is important to work with the corporate’s finance
team and to fashion the most suitable disposal provisioning
methodology.
Provisions should not just be used on a piece meal basis and
the disposal team should look to manage the entire provision
figure allocated to the disposal portfolio as a whole as it will
be inevitable that some deals will be over the provision figure
however some will be under.
By tracking the forecast provisions against the actual provision
incurred, an accurate assessment can be made whether a
particular transaction can be pursued when it is under provided
for (and is unlikely to bettered in the market), but can be
compensated for by other deals which are over provision.

Page 15
ESTATES MANAGMENT
• An effective Estates Management function is integral to an
effective disposal process
• The Estates Management Team has key responsibilities.
The Disposal team’s focus should not be diverted by
straying into the Estates Manager’s realm or area of
expertise
• The Estates Manager often provides early warning of an
impending disposal
• Ideally the same company should manage the disposal
process and undertake the Estates Management function
Estates Management Team Responsibilities
The Estates Management team play a hugely important role
in the successful and efficient running of any Volume Disposal
situation. It is therefore vital that the disposal team and
Estates Management operate as a cohesive and integrated
unit. There is clearly an advantage in terms of efficiencies
and communication where both functions are performed by
the same company. However, regardless of which scenario
is encountered, team work is vital. It is important that there is
a clear definition around the roles and responsibilities of the
Estates Management and Transaction Management functions.
Typically, we would expect the Estates Management function to
be responsible for the following;
• Access arrangements, including providing keys and alarm
codes etc
• Provision of service charge information
• Replies to new pre-contract enquires
• The provision of maintenance and condition documentation
in respect of the property to be disposed of, i.e. asbestos
reports and maintenance programmes etc.
• Copies of lease/freehold documentation, including
Licenses to Alter and Rent Review Memorandums
• Details of rents, rates and service charge payable
• Copies of plans
• Updating the central tracker following completion of any
disposal
• Sub-tenant management include collection of rents in
conjunction with Client Accounting team.
The majority of the above is part of a site’s due diligence and
relevant documentation should be stored in a central depository
such as Sharepoint. However, when space becomes vacant the
Estates Manager or Property Manager will also be accountable
for the provision of Facilities Management services and has
a duty to ensure the vacant space is inspected on a frequent
basis, ensuring compliance of any statutory regulations and that
the space is maintained in a clean and marketable condition so
it presents in the best possible light for any viewings
Where the Transaction Management and Estates Management
function are performed by different firms the need for open
collaboration is even greater. The need for joint meetings and
clear definition around roles and responsibilities become even
more important.
Whilst the Estate Management function would usually deal
with such matters, where a property is being disposed; the
disposing team’s rent review and dilapidations surveyors should
undertake such tasks to ensure the maximum convergence of
opinion and integrated strategy.
To ensure increased connectivity the building consultancy team
aligned to the disposal team should also have responsibility for
sourcing EPCs.
Managing the Vacation of Premises
Vacating surplus premises should not be a question of turning
off the lights and locking the door. A conscious effort should
be made that when vacating a property the actions of the
decommissioning team is aware of the needs and requirements
of the disposal team. As such, there needs to be close liaison
between the two teams whilst clarity and consistency around
the process should be set and nderstood by all. Again clarity
and consistency around the process should be set and
understood by all. An example of a useful checklist for this
important process can be found in Appendix 2.
The Estates Management team should also have responsibility
for the management of critical dates, for example break notices
and the like. The focus of the disposal team should be on just
that – disposals and not the general property management of
the disposal estate.
However, this will often depend on the structure of the account
team as it is common for critical date reports to be issued
directly by the Lease Admin team but the follow up with the
client to be managed by both the Estates Manager and a
Transaction Manager. This responsibility is fundamentally
important to ensure additional obligations are not created
through missing a critical date, for example, in many European
countries, leases carry an automatic renewal clause under
which if no notice is served by the tenant then the lease can
extend for a new term committing them to considerable cost
and risk.
Frequently in a Volume Disposal situation, new properties
are identified for disposal and the sensitive issue of staff
communications needs to be addressed. This should be
managed by the client or the Estates Management function.
The disposal team should be made aware of the impending

Page 16
announcements so that the necessary pre marketing actions
can be made in confidence e.g. initial views on marketability
and draft disposal particulars prepared. The disposal team is
therefore immediately able to formally bring the space to market
as soon as the formal announcement is made by the client.
Dilapidations / Reinstatement Works
A key element for close liaison between the Transaction
Management and Estates Management function is in relation to
dilapidations. Where the estates manager knows a sub tenant
is vacating the Transaction Management team should be alerted
at an early stage. Clear recommendation needs to be made to
the client in respect of what works are required to successfully
market the space and how these interlink with the dilapidations
liability of the vacating sub-tenant.
The objective should be to ensure a speedy resolution of any
dilapidations negotiations to ensure the refurbishment works
required for marketing can be carried out without delay following
the sub-tenant’s vacation.
Cost Mitigation through UK Business Rates Strategy
UK business rates tend to represent roughly 45% of the
overall occupancy costs for a building so companies are
always looking for ways to reduce this cost as part of a larger
saving initiative. In April 2008 the old policy of empty rates for
commercial buildings was abolished and replaced with a new
directive which allows an occupier to claim three months of
rates relief at 100% immediately after vacation but thereafter the
full rates liability reverts.
We encourage clients to actively review their portfolios to ensure
all claims are made to local authorities as soon as space is
vacated and our Rating advisors can provide professional
support on both a contracted and ad-hoc basis.
In addition to the three months rates relief, there are further
strategies available to reduce the longer term rates liability for
vacant buildings. We have existing relationships with companies
and charitable organisations which can subsequently take
occupation through a short term license to occupy, thereby
triggering a new period of occupancy which lasts 42 days and
then they vacate the premises. This follow-on vacation allows
a new claim for the three months of 100% rates relief and is
therefore a highly beneficial mechanism of achieving significant
savings for the occupier through reducing this exposure. This
strategy is sometimes referred to as “intermittent occupancy”.
Please also note that for industrial properties the rates relief
period is increased to six months.
Sources of Efficiencies
There should also be close liaison between the Estates
Management and Transaction Management function in respect
of exploring and where beneficial, implementing short form
leases and fixed services charges. Such approaches are
extremely useful where the unit to be disposed of is small and
part of a larger building that remains occupied by the client.
In such circumstances there are real efficiencies to be gained
by all parties in using these approaches. There is for example
frequently inadequate information to prepare a fully accounted
service charge and even where there is, the management of this
is not cost effective. Whilst consent from the superior landlord
will be required in respect of using short form leases, if this
can be obtained, their use will significantly speed up the legal
process of documenting any letting.
USE OF AGENTS
• Using regional clusters and SPOCs to drive efficiency, the
portfolio defines the structure
• Consistent Terms of Engagement
• Giving ownership and responsibility to brokers in field
• Town Hall meetings drive collaboration and sense of
collective purpose
• Ensuring agents are adequately incentivised in fee
agreement
• Maintain personal contact with agents – don’t be too
remote
In all probability the portfolio will be dispersed across a wide
geographic area and will be highly variable in terms of quality
and size. It is therefore unlikely that one single firm of agents will
be best placed to provide market advice, undertake viewings
and negotiations with potentially interested parties. The key is
to achieve a balance between market coverage and using best
in class and not ending up with 200 agents reporting into the
central account ream.
Terms of Engagement
Fees will need to not only reflect any Master Services
Agreement between the central account team and the client,
but must also incentivise the disposal agent. It may therefore
be necessary to seek exceptions to ensure a fee is offered
to agents which both incentivises them to truly focus on the
programme in question, but to also accept instructions on
some of the more challenging disposals projects.
Terms of Engagement should be drafted for each sub-agent.
We recommend the central account team prepares a consistent
Terms of Engagement letter rather than accepting individual
letters from each sub-agent. It is important when drafting
such a letter that the central account team are cognisant of the

Page 17
needs and requirements of the sub-agent to ensure the clauses
adequately reflect what a sub-agent could reasonably require
and not just those of the client.
Agent Responsibilities
The sub-agents will be required to not only inspect the
properties, but to check the measurements and prepare
Strategic Disposal Reports, but to ensure full engagement
they should have responsibility in respect of maintaining
certain fields within the main tracker. This will require close
liaison between the central account team and the sub-agents
to ensure consistent standards of quality and accuracy are
maintained. We have also found direct client contact motivates
agents and as such the use of regional meetings with the
sub-agents and conference calls ensure the necessary focus is
maintained across the entire team.
There will be instances where even the most suitable agent
“takes their eye off the ball” – typically where there is a
secondary property and the condition of the vacant unit
deteriorates, post builds up, marketing boards get damaged
etc and it goes unnoticed. To ensure this does not happen, a
monthly written declaration from the disposal agent confirming
that they have inspected the property and it is fit for marketing
should be part of their contractual obligations.
This will also help guard against the head of property getting
uncomfortable calls from the Chairman who has recently driven
past one of his properties where the board is hanging off and
weeds are growing in the gutter!
It is also important to note that the Property Manager will be
responsible for maintaining the vacant space, both to comply
with ongoing repairing covenants in the lease and also to
ensure it is presented in the best possible light to assist in
the marketing efforts, but will need to take advice from the
agent who can make recommendations in respect of potential
refurbishment works.
Don’t Forget The Personal Touch
Property remains a people business. It is important to build
good working relationships with the agents. They will perform
much better if they feel part of a cohesive team, rather than if
they feel isolated and remote.
We have found that judicious use of best in class agents and
where ever possible conurbation clusters of agents with a
single point of contact reporting into the central account team
for each conurbation/region, maximises the bespoke needs of
the portfolios more unique properties with the requirement for
efficiency of process.

Page 18
DISPOSAL STRATEGIES
This paper’s primary objective is to provide guidance and advice in relation to the process and structure to maximise the success of
a volume disposal programme. A summary of disposal strategies the team should consider in such a programme is outlined below
and these are frequently determined by the type of property and circumstances. It should be noted that this section does not look
at the wider issue of portfolio cost reduction, which is the topic of a separate CBRE paper.
Volume Disposal Programme – Conventional Transaction Approaches
Volume Disposal Programme – Creative Portfolio Transaction Structures
Strategy Description
1 Lease Buy-out / Termination • Negotiate termination price for lease
2 Sublease / Assign • Sublease or assign space to third party
3 Sell Surplus Asset • Sell asset once asset becomes vacant
Strategy Description
1 Acquire Leased Assets and Sell – Surplus Assets
• Compare sublease strategy / recovery with buying property and selling with restructured /
downsized lease or as vacant asset
• Buy outright or restructure occupancy / lease with third-party buyer (probably requires cash
payment
2a Short Term Sale Leaseback – Future Surplus
• Sell asset with 1-3 year Sale Leaseback; higher proceeds than selling vacant
• Provides buyer time to reposition / re-entitle/ re-lease asset
2b Partial Sale Leaseback – Partial Surplus • Sell asset and lease back only a portion of the Asset
3 Move from owned to leased property(s)
• Relocate from oversized/inefficient owned asset(s) to smaller leased property
• Sell vacated owned asset
4a Asset Swaps • Swap surplus owned site(s) in exchange for better terms on leased locations with same landlord
4b Asset Swaps
• Sell oversized/inefficient owned asset (Relinquished Property) and trade into smaller/more ef-
ficient purchased asset (Replacement Property)
5 Portfolio Sale
• Bundle/Sell owned Operating and Surplus assets – including those with vacancy (include OREO
if US Financial Institution)
6
Trade lease rights for rent reductions or ability to
relinquish space
• Trade lease rights for rent / size / term concessions
• Surrender Lease Options – Purchase, Termination
• Substitute Parent for Subsidiary for guarantees
• Offer “must-take” and extension for relief on surplus space (defer / blend and extend)
7 Inactive Property Program
• Create an inactive property programme to separate operating assets from surplus
• Advantage is focus of Programme on rapidly disposing of surplus real estate – specialized
expertise / rapid action
8
Restructure Old (or Get New) Economic Incentives
for Staying
• Renegotiate ground leases, economic incentives
9 Subsidiary Sale • Bundle Real Estate Assets (owned and leased) with sale of Subsidiary
10 Subsidiary Bankruptcy
• Reject or assign leases within Subsidiary
• Assign (“sell”) Below Market leases
11 Sublease to Landlord
• Tenant subleases to Landlord vacant space
• Advantage to Landlord
• Controls leasing activity in building
• May result in positive impact on Financial Statement impact vs. reserves
• Avoids further capital expenditures on fit out
12 Place new leases in Unrestricted Subsidiary
• Create unrestricted subsidiary that falls outside of debt covenants
• Only works where Lessee can avoid a parent guarantee

Page 19
APPENDIX 1, BROKER OPINION OF VALUE
Property Description
Broker Information
Market Evaluation
Property Name
Property Address
Use
Owned or Leasehold / Sublease:
Total Building Size
Lease Expiration
Year Built (age of building)
Class Type (a, b, c)
General Condition (scale 1-10,
10=highest)
Building Features / Area Amenities
(Restaurants, Neighbourhood etc.)
Operating Expenses / Cam
Parking ratio / spaces
Local currency
Comments
Broker Contact Info: Broker Contact Info:
Address Address
Phone / Email: Phone / Email:
Area Description
Submarket Vacancy (%)
Under Construction
Market Conditions & Trends (Pro/Con)

Page 20
Property Evaluation
Additional Comments
Lease Comparables
Competitive Buildings
Client Estimated Vacate Date
Reasonable Marketing Period
Recommended Asking Price
Projected Taking Price
Lease Incentives
Local Commission Rates
Comments
Address Size Tenant Term Ti/Rent abatement Net Rent Comments
Address Size Tenant Term Ti/Rent abatement Net Rent Comments
Best Case Worst Case

Page 21
APPENDIX 2
Following information or action needs to be completed before a building /floor is moved to Vacant Estate Program.
General guidance:
The Client CRE Team or project managers needs to remove anything installed (unless the buyer / landlord want it) and leave the
space in a clean and tidy condition so the space presents well. All contracts need to be cancelled and forwarding addresses put in
place. All furniture and rubbish need to be removed with the space cleaned & dusted before closing the door and handing over the
keys / security codes. This train of thought should apply whether property is managed out by the local delivery (fag end leases) or
is to be handed over to the Vacant Estate Program if managed separately.
Information Gathering and Processing Team involed Completed Comments
1
Site Identification (approximately. 120 days prior to
space vacating
Client CRE Manager and CBRE TM team
2 Confirm Sqft and strategy (Sale, Sublet, mothballing) Client CRE Manager and CBRE TM team
3
A call need to be organised by the Portfolio Manager to
discuss scope and handover process. Following topics
need to be on the agenda:
Client CRE Manager,Project Manager, security
Manager, Property Manager, CBRE team
3.1
Agree the scope of works prior to handing the space
to vacant estate program (Broom Clean, Refurb.) Are
there any assests that are to be kept or to be removed
e.g furniture
Project Manager and client/CBRE TM team
3.2
Confirm the possible amount for dilapidations /
restoration
Project Manager and FM partner
3.3
Ensure any contracts are terminated or re-scoped
(incl.utility’s, service, lease, security contracts)
3.4
Inventory of statutory O&M manuals, site plans and
instruction need to be provided, including specific
information related to the infrastructure e.g air con, or
raised floor with max loads. etc. - To be provided at
handover
3.5
Provide building related Health and Safety information
and asbestos reports / certificates etc. at handover
Client CRE Manager and FM partner
3.6 Provide copy of insurance details to Vendor. Client CRE Manager
3.7 Identify all existing FM contracts and realated costs Client CRE Manager and FM partner
3.8
Following documents need to be completed before
handover, Contact list, Site Inspection and Security
Check List.
Client CRE Manager and FM partner
4
Identify FM and Security services that need to be part
of the space management.
FM and client Security
5 Obtain Client approval on FM SLA Client Property Manager and CBRE team
6 Implementation and monitoring of services Client CRE Manager/CBRE property manager

Volume Disposal Guide 2012

Recomendados

Recomendados

Mais conteúdo relacionado

Destaque

Destaque (7)

Semelhante a Volume Disposal Guide 2012

Semelhante a Volume Disposal Guide 2012 (20)

Volume Disposal Guide 2012