1. 1.
The Kelly commentary
CORPORATE REAL ESTATE ISSUES AND IDEAS Dec 2014
YOURS, MINE AND OURS!
with any unamortized improvements to
the appropriate balance sheet.
Depending on the rigor used in
originally accumulating the costs,
moving these to the right place can take
a few days or require months of
figuring out what goes where from a
raw mass of historical data.
Independent accounting review is
recommended to ensure the splits are
equitable.
‘Ours’ is more complex requiring both
the accounting procedures mentioned
above and the designation of one party
to be landlord to the other. Like any
sublease, physical separation by walls or
floors is necessary to define rentable
area and a fully loaded sublease
agreement is recommended.
Experience indicates that allocating the
full costs including CAM creates far less
ongoing turbulence after the deal is
Recently, the news has been dominated
by corporate splits. In the search for
greater stockholder value, companies
like HP and JDS Uniphase have made
known their intention to split into units
whose individual values when added
together exceeds their current,
combined value.
What are the rules, if any, that govern
how real estate division occurs? From
the SEC viewpoint, whatever occurs
needs to have some agreement in place
before Day 1 of the completed
split. From an internal operations and
financial viewpoint, the facts are a bit
more complex. Whether it is a
merger, business sale or a split, the
three decisions and their paths are
based on what is mine, yours and ours.
‘Mine and yours’ are relatively
straightforward. Facilities and their
FF&Es are retained or moved, along,
PROVEN PRACTICES, REAL RESULTS
EMAIL JIM: JIMKELLYAIA@COMCAST.NET CELL: 408.394.7898
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done, assumptions about any pre-existing
real estate cooperation as a
single company should not be relied
upon in lieu of strong contracts.
Mine, yours and ours are time
sensitive, accounting intensive
dispositions of space, assets and
obligations. Time to act seems to be the
greatest constraint, but a good real
estate and operations grounding can
make these decisions flow alongside the
other transition components supporting
the added value of the corporate split.
NB: Special thanks this month to TerryWood