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Virtual Premise Helps Retailers Get the Most Out of Existing Locations

For retailers, keeping track of real estate commitments and costs is important in any market climate. But given today's challenging environment, having a clear sense of the scope, geographic distribution and performance of each store has become doubly critical.

Knowing how much profit a particular location generates can help retailers figure out which stores should be slated for closing. Being aware of which leases feature co-tenancy clauses that can be activated may be beneficial in negotiating lower rents. And keeping tabs on which markets offer opportunities for expansion may make it easier to take advantage of favorable leasing conditions without indulging in reckless growth.

These are some of the advantages Virtual Premise Inc., an Atlanta-based real estate information management solutions provider, claims to offer its customers. The firm, which has been around since 1999, offers a wide range of products, ranging from lease administration to management reporting. But one of its basic functions is making sure that its clients' real estate data remains accurate, up-to-date and accessible from a single source, according to Virtual Premise President and COO Andy Thomas. That allows the company to help its clients execute their real estate strategies in an intelligent way.

"The store is where revenue enters the [retailer's] company and what our software solution does is we help retailers manage everything related to their store location, including the operational aspects of their real estate, the financial aspects and the strategic aspects," says Thomas.

For example, a client that may want to cut operating costs, either through closing underperforming stores or getting rent concessions can use the software to analyze all its leases to get a sense of what the real estate costs for each store are and whether those costs can be reduced by exercising various clauses. At the same time, Virtual Premise software can recall sales performance metrics for each store, so it would be easy to calculate the profitability of each location.

"We are able to look at the store and evaluate how it is performing from a sales' perspective, as well as from a gross margin perspective," says Thomas. "I can have a store that may not be producing as well from a sales perspective, but because of low operating expenses, it may be producing an attractive profit. So what we do is bring the profitability information together with the real estate information to help determine if the retailer should exit the lease and if there are options to exit that lease" without excessive penalties.

By the same token, the software can help retailers figure out gaps in their market coverage, so they know where it would make sense to expand. After the liquidations of Circuit City and Linens 'n Things, for example, the country was flooded with empty big-box stores, which now can be had for a bargain. Virtual Premise can identify what areas of the country a retailer should explore to find those steals. The firm has already been doing that for supermarket operator Food Lion.

In addition to Food Lion, Virtual Premise is currently working with H&M, Tween Brands, Verizon Wireless and the retail division of Bank of America, among other chains. The firm works on the landlord side as well, supplying property management accounting systems, but it's an admittedly smaller market for Virtual Premise. Among its retail landlord clients are Madison Marquette and Wells Real Estate.

Purchasing a Virtual Premise software contract can cost anywhere from $25,000 to $100,000 depending on the size of the real estate portfolio involved, but the product can support an unlimited number of users. Virtual Premise works as software-as-a-service, meaning that users can access the system without having to install new hardware on their computer and that system maintenance is performed by Virtual Premise rather than the client. Thomas cautions potential clients to allow for an initial set-up period that can range from 30 days to four months, during which Virtual Premise would integrate all of the client's real estate information into the account.

—Elaine Misonzhnik

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