Corporate real estate execs head back to school

To compete in today's real estate game, corporate real estate executives are arming themselves with the educational tools they need to succeed. Reality is catching up with all of the rhetoric. In the 1990s, the buzz in the corporate real estate world continues to center on the importance of increasing shareholder value through more sophisticated financial analysis of corporate real estate holdings. Facilities management alone is not enough. Brokerage skills by themselves don't cut it in today's globally competitive, bottom-line-oriented world. Corporate real estate managers must possess a broader skill set to be effective or even stay alive.

Hearing all this talk, record numbers of corporate real estate executives and service providers have been enrolling in educational programs designed to help meet the challenges of remaining viable in a rapidly evolving industry that increasingly relies on strategic thinking.

Two major trade organizations, West Palm Beach, Fla.-based NACORE International, through its Institute for Corporate Real Estate, and the International Development Research Council (IDRC), Norcross, Ga., are working hard to keep pace with the demand, offering continuing education and designation programs for professionals to gain credentials that show the industry they know how to handle extensive corporate portfolio responsibilities.

Annual enrollment for NACORE's courses has more than doubled -- from 450 to more than 900 -- in the last two years, according to Dr. Sally Mertens, NACORE executive vice president and senior director of the Institute for Corporate Real Estate. "Five years ago, we offered one finance course. Today we have five courses in the financial analysis arena," she says. "There is a big need for corporate real estate executives who have a financial analysis background. They are worth their weight in gold."

Mertens says that only two or three years ago most corporate real estate executives felt it was optional to take such courses. Often they found excuses for not participating, claiming a lack of time or money. "They can't afford not to come anymore. They are obsolete if they don't. They have seen their colleagues disappear because of old attitudes and old skills that did not carry them over. Today they must show how they add value or else there is no place for them," she says.

Knowing this, NACORE has designed courses meant to elicit change and give executives an action plan to take home, Mertens says, and courses continually evolve, based on both student and faculty input.

Besides five courses related to financial analysis, NACORE offers instruction in areas of strategic management, applied corporate knowledge, competitive facilities strategies, strategic workplace planning, reengineering the office, advanced corporate real estate negotiation, surplus property strategies, office leasing and construction project management.

"Financial analysis is now a part of every course," Mertens says, mentioning that the surplus property course now includes a half-day discussion on the financial impact of dispositions. Instead of focusing merely on how to get rid of properties, the course now aims to give executives the appropriate skills in which to paint a complete financial picture of a disposition including after-tax effects and present it to a chief financial officer, who can then better evaluate options and make decisions.

Executives who complete a series of coursework are eligible to receive a professional designation of either Master of Corporate Real Estate (MCR) for regular (end-user) NACORE members or Master of Corporate Real Estate Services (MCRS) for members who are service providers.

NACORE offers company-based education programs that are approved for credit toward the professional designations. If a company has 12 or more corporate real estate specialists on board, the institute will provide a full two-day program tailored to the specific needs of a company site.

Nearly 500 professionals have earned a designation since the program started in 1982, Mertens says, and the institute currently has some 900 candidates at work, who graduate at a ceremony at NACORE's annual meetings. Mertens says she expects approximately 100 new graduates this year, up from 65 last year. NACORE expects approximately 1,200 professionals to earn designations by 2000.

Case studies provide the substance of the curriculum, Mertens says. Courses are based on NACORE's "Proven Performance Model," the result of more than two years of research based on a behavioral analysis of 783 case studies documenting successful in-house real estate projects. Rather than having someone simply get up and read a script, all courses are team taught by volunteer faculty who have already completed a designation program, Mertens says. Ninety-five percent of course participants work for corporations, and the other 5% are service providers, she says, adding that 92% of students return to take more courses within two years.

"There is an urgency out there. We are turning people away in order to keep classes at a manageable size. Service providers are having trouble staffing with the kind of specialists they need. Possessing brokerage skills is essential, but it is not the whole story to being a successful corporate real estate executive today," she says.

"The skill set has changed. Strategy is more important now than it was in the 1980s, when corporate real estate thinking was more reactive," says David Latvaaho, president and national director of office and industrial leasing of Heitman Properties, Chicago. Latvaaho was one of the early recipients of a NACORE designation, completing the program in the mid-1980s when he served as director of corporate real estate for General Mills Corp. Latvaaho says he found the courses to be beneficial because of their practical rather than academic nature, as teachers are practitioners in the field. The program also offered a valuable opportunity to compare notes and discuss alternatives and solutions to corporate real estate cases, he says.

Besides the designation program, NACORE sponsors the Corporate Real Estate Strategy Forum, a two-day program delivered on-site at a company or at Harvard University, Cambridge, Mass. The Forum emphasizes setting and implementing corporate real estate and facility management strategy.

NACORE's upcoming 1997 Annual Symposium and Exposition (September 13-16, San Francisco) will include more than 20 educational sessions and professional development seminars on a wide range of topics from The Corporate Real Estate Executive in the Next Millennium to Using Off-Balance Sheet Deal Structures, as well as a mini course on Getting the Most for Your Leasing Dollar and two sessions based on the Institute's latest negotiation video projects: Negotiating High Performance Tenant Buildout and U.S./U.K. Lease Negotiations. Mertens says the institute is planning to add a video component to all of its courses within two years, and she notes video's particular effectiveness in helping to develop negotiating skills.

IDRC, which was established in 1961, includes more than 2,500 members worldwide, offers a comprehensive range of research and educational programs for individuals active in formulating corporate strategy, managing real property assets and planning new facilities.

Seeing a lack of an industrywide educational benchmark that encompassed all aspects of corporate real estate, IDRC, in 1996, began implementing a certification program known as Board Certified in Corporate Real Estate (BCCR). To achieve the designation, candidates must complete four elective courses and a university-style capstone course and pass five two-hour, multiple-choice exams in core competencies: strategic planning, transactions, site selection and location analysis, facilities management, and project execution.

"Other programs were more participatory-based as opposed to knowledge-based. The integration of corporate real estate into the mainstream of corporations means that real estate people have to integrate themselves with other departments and have knowledge of all aspects of corporate real estate, which makes the five core competencies very important," says Bruce Margine, IDRC's director of Global Education Services.

Approximately 70 professionals already have passed one or more of the BCCR examinations, and 10 candidates have already passed all five tests, reports Sarah Todd, manager of BCCR. Since the capstone component of the designation is still in development, no one has completed the entire program and received their designation yet, but the first round of certificants are expected early next year, Todd says.

Even though the BCCR program is still in its pioneer period, it has already seen "a tremendous potential" for candidates, Todd says, adding that she expects the program to accommodate thousands of participants -- including facility managers, brokers, developers, architects, attorneys, commercial lenders and economic development executives -- in the coming years. "It typically takes four years to get a certification program up and running. We have had a very good acceptance and interest in our first year," she says.

Candidates have five years to complete the certification process, including the capstone requirement. Unlike NACORE, the program does not differentiate between in-house corporate executives and service providers. To qualify as a candidate for certification, applicants must have at least five years of experience in corporate real estate, a bachelor's degree or a minimum of 10 years of experience without a degree. No association memberships or affiliations are required.

Eric Thorpe, manager, Financial Group, Real Estate Services for Ford Land Co., Detroit, has completed several IDRC courses and recently passed all five BCCR exams in one setting. "At Ford, we are seeing a sea change in the skill sets required for corporate real estate professionals, which points to a real need for professionals to broaden their field of expertise. There has always been a premium on transaction abilities, but now there is a drive to apply strategic thinking to the operational and financial aspects of business. This makes education critically important," he says.

One real benefit of IDRC courses, which Thorpe calls "very focused and specialized," is the opportunity to learn as much from the broad backgrounds and different perspectives of other students as well as from instructors.

"Real estate is becoming more knowledge-based, and it is critical to improve our skills continually. At Ford and other companies, real state professionals have not often come through the ranks of real estate, but have instead brought the strength of other disciplines such as marketing, finance and operations. Broader-based professionals are helping corporate real estate break out of its traditional role," Thorpe says.

"We see the certification process as a beginning, rather than an end, to career development," Margine says. "It's a launching pad that can propel corporate real estate executives into the higher reaches of business."

IDRC stresses the linkage between research, education and certification, Margine says. The backbone of IDRC's educational programs are the organization's World Congresses and international conferences. Congress themes are based on what is impacting corporations the most, Margine says. Professionals come together for five days, and "this is where the research and learning is crystallized. The Congresses feed the BCCR program," he says.

IDRC also offers management seminars and business television programs on a regular basis. "Managing Shareholder Value," an executive symposium designed for CFOs, controllers and corporate treasurers, will be held at the University of Pennsylvania's Wharton School in Philadelphia, on June 26-27. Dr. Peter Linneman, director of the Wharton Real Estate Center, will lead the symposium. The keynote speaker will be Dr. Thomas E. Copeland, an authority on valuation and risk management and director of corporate financial services for McKinsey & Co. Inc., an international consulting firm. Marc Hodak of Stern Stewart & Co. will present a course on the concept of economic value added (EVA), one of the most currently popular value-based management concepts, which was developed at his firm.

Edward A. Noha, executive vice president in the tenant representation group at LaSalle Partners, Chicago, has taken IDRC courses that focused on strategy and forming strategic alliances and has been a NACORE faculty member for its strategic management of corporate real estate course, which concentrates on applying benchmarking and performance measures to the corporation.

Noha says that the integration of research and educational components of IDRC programs provides professionals with a dual advantage. Research provides understanding of new models of providing service, while the educational experience complements the research by offering a practical how-to case study approach at a more "tactical level," he says. "It is very different to hear about a model in the abstract and then hear from other participants why and how they implemented or ran into obstacles implementing a model in their practice."

James B. Frantz is a New York-based business writer specializing in commercial real estate.

NACORE courses are offered in nine cities in North America, Europe and Asia. Courses are offered four times a year in four different cities in the United States. The next course offerings are in Boston on July 28-30 and July 30-Aug. 1. Fall sessions will be in Chicago on Nov. 3-5 and Nov. 5-7.

For additional information on NACORE's educational programs, call 1-800-726-8111.

The next IDRC World Congress will be in San Diego on Nov. 15-16. In 1998, seminars will be held at IDRC World Congresses in Baltimore (May 8-13) and San Antonio (Oct. 31-Nov. 4).

Candidate handbooks and applications can be obtained through the Candidate Services Department of Applied Measurement Professionals at 913-541-0400. For more information about the BCCR program, call Sarah Todd at 770-453-4205.

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