The corporate real estate software challenge: get on the bandwagon orget out of town

Attention corporate real estate executives, Mark Kring has an eye-opening message for you. The president of Laser Application Corp. in Irvine, Calif., says the software package you choose could be your ticket to super stardom at your firm -- or possibly a one-way pass out of town.

The reason for such a sobering missive?

"The demand is growing for real estate software in corporate real estate departments with increased pressure from above to either become more efficient or become outsourced," Kring says. "If corporate real estate departments do not recognize the importance of software in their day-today activities, they soon will. Otherwise, their job may be eliminated by upper management to make room for the average property or asset manager who will be able to perform their work more efficiently."

That means the days of merely trying to scrape by using piecemeal software may be over, says Kring and others. Partly because of increased downsizing of corporate real estate departments and partly because the real estate department is usually allocated the least in capital expenditures, software used by internal real estate groups is behind the curve. "They must catch up to the use of outside managers, etc., or they will not be able to compete with outside vendors, whose main function is providing third-party management of corporate real estate departments -- also known as outsourcing," Kring says.

In other words, rapid changes are occurring in corporate real estate throughout America. Considered by some executives as a mere step child of the company, corporate real estate departments have come into their own -- now considered an integral part of a firm's strategic game plan and bottom line. Accordingly, top executives from the CEOs on down are shining their lights more brightly on their real estate departments, demanding additional information more quickly and in more varieties than ever before.

The result? Managers are rapidly learning just how hot the spotlight can be. "The corporate executives at larger corporations are now looking at real estate in a different way," says Bob Fahey, senior vice president of sales at Yardi Systems of Santa Barbara, Calif. "Historically, big corporations thought real estate was incidental but, with everyone working on a leaner edge, they now need someone to collate the situation, to report on leases, assets, cost per square foot, full-time employment equivalence, cost per employee and so forth."

In other words, corporate real estate is evolving as businesses become more concerned about managing their assets and positioning themselves for the future. Since Corporate America's executives want information they can understand, software now is viewed as a tool to assist the company, rather than merely a means to manage a far-flung operation.

"Corporate America is now going through its second and third generation of automation; it cut its teeth on main frame systems which are nothing like today," Fahey says. "Not only that, but it used to be you'd go to an oil company, a bank or whatever and ask, `How much space do you have?' and many didn't have any idea. Corporate America is now looking at real estate twofold: owning the asset and allocating expenses to the business unit.

"Better tools are needed," Fahey says. "In the old days, you'd have five dissimilar pieces of real estate software that didn't talk to each other. Today, compatibility and integration are the key words. If you're going to enter information about a lease in Beverly Hills in your system, you have to make sure the acquisition people, or others, are able to get information and not have to re-key it."

Today's corporate executive either wants everything in one system (hard to do) or a seamless interface so that he or she can drill down graphically into data and obtain the information they want, observers say. There are a number of systems which can upload tenant/property management data from the various property management systems, such as MRI, Skyline, etc., so that everything is on the system and can be reported.

Marianne Conroy of Timberline Software Corp., Beaverton, Ore., says that making the information easy to access for the corporate real estate executive is key. "For the executives, we feel they just want immediate access to certain tools." So, Conroy says, her company has developed subsets, within the accounting packages they provide to companies, that give quick and easy access to information that corporate real estate executives might need.

Ted Stearns of Real Pro-Jections of Carlsbad, Calif., which offers the WinStack program, agrees. "There is a definite segment, the corporate real estate segment, that hasn't had too many innovative systems developed in the past years," he says. "It was considered a niche marketplace, and any software developer would take a look at size of market-place to see if it was large enough to develop packages. If it is an important enough segment for companies to spend the bucks, then OK. But if it's only a step child, software companies are not going to s end a lot of money developing a package if there is no market."

Some of the items corporate real estate executives are now looking at are universal, say those in the industry, such as lease management packages, something that would help them keep track of all leases or assets they have as well as rents and rent step-ups, the options they have on leases and projections for monthly or annual budgets -- all tied into some type of accounting system so they will be able to track what their budgets are vs. actual.

In addition, executives stress they need some type of interface between systems -- the real estate software and the accounting software, for example -- so that, rather than manually inputting the data a couple of times, it is accessible to other departments.

This trend comes at a time when more and more executives, who have had a computer on their desk for years, are becoming aware of its ability. These managers are searching to make their systems more useful and are looking for graphical interfaces, very intuitive systems, with drill down software, that allows for easy queries.

In today's real estate market, knowledge is key, notes Ron McComas, vice president/marketing for Management Re, ports Inc. (MRI) of Cleveland. "Today, a company can be a landlord and a tenant," McComas continues, "and those firms are prime candidates for traditional property management software. If a corporation is only concerned with their activities as a tenant, it's been our experience that, by and large, all they really want to do is create an extensive data base to monitor their own lease status and expiration, determine CAM charges and so forth."

Corporate real estate's requirements are becoming increasingly diversified. "In the past, real estate executives were looking for software that automated the function of tracking leased or owned properties," says Kring of Laser Application. "Today, real estate managers are looking for fully integrated systems to fulfill their requirements. Most systems do not handle every task of the corporate real estate department and, therefore, must be pieced together to meet a comprehensive set of tasks."

Because the cost of tailoring a fully customized integrated system is extremely expensive, most software products are customized to meet a specific need or task of a real estate executive. "This means that the software will do specifically what the executive wants it to do for a specific task but not for every task," Kring says.

"We're seeing a change in the needs of corporate real estate executives," says Mark Lambourne, CEO at ASI International, Lafayette, Calif. "They are asked to keep and have access to more information." Lambourne says that his company provides software that allows real estate executives to consolidate their information in one central repository while being able to interact and communicate with other groups within and outside of the company. "Corporate real estate no longer exists on an island."

Part of choosing the best product is how well the software can be pieced together with other software packages.

"A picture is worth a thousand words. People can grasp a situation much faster with a picture than with tabular reports, which is why we developed Winstack," says Stearns. "With the interface between property management systems and WinStack, a property manager can take data from their property manager system and can bring it right into WinStack, to produce a vertical stacking plan that displays tenants on a floor-by-floor basis in the building. They can produce graphical printouts showing color coding of the tenants by lease expiration year, vacancy and occupancy, lease options ... any number of ways.

"Observers point out that if companies have different systems, it could take a lot of dollars to convert and that can get to be very expensive, to say nothing of the errors produced when a firm goes from one system to the next," says Steams.

Al Lehman, president of Colonial Systems Inc., Exton, Pa., says computer manufacturers had a proprietary way of doing things, but the PC industry has been forced to cooperate. In addition, PCs that weren't big enough to run a whole business now are more powerful and are used as a work station.

"We've all seen the benefit of open hardware and what it's done with the PC area, and it's about time software is viewed the same way," Lehman says. "All of the information ought to be stored in an open database format, directly by other information, so if you're looking at real estate software, it will contain information about leases or tenants, depending on what you're doing."

Colonial, known for its Property Management System, realized some time ago that departments needed to be able to interface and deal with the utilities that are available, either correspondence with existing word processors, downloading information to a spread sheet for analysis, index or retrieve software, Lehman says.

"People want to see pictures of a building and bring up the floor plans," Lehman says. "In property management, there is a big demand to bring up a tenant's floor plan. If someone calls with a service problem, whoever is taking the call can see on screen which hallway has the light out. We're trying to create a filing cabinet, where you can store a host of things and look at the information historically -- lease abstract, outstanding correspondence and so forth. Business correspondence is now delivered by fax, and I can get an incoming fax on my computer screen so I can print it if I want it. But I still have to file it. So why not file it with the other information in a complete information management system."

Howard Honickman, executive vice president of Newstar Technologies Inc. of Ontario, Canada, notes that in the past, information was presented to various groups of executives -- operations, property management, acquisition/disposition, asset manager, owners and so forth -- in one form.

"It was fairly simple," Honickman says. "Historically, information was produced in paper format, and managers took it and re-keyed the information into a package, a sort of micro database spread sheet, where they would prepare reports for internal use and others. What we are seeing now is managers getting all the information electronically from property management sites and any other sources of information and using day-to-day and access temporal data."

Honickman notes that a recent addition, OLAP (On Line Analytical Process), desribed as a multidimensional database and tool kit, allows an executive to take one slice through data instantly, dragging in and dropping information, changing dimensions and viewpoints.

"This is the kind of tool kit owners are all using or should be using," he says. "What we're finding is that no one gets paper any longer. Top executives are getting electronic briefing books -- a whole series of mini markets on a laptop. When a manager uses OLAP, they can see an entire 1,000-page report on their laptop and slice and dice, create graphs, print out only what they want, highlight trends and so forth. It's blowing away the industry."

Actually, say those in the real estate soft-ware business, today's busy executive could care less where the data exists, he or she just wants the information available. Interfacing is happening more and more with other packages, such as Lotus Notes and, with the Intemet, more and more companies are developing interfaces to data in different locations. The information may be available to an executive in New York, but he or she might be accessing data in Chicago or Los Angeles.

"Communication has become more expedient," says Lambourne of ASI, which uses the Lotus Notes software. "Our software is designed to interact both internally and externally."

So what does the future hold for corporate real estate departments?

Software is expected to become increasingly important as firms continue their evolution from bloated giants lithe companies, says Ronald Dean, managing director at ARGUS Financial Software in Houston.

"Corporations aren't set up to mimic the real estate world, and they might have a bookkeeping entry that is an allocation of costs, which has nothing to do with real world occupancy of space," says Dean. "One profit center may use utilities a lot more than another profit center, but that may not be accounted for or metered separately. Therefore, a profit center that has a low utility usage is being penalized by another profit center with a high use. It's very difficult in corporate real estate to allocate all these things specifically, and corporations are now discovering they need to have a better sense of how to make their operations fit the real world so they understand there is profit and loss in real estate as there is profit and loss in the business."

Generally, he adds, corporate real estate executives use the same type of software that investment executives do. However, their particular "slant" on accounting or valuation often has more to do with how their corporate books are set up. Many corporations do not have tenants in the traditional sense of the word in the real estate that they occupy, but they have divisions of the corporation that they treat like tenants for a variety of accounting purposes (rental allocation, for instance).

Realizing that corporate real estate departments are currently "piecing together" various software packages, Dean says that ARGUS is meeting with corporate real estate executives to plan future products. "We're in the midst of creating specific software tools to help the corporate executive do his job," he says.

That will be good news to corporate real estate executives who want to catch the corporate wave instead of the next train out of town.

The use of computers to enhance the capabilities of business is expanding in few places faster than in the real estate industry. Newer, more efficient ways of tracking and using property data have driven the success of numerous firms.

But as technology has increased the amount of data, it also has focused on how to get this data to the decision-makers more quickly and in a more easily understandable form.

This is a prime objective of Dallas-based Fischer & Co., national corporate real estate services firm, and its subsidiary, Fischer Systems, which creates corporate real estate management system software for its parent company's clients.

"Upper management can get information directly from the system by just pointing and clicking the mouse on their computer," says Cliff Fischer, who started the firm in 1986. "They never have to use the keyboard."

So members of management need not be computer knowledgeable to gain access to information. But Fischer stresses it is the combination of both ease of use and depth that sets the system apart. "Other programs are easy to use, but none of them offer access to this amount of data."

The systems are divided into several service-specific modules, including transaction management, strategic planning, financial lease analysis and benchmarking. Each module stands alone and can be used independent of the others, but they also work in tandem.

Fischer points to the benchmark module as another important aspect of the system. This module brings more accountability to the client's company by providing more effective reporting of results to upper management. He stresses that being able to quantify performance is even more important in today's changing business environment. "The job may be done well, but if it is not reported effectively, it will go unnoticed."

Fischer Systems will send technicians to help train personnel in using the program, but Fischer says the operations have been simplified to the point where a tutorial disk is usually all that is required. The company's growing client list includes IBM, GTE, Federal Express and Texas Instruments, among others. "It is a big change for a company to got to this level of automation," says Fischer. "But we feel all corporate real estate owners will have to make the change in order to ensure future success."

With the push of a button and the assistance of Yardi Systems' Advantage System, Rene O'Brien can send a property management report directly to Excel or Word, where she can add graphics, rearrange the data or put it in a more easily understood form.

"Before, we were running an old system that was bought in 1988 and wasn't very friendly. We couldn't even use our PC," she says. "With that system, you'd have to re-input the file into Excel or Word. It was a nightmare. Now, I just push a button to send it there."

O'Brien, vice president/controller of the privately held Carson Cos., a real estate developer in Southern California, adds that integrated systems, such as the company now has, is the wave of the future.

"We've been getting the comment from executives for five years that they just want to push one button and be able to get all the information," she says. "Now they might have to push two or three, but it's a lot better than before, when you had to know all the commands to get the information."

Such an integrated system is more up-to-date for executives, too. "My department did everything and, before we'd put out a monthly report, we'd have to manually input and update the information in that book," she says. "Now the executives can just pick up the information on line. It's terrific!"

Mike Sheridan is a Houston-based freelance writer who contributes regularly to a number of national magazines.

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