Core
Asset Strategy

Background

Real estate is oftentimes the second largest expense facing a corporate income statement. Only second to labor, it moves the bottom lines of thousands of domestic and foreign companies. An aggressive spend reduction and major asset strategy program can lead to tens of millions of dollars in lower operating expenses.

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2-4
basis point improvement in profitability by optimizing real estate operations

Delivering Results

Reconsidering Desires

Corporate decisions inevitably involve give and take. Reducing costs can often require firms to end relationships with buildings and landlords that may still perform a function for the business. TheActivationGroup recommends that clients close, sublease, terminate or sell non-productive locations. Additionally, consolidation or co-location can make additional reductions to corporate real estate costs.

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Market Conditions

Real estate is a cyclical market. It is rarely possible to time market swings, however, there are times that it makes more economic sense to transact. The current interest rate decision(s) will act as an inflection point for many real estate decisions. Now it’s time for firms examine every major real estate asset occupied to determine whether or not it’s reasonable for the business to expand or contract.

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Polished Processes

It can be less politically abrasive to reduce space rather than headcount. Management’s concern for staff may not consent to right-size a department or reduce excessive space. Outsourcing may be a more effective and less costly way to reengineer your real estate portfolio and processes to ensure that a team’s performance goals are aligned with your firm’s evolving needs.

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Restructuring Tactics

TheActivationGroup works with clients to determine the next steps for a portfolio. We communicate and establish goals with management to discuss and decide if we should renegotiate early—to then blend and extend, buy low/sell high, buy out and terminate the lease and/or appeal property taxes. TheActivation Group has decades of years negotiating with different areas of the commercial real estate market.

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Optimize Capital Deployment

Firms deployment of capital relative to market conditions and company goals can result in significant savings. TheActivationGroup has determined whether you should: own instead of lease, monetize embedded equity through sale/leasebacks, generate cash through the sale of assets and/or segment costs. It may take experienced professionals to objective and holistically approach these decisions within the larger context of the firm and market.

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Reduce Facility Operating Expenses

Most good internal real estate departments have implemented operating expense reduction initiatives. There still may exist plenty of savings opportunities that can be captured. TheActivationGroup utilizes facilities procurement leverage, energy management solutions, operations and maintenance support, facilities asset planning, value engineering capital investments and rent/lease invoice auditing to drive spend reduction.

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Workforce & Location

The configuration of a workplace and real estate portfolio can impact long and short-term costs. Before making any real estate decision, TheActivationGroup helps identify labor longevity and costs, alternative workplace strategies, economic incentives and workplace standards.

Our Principles

Research has found that there is almost always a trade‐off between the two dimensions of cost and quality in commercial real estate: low‐cost locations offer lower quality, whereas higher‐quality locations are more expensive. The challenge for companies aiming to reduce their operating expenses is to identify those locations where costs are low and quality is at an optimized level.

Mergers +
Acquisitions

Corporate real estate is one of the top three assets for every company and is often ignored in M&A transactions. Having a defined real estate strategy and determining how to handle the portfolio before, during and after a M&A transaction is critical to a strategic acquisition’s overall success.

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Financial Structuring

FASB/IFRS updates have presented millions of dollars worth of opportunities that most companies are not taking advantage of. TheActivationGroup is experienced in restructuring, refinancing and altering lease and ownership of real estate assets.

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