July 12, 2010

Reporting options in IWMS applications

IWMS expert and Lucernex President, Joe Valeri (see Joe’s management summary here), discusses reporting options in IWMS Location Performance Management Applications.

It always amazes me how little importance some software buyers place on reporting options. The fact is, while some IWMS applications have great industry specific functionality or better project management or CAFM or lease administration; the ultimate reason to establish a single source of location data it to enable effective decision-making. And effective decision-making can only come through thoughtful review of summarized data (i.e. reporting). While dashboards can help drive some decision making as can specific analysis functionality, reports are still the most widely used deliverable of any IWMS system.
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April 12, 2010

Why a single platform IWMS beats "best of breed"

Lucernex expert and President Joe Valeri (see Joe’s management summary here) discusses how integrated sales prediction modeling improves an IWMS.

There are many vendors of real estate software to choose from today. There are vendors that provide individual solutions for mapping and GIS technology, modeling technology, transaction management, site selection and project management technology and there are several vendors that provide individual applications for facility management and maintenance technology. Firms possessing multiple locations can choose to buy one application at a time selecting the “best of breed” to meet each major set of requirements. For example, it is very common for the construction department of multi-location firms to buy a construction project management system purely to meet that very specific need while the real estate department might choose a lease administration solution and a mapping solution and the facilities group selects capital projects and facilities maintenance applications. The groups buy based on a singularly focused set of requirements pay a fair price and implement their technology.
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March 31, 2010

It's time to upgrade lease administration software now

Lucernex expert and EVP Ken Brown’s (see Ken’s management summary here) discusses why its time to upgrade your Lease Administration Software.

Real estate organizations have been using lease administration systems for years. What started out as a replacement for clunky, file-based records that were often misplaced and decentralized, modern lease administration systems have turned into centralized, decision-support databases that are critical to maximizing ROI of real estate assets. When these systems first appeared, simply having all of the key leased and owned data in one place and sharable across the organization was the primary goal.
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March 15, 2010

5 GAAP/SOX Rules You Need to Know

Lucernex expert Jim Duport discusses the 5 rules you need to know about GAAP/SOX. Learn more about Lx LseMod Corporate for lease analysis including GAAP impact.

1. Rent straight-lined over the term if rent increases are known.

Impact: First Fiscal year cost will increase

 

2. Landlord Tenant Improvement Dollars are shown as a net rent credit, and Total construction cost including Landlord’s TI Dollars are depreciated.

Assume: Construction cost is $30/sf, Landlord paying $21/sf
Old Days: Depreciate $9/sf (part paid by tenant)
Now: Depreciate $30/sf (tenant and landlord cost) Landlord cost shown as credit to rent spread over term Tenant’s capital stays at $9/sf ($30 – $21)
Why? Rationale – base rent includes landlord’s amortization of TI$
Impact: Reduces “rent” charged to the P&L
Increases depreciation
Changes EBITDA

 

3. GAAP rent starts with “beneficial use” GAAP rent starts earlier of when construction starts or lease commences

Assume: Lease starts March 2007, construction starts January 2007
Old days: Start paying costs in March 2007
Now: GAAP rent starts when you “use” the space e.g. January 2007
Why? Tenant, in essence, controls space since construction is for Tenant’s use
Impact: Potential double rent on financial statements during construction (if relocating)
First Fiscal year cost will increase
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4. Restoration amortized over term

aka – “make good” or in UK, called “dilapidations”
Old days: Adjust Cash Flow at the end of term to include Restoration cost
Now: FASB 143 requires the accrual of future liabilities, in this case Restoration / Dilapidations. The following applies if you choose to Apply GAAP Accounting.The methodology used is to estimate the cost now, then apply an inflation factor to estimate the cost at the end of the term, the Future Cost.

The Future Cost is then discounted to a Present Value. The Discounted Present Value of the Future Cost is straight-lined over the lease term AND an accretion expense is applied to the increasing liability. The accrual starts with the GAAP lease term since it represents a liability. Cash Flow needs to be adjusted to reflect the P&L liability and the payment of the actual cost at the end of the lease term

Impact: Increases average annual occupancy cost on P&L

 

5. Rules for sublease analysis write-offs have been further defined

  • Cost written off when decision made. When vacate space or if vacant, when decide to sublease
  • Costs include NPV of rental costs, depreciation write-off, estimated subleasing costs and sublease income
  • Income Statement (P&L) charged the NPV of write-off
  • Monthly, interest expense on declining balance of the NPV Write-Off charged to P&L
  • Declining balance determined by taking net monthly costs and
    interest expense, deducting that from the NPV write-off

 

GAAP Accounting

GAAP Comparison

Shameless Plug

Lx LseMod Corporate Lease Analysis is the market leading application for Corporate lease analysis, providing GAAP impact analysis within detailed P&L and Cash Flow projections. Companies like GE, MetLife, American Express and Robert Half use Lx LseMod Corporate for lease analysis making it the most trusted name in corporate lease analysis.

March 15, 2010

What Makes some IWMS software so expensive?

Lucernex expert and President Joe Valeri (see Joe’s management summary here) provides details of why IWMS software from some vendors can be so expensive.

Reasons some vendors IWMS Software can get expensive

There are actually several answers to this question depending on the vendor you are looking at. I don’t believe it is appropriate to mention other vendors in a negative light so I will simply characterize them into groups and potential buyers will need to ask the right questions to ascertain where we all fit. Several vendors, particularly the really expensive ones, fit into many of these categories.
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March 11, 2010

Tenant Rep Brokers surviving the economy

Lucernex Commercial Brokerage expert and Account Executive Cinnamon Trimmer discussed how some Tenant Rep brokers are surviving the current economy.

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Recently I had very good conversation with an old brokerage buddy in California, Jack. He was really freaking out that his real estate career was heading in directions he was not prepared for. See he’s been a “Tenant Rep” for 20 plus years and now is competing for Landlord Rep and Sublease deals just to make ends meet!
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March 7, 2010

The power of Location Management

Lucernex expert and President Joe Valeri (see Joe’s management summary here) provides details of why Location is the key to Real Estate Technology.

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In the last Blog I talked about the importance of an IWMS using the Location as the central organization point for all data.
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March 1, 2010

IWMS? It’s Location! Location! Location!

Lucernex expert and President Joe Valeri (see Joe’s management summary here) provides details of why Location is the key to Real Estate Technology.

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My last blog discussed the very loose definition of IWMS and how it tries to describe a wide array of very different vendors. In this blog I will discuss one type of IWMS, Location Management Software, and what the different end users may need to focus on when selecting a Location Management IWMS.

What are the three things that matter in real estate – Location, Location, Location. This old adage about real estate applies to commercial real estate technology as well. The location is what real estate is all about whether you are a 2000 store retailer, a 30 building corporation, a large hotel company or a multi-building campus – everything you do in relation to your real estate is based on a location. And, managing the performance of each location to perform optimally is the ultimate goal for each location whether it’s optimizing revenue or minimizing cost.
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March 1, 2010

Technology: Turning time into money

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Originally published in the National Association of Realtors RCA Report, Winter 2010

If time is money, then technology is an investment a commercial real estate professional can scarcely afford to neglect. Today, brokers and property managers can produce complex analytical data, transfer the information to an easy-to-read Excel file and present it to clients with a few key strokes. What used to be a laborious, mathematically-inclined and time-consuming process now has been so streamlined by software products that pencil pushing and number crunching are a much smaller part of the job.
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February 10, 2010

What is IWMS anyway?

Lucernex expert and President Joe Valeri (see Joe’s management summary here) provides a start to the conversation.

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The term “Integrated Workplace Management Systems” or “IWMS” was coined by Michael Bell formerly of The Gartner Group. This new term was then used as the basis for producing an IWMS market assessment including a Gartner Magic Quadrant. This type of assessment is commonly produced by Gartner to compare technology vendors in many industries. Without a common term, in this case IWMS, there would have been no way to ‘lump’ a bunch of vendors together into a comparison document. In reality, at the time the term was coined, the vendors thrown into the IWMS bucket were very dissimilar and often addressed very different markets. Since then, however, using the IWMS blueprint provided in the IWMS market analysis containing the Magic Quadrant, the vendors have actually enhanced their products, changed messaging and in some cases merged to better fit the image of “IWMS”. While features of the vendors have grown more similar, they remain different in some very important ways, most notably their expertise in specific customer bases and specific functionality that addresses that base.
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