The Savills Blog

Understanding Corporate Real Estate Dispositions

Part 1: Q&A with Savills Gerard Staudt, Head of Dispositions, North America

Corporate real estate professionals spend much of their time finding the right space for a growing workforce. However, at some point, many companies will need to shed some square footage. Savills Gerard Staudt, Head of Dispositions for North America (leasing and sales), explains why this area of commercial real estate requires a different approach and a unique set of skills.

Q: Why hire a real estate dispositions specialist?

Gerard Staudt: Carrying excess space on the books can be a financial burden on a company’s balance sheet. That’s when bringing in a dispositions specialist, not a general real estate broker who splits his or her focus on acquisitions and dispositions, can make a difference. Each dispositions project is like starting a new business. It requires extraordinary focus to be effective.

Q: What sets real estate dispositions apart from other commercial real estate services?

A:
Dispositions typically entail the leasing, sale or sale-leaseback of surplus corporate real estate, due to changes in corporate strategy, mergers and acquisition activity, or economic trends. It’s a routine part of the overall commercial real estate landscape, but hitting corporate targets on surplus real estate is anything but routine. It’s an area that many companies and brokers fail to plan for adequately. Without proper analysis and planning, surplus real estate can become a drag on corporate finances. Executing an effective dispositions process requires expertise in analyzing and transforming typical market data into realistic achievable targets with a focus on corporate surplus real estate cash flow.

Q: What is the difference between a dispositions specialist and other corporate brokers?

A: Dispositions specialists are laser-focused on handling surplus real estate transactions. We are different from other brokers; a big part of their focus is on availabilities in the market that are managed and marketed by their brokerage firms and their markets’ landlords.

Dispositions specialists are keenly aware of corporate processes and policies and the value of time and cash flow. One of the critical success factors of a dispositions specialist is understanding how to set accurate expectations up front to position transactions to close without having to reset targets. It’s crucial to perform due diligence upfront and be transparent with everyone involved, including clients, the markets and the potential prospects.

Q: Why hire a dispositions pro instead of local market representatives?

A: Savills Dispositions specialists are solely focused on getting rid of the surplus real estate at maximum value. We are not focused on being a local market broker representative, but we work with local broker reps, as they have the local knowledge and relevant base data. We transform the base data the local market broker representatives use into realistic, achievable pricing and timing for the unique surplus corporate real estate. The local reps’ natural focus and incentive are to protect their market pricing, because they have competing interests in serving local clients, landlords and associates. By contrast, Savills Dispositions’ sole focus in every city is to get rid of that excess space to produce maximum cash flow. Timing is critical – to protect the client who is carrying the surplus real estate, we follow a process that ensures that we don’t miss opportunities by listing at the wrong price.

Q: Can you explain at a high level how typical dispositions transactions work?

A: Dispositions often start after a property has already been unsuccessfully listed by a local market broker. We start with the most basic steps:

1. We conduct a detailed review of the client’s objectives.
2. We thoroughly assess each site’s assets and issues.
3. We analyze local market data from numerous resources, including brokers.

Unlike typical local brokers, when we inspect the “surplus” site, we factor in all positive and negative issues, such as location, property condition, access, parking, shorter lease periods, construction requirements, lower ceilings, maintenance needs, etc. The details can make a significant difference in the on-time delivery of a dispositions project. We analyze a list of comparable sites, making necessary adjustments line by line, work with the local brokers. We assess the local reps’ conflicts of interest – for example, if they are working with landlords who don’t want to see a surplus space undercut their own prices.

One of the most critical steps we take is to transform the typical market data into realistic achievable pricing and timing targets for unique surplus real estate. We control the dispositions process every step of the way, maximizing the probability of success in all the transactions we take on. We bring an independent, holistic view to any market, to maximize the client’s value within a given time frame.  

In our next installment of this Q&A with Gerard, we will drill down further into what makes our dispositions process so successful, time after time.     

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