Strategic Real Estate Asset Management ("STREAM") is FutureLaw’s aggressive approach to lowering occupancy costs through the development and application of a carefully crafted real estate strategy. While many organizations have internal or outsourced property management functions, master facility plans, legal support, financial staff and other resources, few have a focused, integrated and proactive approach to optimizing the real estate asset management function. FutureLaw’s role is to organize, concentrate and complement existing resources and relationships to enhance and coordinate with the resources already in place. Current economic conditions mandate an aggressive approach to lowering operating expenses, adjusting balance sheets and financing growth and development, despite the tightening of credit. We leverage those conditions for the client, utilizing our legal, real estate brokerage, government affairs, due diligence, investment banking, private debt/equity funding, energy audit and other resources. We are not a conventional property management, brokerage or master facility planning firm. We lead the development and implementation of strategies to ensure real estate assets are deployed to the maximum benefit of the client and that occupancy costs are kept to the absolute minimum possible.
Our value proposition consists of three key elements:
1. FutureLaw has an experienced, multi-disciplinary internal team with decades of success in the real estate industry.
2. Through existing teaming relationships with best-in-class service providers, FutureLaw can apply additional resources to meet a client’s needs. FutureLaw coordinates these resources and seamlessly integrates them into the STREAM process.
3. FutureLaw is results-oriented and seeks to share risk with clients. This risk-sharing includes our compensation structure.
The team of attorneys and consultants at FutureLaw can assist you with an analysis of real estate assets and make specific recommendations to save money in the near term, while securing the real estate facilities needed for the long term. Contact FutureLaw to explore which STREAM strategies will make your commercial real estate assets more profitable. Chip Dicks coordinates our STREAM efforts and can be reached at 804-225-5507, or by e-mail at email@example.com. See www.futurelaw.net for more information.
What Kinds of Projects Are We Talking About?
Hospitals and Health Systems
Despite the economic downturn, the healthcare industry is experiencing continued growth in demand and a high rate of merger and acquisition activity. However, decreased non-operating revenue, cutbacks in reimbursements from third-party payers including the federal government, increasing numbers of uninsured patients and the tightening of credit and capital markets, have created major obstacles. FutureLaw’s STREAM process can be a valuable tool in helping healthcare organizations weather this storm, while continuing the growth and development needed to serve their patient populations by lowering occupancy costs and reducing liabilities. While increasing revenue produces a marginal impact on net income, each dollar saved as a result of STREAM goes right to the bottom line. Examples include:
Existing, new or replacement hospitals, mergers, major additions and renovations. FutureLaw can work closely with an organization’s internal team to evaluate all aspects of a project, including financial feasibility; zoning review and approvals; certificates of need; permitting; tax-exempt bond financing; private debt and private equity financing; sale/leaseback or lease/purchase options; site acquisition and disposition and more. FutureLaw’s Renewable Energy Team can also work with new and existing projects to evaluate and optimize energy efficiency.
An example is the non-profit health system that seeks a merger with a single independent non-profit hospital that will expand its primary service area. Due to internal capital requirements and current debt/equity ratios, the health system does not have access to funds to complete the merger in a timely fashion, and may lose the opportunity to a competitor. Through the STREAM process, FutureLaw can evaluate all of the health system’s real estate holdings to determine if a sale/leaseback transaction for an unrelated property could produce the capital needed to complete the merger. Or, FutureLaw can facilitate the purchase and leaseback of the non-profit hospital’s real estate in an off-balance sheet transaction.
Medical office buildings. As physician practices continue to merge with hospital-based health systems, the number of associated leased and owned properties can become difficult and expensive to manage. FutureLaw can assist in the development of a real estate strategy to support the proposed merger, including: consolidation of practices into one property with centralized support services; acquisition/disposition of property; lease negotiation/renegotiation; tax exempt, private debt or private equity financing or refinancing; sale/leaseback; lease/purchase; and other options.
An example is the merger of a sizable physician practice that owns its building and leases the building to the practice. The merger may become more attractive to the physicians if a sale and leaseback of the property puts immediate cash in the pocket of the physicians, especially for those who may not participate in the merger. The leaseback to the health system could lower rents and if an energy audit is performed, further lower the occupancy costs of the practice. This could result in a stronger bottom line performance and offset the costs of the merger. Financing for the sale could be provided through a variety of means, depending upon factors such as non-profit or for-profit status of building tenants, long-term real estate objectives of the health system and timing of the transaction.
Local governments are suffering from budget deficits due mainly to decreased tax revenues. In areas where housing starts have fallen, unemployment has risen and other revenue sources have eroded, the deficits are significant. However, due to the rapid residential and commercial growth in many of these localities, the need for funding related to capital projects remains strong. FutureLaw can help local governments fund projects and reduce overhead and liabilities in existing projects through tax-exempt bond financing coupled with sale/leaseback and lease/purchase transactions.
An example is a local government that has a long-term lease commitment to a building owned by a private, for-profit entity. The local government is paying rent based on market rates at the time the lease was signed, but declining tax revenue has created a budget shortfall. With FutureLaw’s help, the local government can negotiate a lease purchase agreement with the building’s owner that will reduce the current rent levels. It will also allow the rent proceeds to be used productively over time, making available the acquisition of the building over a 20-year lease purchase period by using a $1 purchase option at the end of the 20-year period.
These are difficult times for institutions of higher learning in the Commonwealth. Public colleges and universities are being told to reduce their current budgets by an additional 15 percent, marking the fifth time in four years that the state has cut its financial support. Both public and private endowment funds have lost significant amounts of revenue as a result of recent conditions in the stock market. Capital and operating budgets are negatively impacted.
As an example, a Virginia college is facing considerable budget reductions that impede progress on campus growth and expansion. The college capital improvement plan calls for the construction of a new graduate school, but the budget reductions have put that construction project on hold. By conducting a top-down real estate plan review, FutureLaw can work with the college and with our strategic financing partners to develop creative financing approaches, such as tax exempt bond packages, that reduce overhead and liabilities. We also can work with the college’s real estate and development staff to review current holdings that may be best suited for sale/leaseback and lease/purchase transactions that would reduce debt, and provide immediate capital.
An additional example is offered by a state university that owns a prime parcel of commercial real estate. When sold, this asset would put much needed funding into the university’s coffers. FutureLaw can work with the local government structure to assure that the parcel is zoned for the highest and best use, assist with the disposition of the property for the maximum price and provide all necessary legal and settlement services upon sale.
Private Building Owners
With the difficulty in securing refinancing of an existing loan in the current commercial credit climate, FutureLaw can work closely with private building owners with government or non-profit tenant(s) to evaluate and implement successful exit strategies through tax exempt bond financing, and/or conventional and taxable financing. FutureLaw’s STREAM strategies routinely employ sale/leaseback and lease purchase transactions to bring forth a rewarding outcome for all parties involved in the transaction.
The STREAM process offers the expertise to provide the private building owner with a broad range of specialized services, including but not limited to:
• Discovery, due diligence and development of a disposition plan;
• Strategic organizational review, including financial analysis of current and future occupancy costs;
• Analysis of existing financing structure and capital requirement projections;
• Local real estate market analysis;
• Lease analysis and strategies for restructuring;
• Navigation of the necessary political processes;
• Negotiation with governmental and/or non-profit liaisons;
• Energy efficiency audit and analysis;
• Exploration of availability of tax credit and incentives;
• Origination and placement of tax-exempt municipal securities through strategic alliances;
• Coordination with traditional lending institutions for conventional and taxable financing; and
• Legal documentation, processes and settlement services.
As an example, the owner of a large office complex must reduce its operating costs. An energy savings company, in partnership with FutureLaw, conducts a comprehensive audit of the complex’s energy footprint, including conducting an energy audit, utility bill review and metering and load profiling. This evaluation will help ascertain if the facility is using its resources effectively and efficiently. After the evaluation is completed, The solution to provide near-term cost savings to the owner will include designing, building, maintaining and continually monitoring the complex’s energy infrastructure to maximize operational efficiency while reducing operating costs. All of this is completed using performance-based solution that allows facility and capital improvements to be made and funded through the energy savings of the facilities. The complex owner, having employed STREAM, realizes quick savings, reduces its operating costs and increases its bottom line.
Download the STREAM brochure.