PLANNING VS . STRATEGIZING Successful planning involves a set of steps . Follow them and you ’ ll achieve what you want ; fail and you won ’ t reach your goal . Strategizing , meanwhile , requires a more holistic approach to the situation — it requires knowledge , thinking outside the box , creativity , and innovation . When someone on the battlefield identifies a certain spot as a strategic position , for example , it means they have examined the location , analyzed it , observed its strengths and weaknesses , and identified important aspects that others couldn ’ t .
• Approaches are mismatched — for example , specialized finance assigned to accounting or corporate tax assigned to real estate and vice versa .
• There is a lack of applicability .
• Improper classification takes place .
RIGHTING CLASSIFICATIONS Improper asset classification can lead to many negative consequences — from fighting the wrong battle to turning capabilities into liabilities and not tapping into the power of an intangible asset . For example , Apple ’ s biggest
No matter if you lease or buy , you ’ re paying for the property you occupy . Now , the question is : If there ’ s one thing that could prevent an organization such as Apple from shifting its real estate from cost center to profit center , what would it be ?
The short answer is that people often limit themselves to choosing between leasing and owning , despite more than three dozen value-add options available for a commercial property . Both leasing and owning an asset are still considered a cost center .
Apple failed to take advantage of the increasing worth of its real estate in Santa Monica , Calif .
Looking at the Apple case , the company planned for its real estate to be a cost center . It wasn ’ t seen in a strategic light — one that aims to monetize both tangible and intangible assets . The goal is to collect that goodwill premium for the stakeholder ’ s benefit and not leave it on the table for other investors .
Along those lines , no matter what market a busines is in , companies need to have a proper strategy to ensure financial sustainability . Financial sustainability is unachievable when :
• Strategizing falls short , as it did in the Apple case .
• Some of the available options remain unknown ; what if the best strategic solution is the option the company isn ’ t even aware of ? asset is not the iPhone or any other physical product — it ’ s the intangible of its brand recognition . Apple certainly knows that , but the company failed to strategize for optimizing this asset in this instance . The intangible asset in this case became a liability instead of a capability , thus stacking up the cost center .
In addition to the cause cited in the Apple case , cost centers can quickly snowball due to inadequate strategizing in other areas as well .
• Why would a publicly traded company assign the real estate matter to HR ?
• The REIT is managed by someone who has no experience in the commercial real estate industry or any related industry .
• A publicly traded REIT does not have a real estate department , and so the transactions are handled by an accountant .
Take , for example , the spaceship headquarters at an assumed value of $ 6 billion with utilization of less than 5 percent since its inception . What is the translation of cost per person for this property ?
Which of the value-added options could be appropriate to apply — is it leasing , owning , planning , strategizing , or restructuring real estate with a creative thinking ? The real estate portfolio of any organization can either make or break it . The opportunity lies in carefully looking at proper strategizing before rather than after the fact .
Moustafa Elsayed , CCIM , CSM President and chief strategy officer of
Corporate Commercial Real Estate Counselors Contact him at elsayedsc @ gmail . com .
CIREMAGAZINE . COM COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE 15