Helping the University of Pennsylvania
develop and implement a real estate strategy

In 2001, the University of Pennsylvania (Penn) was in the midst of completing one of the most extensive redevelopments of off-campus real estate in its history. Penn’s president and executive vice president needed assistance rationalizing the strategy, structure and operations of the University’s 15-million-square-foot on- and off-campus real estate portfolio.

As part of the redevelopment, Penn was evaluating the acquisition of the last major parcel of land available for accommodating its growth and improving its connection to Center City Philadelphia. At the same time, Penn was working to maintain strong relations with the economically and ethnically diverse community of West Philadelphia.

Penn entered into an innovative real estate innovative agreement with a national real estate services firm to provide facility and project management services for on-campus buildings, as well as portfolio management, development, and leasing and management services for 1.6 million square feet of Penn’s off-campus retail, office, hotel and multifamily portfolio.

Unfortunately, Penn’s executive management and the Board of Trustees were not satisfied with the responsiveness or quality of services provided under the contract.

Penn’s executive team turned to Bulls Advisory Group for advice.

Initiatives

Bulls Advisory Group immediately conducted a 90-day assessment to identify and outline the major issues related to the implementation of the outsourcing contract with the real estate service provider. The process included extensive interviews with board trustees, the president and her executive team, the outsourced service provider, academic departments, and members of the university’s real estate team.

Once the assessment was complete, recommendations were made to the president for a new strategy and staffing plan for the management of Penn’s real estate. The assessment also helped Penn prioritize its extensive deferred maintenance program and initiate a process for implementing critical projects.

Bulls Advisory Group was also asked to:

• Review lease administration process for Penn’s 1-million-square-foot leased portfolio

• Provide advice related to the strategy and due diligence for the purchase of 22 acres of land, including a 1-million-square-foot facility, from the U.S. Postal Service

• Serve as Acting Chief Real Estate Officer and recruit key real estate personnel, consolidate financial reporting, and establish portfolio and asset management processes for the off-campus portfolio

• Lead negotiations with the national service provider to terminate the contract

• Oversee the process to engage four real estate firms to provide retail and multifamily property management services, including retail leasing.

Results

Penn realized an immediate savings of more than $3 million per year and service quality dramatically improved. Bulls Advisory Group also helped identify more than $2 million of ongoing annual savings that could be re-directed for portfolio reinvestment and acquisitions. Other outcomes that Bulls Advisory Group helped Penn achieve include:

• Short- and long-term strategy and planning were fueled by a centralized real estate accounting system, allowing Penn to manage all its real estate assets at the portfolio-level.

• A smooth transition of management from the national real estate firm to Penn occurred without litigation or a disruption in service.

• Penn increased its ownership share and became the general partner of a five-building, 206-unit multifamily partnership with Trammell Crow and Fannie Mae American Communities Fund.

• Penn completed business negotiations and signed a LOI for the 2007 acquisition of the 30th Street U.S. Postal facility. This property will serve as the cornerstone of the university’s long-term expansion plans.

On an as-needed basis, Bulls Advisory Group continues to provide Penn with strategic advisory services related to its real estate organizational structure, finance and operations.

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For more information, please contact Herman Bulls at (202) 256-1814

 


 

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