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
