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NOVEMBER | DECEMBER 2014<br />

MAXIMIZE ESCALATION INCOME<br />

Enhance Your Building’s Cash Flow<br />

Magazine<br />

LOW-RISE ELEVATORS<br />

Choosing the Best Option for Your Property<br />

CREATING A BETTER WORKPLACE<br />

Well-Designed Offices Can Improve Well-Being<br />

IG<br />

ATA<br />

Big Data Is Changing the Way<br />

Commercial Properties Operate


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NOVEMBER | DECEMBER 2014<br />

24<br />

BIG DATA, BIG REWARDS<br />

Phil Mobley<br />

Analytics are changing the way<br />

commercial properties operate,<br />

but the end goal of tenant<br />

satisfaction remains the same.<br />

32<br />

LOW-RISE ELEVATORS: MYTH &<br />

REALITY<br />

Sasha Bailey, LEED AP BD+C<br />

How do you choose the best<br />

elevator for low-rise applications<br />

30<br />

MAXIMIZE YOUR ESCALATION<br />

INCOME<br />

William H. Brownfield, CRE, CCIM, and<br />

Lawrence M. Mayerhofer, CPA<br />

Understand these four key<br />

concepts to enhance your<br />

building’s cash flow.<br />

34<br />

CREATING A BETTER WORKPLACE<br />

Jessica Bates<br />

Companies are realizing the<br />

impact of a well-designed office<br />

on their employees.<br />

6 FROM THE CHAIR<br />

A global resource for industry knowledge.<br />

8 ON THE HILL<br />

Important issues saved for lame-duck session;<br />

the EPA expands ENERGY STAR ® opportunities.<br />

14 IN THE STATES<br />

Building re-tuning training sessions offered;<br />

new mandatory sick leave legislation signed in<br />

California.<br />

16 UP TO CODE<br />

ICC and ASHRAE to consolidate green code<br />

efforts; North Carolina considers codecompliance<br />

alternative; BOMA’s Codes Toolkit<br />

offers resources for state and local code-adoption<br />

process.<br />

18 GET TO KNOW…<br />

Lacey Willard—Executive Committee member,<br />

work-life integration enthusiast.<br />

20 NEWS & NOTES<br />

REITs outperform in pension funds; survey finds<br />

tenants have little tolerance for pests; BOMA<br />

mourns the passing of Henry Palm.<br />

22 LEGAL-EASE<br />

Complying with the employer mandate under the<br />

Affordable Care Act.<br />

40 TRENDS, STATS & FACTS<br />

Highlights from BOMA Canada’s BOMEX ® 2014.<br />

45 GREEN SCENE<br />

Four tips for maintaining a successful recycling<br />

system.<br />

46 HEALTHCARE PULSE<br />

Non-traditional tenants find a place in medical<br />

office buildings.<br />

48 MARKETPLACE<br />

Check out the latest products and services.<br />

50 EYE ON EDUCATION<br />

On-demand webinar highlights successful lease<br />

negotiation tactics.<br />

The cost for BOMA Magazine is $75 a year for subscribers and $50 a year for BOMA<br />

International members.<br />

Publication of advertising should not be deemed as endorsement by BOMA International. The<br />

publisher reserves the right in its sole and absolute discretion to reject any advertisement at<br />

any time submitted by any party. Material contained herein does not necessarily reflect the<br />

opinion of BOMA International, its members or its staff.<br />

Volume 10, Number 6 The BOMA Magazine November/December 2014, (ISSN 1532-4346),<br />

Copyright 2014. The BOMA Magazine is published bimonthly in January/February; March/<br />

April; May/June; July/August; September/October; and November/December by the Building<br />

Owners and Managers Association (BOMA) International, 1101 15th St., NW, Suite 800,<br />

Washington, D.C. 20005; Telephone 202-408-2662; Fax 202-326-6377; www.boma.org.<br />

Periodicals Postage paid at Washington, D.C. and additional mailing offices.<br />

For advertising rates and information, contact Paul Hagen at Stamats Buildings Media 866-965-4205.<br />

On the Cover: Cover design by Elisa Geneser, Art Director.<br />

POSTMASTER: Send address changes to: The BOMA Magazine, Attn: List Department,<br />

1101 15th St., NW, Suite 800, Washington, D.C. 20005. Undeliverable U.S. copies should<br />

be sent to: The BOMA Magazine, Attn: List Department, 1101 15th St., NW, Suite 800,<br />

Washington, D.C. 20005. Return undeliverable Canadian addresses to: PO Box 875, STN A,<br />

Windsor, ON N9A 6P2.<br />

BOMA MAGAZINE 5


FROM THE CHAIR<br />

CREATE YOUR OWN SUCCESS<br />

Magazine<br />

Lisa M. Prats, CAE, Publisher<br />

Courtney C. McKay, Editor<br />

Jessica Bates, Associate Editor<br />

A GLOBAL RESOURCE FOR<br />

INDUSTRY KNOWLEDGE<br />

Commercial real estate has always been an industry<br />

driven by relationships—and these relationships are<br />

becoming even more important as our industry expands<br />

around the globe. I saw this firsthand during my recent<br />

travels representing BOMA International at BOMEX ® , BOMA<br />

Canada’s annual conference, in Winnipeg (see page 40 for<br />

a recap) and at BOMA China’s second annual conference<br />

in Shanghai. Whether you’re in Canada, China or any of the<br />

other countries that are home to a BOMA International affiliate,<br />

you will find property professionals who are interested<br />

in helping each other succeed, advancing the industry and<br />

learning best practices through thoughtful dialogues.<br />

BOMA International has an important role to play in facilitating these dialogues and the<br />

exchange of ideas. Emphasizing the “International” in BOMA International has long been<br />

a priority, but it’s not enough to simply place another marker on a world map. Instead, we<br />

must strive to be a global resource for industry knowledge through world-class education,<br />

measurement standards, networking opportunities, research and guidebooks that will<br />

enable property professionals around the world to achieve excellence in their buildings or<br />

portfolios. Why Because we continue to find that working together to share our insights<br />

and resources across global markets not only makes each individual market stronger, but<br />

also makes the commercial real estate industry stronger as a whole.<br />

China is in the midst of extraordinary commercial real estate growth, and with this growth<br />

comes an increased focus on preserving asset value and prolonging building life. To address<br />

this need, BOMA International worked with BOMA China to develop a Mandarin-language<br />

version of BOMA’s Preventive Maintenance Guidebook, which was unveiled during the recent<br />

conference. This publication will help establish key operational best practices in a market<br />

that continues to develop at a rapid pace, and it follows the footsteps of BOMA’s Guide to<br />

Developing a Standard Operating Procedure Manual, which was translated into Mandarin<br />

a year ago and has seen widespread use since that time.<br />

The exchange of ideas does flow both ways, though, and there is much to learn from<br />

beyond our own borders. With international investments on the rise and companies competing<br />

in a worldwide economy, it is more important than ever to understand global trends and<br />

what other markets are doing better—in fact, it’s a smart business strategy. What’s the best<br />

way to gain these insights Reach out to your counterparts in other countries to compare<br />

notes, which will help you CREate your own success for your career and your company.<br />

Relationships matter—and BOMA International is working to build stronger ones with<br />

our colleagues worldwide as we continue to expand BOMA’s global outreach. I encourage<br />

you to cultivate broader business relationships, too.<br />

Contributing Editors: Ronald Burton;<br />

Amy Chisholm, CAE, CMP; Marissa Mitzner,<br />

LEED Green Associate; Scott A. Morris;<br />

Emily Naden, LEED Green Associate;<br />

Karen W. Penafiel, CAE<br />

Elisa Geneser, Art Director<br />

Kristi Kidd, Graphic Artist<br />

Published by: Building Owners and Managers<br />

Association (BOMA) International<br />

BOMA International Officers<br />

Chair and Chief Elected Officer<br />

John G. Oliver, BOMA Fellow<br />

Oliver & Company<br />

Atlanta, Georgia<br />

Chair-Elect<br />

Kent C. Gibson, CPM, BOMA Fellow<br />

Capstone Property Management, L.C.<br />

Salt Lake City, Utah<br />

Vice Chair<br />

Brian M. Harnetiaux<br />

McCarthy Cook<br />

Costa Mesa, California<br />

Secretary/Treasurer<br />

Daniel W. Chancey, RPA<br />

Commercial Advisors Asset Services, LLC<br />

Memphis, Tennessee<br />

President and Chief Operating Officer<br />

Henry H. Chamberlain, APR, FASAE, CAE<br />

BOMA International<br />

Washington, D.C.<br />

Call for Nominations:<br />

Vice Chair and Executive<br />

Committee Members<br />

BOMA International’s Nominating Committee<br />

is seeking candidates for the position of vice<br />

chair and for five principal members and one<br />

associate member of the Executive Committee<br />

to the Board of Governors. For further information,<br />

contact Ann Coslett at acoslett@boma.org.<br />

Connect with BOMA<br />

Join BOMA on Facebook<br />

Join BOMA on LinkedIn<br />

Join the EER and BOMA 360 User Groups<br />

See BOMA on YouTube:<br />

www.youtube.com/bomainternational<br />

John G. Oliver, BOMA Fellow<br />

Chair and Chief Elected Officer<br />

Follow BOMA on Twitter:<br />

BOMA Magazine @BOMAmagazine<br />

BOMA President Henry Chamberlain @HenryBOMA<br />

BOMA Vice President Lisa Prats @LisaPratsBOMA<br />

6 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


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ON THE HILL<br />

BY EMILY NADEN, LEED GREEN ASSOCIATE<br />

U.S. CONGRESS LEAVES LOOSE ENDS FOR<br />

LAME-DUCK SESSION<br />

Prior to the mid-term elections, no<br />

one on Capitol Hill was feeling very<br />

cooperative. During its two weeks in<br />

session in September, Congress passed<br />

only a continuing resolution (CR) to fund<br />

the government through December 11,<br />

2014. The CR also includes funding for<br />

a U.S. response to the Ebola outbreak,<br />

authorizes support for Syrian rebels<br />

fighting ISIL and extends the Internet Tax<br />

Freedom Act. Everything else was left for<br />

a lame-duck session scheduled to begin,<br />

at press time, on November 12.<br />

Issues saved for the lame-duck session, which will likely<br />

be kept short, include finalizing funding of the federal<br />

government for fiscal year 2015, immigration reform<br />

and, potentially, an attorney general nomination. BOMA<br />

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ON THE HILL<br />

International also hopes to see Congress<br />

tackle some of commercial real<br />

estate’s top-tier issues: extending the<br />

Terrorism Risk Insurance Act (TRIA)<br />

and retroactively extending the 15-year<br />

depreciation period for leasehold<br />

improvements, which may be included<br />

in the tax extenders package. Both of<br />

BOMA’s key issues are expected to<br />

receive serious consideration during<br />

the lame-duck session of Congress,<br />

as they have already gained significant<br />

traction in both chambers, but the<br />

outlook is uncertain. What is certain is<br />

that BOMA will continue to work with<br />

coalition partners to push lawmakers to<br />

reauthorize TRIA before its December<br />

31 expiration.<br />

BOMA International will also continue<br />

to work with its partners in the<br />

Invest in America coalition during<br />

the lame-duck session to convince<br />

the House of Representatives to take<br />

up legislation reforming the Foreign<br />

Investment in Real Property Tax Act<br />

(FIRPTA). FIRPTA was first introduced<br />

during the American farm crisis more<br />

than 30 years ago to discourage overseas<br />

investors from buying American<br />

cropland. However, when it became law<br />

in 1980, FIRPTA imposed a 35 percent<br />

capital gains tax on international investors<br />

with an interest in any type of U.S.<br />

commercial property. This punitive tax<br />

remains a significant barrier to new<br />

investments that could help America<br />

grow. Today, no other asset class or<br />

industry is singled out for such negative<br />

tax treatment.<br />

When it became law,<br />

FIRPTA imposed a 35<br />

percent capital gains<br />

tax on international investors<br />

with an interest in any type<br />

of U.S. commercial property.<br />

This punitive tax remains<br />

a significant barrier to new<br />

investments that could help<br />

America grow.<br />

The primary change currently being<br />

sought would be to increase the ownership<br />

stake a foreign investor may<br />

have in a publicly traded real estate<br />

investment trust (REIT) without being<br />

subjected to FIRPTA from five to 10<br />

percent. Similar legislation passed<br />

the House in 2010 by a vote of 402-11.<br />

Efforts are under way to urge leadership<br />

to have the House consider the<br />

bill under the suspension of the rules,<br />

which is typically reserved for noncontroversial<br />

measures. Debate on a<br />

bill brought up under suspension of the<br />

rules is limited to 40 minutes, amendments<br />

typically are not permitted and<br />

it takes a two-thirds vote for passage.<br />

BOMA International is hopeful that<br />

Congress once again will consider<br />

FIRPTA reform during the current<br />

lame-duck session.<br />

10 THE BOMA MAGAZINE NOVEMBER | DECEMBER 2014


ON THE HILL<br />

NEWS FROM ENERGY STAR ®<br />

Two big announcements came out of<br />

the U.S. Environmental Protection<br />

Agency’s (EPA’s) ENERGY STAR® program<br />

office this fall. First, in celebration<br />

of 15 years of the ENERGY STAR<br />

certification for buildings, the EPA is<br />

offering special one-time recognition<br />

to organizations that certify five, 15, 50<br />

Belco was founded to restore previously inaccessible piping<br />

in the NYC market place by utilizing a proven British lining<br />

technology. We are expert applicators for Spray-In-Place-Pipe<br />

(SIPP) and Cured-In-Place-Pipe lining technologies.<br />

The major benefit of Belco Pipe Restoration is the ability<br />

to customize the pipe lining solution (method and epoxy)<br />

to your specific piping issue. Our state of the art green<br />

building technologies restore pipes from ½ inch to 60<br />

inches in diameter. Belco Pipe Restoration coats pipes<br />

made of a wide variety of piping materials and within<br />

systems with varying service needs including but not<br />

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Belco products are solutions for:<br />

Corrosion<br />

Pin-holing<br />

Leaching of lead<br />

Water quality deterioration<br />

Chronic scaling<br />

Flow deterioration<br />

Joint leaks<br />

Pipe Encrusting or rust<br />

or 150-plus buildings in 2014. The EPA<br />

has extended the deadline to apply<br />

for certification to December 12, 2014,<br />

so applicants have more time to earn<br />

this recognition. BOMA International,<br />

a seven-time ENERGY STAR award<br />

winner, encourages all BOMA buildings<br />

to benchmark their data using<br />

the ENERGY STAR Portfolio Manager.<br />

Buildings that achieve a score of 75 or<br />

before<br />

cleaned<br />

higher within Portfolio Manager can<br />

become ENERGY STAR certified. More<br />

information at<br />

www.energystar.gov/<br />

CertificationNation.<br />

The EPA also<br />

announced that<br />

the ENERGY<br />

STAR program<br />

has expanded. For<br />

years, office buildings<br />

have been<br />

able to receive<br />

ENERGY STAR<br />

scores—now multifamily properties<br />

can, too. The EPA has unveiled a 1-100<br />

ENERGY STAR scoring system for<br />

multifamily housing properties, which<br />

provides a simple metric to understand<br />

the energy performance of a multifamily<br />

housing property compared to<br />

similar properties nationwide. Using<br />

the ENERGY STAR score, owners and<br />

managers of multifamily buildings can<br />

The U.S. Environmental Protection<br />

Agency has unveiled<br />

a 1-100 ENERGY STAR<br />

scoring system for multifamily<br />

housing properties,<br />

which provides a simple<br />

metric to understand<br />

the energy performance<br />

of a multifamily<br />

housing property<br />

compared to similar<br />

properties nationwide.<br />

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Protects pipe against future corrosion<br />

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Enhances flow capacity and system efficiency<br />

State of the art equipment for more refined application<br />

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Full life-cycle quality control and project management<br />

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Warranted/bondable solutions<br />

Ability to withstand prolonged exposure to heat, chemical<br />

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lined<br />

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quickly understand how their portfolios<br />

are performing and which properties<br />

to target for cost-saving improvements.<br />

Just as with office buildings, a<br />

score of 50 is median, and a score of 75<br />

or higher means a property is among<br />

the top quartile of energy performers<br />

and may be eligible for ENERGY STAR<br />

certification. The ENERGY STAR score<br />

for multifamily housing is based on<br />

data compiled through the Fannie Mae<br />

Multifamily Energy and Water Market<br />

Research Survey. At press time, the EPA<br />

planned to recognize the first group<br />

of existing ENERGY STAR-certified<br />

multifamily properties with a national<br />

press release this fall. B<br />

12 THE BOMA MAGAZINE NOVEMBER | DECEMBER 2014


NOT ONLY DOES A TRANE ® WATER-COOLED VRF SYSTEM WORK MORE EFFICIENTLY USING LESS ENERGY, it also plays nice with Mother Nature.<br />

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is a world leader in creating and sustaining safe, comfortable and effi cient environments. © 2014 Ingersoll-Rand Company.


IN THE STATES<br />

BY SCOTT A. MORRIS<br />

PILOT BUILDING RE-TUNING TRAINING<br />

SESSIONS OFFERED<br />

In partnership with the U.S. Department<br />

of Energy and the Consortium of<br />

Building Energy Innovation (CBEI), BOMA<br />

International has created<br />

two free pilot training<br />

sessions on building<br />

re-tuning, a no- to lowcapital<br />

cost systematic<br />

approach to identifying<br />

and correcting building<br />

operational problems<br />

that lead to energy<br />

waste. The process includes<br />

small repairs, such as replacing<br />

faulty sensors or caulking openings<br />

in the building envelope, as well<br />

as such adjustments as timing<br />

thermostats for actual occupancy<br />

patterns, which can lead to a<br />

reduction of five to 20 percent<br />

in a building’s overall energy<br />

consumption. Rather than retrocommissioning<br />

a building every<br />

few years, a building operator can<br />

re-tune the building regularly<br />

throughout the year, reducing<br />

“drift” of the building and<br />

maintaining ongoing energy<br />

savings.<br />

The first pilot session was held<br />

in Milwaukee on October 29-30 in<br />

Rather than<br />

retro-commissioning<br />

a building<br />

every few<br />

years, a building<br />

operator can retune<br />

the building regularly<br />

throughout the<br />

year, reducing “drift”<br />

of the building and<br />

maintaining ongoing<br />

energy savings.<br />

partnership with BOMA/Wisconsin, and the second two-day<br />

session is scheduled to be held in partnership with BOMA/<br />

San Diego in late February 2015. Each training session is<br />

Introducing a new line of<br />

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14 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


designed to be an in-depth technical<br />

course ideally suited for individuals<br />

directly responsible for the ongoing<br />

and hands-on operation of a building<br />

or portfolio of properties. The sessions<br />

have been planned as “train-thetrainer”<br />

programs, meaning many session<br />

attendees not only will be able to<br />

utilize the skills and knowledge learned<br />

in their own buildings, but they also<br />

will be able to conduct their own training<br />

sessions on building re-tuning.<br />

BOMA International’s hope is<br />

that, once both pilot sessions are<br />

completed and the curriculum<br />

is fine-tuned and finalized, this<br />

program can be deployed through<br />

BOMA’s network of local associations<br />

across the country. For more<br />

information, contact BOMA International’s<br />

Director of State and<br />

Local Affairs Scott Morris at<br />

smorris@boma.org.<br />

nd ½ wide by<br />

height.<br />

CALIFORNIA GOVERNOR<br />

SIGNS MANDATORY SICK<br />

LEAVE LEGISLATION<br />

In September, Governor Jerry<br />

Brown of California signed Assembly<br />

Bill 1522, also known as the<br />

“Healthy Workplaces, Healthy<br />

Families Act of 2014.” The bill<br />

requires nearly all California<br />

employers to provide a minimum<br />

of three paid sick days per year to<br />

workers who meet certain requirements.<br />

The bill goes into effect on<br />

July 1, 2015, and<br />

The new<br />

statewide<br />

sick leave<br />

guarantee<br />

affects nearly<br />

40 percent<br />

of California’s<br />

workforce,<br />

roughly 6.5<br />

million people<br />

who currently<br />

are not paid if<br />

they stay home<br />

when sick.<br />

it will be the<br />

nation’s largest<br />

expansion of<br />

this employee<br />

benefit.<br />

California is<br />

the second state<br />

in the nation,<br />

following Connecticut,<br />

to<br />

enact a statewide<br />

sick leave<br />

guarantee.<br />

The new law<br />

affects nearly<br />

40 percent of<br />

California’s workforce, roughly 6.5 million<br />

people who currently are not paid<br />

if they stay home when sick.<br />

BOMA California opposed this bill,<br />

stating that “it would add to the already<br />

growing number of costs for California<br />

businesses by requiring both small<br />

and large employers to provide their<br />

employees with mandatory, protected,<br />

paid sick leave.” BOMA California<br />

added that the expansion of sick leave<br />

to all employees—including temporary,<br />

seasonal and part-time employees—<br />

will create a huge burden on employers<br />

in the commercial real estate industry.<br />

BOMA California joined the California<br />

Chamber of Commerce, the<br />

California State Council of the Society<br />

of Human Resources Management and<br />

many other business groups in unsuccessfully,<br />

but very diligently, opposing<br />

this legislation. B<br />

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BOMA MAGAZINE 15


Carrier<br />

10:34 AM<br />

UP TO CODE<br />

BY RON BURTON<br />

CONSOLIDATION<br />

OF GREEN CODE<br />

DEVELOPMENT<br />

The International Code Council (ICC)<br />

and ASHRAE (formerly the American<br />

Society of Heating, Refrigerating and<br />

Air Conditioning Engineers), developers<br />

of the two current national model green<br />

building codes and standards for commercial<br />

buildings, have announced they<br />

will cooperate in developing a single<br />

document in the future.<br />

BOMA International, which had urged both organizations<br />

to merge their efforts on green codes for some time,<br />

congratulates ICC and ASHRAE, as well as the other organizations<br />

that were a part of the effort to reach this agreement:<br />

the U.S. Green Building Council (USGBC), the American<br />

Institute of Architects (AIA) and the Illuminating Engineering<br />

Society of North America (IESNA). Details of this<br />

cooperative agreement will be finalized soon, but the intent<br />

is for ICC to continue developing the administrative provisions<br />

in the joint code with ASHRAE, taking responsibility<br />

for the development of the technical content spearheaded by<br />

the Standard 189.1 development committee.<br />

BOMA International holds an organizational voting membership<br />

on the ASHRAE 189.1 committee and will continue<br />

its efforts to ensure the concerns of the commercial real<br />

estate industry are addressed. The USGBC also intends to<br />

recognize the joint document as part of the base requirements<br />

in the development of the LEED program. It is anticipated<br />

that the joint code will roll out as the 2018 edition of<br />

the International Green Construction Code (IgCC).<br />

1<br />

1<br />

Carrier<br />

10:34 AM<br />

TENANT REQUESTS<br />

All Properties<br />

HVAC<br />

9550 Warner Ave<br />

East Tower - 01<br />

1329765 | DUE Sept 15, 2014 04:26 PM<br />

HVAC<br />

9550 Warner Ave<br />

East Tower - 01 - 101<br />

1509163 | DUE Sept 24, 2014 12:52 PM<br />

Date<br />

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TENANT REQUESTS<br />

5<br />

3<br />

1<br />

Electrical<br />

1800 Commerce Court<br />

South Building - Main Lobby<br />

1535269 | DUE Sept 17, 2014 09:21 AM<br />

HVAC<br />

9550 Warner Ave<br />

East Tower - 01 - Men’s Washroom<br />

1329765 | DUE Sept 17, 2014 12:26 PM<br />

Locks<br />

1800 Commerce Court<br />

South Building - Main Lobby<br />

37177314 | DUE Sept 18, 2014<br />

3<br />

1<br />

5<br />

3<br />

1<br />

SORT<br />

Property<br />

BY Select<br />

Access Card - Activation<br />

650 Fifth Ave<br />

General Building - Inside<br />

37457663 | DUE SEPT 15, 2014<br />

HVAC - Too Cold<br />

650 Fifth Ave<br />

01 South - 165<br />

37534107 | DUE SEPT 15, 2014<br />

Light Bulbs & Ballasts<br />

650 Fifth Ave<br />

North Tower - 712<br />

3758885 | DUE SEPT 18, 2014<br />

Loading Dock/Service Elevator<br />

650 Fifth Ave<br />

Garage - Main Level<br />

37457663 | DUE SEPT 18, 2014<br />

Locks<br />

1800 Commerce Court<br />

South Building - Main Lobby<br />

37177314 | DUE SEPT 29, 2014<br />

PM<br />

Induction CPM<br />

9550 Warner Ave<br />

1 East Tower - Other<br />

1625257 | DUE Sept 15, 2014<br />

Equipment<br />

Name<br />

Induction Unit<br />

System HVAC<br />

Make<br />

Worthington<br />

Model W-438944<br />

Asset/Tag # A19384<br />

Serial<br />

FSB36LRFABSAAA1<br />

Details Static Pressure at<br />

Nozzle: .5” : 92<br />

UNITS EACH<br />

FLOOR 2-49<br />

EXCEPT MACHINE<br />

FLOORS<br />

10:34 AM 3G<br />

Work Order # 1022 Top of page<br />

HVAC - Too Hot<br />

Bottom of page<br />

Rosseau Park Place Task 1<br />

Rosseau Park North Accept<br />

02<br />

Reject<br />

202<br />

Travel<br />

Rock Networking Inc<br />

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Tommy Tutone<br />

416 867 5309<br />

Delayed<br />

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Priority: 5<br />

Contact us to learn how we can help your organization<br />

stay connected, informed and efficient.<br />

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NORTH CAROLINA ENERGY<br />

CODE LEGISLATION<br />

REFLECTS TREND<br />

Recently introduced legislation in the<br />

North Carolina General Assembly<br />

would allow for an alternate path for<br />

energy-conservation code compliance<br />

for alterations and additions to<br />

commercial buildings. This alternative<br />

would allow the use of the 2009<br />

North Carolina Energy Conservation<br />

Code, in lieu of the current 2012 edition,<br />

and would apply to buildings<br />

that received a certificate of occupancy<br />

prior to January 1, 2012. The<br />

legislation reflects concerns that<br />

the imposition of the much more<br />

stringent 2012 code requirements<br />

can be prohibitively expensive for<br />

projects in many existing buildings—<br />

sentiments that have been echoed<br />

in a number of major jurisdictions<br />

throughout the country. This also<br />

parallels concerns expressed by<br />

numerous municipalities and states<br />

in the development of national<br />

model energy codes by the International<br />

Code Council (the International<br />

Energy Conservation Code<br />

[IECC]) and ASHRAE (Standard<br />

90.1) that these codes increasingly<br />

represent a set of “stretch” requirements<br />

that are more akin to what is<br />

being considered for green building<br />

and other above-code programs.<br />

an online resource to assist its local<br />

associations and members in becoming<br />

active in the state and local code-adoption<br />

process—the Codes Development<br />

and Adoption Toolkit, which is available<br />

at www.boma.org/CodesToolkit.<br />

The toolkit includes a wealth of materials<br />

to assist with building professionals’<br />

efforts to effectively represent the<br />

interests of the commercial real estate<br />

industry in their specific areas, including<br />

information on understanding<br />

the adoption process, how to organize<br />

efforts, a list of key code officials in<br />

the area and suggested amendments<br />

to deal with problem areas in the new<br />

codes. Publications outlining the major<br />

changes in the 2012 and 2015 codes<br />

also are available from ICC at<br />

shop.iccsafe.org.<br />

For any questions, please contact<br />

BOMA International’s Director of<br />

Codes and Standards Kevin Fry at<br />

kfry@boma.org. B<br />

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STATE AND LOCAL<br />

ADOPTION OF 2015<br />

ICC CODES<br />

A number of municipalities and states<br />

have begun the process of adopting<br />

the latest edition of the International<br />

Codes, the 2015 family of ICC<br />

model codes. While some jurisdictions<br />

adopted the 2012 codes, most<br />

currently utilize the 2009 editions,<br />

so consideration of the 2015 editions<br />

will involve changes spanning<br />

two code-development cycles<br />

in most areas. Virtually all state and<br />

local adoption procedures incorporate<br />

modifications to the model<br />

codes through an adoption process<br />

that is open to public comment and<br />

participation.<br />

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BOMA MAGAZINE 17


GET TO KNOW...<br />

LACEY H.C. WILLARD, ESQ., RPA<br />

Lacey Willard is a director in CBRE’s<br />

Strategic Accounts division and is<br />

based out of Tampa, Florida. She recently<br />

completed a term as president of BOMA/Greater Tampa Bay<br />

and currently serves as president of BOMA Florida and on<br />

the Board of Directors for the BOMA Southern Region. Willard<br />

also has served as vice chair of BOMA International’s<br />

State Government Affairs Committee and co-chair of BOMA<br />

International’s annual conference<br />

Career Day. She was elected<br />

to BOMA International’s Executive<br />

Committee in June. Prior to working<br />

at CBRE, Willard served as contracting<br />

officer and senior property<br />

manager for the U.S. General Services<br />

Administration (GSA).<br />

How did you get your start<br />

in commercial real estate<br />

When I was an undergraduate<br />

student at Purdue University,<br />

I majored in political science and<br />

psychology, and I was very involved<br />

in student government. The dean<br />

EXECUTIVE COMMITTEE MEMBER,<br />

who supervised the student government<br />

program received a call<br />

WORK-LIFE INTEGRATION<br />

ENTHUSIAST<br />

from a GSA recruiter, and he sent<br />

my résumé along. As someone<br />

interested in government, a job with the agency that makes<br />

all of the real estate space decisions for the federal government<br />

seemed like the perfect fit.<br />

During your time with the GSA, you won an<br />

International TOBY ® Award, right<br />

Yes! While at the GSA, I managed eight U.S. courthouses<br />

in addition to overseeing federal government leases. In<br />

2006, one of these courthouses, the U.S. Courthouse in Fort<br />

Myers, Florida, won an International TOBY Award in the<br />

Government Building category. There’s a wonderful story<br />

behind the win. When the TOBY Awards judges visited the<br />

courthouse for the official tour, our tour guide was a U.S.<br />

Marshal with a great sense of humor who decided he would<br />

lock all of the TOBY judges in the courthouse holding cells.<br />

I thought to myself, “Well, there goes any chance we have of<br />

winning,” but the tour must have made quite an impression<br />

because we did take home the TOBY Award in the end!<br />

After working for the GSA, you joined the<br />

team at CBRE. Tell us about that.<br />

For the past several years, I had coordinated the receivership<br />

and distressed asset portfolio management program<br />

for CBRE in Florida. I had just graduated from Stetson<br />

University’s joint law degree and MBA program in the<br />

midst of the market crash and CBRE needed someone who<br />

understood both commercial real estate operations and<br />

the legal side of things. It just so happened that my skillset<br />

matched this very niche area. However, I always knew there<br />

was a limited shelf life for this particular program, which<br />

coincided with improving market fundamentals to the point<br />

where instances of foreclosures decreased. Recently, CBRE<br />

picked up a unique national assignment—a 41.2 millionsquare-foot<br />

portfolio that is one of the largest third-party<br />

property management assignments in the U.S. commercial<br />

real estate industry. I’ve been thrilled to transition into a<br />

new role at CBRE within our Strategic Accounts division<br />

working on this national assignment.<br />

You’ve been involved with BOMA International’s<br />

State Government Affairs Committee<br />

for many years. What is the biggest legislative<br />

issue facing Florida right now<br />

We currently are fighting a $2 billion sales tax on commercial<br />

leases here. Florida is the only state to impose this<br />

tax, but I learned that Arizona had phased out a similar<br />

sales tax about 10 years ago. Through BOMA connections,<br />

I was able to get in touch with the former head of the<br />

Arizona Department of Revenue, who just so happened to<br />

be a BOMA member, and we were able to have a very valuable<br />

conversation with him that really has helped inform<br />

our efforts here in Florida. This collaboration through the<br />

BOMA network has just been so beneficial, and there’s<br />

definitely a camaraderie among advocacy folks. It has been<br />

great to be able to reach out to my counterparts in other<br />

BOMA state and local advocacy groups on these issues<br />

because we know the impact these issues have—not just on<br />

bottom lines, but on the viability of the entire commercial<br />

real estate industry.<br />

What is something most people don’t know<br />

about you<br />

Well, attendees at recent BOMA conferences may already<br />

know this, but I have two little girls—a two-year-old and<br />

a four-year-old—and they travel with me to almost every<br />

BOMA event I attend. In fact, I flew with my youngest<br />

daughter all the way to Hawaii for the 2013 Winter Business<br />

Meeting when she was only a few months old. I’m a<br />

big believer in the concept of work-life integration, not the<br />

typical notion of work-life balance. My daughters have a lot<br />

of fun tagging along with me to the different meetings—and<br />

they just might end up becoming the industry’s youngest<br />

property managers! B<br />

18 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


Building Performance<br />

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• Safety walkway pads and strips<br />

• Sustainable enhancements:<br />

Vegetative roof systems,<br />

Daylighting, Solar<br />

• UnaClad metal roof and<br />

wall panels<br />

• Enverge cavity wall products<br />

• Red Shield warranties and<br />

TotalGard maintenance services<br />

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firestonebpco.com/bpuonline<br />

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NEWS & NOTES<br />

REITS OUTPERFORM<br />

IN PENSION FUNDS<br />

A<br />

new study that analyzed data from<br />

more than 300 pension funds found<br />

listed equity real estate investment trusts<br />

(REITs) to be the top-performing asset<br />

class overall. While private equity had a<br />

higher gross return, on average, than<br />

listed REITs, the high fees associated<br />

with private equity gave REITs a greater<br />

realized net return.<br />

The study was conducted by CEM Benchmarking Inc. and<br />

Runs in:<br />

analyzed the period between 1998<br />

and 2011. During that time, listed<br />

equity REITs delivered higher<br />

net total returns than any other<br />

alternative asset class, driven by<br />

high and stable dividend payouts,<br />

long-term capital appreciation<br />

and a significantly lower<br />

fee structure compared to<br />

private equity and private real<br />

estate funds.<br />

Pension plans included in the<br />

study increased their investments<br />

Mar/Apr, July/Aug, Nov/Dec<br />

During the study’s<br />

time frame, listed<br />

equity REITs<br />

delivered higher<br />

net total returns<br />

Boma<br />

than any other<br />

Salsbury alternative Industries asset<br />

class.<br />

in alternative assets, including real estate, by nearly 400<br />

percent, on average, over the study’s time frame. Despite this,<br />

the study concluded that further increasing the allocations<br />

to long-duration fixed income, listed equity REITs and other<br />

real assets would have had the largest positive impacts on<br />

plan performance.<br />

The complete study can be found on www.reit.com.<br />

20 BOMA MAGAZINE NOVEMBER | DECEMBER 2014<br />

1/2 Page Horizontal


SURVEY SAYS TENANTS HAVE LOW<br />

TOLERANCE FOR PESTS<br />

Half of all<br />

tenants will start<br />

looking for a new<br />

space after<br />

multiple pest<br />

sightings.<br />

Pests are a common issue in offices and<br />

a source of anxiety for office managers,<br />

according to survey findings released by pest<br />

control leader Orkin and BOMA International.<br />

The survey,<br />

which polled office,<br />

building and facility<br />

managers in a<br />

variety of property<br />

types, revealed that<br />

89 percent of office<br />

tenants have seen<br />

at least one pest in<br />

the past 12 months. When it comes to reporting<br />

pest sightings, almost one-half of office tenants<br />

will notify building management after a single<br />

pest sighting, and that number jumps up to 83<br />

percent by the time the second sighting occurs.<br />

Although it is likely that office tenants expect to<br />

see pests on occasion, the study shows that half<br />

will start looking for a new space after multiple<br />

pest sightings.<br />

Read the full report at bit.ly/1w5LzuS.<br />

BOMA MOURNS PASSING<br />

OF HENRY PALM<br />

It is with sadness that we note the peaceful passing of BOMA Life<br />

Member Henry “Hank” Palm, RPA, on September 1, 2014.<br />

Hank became a founding member of BOMA/<br />

Greater Hartford while working as the director of the<br />

Real Estate Division of Travelers Insurance Company,<br />

where he enjoyed a 32-year career until his retirement.<br />

He was an early member of BOMA International’s<br />

National Advisory Council, and he also was active on<br />

many BOMA committees centered on advocacy and<br />

building and facility management.<br />

Hank joined the BOMI International (then known as the Building<br />

Owners and Managers Institute International) Board of Trustees in<br />

1982, was elected secretary/treasurer in 1984 and progressed to vice<br />

chairman in 1986. He was elected chairman in June 1988 for a twoyear<br />

term. Following his chairmanship, he led the Nominating Committee.<br />

The BOMI Board of Trustees honored his 10-year tenure with<br />

a “Life Director” title following his retirement from the Board.<br />

Prior to joining Travelers, Hank had a 20-year career as a U.S.<br />

Naval civil engineer in various domestic and overseas locations, and<br />

he retired with the rank of Lieutenant Commander. B<br />

BOMA MAGAZINE 21


LEGAL-EASE<br />

BY KURT R. ANDERSON, ESQ., AND EDWARD I. LEEDS, ESQ.<br />

COMPLYING WITH<br />

THE EMPLOYER<br />

MANDATE UNDER<br />

THE AFFORDABLE<br />

CARE ACT<br />

Beginning in 2015, many employers,<br />

including many commercial real<br />

estate ownership and management<br />

companies, will need to comply with<br />

one of the most significant healthcare<br />

reforms introduced by the Affordable<br />

Care Act (ACA): the employer mandate.<br />

Generally speaking, the employer<br />

mandate requires “large employers”<br />

to offer adequate, affordable group<br />

health coverage to full-time employees<br />

or pay an assessment under the<br />

Internal Revenue Code. While this<br />

new requirement can be complicated,<br />

employers will need to address certain<br />

basic questions, as follow.<br />

Does the employer mandate apply to my<br />

company<br />

The employer mandate applies to “large” employers that<br />

employ 50 [1] full-time employees. Closely related companies<br />

will typically be treated as a single employer.<br />

An employee is full time if he or she worked, on average,<br />

at least 30 hours per week during the preceding calendar<br />

year. Solely for determining whether an employer is subject<br />

to the mandate, the hours worked by part-time employees<br />

are converted to “full-time equivalent employees.”<br />

Which employees must be offered<br />

coverage<br />

To determine who must be offered group health coverage at<br />

your company, consider that:<br />

• Only full-time employees must be offered coverage. The<br />

mandate does not apply to part-time employees (those<br />

working, on average, fewer than 30 hours per week).<br />

• The mandate requires coverage for “common-law employees.”<br />

There is no definitive test for determining if an<br />

individual is a common-law employee or independent<br />

contractor, but you should evaluate the degree of control<br />

your company exercises over the individual’s activities.<br />

• If your company uses a temp agency, professional<br />

employer organization or other staffing firm to engage<br />

workers, it may be difficult to determine whether those<br />

workers are your company’s common-law employees. As<br />

described in the regulations, you may address this situation<br />

by introducing appropriate terms into your company’s<br />

staffing firm contracts.<br />

• Beginning in 2016, coverage also must be offered to<br />

dependents of full-time employees. Your company is<br />

not required to pay any portion of the cost of dependent<br />

coverage.<br />

What must my company do to avoid paying<br />

an assessment<br />

If your company is large, there are two different tests it must<br />

meet to avoid paying an assessment.<br />

• Under the first test, your company must offer at least 95<br />

22 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


percent of its full-time employees the opportunity to enroll in<br />

“minimum essential coverage.” [2] Most insured and all selffunded<br />

group health coverage will qualify as minimum essential<br />

health coverage.<br />

• Under the second test, your company must offer each of its<br />

full-time employees coverage that meets certain standards for<br />

value and affordability. Coverage will be deemed “affordable”<br />

if an employee contributes no more than 9.5 percent of his or<br />

her household income toward the cost of coverage. Regulations<br />

provide special rules and certain safe harbors for determining<br />

affordability.<br />

SPOT-ON<br />

HEAT<br />

What if my company fails to meet the tests under<br />

the employer mandate<br />

The assessment imposed depends on whether your company fails<br />

the first test or the second.<br />

• For 2015, the assessment for failing the first test can be severe<br />

because it is based on the total number of your company’s fulltime<br />

employees, whether or not they are offered coverage. The<br />

penalty is determined each month and will equal $173.33 times<br />

the number of full-time employees (minus 30). The penalty<br />

applies only if at least one of your full-time employees gets<br />

government-subsidized individual coverage through an ACA<br />

marketplace. An employee who is not offered medical coverage<br />

will often qualify for a subsidy.<br />

• For 2015, the monthly assessment for failing the second test<br />

is based on the number of full-time employees who are not<br />

offered affordable coverage of appropriate value and who actually<br />

obtain subsidized coverage through an ACA marketplace<br />

times $260.<br />

How does my company notify the government<br />

about its compliance<br />

In a process designed to be similar to the process for reporting<br />

income on IRS Form W-2, employers must provide information<br />

about their compliance with the employer mandate. If your<br />

company employs more than 50 full-time employees or full-time<br />

equivalents, it will need to distribute IRS Form 1095-C to employees<br />

and then provide that information, with a transmittal form<br />

(IRS Form 1094-C), to the IRS. The first of these forms must be<br />

filed in early 2016 to report on the 2015 year. You should consider<br />

how to capture information needed to meet the reporting requirements<br />

well in advance. B<br />

ABOUT THE AUTHORS: Kurt R. Anderson and Edward I. Leeds<br />

are employee benefits lawyers in the Philadelphia office of Ballard<br />

Spahr LLP. Learn more at www.ballardspahr.com.<br />

800.367.8675<br />

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[1]<br />

For 2015, employers with at least 50 but fewer than 100 full-time employees may obtain<br />

an exemption from the mandate.<br />

[2]<br />

For 2015 only, this percentage is reduced to 70 percent of your company’s full-time<br />

employees.<br />

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IG<br />

IG<br />

ATA<br />

REWARDS<br />

BY PHIL MOBLEY<br />

Using Analytics<br />

to Change the<br />

Way Commercial<br />

Properties Operate<br />

Big data is here, and it is only getting bigger. According to a recent<br />

report from commercial real estate giant JLL, entitled Data-centric<br />

CRE: A competitive imperative, the total amount of available digital<br />

data is expected to grow tenfold by 2020. Within the realm of commercial<br />

real estate, data collection is advancing on multiple fronts, creating weighty<br />

implications for building owners and managers in their quest to deliver an excellent<br />

working environment.<br />

It is not only the volume of data that is transforming commercial real estate. The<br />

increasing immediacy and accessibility of data—not to mention the changing definition<br />

of what information constitutes “data” in the first place—has contributed to the<br />

aura of its expansiveness. This might seem overwhelming, but harnessed properly, the<br />

data explosion can help property management teams perform better and property<br />

systems operate more efficiently. It can even change the way buildings are used.<br />

BLOCKING BETTER, TACKLING FASTER<br />

As senior vice president and leader of Cushman & Wakefield | Thalhimer’s threestate<br />

property management operation, Curtis Mummau is focused on a differentiated<br />

24 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


service offering. “The vision I’ve always<br />

had, from pagers and bag phones to<br />

smartphones and tablets, is to escape<br />

commoditization,” says Mummau, when<br />

explaining his viewpoint of digital information<br />

management. His latest initiative<br />

is real-time, two-way data access for his<br />

teams in the field. “We’re going to be rolling<br />

out tablets to our teams later this year.<br />

We aren’t trying to take our people out of<br />

the process; on the contrary, we want to<br />

make them more efficient.”<br />

Mummau’s team relies on a platform<br />

built by Building Engines, a provider of<br />

web- and mobile-based property management<br />

software solutions. The software<br />

can capture and link data in four main<br />

categories: tenant service (work orders,<br />

resource scheduling, handbooks and<br />

documents); equipment (maintenance<br />

manuals, service records and projecttracking<br />

documentation); risk management<br />

(visitor access, fire and life safety,<br />

incident tracking and insurance information);<br />

and communications (emergency<br />

bulletins and building status). “There<br />

has been a progression, even in the last<br />

year, in terms of the amount of data and<br />

the ability of our people to access it in<br />

real-time,” explains Mummau. “A building<br />

engineer can glance at a tablet and<br />

know everything he or she needs to know<br />

before a meeting.”<br />

The ability to view and analyze data in<br />

the field is only the beginning of better<br />

building operations. Mummau views his<br />

property teams as crucially valuable for<br />

the data they produce at the properties,<br />

and a mobile application facilitates their<br />

ability to capitalize on this data immediately.<br />

As an example, Mummau describes<br />

a basic app-based inspection form with a<br />

series of “yes/no” questions for a property<br />

manager or engineer: “Does the front<br />

entrance look presentable” “Is the lobby<br />

area clean” “Are the elevators in working<br />

order” If the answer is “yes,” then the<br />

team has a status report with minimal<br />

effort. If it is “no,” the app is programmed<br />

to ask a series of follow-up questions<br />

that, depending on the answer, can automatically<br />

generate a work order, contact<br />

a vendor or escalate an issue to an owner<br />

or asset manager. The linked, mobileaccessible<br />

platform enables a consistent<br />

timeliness that would have been impossible<br />

even a few years ago. For his part,<br />

Mummau also envisions eventually<br />

granting tenants a level of access to selfreport<br />

issues from a mobile platform.<br />

THE NEW BENCHMARKING<br />

The utility of mobile-enabled data entry<br />

does not end at the property. The bigger<br />

the data set, the more valuable it is as<br />

an entity unto itself. For Scott Sidman,<br />

senior vice president at Building Engines,<br />

unlocking this value is a strategic<br />

initiative.<br />

Sidman emphasizes something<br />

familiar to many real estate practitioners:<br />

benchmarking. He recommends<br />

that clients take a three-pronged<br />

approach to benchmarking operational<br />

performance. First is the internal target<br />

or standard that management and<br />

engineering teams are taught. Second is<br />

an intra-portfolio comparison of property<br />

and team performance. Third—<br />

and most critically from a competitive<br />

standpoint—is a benchmark to similar<br />

buildings in the marketplace by using<br />

resources like BOMA International’s<br />

annual Experience Exchange Report®<br />

(EER) for expenses (eer.boma.org) or<br />

digital platforms like the one offered<br />

by Building Engines for operational<br />

efficiency.<br />

Building Engines is also investing in a<br />

newer, less traditional approach to data<br />

mining. Inputs, such as response times,<br />

completion times and customer satisfaction<br />

ratings, are what Sidman calls<br />

“structured” data. They are predefined<br />

concepts and can be captured and stored<br />

in a standardized format. “Unstructured”<br />

data, on the other hand, is everything<br />

else: text comments, for example, or the<br />

soup of operational metrics spit out by<br />

networked systems and devices (the<br />

so-called “Internet of Things,” as referenced<br />

in JLL’s report). “Without some<br />

high-level analytics, this information<br />

is just noise,” says Sidman. “It’s a little<br />

overwhelming to a lot of real estate firms<br />

right now. Deriving meaning from the<br />

patterns in unstructured data requires<br />

developing hypotheses and testing theories.”<br />

Though not easy to analyze, Sidman<br />

argues that it is worthwhile: “This<br />

ONCE A<br />

MAINTENANCE<br />

TEAM<br />

UNDERSTANDS<br />

THAT ANALYTICS<br />

ALLOW THEM TO<br />

THINK IN TERMS<br />

OF ROOT CAUSES<br />

AND IDENTIFY<br />

SOLUTIONS<br />

USING<br />

PROGRAMMING,<br />

SEQUENCING<br />

AND CONTROLS,<br />

IT IS NOT<br />

UNCOMMON<br />

TO REALIZE<br />

OPERATIONAL<br />

SAVINGS OF UP<br />

TO 30 PERCENT.<br />

BOMA MAGAZINE 25


is how you know if your tenants are really satisfied or if<br />

your building is really operating optimally.” Armed with<br />

this degree of understanding from data, management<br />

teams can offer better service.<br />

OPTIMIZING TO THE RIGHT DRIVER<br />

“There’s a huge gap between saying ‘We’re going to save<br />

20 percent in operating expenses by the year 2020!’, and<br />

actually developing an action plan to get there.” So says<br />

Jim Meacham, principal at Altura Associates, an energy<br />

management and sustainability consultancy. His firm<br />

helps real estate organizations “get there” by using data<br />

they may not even realize they have. “To drive savings<br />

here, commercial real estate companies don’t necessarily<br />

need more data. They instead need better ways to make<br />

decisions with the data that already exists.”<br />

There’s No Room for Guesswork...<br />

As the rise in industry “big data” shows, there’s no room for guesswork in any<br />

facet of commercial real estate. This is doubly true, however, when it comes<br />

to understanding the critical wants, needs and expectations of your office tenants.<br />

But how can you really know what they want<br />

Based on the results of a global survey of office tenants, BOMA<br />

International’s What Office Tenants Want contains valuable, quantifiable<br />

data about what tenants truly value most in a property and what their<br />

collective feedback means for future trends in commercial real estate.<br />

Covering issues from sustainability and maintenance practices to<br />

building amenities and services, this comprehensive research report takes<br />

the guesswork out of the equation with the information you need to foster<br />

tenant relationships today—and position your property for tenant-driven<br />

success in the future.<br />

Order your copy now at store.boma.org.<br />

Used well, modern building automation systems offer<br />

the data necessary to isolate, diagnose and repair quickly<br />

the kinds of problems that only recently would have<br />

confounded even the best engineers for months. “The<br />

opportunity is huge,” Meacham says, “but there are so<br />

many different levels to these systems. It really requires an<br />

analytics platform to sort through it all.”<br />

Meacham walks through a simple example involving<br />

one of the highest-profile organs in a building: the<br />

chiller plant. “A chiller plant doesn’t have a lot of moving<br />

parts, so optimizing it at the plant level is fairly simple,”<br />

explains Meacham. “In the past, that is how everyone did<br />

it. The problem is that it may be serving several hundred<br />

individual zones, and that is what is generating demand.”<br />

Sifting through data on hundreds of climate control zones<br />

is next to impossible for a building engineer, but advanced<br />

analytics render it feasible.<br />

Suppose, suggests Meacham, that one of the zones is<br />

starved for air because of a malfunctioning damper. As<br />

a result, the tenants in that zone adjust the thermostat,<br />

making the “optimized” system work harder than it needs<br />

to. This is obviously inefficient, and the double whammy<br />

is that the tenants are still uncomfortable. “That damper<br />

issue is really hard for an engineer to find,” comments<br />

Meacham. “But the data is there, and analytics can find it.<br />

Then the real, underlying issue can be addressed.”<br />

According to Meacham, the payoff is immediate.<br />

“It’s usually not about equipment upgrades; it’s usually<br />

about controls,” he says. Once the maintenance team<br />

understands that analytics allow them to think in terms<br />

of root causes and identify solutions using programming,<br />

sequencing and controls, it is not uncommon to realize<br />

operational savings of up to 30 percent. And, since it is<br />

increasingly rare that building systems lack the datatracking<br />

capability necessary for this process, the value is<br />

particularly high for Class B and C buildings that may not<br />

have the largest management teams or operating budgets.<br />

Not only is “big data” here, it has been democratized.<br />

REPROGRAMMING SPACE USE<br />

As occupiers shift their thinking about real estate from<br />

efficiency to effectiveness, data analysis can have a profound<br />

impact on how building owners and managers serve<br />

them. “Office space densification was an exercise in cost<br />

savings, but there were crimes committed against productivity<br />

in the process,” notes Bernice Boucher, managing<br />

director and head of Workplace Strategy in the Americas<br />

for JLL. “The tenants that owners and managers want to<br />

attract are looking for better ways to engage their space.”<br />

This means looking at real estate not just as a cost, but as<br />

a facilitator of employee attraction, retention, collaboration<br />

and innovation.<br />

Addressing this need properly requires more than just a<br />

26 22 BOMA MAGAZINE NOVEMBER JULY | AUGUST | DECEMBER 2013 2014


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DATA IS<br />

GROWING,<br />

FROM ITS<br />

COLLECTION<br />

SOURCES<br />

TO ITS<br />

APPLICATIONS.<br />

BUT THE END<br />

GOAL OF<br />

IMPROVING<br />

THE CUSTOMER<br />

EXPERIENCE IS<br />

THE CONSTANT.<br />

few interviews with corporate real estate<br />

executives. The right solution depends on<br />

figuring out how individual workers actually<br />

use space every day. “We talk about<br />

three metrics in an office space,” explains<br />

Boucher. “‘Capacity’ is the number of seats.<br />

‘Occupancy’ is the number assigned. The<br />

key metric, though, is ‘utilization,’ or what<br />

space is being used right now.”<br />

Data from the Internet of Things now<br />

offers an unprecedented ability to focus<br />

on this third metric. Keycards capture<br />

the number of workers in a suite, and<br />

motion detectors can determine when<br />

they are at their desks. Heat indicators<br />

can approximate how many people are in<br />

a conference room at a given time. One<br />

of Boucher’s colleagues has even seen a<br />

carpet with embedded sensors that capture<br />

foot traffic. Individually, these items<br />

offer convenience and the efficiency of<br />

fast-reacting light switches and thermostats.<br />

But their collective potential is far<br />

more when combined with a robust data<br />

warehouse—and advanced analytics.<br />

Whether through hiring, outsourcing<br />

or creating alliances, companies like JLL<br />

are scrambling to plug the analytics gap<br />

in their capabilities, competing for the<br />

best and brightest data scientists with the<br />

likes of hedge funds, technology firms<br />

and pharmaceutical companies. Only<br />

then can they take full advantage of the<br />

data, answering more detailed questions<br />

about the space they serve: How much of<br />

each different type of space do tenants<br />

really need When and where exactly<br />

do they need it With enough data history,<br />

they can build predictive models of<br />

utilization and program building systems<br />

accordingly. For example, the HVAC system<br />

can control the climate of a conference<br />

room better if it “knows” there will<br />

be 25 people in the room every second<br />

Tuesday of the month at noon.<br />

Gathering and analyzing individualized<br />

data on such a scale is powerful, but<br />

it also raises privacy concerns for some<br />

workers. Boucher stresses that utilization<br />

data, while highly detailed and personalized,<br />

is also anonymous from the moment<br />

of its collection. “We don’t need to know<br />

which bodies are moving around to track<br />

utilization,” she explains. Thus, personal<br />

identifiers are either scrubbed or not collected<br />

in the first place. In many cases,<br />

workers can also opt out of some data<br />

collection initiatives, though they are<br />

encouraged to participate, since the end<br />

goal is to improve the professional ecosystem<br />

in which they work.<br />

ALL ABOUT THE CUSTOMER<br />

Data is growing, from its collection sources<br />

to its applications, but the end goal of<br />

improving the customer experience is the<br />

constant. As Sidman says, “You can measure<br />

response time and completion time<br />

directly, and you can benchmark that. But<br />

the ultimate measure of quality is the tenant’s<br />

satisfaction.”<br />

Meacham agrees. “Saving $50,000 on<br />

expenses is great, but a satisfied tenant is<br />

worth 10 times that amount.” One of his<br />

favorite stories is of a tenant who finally<br />

experienced relief from a too-hot office<br />

after analytics revealed the real problem.<br />

“They were so happy that they actually<br />

held a ‘Turning Off the Fan’ ceremony in<br />

the suite,” he recalls.<br />

Without “big data,” perhaps this tenant<br />

would have defected after years of<br />

living with a band-aid solution. In this<br />

situation and thousands like it, building<br />

owners and managers now have another<br />

tool to deploy in satisfying their customers.<br />

The challenges are real, but the<br />

rewards will be as big as the data that<br />

produced them. B<br />

ABOUT THE AUTHOR: Phil Mobley is<br />

a frequent contributor to BOMA Magazine.<br />

As a vice president at Kingsley Associates,<br />

he co-managed BOMA International’s<br />

Experience Exchange Report® (EER) for<br />

five years and led BOMA International’s<br />

2013 global office tenant survey, What<br />

Office Tenants Want. He is now principal of<br />

Koine Communications, a content strategy<br />

and development firm that serves the<br />

commercial real estate industry. He can be<br />

reached at phil@koinecommunications.com.<br />

28 22 BOMA MAGAZINE NOVEMBER JULY | AUGUST | DECEMBER 2013 2014


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40<br />

MAXIMIZE<br />

YOUR<br />

ESCALATION<br />

INCOME<br />

BY WILLIAM H. BROWNFIELD, CRE, CCIM, AND LAWRENCE M. MAYERHOFER, CPA<br />

FIGURE 1<br />

Operating expense escalations are often treated<br />

like a departmental hot potato by office building<br />

executives and owners. Fortunately, property<br />

managers can educate owners and other<br />

executives about the importance of escalations<br />

by explaining that expense recoveries are usually the second largest<br />

income source for most office buildings, lagging only base rent.<br />

Review the four important concepts outlined below to maximize<br />

escalation income due from your tenants. The escalation processes<br />

you establish should both help you bill tenants and help you monitor<br />

any leakage that might occur. The content and concepts that<br />

follow relate to typical multi-tenant office buildings.<br />

Expense Ratio & Potential<br />

Escalation Income<br />

60+<br />

(NNN Lease, Up to 40%)<br />

40%<br />

60%<br />

n Potential Escalation Income<br />

n Base Rent & Other Income<br />

1ESCALATION INCOME IS 10 TO 50<br />

PERCENT OF REVENUE<br />

With a Base Year lease structure and an average term<br />

of five years, escalation income will amount to approximately<br />

10 to 15 percent of gross revenues, depending on<br />

local inflation in labor costs, operating<br />

costs, property taxes and so on.<br />

Base Year leases are designed to shift<br />

operational cost increases (inflation)<br />

to the tenants receiving those<br />

services, so that the landlord’s net<br />

income agreed to during lease negotiations<br />

is preserved. What is your<br />

escalation income as a share of total<br />

income If you are billing escalations<br />

properly, you might be surprised at<br />

how high the percentage is.<br />

With triple net (NNN) leases, the<br />

mutual intent is for the tenants to<br />

collectively reimburse the landlord<br />

for all operating expenses and<br />

taxes and approved capital expenditures<br />

(assuming a fully occupied<br />

building), starting at the beginning of each lease term and continuing<br />

until each lease expires. Take a look at your property’s annual<br />

budget and divide the expenses by total income (excluding escalation<br />

reimbursements). The product of that calculation is known as the<br />

“expense ratio,” and expense ratios for stabilized office buildings in<br />

most markets are often 40 to 50 percent of total income. That’s a huge<br />

portion of a building’s income and value (see Figure 1, below, left).<br />

2MOST ESCALATION INVOICES HAVE<br />

ERRORS<br />

Why Because the methodology and formulas used<br />

for billings are often inconsistent with what the<br />

lease requires. Having looked at escalation billings<br />

for several thousand buildings over the years, the authors have seen<br />

that most billings had errors—some small and some large, some<br />

which benefited the landlord and others that benefitted the tenants.<br />

If you’re with a small company, these comments might resonate<br />

strongly, because smaller property management and accounting<br />

staffs are frequently stuck with homegrown Excel schedules that<br />

haven’t been tested for years and can have corrupted formulas.<br />

But even large national real estate investment trusts (REITs) can<br />

and do have problems with errors, because the escalation modules<br />

included in popular accounting software packages are not flexible<br />

enough to accommodate every type of lease provision. Grossup<br />

methodology, expense caps and combined-versus-separated<br />

expenses and property provisions don’t always match up well with<br />

standard off-the-shelf software capabilities.<br />

So, what should you do about these problems Talk to your software<br />

provider about making enhancements and improvements. If<br />

that doesn’t work, look for better software, because it’s out there.<br />

3LANDLORDS NEVER RECOVER 100<br />

PERCENT OF OPERATING EXPENSES<br />

Vacancies, lease expirations, type of lease, rollovers,<br />

expense stops and caps will prevent a multi-tenant<br />

building’s landlord from recovering all escalatable<br />

30 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


A Guide to Understanding, Preparing and<br />

Grossing Up Expense Escalations<br />

THird EdiTiOn<br />

William H. Brownfield, CRE, CCIM<br />

Lawrence Mayerhofer, CPA<br />

FIGURE 2<br />

Base Year Components<br />

50+30+20=<br />

n CapEx Amortization<br />

n Base Year Taxes<br />

n Base Year Expenses<br />

If the CapEx Amortization expires before tenant<br />

leases expire, their Base Years will have been<br />

temporarily inflated and future expenses could<br />

be below their Base Year amounts, thereby<br />

reducing a landlord’s recovery of expenses.<br />

operating costs, especially as<br />

Base Years get changed for<br />

existing tenants. Are there ways<br />

to mitigate the leakage Yes.<br />

Stagger lease expirations when<br />

appropriate, create a schedule<br />

that shows when each lease<br />

rolls and then lengthen leases<br />

currently under negotiation<br />

by several months or a year<br />

to push them into less volatile<br />

years. Just because most leases<br />

are usually three-year or fiveyear<br />

terms doesn’t mean that<br />

tenants are locked in to those<br />

time frames. Think of ways to<br />

incentivize them to add time to<br />

the lease term.<br />

Do the math for your buildings.<br />

Calculate the percentage<br />

of ex penses you actually<br />

recover each year, and track it<br />

to see if the techniques mentioned<br />

above help to increase<br />

your recovery percentages.<br />

Finally, avoid creating “Base<br />

Year Inflation” that will erode<br />

your recoveries (see Figure 2, above). A common error made in most<br />

office lease documents is to combine approved capital amortizations<br />

within a tenant’s Base Year and inflate that amount temporarily<br />

until the capital expenditures (CapEx) amortization burns off,<br />

resulting in no future recoveries by the landlord. This can lead to a<br />

massive hidden leakage of expense recoveries. The lease’s definition<br />

of escalatable capital expenditures should be done in a separate,<br />

freestanding section, so that it does not get merged into how<br />

Base Years for operating expenses are. A simple workaround is also<br />

available: Treat your cost-saving CapEx like your code-required<br />

CapEx; and for Base Year leases, only escalate those jobs which<br />

are placed in service after lease commencement. This topic is more<br />

fully discussed in BOMA International’s newly revised publication<br />

The Escalation Handbook for Office Buildings (available at<br />

store.boma.org).<br />

4LANDLORDS MAKE TWO BIG<br />

MISTAKES WITH CAPITAL<br />

AMORTIZATIONS<br />

First, landlords often assume they’ll recover 100<br />

percent of capital expenditures and don’t question<br />

if that’s true. Landlords generally approve cost-saving capital costs<br />

because most leases say this type of capital expenditure is recoverable<br />

by amortizing it over a payback period. However, capital amortizations<br />

can and do have the same leakage as operating expenses,<br />

and for the same reasons. An analysis presented in The Escalation<br />

Handbook for Office Buildings (Chapter Six, Exhibit 6-3) shows that<br />

a hypothetical 100 percent leased building with 20 percent of leases<br />

expiring each year only recovers 40 percent of each dollar spent on a<br />

capital expenditure amortized over five years (see Figure 3, below).<br />

Such a low recovery should limit capital expenditures considerably.<br />

Second, landlords rarely charge interest on escalatable capital<br />

expenditures, even though most leases permit it. Why Because<br />

most property managers and accountants don’t pick up on this<br />

obscure, minor point found deep in the lease. They miss the opportunity<br />

to earn a return on newly invested capital. How much Over<br />

five years, a seven percent rate compounds to 18.8 percent of the<br />

original investment.<br />

FIGURE 3<br />

100+16+12+8+4<br />

$1.00<br />

$0.80<br />

$0.60<br />

$0.40<br />

$0.20<br />

$<br />

Tenants benefit when they incentivize landlords to reduce<br />

operating costs by agreeing to pay interest on new capital dollars<br />

invested. Most cost-saving CapEx jobs are big-ticket items either<br />

financed or paid for upfront as a capital investment by the landlord.<br />

With a financing charge included, the landlord wins by getting a<br />

return on newly invested capital. Once the amortization is complete,<br />

the tenant wins due to reduced operating expenses.<br />

Understand these escalation concepts to enhance your building’s<br />

cash flow. Use the information above to answer two important<br />

questions when budgeting and/or reconciling last year’s escalation<br />

billings:<br />

• What is the percentage of annual total expenses that are actually<br />

reimbursed by tenants<br />

• What is the corresponding leakage that is not reimbursed, and<br />

how can I reduce it B<br />

The Escalation Handbook<br />

for Office Buildings<br />

$1.00<br />

CapEx Recoveries<br />

n For Each $1.00 of CapEx Spent<br />

n CapEx Recovered = ~ $0.40 Max<br />

0.16<br />

0.12<br />

0.08<br />

0.04<br />

0 0 0 0<br />

Base Year Year 2 Year 3 Year 4 Year 5<br />

ABOUT THE AUTHORS: Brownfield & Mayerhofer,<br />

Inc., provides solutions for operating expense escalations<br />

and offers consulting, training, software and dispute<br />

resolution services. Bill Brownfield and Larry Mayerhofer<br />

are the authors of The Escalation Handbook for<br />

Office Buildings (Third Edition), published by BOMA<br />

International and available at store.boma.org, and ALPHA Office<br />

Escalations (AOE) software, available at www.EscalationAdvisors.com.<br />

AOE automatically will calculate and prepare tenant billings for your<br />

buildings and determine reimbursement and leakage percentages.<br />

BOMA MAGAZINE 31


LOW-RISE<br />

ELEVATORS:<br />

Myth and Reality<br />

BY SASHA BAILEY, LEED AP BD+C<br />

Elevators in low-rise buildings have become<br />

more prevalent as the commercial real<br />

estate industry has adapted to comply with<br />

building codes under the Americans with<br />

Disabilities Act (ADA). For a century, the<br />

hydraulic elevator’s reliability and longevity made it the<br />

workhorse of the vertical transportation industry, especially<br />

for low-rise applications. Hydraulic elevators move weight<br />

efficiently through the simple<br />

displacement of fluid and have<br />

few moving parts. They are easy<br />

to maintain, and their major<br />

components can run for years<br />

without needing to be replaced.<br />

However, as the green building<br />

movement gained popularity<br />

in the commercial real estate<br />

industry, the hydraulic elevator<br />

fell out of favor, due to high<br />

energy usage and its reliance<br />

on petroleum-based hydraulic<br />

fluid. As a result, traction elevators,<br />

once reserved for high-rise<br />

buildings, are now being installed<br />

in buildings where they only<br />

need to travel a few feet.<br />

IMAGE: COURTESY OF THYSSENKRUPP ELEVATOR AMERICAS<br />

Traction elevators can offer a number of benefits, including<br />

improved ride quality and, in some cases, regenerative-drive<br />

technology that offers energy savings. Some traction elevators<br />

also do not even require a separate machine room to house the<br />

elevator mechanics that operate the equipment, adding to their<br />

popularity. The machine room-less (MRL) option appeals to<br />

architects who can use the extra space in the building footprint<br />

design. When using a machine room-less elevator, contractors<br />

don’t need to feed power, HVAC or ventilation to a separate<br />

elevator space; building owners also do not have to pay to heat<br />

and cool that same space. In addition, they offer an alternative<br />

to using the petroleum-based hydraulic fluid to operate.<br />

Before selecting elevator equipment for a low-rise application,<br />

however, it is important to understand the differences in<br />

maintenance needs of both traction and hydraulic elevators and<br />

take into consideration the total costs of installing, operating<br />

and maintaining each elevator type over its lifetime. Maintaining<br />

certain traction elevator models can cost almost as much as<br />

the initial purchase and installation. A three-stop traction MRL<br />

elevators requires an average of $173,000 in maintenance over<br />

25 years, compared to $91,000 to maintain the same hydraulic<br />

MRL elevator. This difference is easily overlooked in the initial<br />

cost comparison.<br />

Moreover, surprisingly, even older models of low-rise hydraulic<br />

elevators do not require significantly more energy than<br />

similar traction units in low-rise buildings. Neither traction nor<br />

32 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


hydraulic elevators require much energy when traveling only a<br />

few stories. A 2,500-pound elevator traveling a single floor (12<br />

feet) at 100 feet per minute that operates 100 runs a day does not<br />

even use $600 worth of energy in an entire year. Assuming the<br />

hydraulic uses more energy than traction, there may be a differential<br />

of perhaps just $150 a year in energy cost. That extra $150<br />

a year would not even cover one month of maintenance on most<br />

traction MRL elevators. At low heights, the difference between<br />

the energy consumption of the two types of two- to three-stop<br />

elevators is negligible.<br />

Furthermore, in response to the growing demand for green<br />

products, there are now hydraulic elevators specifically designed<br />

for low-rise applications that use canola-based hydraulic fluid<br />

that is both recyclable and biodegradable in place of petroleumbased<br />

fluid. Testing on elevators that use this fluid has shown an<br />

improvement in elevator performance and the ability for operation<br />

over a broader temperature range than those hydraulic elevators<br />

using traditional petroleum fluid, making these models a<br />

more attractive and cost-effective option than they once were.<br />

As the green building movement has expanded, so have<br />

expectations for manufacturers to provide data on the true cost<br />

and impact of their products. Savvy property professionals can<br />

investigate whether manufacturers have performed life-cycle<br />

analysis and life-cycle costing (LCC) studies on low-rise elevators<br />

to help customers understand their economic and environmental<br />

impacts. A life-cycle assessment (LCA) is a scientific<br />

method for measuring the environmental footprint of materials,<br />

products and services over their entire lifetime. An environmental<br />

product declaration (EPD) is third-party-verified<br />

information, based on life-cycle analysis data from studies<br />

according to the ISO 14040, a family of standards related to<br />

environmental management. Life-cycle costing takes that LCA<br />

one step further to look at the direct monetary costs involved<br />

with a product or service over its entire lifetime.<br />

Elevators have a long life span and are a major financial<br />

investment. In order to make an educated decision about<br />

purchasing the right elevator for the right project, property<br />

professionals can use a manufacturer’s LCA and LCC documentation<br />

that makes the long-term costs and environmental<br />

advantages transparent. The LCA illustrates the impact that<br />

extraction, manufacturing, installing, servicing, modernizing<br />

and end-of-life disposal or re-use have on the environment.<br />

The EPD is also helpful for anyone striving to meet the<br />

requirements of green building rating systems, like the U.S.<br />

Green Building Council’s Leadership in Energy and Environmental<br />

Design (LEED). Responsible manufacturers work to<br />

help consumers make the most informed decision possible<br />

by providing transparent information on their products and<br />

objective data on their long-term costs.<br />

When making a decision about what type of elevator to<br />

install in a low-rise building, consider the total costs of installing,<br />

operating and maintaining an elevator over the long term.<br />

With the availability of plant-based hydraulic fluid and energy<br />

consumption relatively even with traction elevators, hydraulic<br />

elevators are a greener option than they once were. And,<br />

when it comes to maintenance costs, the hydraulic elevator can<br />

be the best choice for low-rise projects. It is possible to meet<br />

ADA requirements, achieve your energy goals and serve your<br />

tenants well, while still<br />

choosing a cost-efficient<br />

option. B<br />

Before selecting an<br />

elevator type for a<br />

low-rise application,<br />

it is important to understand<br />

the differences in maintenance<br />

needs of both traction and<br />

hydraulic elevators and take<br />

into consideration the total<br />

costs of installing, operating<br />

and maintaining each elevator<br />

type over its lifetime.<br />

ABOUT THE<br />

AUTHOR: Sasha<br />

Bailey, LEED AP BD+C,<br />

is strategic communications<br />

manager for<br />

the Business Unit of<br />

ThyssenKrupp Elevator<br />

Americas. Contact her at<br />

Sasha.Bailey<br />

@thyssenkrupp.com.<br />

Visit www.thyssen<br />

kruppelevator.com/<br />

sustain.asp for more<br />

information about<br />

ThyssenKrupp’s sustainable<br />

design solutions.<br />

BOMA MAGAZINE 33


CREATING A BETTER<br />

Workplace<br />

Mars Drinks global headquarters in West Chester, Pennsylvania.<br />

BY JESSICA BATES<br />

Just as building owners and managers continually<br />

strive to keep their tenants satisfied, tenants themselves<br />

constantly are looking for innovative ways<br />

to foster employee satisfaction while increasing<br />

productivity. More and more companies are finding<br />

that the physical spaces in which their employees<br />

work can have a dramatic effect on everything from their creativity<br />

to their health.<br />

“It is a travesty how often people don’t feel happy or have a<br />

sense of well-being at work,” says Tracy Brower, PhD, author of<br />

Bring Work to Life by Bringing Life to Work and the director of<br />

Human Dynamics of Work for office furniture supplier Herman<br />

Miller. “When companies support and engage employees, these<br />

companies see more employee productivity, higher employee<br />

retention rates and a whole host of other benefits.” Design experts<br />

have begun exploring how our surroundings can affect our behavior,<br />

and office spaces are no exception. According to Brower, companies<br />

can reap dramatic results by creating office layouts that<br />

encourage innovation and engagement.<br />

One such company is Mars Drinks, a segment of Mars, Incorporated,<br />

that offers coffee and other hot beverage solutions to<br />

workplaces worldwide. Recently, the<br />

Mars Drinks global headquarters in<br />

West Chester, Pennsylvania, were redesigned<br />

with the help of Herman Miller<br />

to inspire happier and more productive<br />

employees. The new space includes a<br />

variety of work areas to meet different<br />

employee needs. Much of the office<br />

space has been kept open to promote<br />

communication between workers, but<br />

when employees need time for quiet work or private conversations,<br />

special “huddle rooms” are available. Dynamic coffee lounges and<br />

so-called “social kitchens” have been designed to allow coworkers<br />

and company leaders alike to recharge and converse. By creating<br />

inviting break areas, Mars Drinks encourages its employees to stay<br />

on-site for coffee breaks and lunch, thereby creating more opportunities<br />

for collaboration and connection.<br />

Frank LaRusso, vice president of Business Development for Mars<br />

Drinks, says the decision to focus on company culture was a simple<br />

one. “When companies look at the value of employee health and<br />

well-being, they should be inspired to do something.” As our<br />

society becomes increasingly aware of the negative impacts that<br />

poor office culture and even sitting for long periods of time can<br />

have on our health, LaRusso believes it is important for employers<br />

to take proactive measures to mitigate these effects. “An office<br />

space should be highly energetic and highly inspirational, helping<br />

companies create more innovation, better health and greater<br />

happiness for their employees.”<br />

However, companies need not knock down every wall and<br />

construct entirely open office spaces in order to create what Herman<br />

Miller terms a “Living Office”—a workplace that continuously<br />

evolves for greater prosperity. In fact, Brower points out that some<br />

companies have over-compensated, creating more open spaces and<br />

collaboration at the expense of privacy and contemplative time. The<br />

most successful workplaces accommodate a variety of work activities<br />

and characters, a concept reflected in the redesigned offices of Mars<br />

Drinks. “No matter our style, work preferences or job function, there<br />

will be times when we need to connect with others and there will be<br />

times when we need to work in a more solitary space. The key is for<br />

companies to provide options,” Brower explains.<br />

Both Brower and LaRusso believe that well-designed offices<br />

will become more prevalent as the benefits become better known.<br />

As pioneering employers realize increasing economic benefits from<br />

happier and healthier employees, others will follow similar workplace<br />

strategies.<br />

But the best employers will always see room for improvement.<br />

“Companies should be continuously striving to improve office spaces,<br />

rather than just modernizing once every 10 or 20 years and wiping<br />

their brow,” says Brower. “Work and workers are always changing, so<br />

companies should always be listening to what employees need.”<br />

Brower’s advice for companies looking to improve their space<br />

“Start by identifying the purpose that your organization is trying to<br />

fulfill, then really look at the work activities that need to be supported,”<br />

says Brower. “Finally, think about the settings that will best<br />

encourage these activities and create workplace landscapes accordingly.”<br />

Building owners and managers also should keep this advice in<br />

mind as they continue to look for ways to attract and retain tenants.<br />

As seasoned property professionals know, an office space truly isn’t<br />

just a place to work. B<br />

34 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


SPECIAL ADVERTISING SECTION<br />

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CAMBRIDGE SOUND MANAGEMENT<br />

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• Protect speech privacy<br />

• Reduce noise distractions<br />

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QtPro can also help contribute to<br />

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GEOPAL MOBILE SOLUTIONS FOR<br />

FACILITY MANAGEMENT<br />

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UTILITY REBATES MADE SIMPLE<br />

For over 35 years, EHC Global has proudly<br />

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Designed to withstand the demands of today’s<br />

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BUILDING ENGINES<br />

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36 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


SPECIAL ADVERTISING SECTION<br />

SUPPLIER SHOWCASE PRODUCTS & SERVICES<br />

VERTICAL ASSESSMENT ASSOCIATES<br />

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HUGUENOT<br />

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Huguenot Laboratories offers comprehensive<br />

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analysis testing services for Fire Protection<br />

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HIGH-PERFORMANCE PORTABLE<br />

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ARCHITECTURAL BIRD CONTROL<br />

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BOMA MAGAZINE 37


SPECIAL ADVERTISING SECTION<br />

SUPPLIER SHOWCASE PRODUCTS & SERVICES<br />

REDUCE POWER<br />

COSTS BY<br />

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YOUR HVAC<br />

COMPRESSORS<br />

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POTTER NITROGEN<br />

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Displacing Oxygen with pure Nitrogen<br />

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dramatically reduce corrosion rates and<br />

prolong the life of your dry or pre-action<br />

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LIGHT EFFICIENT DESIGN<br />

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ENERGY PROFILES LIMITED<br />

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38 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


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TRENDS, STATS & FACTS<br />

BOMEX ® 2014:<br />

HIGHLIGHTS FROM<br />

WINNIPEG<br />

Members of the commercial real estate<br />

industry gathered in Winnipeg, Manitoba,<br />

from September 9-11, 2014, to attend<br />

BOMEX ® 2014, BOMA Canada’s national<br />

commercial real estate conference. Among<br />

the attendees were BOMA International Chair John Oliver<br />

and President Henry Chamberlain, who were hosted by<br />

BOMA Canada Chair Mike Bishop and President & CEO<br />

Benjamin Shinewald.<br />

BOMEX 2014 began with the BOMEX Golf Classic at the<br />

Pine Ridge Golf Course, while non-golfers enjoyed an alternative<br />

excursion to Winnipeg’s Assiniboine Park for a tour of<br />

its “Journey to Churchill” arctic exhibition at the Assiniboine<br />

Park Zoo. Delegates gathered that evening to officially kick<br />

BOMA International President Henry Chamberlain (left) and Chair John<br />

Oliver with a winner from BOMA Canada’s TOBY ® Awards.<br />

off the conference with a welcome reception at Manitoba<br />

Hydro Place, headquarters of electric power and natural gas<br />

utility Manitoba Hydro and the only office tower in Canada<br />

to receive the LEED Platinum rating.<br />

True to the conference theme of “Unlock Your Potential,”<br />

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40 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


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TRENDS, STATS & FACTS<br />

BOMEX 2014’s<br />

charitable<br />

partner, Habitat<br />

for Humanity<br />

Manitoba, was the<br />

beneficiary of more<br />

than $6,000.<br />

time, wellness and human resources. The BOMEX 2014<br />

trade show, presented in partnership with the Manitoba<br />

Building Expo, boasted more than 170 exhibitors showcasing<br />

the latest products and technologies for commercial<br />

properties and offered a terrific networking opportunity<br />

for property professionals. The two-day conference also<br />

featured a number of excellent speakers, beginning with<br />

an inspiring presentation by Gail Asper of the Canadian<br />

Museum for Human Rights, which opened in downtown<br />

Winnipeg this year.<br />

Delegates and guests were treated to their own private<br />

concert on Wednesday night with rock ‘n’ roll superstar<br />

Randy Bachman of Bachman-Turner Overdrive fame during<br />

“A Night in Manitoba.” Food stations and live music from the<br />

Justin Lacroix Band set the stage for the legendary rocker,<br />

whose energy had RBC Convention Centre Winnipeg<br />

visitors singing and dancing the night away.<br />

Funds were raised throughout the night in support<br />

of BOMEX 2014 charitable partner Habitat<br />

for Humanity Manitoba, which was the beneficiary<br />

of the more than $6,000 collected.<br />

The grand finale of the conference was the<br />

National Awards Gala, held in the historic Fort<br />

Gary Hotel on Thursday night, where BOMA<br />

Canada’s The Outstanding Building of the Year®<br />

(TOBY®), Pinnacle, Earth and Chairman’s Awards were<br />

presented during a James Bond-themed black tie affair.<br />

The evening’s most prestigious honor, the BOMA Canada<br />

Chairman’s Award, was bestowed upon Keith Major, senior<br />

vice president of Property Management for Bentall Kennedy<br />

(Canada) LP and a member of BOMA International’s<br />

Executive Committee. Major was recognized for his leadership<br />

and outstanding contributions<br />

to the success of BOMA<br />

Canada and the commercial real<br />

estate industry at large. Attendees<br />

of the gala also took time<br />

to acknowledge the upcoming<br />

retirement of Bill Partridge,<br />

chief staff officer (CSO) of<br />

BOMA/Calgary and the driving<br />

force behind many major<br />

industry initiatives over the past<br />

34 years, for his dedication and<br />

Keith Major accepts the<br />

prestigious Chairman’s Award.<br />

service.<br />

BOMEX 2015 will take place<br />

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GREEN SCENE<br />

BY KATIE ABBOTT<br />

MAINTAINING AN EFFECTIVE<br />

RECYCLING SYSTEM<br />

A well-developed recycling<br />

system can help increase<br />

tenant satisfaction and<br />

cultivate tenant retention,<br />

which are always high priorities<br />

for property managers.<br />

In fact, according to BOMA<br />

International’s recent office tenant<br />

survey What Office Tenants Want, 66<br />

percent of tenants surveyed indicated<br />

that environmentally sustainable building<br />

operations are either “Important”<br />

or “Very Important” to them. However,<br />

once implemented, how can you ensure<br />

that a recycling system is effectively<br />

maintained over time<br />

Following are four simple tips for<br />

sustaining a successful recycling program<br />

in your building.<br />

1. EDUCATE. Posters and labels that<br />

clearly identify the waste and recycling<br />

streams are key.<br />

• Ensure each receptacle throughout<br />

the building includes a visual clue,<br />

like a label or poster. This will help<br />

tenants understand what can and<br />

cannot be tossed into each container.<br />

Replace peeling or ripped labels<br />

periodically to maintain a high-end<br />

aesthetic within your building.<br />

• Make sure every tenant has reference<br />

sheets that outline the recycling<br />

program. These can be helpful to<br />

new employees or guests.<br />

• Host a meeting to provide tenants with<br />

recycling tips. This will keep recycling<br />

top of mind and provide a forum for<br />

face-to-face tenant interaction.<br />

2. TRAIN. The janitorial staff in<br />

your building is critical to a successful<br />

recycling program.<br />

• Ensure the janitorial staff has the<br />

right equipment for transporting<br />

multiple waste streams throughout<br />

the building in an efficient manner.<br />

• Provide the janitorial staff with<br />

the same educational tools as the<br />

tenants to explain the reasoning<br />

behind the implementation of a<br />

recycling program.<br />

3. MEASURE. Waste audits are<br />

helpful in understanding the current<br />

recycling rate.<br />

• Conduct a waste audit once per<br />

quarter to maintain a consistent<br />

measurement. By comparing the<br />

results from quarter to quarter,<br />

and then year to year, you will<br />

have an accurate understanding of<br />

building recycling performance.<br />

• Encourage tenants to help with the<br />

waste audit. This will again allow<br />

face-to-face interaction with tenants<br />

and help them take a more<br />

active role in the recycling process.<br />

4. REASSESS. Use the results of<br />

the waste audits to pinpoint areas of<br />

improvement.<br />

• If the recycling rate for a particular<br />

tenant or building floor is less<br />

than stellar, host an individual<br />

education session with the tenant<br />

or tenants to reenergize their recycling<br />

efforts.<br />

• The waste audit may uncover a<br />

common recycling mistake, like<br />

recyclable paper in a landfill<br />

receptacle. Send a reminder e-mail<br />

to tenants informing them of the<br />

focus area and what should be<br />

tossed in the recycling bin.<br />

• If your building’s recycling rate is<br />

consistently over 50 percent, consider<br />

taking your recycling system<br />

to the next level and implementing<br />

an organic waste recycling<br />

program.<br />

These tips not only will ensure that<br />

your recycling program supports the<br />

sustainability efforts in your building,<br />

but they also will go a long way towards<br />

keeping your tenants engaged. B<br />

ABOUT THE AUTHOR: Katie<br />

Abbott is brand manager, Recycling<br />

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BOMA MAGAZINE 45


HEALTHCARE PULSE<br />

BY JOHN B. MUGFORD<br />

Non-traditional<br />

tenants are<br />

especially<br />

welcomed in<br />

certain types<br />

of facilities,<br />

including<br />

medical malls,<br />

where primarycare<br />

doctors,<br />

a variety of<br />

specialists, labs<br />

and other health<br />

services are<br />

housed together<br />

to allow patients<br />

to take care of<br />

several appointments<br />

in one<br />

visit.<br />

NON-TRADITIONAL<br />

TENANTS FIND<br />

SPACE IN MEDICAL<br />

OFFICE BUILDINGS<br />

Even though medical office buildings (MOBs)<br />

are one of the hottest real estate investments<br />

in the country, filling every space in<br />

every MOB is not always a slam dunk.<br />

The fact is that, as many independent physicians and group<br />

practices are being gobbled up by large health systems, the<br />

pool of tenants that could potentially fill remaining MOB<br />

spaces is dwindling. Perhaps this is why the U.S. national<br />

vacancy rate for MOBs has languished above 12.25 percent<br />

over the last three years, according to Colliers International.<br />

So what’s a medical office building owner to do with vacant<br />

spaces as the pool of traditional, potential users is shrinking<br />

For some owners, the answer lies with “non-traditional”<br />

MOB tenants, or those that do not provide<br />

primary care; obstetrics; ear, nose and throat (ENT);<br />

or any number of typical outpatient services. Most<br />

landlords prefer non-traditional tenants that are<br />

medical- or wellness-related and can create synergies<br />

with traditional providers in their building. These<br />

can include telemedicine firms, mental health clinics,<br />

radiology reading centers, wellness clubs, bioscience<br />

incubators, health food stores and eyeglass or medical<br />

product retailers, among others.<br />

While most non-traditional tenants cannot afford<br />

the rents in newer and more expensive Class A MOBs,<br />

some are landing spaces in buildings that are Class<br />

B or lower, according to Robert J. King, president of<br />

Florida medical brokerage firm RJ King Associates.<br />

Non-traditional tenants are especially welcomed in<br />

certain types of facilities, including medical malls,<br />

where primary-care doctors, a variety of specialists,<br />

labs and other health services are housed together<br />

to allow patients to take care of several appointments<br />

in one visit.<br />

“These facilities need optometrists, health food stores and<br />

pharmacies because they provide convenience,” says Megan<br />

Sherwood, executive vice president of Brokerage Services for<br />

Plaza Companies, a healthcare real estate firm in Arizona.<br />

Plaza Companies has landed a few non-traditional tenants<br />

over the years, including a telemedicine firm, Imaging Advantage,<br />

at Paradise Valley Medical Plaza on the campus of Paradise<br />

Valley Hospital in Phoenix. The firm staffs radiologists to<br />

read images for smaller providers that cannot staff radiologists<br />

around the clock.<br />

As far as Seavest Healthcare Properties is concerned,<br />

another good location for non-traditional MOB tenants is a<br />

medical building that has been converted from a former big<br />

box store or corporate headquarters. Portions of such adaptive<br />

re-use projects can be redeveloped with higher-end finishes<br />

needed by medical practices, while other spaces can be<br />

built out for non-traditional users.<br />

That’s exactly what Seavest and KIRCO Health Partners<br />

did after acquiring a vacant three-story, 140,000-square-foot<br />

office building in Dearborn, Michigan, in recent years. About<br />

75,000 square feet is home to services of the Henry Ford<br />

Health System, while other areas include an optometry and<br />

ophthalmology clinic and retail store, a retail pharmacy and<br />

a fitness center. “More and more health systems find they<br />

can save costs, differentiate themselves in the market and<br />

access a larger patient base by offering a full range of services<br />

located in patients’ neighborhoods,” says Jonathan Winer,<br />

senior managing director and CIO of Seavest.<br />

As MOBs evolve in today’s highly technical environment, a<br />

number of landlords are sure to start mixing medical research<br />

with patient care in their buildings. The 340,000-square-foot<br />

Conventus building currently under construction on the<br />

Buffalo Niagara Medical Campus in Buffalo, New York, is a<br />

prime example. Ciminelli Real Estate’s building will be home<br />

to a 50,000-square-foot space occupied by Albany Molecular<br />

Research Inc., as well as other potential medical research<br />

firms. The building also will feature a new use for traditional<br />

MOB space: an admissions and pre-operative area for the<br />

surgery center next door in the John R. Oishei Children’s Hospital.<br />

A skybridge will link the spaces.<br />

“The tenant roster at Conventus evolved, in large part,<br />

due to the project’s location on and connectivity to the<br />

Buffalo Niagara Medical Campus,” explains Jay Miele,<br />

managing director with Hammond Hanlon Camp in New<br />

York, which landed Seavest as a financial partner in the<br />

project. The building’s proximity to several hospitals,<br />

research institutes and a new medical school is why the<br />

tenant roster is much more wide-ranging than “your classic<br />

medical office building,” Miele says. B<br />

ABOUT THE AUTHOR: John B. Mugford is editor of<br />

Healthcare Real Estate Insights magazine at Wolf Marketing &<br />

Media LLC. Visit www.wolfmediausa.com.<br />

46 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


2014 MeMbership Directory<br />

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turns to<br />

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Insight: The Commercial Real Estate<br />

Journal magazine<br />

BOMA Views newsletter<br />

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Annual Membership Directory<br />

Online Buyers’ Guide<br />

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Developments magazine<br />

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Annual Membership Directory<br />

Online Directory & Buyers' Guide<br />

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BOMA/NY Facts eNewsletter<br />

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48 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


ADVERTISING INDEX<br />

COMPANY<br />

PAGE NO.<br />

AAON................................................................. Cov 4<br />

ABM-OneSource...................................................... 37<br />

Advanced Egress Solutions Inc. .............................. 42<br />

AGF Manufacturing Inc. .......................................... 45<br />

Allegion...................................................................... 4<br />

American Anchor....................................................... 3<br />

Angus Systems Group............................................. 16<br />

Aquatherm............................................................... 49<br />

Automatic Building Controls LLC.............................. 37<br />

Avigilon Corp. ......................................................... 41<br />

Bartlett Tree Experts................................................. 49<br />

BCS-Business Credentialing Services....................... 38<br />

Belco Pipe Restoration............................................. 12<br />

BITZER US Inc. ....................................................... 38<br />

Bluebeam Software Inc. .......................................... 35<br />

BOMA International....................................... 39, Cov 3<br />

BOMI International..................................................... 8<br />

Building Engines Inc. ............................................... 36<br />

Cambridge Engineering Inc. .................................... 38<br />

Cambridge Sound Management............................... 36<br />

Chem Link............................................................... 17<br />

Chicago Faucets........................................................ 9<br />

Cintas Corporation..................................................... 7<br />

COIT Cleaning & Restoration Services...................... 42<br />

Directory Solutions Inc.-TouchSource ...................... 37<br />

EHC Global Handrail Co. ......................................... 36<br />

Eklund’s Inc. ........................................................... 10<br />

Energetic Lighting.................................................... 49<br />

EPL Energy Profiles Ltd. .......................................... 38<br />

Firestone Building Products...................................... 19<br />

GeoPal Solutions..................................................... 36<br />

Graybar Electric Co. ................................................ 36<br />

HUB Zeag Canada Ltd. ........................................... 40<br />

Huguenot Laboratories............................................ 37<br />

IAPMO Hydronics Industry Alliance........................... 11<br />

Kenall Manufacturing............................................... 38<br />

KONE Inc. .............................................................. 21<br />

Light Efficient Design...........................................27, 38<br />

Naylor LLC.............................................................. 47<br />

Nixalite of America................................................... 37<br />

One Call Now.......................................................... 29<br />

Onset Computer Corporation................................... 36<br />

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BOMA MAGAZINE 49


EYE ON EDUCATION<br />

BY MARISSA MITZNER, LEED GREEN ASSOCIATE<br />

• How an asset manager uses a 10-year discounted cash<br />

flow to create a pro-forma, and how the asset manager is<br />

then held accountable to achieve the returns that were<br />

anticipated in the pro-forma; and<br />

• The different lease structures (gross, net and hybrid).<br />

ON-DEMAND<br />

WEBINAR HIGHLIGHTS<br />

SUCCESSFUL<br />

LEASE NEGOTIATION<br />

TACTICS<br />

If the three most important things in real<br />

estate are “location, location, location,”<br />

then the three most important things in<br />

asset management are “value, value,<br />

value.” Asset managers are under increasing pressure<br />

to maximize the value of the properties in their portfolios.<br />

Creating asset value can be an uphill battle in a good market,<br />

but when an asset manager has to contend with a sluggish<br />

economic recovery, tenants who have been reluctant to<br />

hire employees despite record profits, the rise in office<br />

densification and an inability to increase rental rates in the<br />

face of climbing operating expenses, lease negotiations can<br />

be a real challenge.<br />

One of BOMA International’s most recent live webinars—<br />

now available for on-demand viewing—is based on its Lease<br />

Analysis, Valuation, Negotiation and Approval course, the first<br />

offering in BOMA’s new Asset Management Course Series.<br />

Titled “You CAN Always Get What You Want: The Basics of<br />

Lease Negotiation,” the webinar offers an overview of basic<br />

leasing principles, examines how to effectively negotiate<br />

a lease or lease renewal and presents ideas for creating<br />

value for the owner of a commercial property. It is facilitated<br />

by Marc Fischer, BOMA Fellow, CCIM, CPM, RPA, LEED<br />

Green Associate, a long-time commercial real estate practitioner<br />

and one of the authors of the Asset Management<br />

Course Series.<br />

The webinar is divided into three major sections:<br />

1. AN OVERVIEW OF BASIC LEASING<br />

PRINCIPLES, INCLUDING:<br />

• How the economic concepts of scarcity, purchasing power,<br />

utility and demand impact asset value;<br />

• How economic, environmental, governmental and societal<br />

forces can influence asset value;<br />

2. AN INTRODUCTION TO THE FUNDAMENTAL<br />

STRATEGIES OF NEGOTIATION, INCLUDING:<br />

• The concepts of win-win, win-lose and lose-lose<br />

situations;<br />

• How to prepare for a negotiation by planning your position<br />

and understanding what your counterpart’s position<br />

is likely to be;<br />

• How to set the stage for the negotiation to conclude in<br />

your favor;<br />

• Negotiating tactics to use, and how to spot and overcome<br />

the same tactics from your counterpart; and<br />

• How to follow through once the negotiation has ended.<br />

3. A DISCUSSION OF LEASE CLAUSES THAT<br />

ARE USUALLY SUBJECT TO NEGOTIATION,<br />

WHICH INCLUDE:<br />

• Occupancy costs, free rent, tenant improvements, building<br />

improvements, leasing commissions, repair and maintenance<br />

responsibilities, operating expense reconciliations,<br />

insurance and indemnification.<br />

This and other informative on-demand webinars are<br />

now available online, providing property professionals the<br />

opportunity to access industry knowledge any time from the<br />

comfort of a computer or mobile device. BOMA’s on-demand<br />

webinars cover a wide range of topics, including: building<br />

operations and management; building codes and standards;<br />

finance and asset management; leadership; medical office<br />

buildings and healthcare facilities; industrial property management;<br />

sustainability and energy management; and tenant<br />

relations and retention. For more information, visit BOMA<br />

International’s Webinar Portal, which can be accessed at<br />

webinars.boma.org. B<br />

Interested in taking your understanding of asset management<br />

to the next level Lease Analysis, Valuation,<br />

Negotiation and Approval, the first course in BOMA International’s<br />

new Asset Management Course Series, is an indepth<br />

look into the leasing and valuation aspects of asset<br />

management. It is designed to help property managers<br />

better understand the function of the asset manager in<br />

order to be a more valuable member of the commercial<br />

property team. The course is offered through BOMA’s<br />

local associations and is taught in an interactive classroom<br />

setting where participants engage with one another<br />

and the instructor. To learn more about the course, visit<br />

www.boma.org/education or contact BOMA International’s<br />

Director of Education Catie Slye at cslye@boma.org.<br />

50 BOMA MAGAZINE NOVEMBER | DECEMBER 2014


ESCALATIONS SEASON<br />

IS COMING.<br />

ARE YOU READY<br />

Escalations are a fact of life for commercial real estate<br />

professionals—and getting them right is critical to<br />

maintaining the profitability of your building and solid<br />

relationships with your tenants. BOMA International offers<br />

the only step-by-step guide you need to better navigate the<br />

gross-up process of your property expenses.<br />

ORDER THE INDUSTRY’S DEFINITIVE GUIDE TO PREPARING<br />

ESCALATION BILLINGS TODAY AT STORE.BOMA.ORG<br />

ESCALATIONS<br />

MADE EASY<br />

BOMA’s newly released<br />

third edition of The<br />

Escalation Handbook for<br />

Office Buildings cuts<br />

through the complex<br />

concepts to provide the<br />

industry-accepted<br />

methodology for preparing<br />

escalation billings.<br />

The new edition tackles<br />

the latest issues facing<br />

property managers with an<br />

emphasis that escalations<br />

are a partnership between<br />

landlord and tenant. It<br />

includes an informative<br />

Q&A section, plus three<br />

new chapters on expense<br />

caps, managing an<br />

escalation audit and<br />

escalating building rating<br />

system costs.


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