The past few years, as corporations have been working toward improved efficiency, their real estate assets have quite naturally come under scrutiny. In step with this trend, NREI instituted in March 1993 a series of stories featuring the professionals whose job it is to administer Corporate America's real estate. This month's corporate real estate executive profile looks at Stephen M. Brazzell, AT&T's Global Real Estate Asset Manage Director.
As asset manager, Brazzell is responsible for the strategic and financial performance of AT&T's domestic real estate portfolio. This includes portfolio management, account management covering AT&T's internal business units, lease administration, master planning and economic analysis.
Brazzell celebrates his 22nd anniversary with AT&T this month, having joined South Central Bell in 1973. His AT&T career has encompassed all aspects of corporate real estate matters, including long-range planning, economic analysis, building design and construction and the management of leases, purchases, sales and joint ventures. His professional memberships include the American Society of Mechanical Engineers and the Industrial Development Research Council.
Q. Has AT&T changed either the structure of its corporate real estate department and/or the way it treats the real estate function in the last two to three years?
A. Eighteen months ago, AT&T conducted a study to evaluate and improve the way it manages its real estate assets. The main objectives of the study were to determine ways to improve the quality of services AT&T Global Real Estate provides to its business units and at the same time decrease total occupancy costs. The ultimate result of such a study is to determine how to enhance the shareholder's value by optimizing the corporation's asset utilization.
As an outcome of the study, the following actions were initiated: * A clear real estate policy was developed to balance the strategic value of real estate assets with AT&T's internal business unit operating needs. * A management model was created that centralized real estate responsibility and accountability. * We adopted and implemented a modified commercial model for all real estate services along with benchmarked cost levels. * Savings objectives were specified for each of the real estate processes totaling a $500 million reduction in operating costs over three years.
These actions moved the organization from an individual transactions-based corporate support-type function to a value-added strategic asset manager of the corporation's real estate investments. We are now organized using functional leadership teams that manage the portfolio within specific geographic areas. The team is led by an asset manager who has ultimate accountability for the strategic and financial performance of the portfolio.
Q. Describe one or two transactions that illustrate either a new way AT&T is handling its space needs or how alliance partners are performing.
A. As part of the model to centralize real estate responsibility and account, ability, we restructured the functions of lease administration and lease auditing, developed specific space and occupancy standards and financial and operating metrics.
An example of a successful initiative is our strategic alliance with a real estate provider, which is now operating the reengineered lease administration function. In October 1994 the lease administration function was re-engineered and centralized in New Jersey and is operated by three full-time lease analysts from our strategic partner and three AT&T administrative managers. The bill payment function was moved to the corporate accounts payable organization so that the lease analysts are now able to concentrate on lease term compliance. The result of this re-engineering effort is that it has moved this function from a "pay first" to a "review first, pay if appropriate" process. In the first five months of the new program, we have realized overall savings of over $1.3 million.
Q. To whom do you report? To whom does he or she report? Do you think it is important for a corporate real estate executive to report either to a company's chief financial officer or chief executive officer?
A. My position as Asset Management Director reports directly to the Real Estate Vice President at an operational level and, in turn, the organization resides in the Chief Financial Officer's organization. Real estate and real estate-related costs, including the cost for space, building operations and common administrative services, are one of AT&T's largest expenses after salaries, benefits and our network operating charges. With a direct impact on the corporation's bottom line, the performance of the real estate assets is best managed with a strong financial focus.
Q. Do you handle foreign transactions as well as domestic?
A. The international portfolio is managed through our GRE-International Organization, which is a part of AT&T's Global Real Estate organization.
Q. What alliances have AT&T formed, if any? How does your company use service providers?
A. We have developed strategic partnerships in several functions such as lease administration as I described earlier. In addition, we have exclusive service agreements with brokers for acquisitions and disposition services, lease auditors and strategic partnerships in property management. Such alliances not only provide for operating savings through exclusive relationships but also the ability to integrate commercial "best practices" into the operation.