We recently concluded a joint survey with the National Retail Tenants Association (NRTA) focused on the retailers’ perspective of the impact of the FASB changes and their readiness for those changes. One of the great things about collecting this much data at once is that many different dimensions can be explored. The finding that intrigued me the most was HOW retailers are planning to solve the problem and WHO they were involving in the resolution. This finding accentuated for me the vast advances the retail industry has made in both technology and process integration over the past 10 to 15 years.

As a general rule of thumb, most retailers made their first selection of a lease administration system anywhere from 10 to 15 years ago. During the selection process, a few key resources, typically the head of real estate and perhaps an accountant and lease administrator came together to evaluate a solution for THEIR singular need – retail lease administration and rent accounting.

Added to this mix is that for the past 7 to 10 years, other parts of the real estate and accounting groups have made their own selections of technology to solve their own individual needs for things like lease analysis, project management, capital or special projects, site selection, market analysis, facilities maintenance and facilities management. In most cases, these choices were made in a vacuum with a set of requirements meant to solve only their narrow needs.

What has developed, as a result, is a complicated mixture of disassociated systems (point solutions) held together by complex and fragile integrations (read: EXPENSIVE). Many retailers have found that making these selections in a vacuum and focusing on getting the cheapest product to meet a narrow set of requirements has ended up costing them FAR more money than they planned. Worse, they have not substantially improved the performance of their real estate; instead they merely automated old processes and solidified their functional silos.

Where has this led us? Ultimately I think retailers now are being much smarter and more calculating in their system selection. I am confident it’s due to lessons learned through a history of buying and implementing expensive point solution selections coupled with a maturing of the overall industry. Decision makers now understand the impact these selections have on their companies performance.

• 89% of respondents somewhat or totally agreed that they are “increasingly aware of the impact of real estate activities on the company’s key performance metrics”
• 56% also somewhat or totally agreed that new procedures were being identified to integrate procedures across multiple groups
• About half of respondents (with 22% abstaining) also said they have a task force in place to create a plan for new technology and process changes
• While 22% said Real Estate is running that task force, far more responses indicated their task forces included a combination of real estate, lease administration, accounting, finance and IT

Clearly, in replacing their legacy lease administration system, many retailers are not going to make a knee jerk point solution selection this time. Instead, as we have seen in recent sales opportunities, retailers are taking a broader look at their requirements and how they can integrate processes across the lifecycle of a store in ways that don’t just automate their processes but allow them to dramatically improve their store lifecycle management.

In the past two months we have been involved in sales processes with several retailers, each about to make a point solution selection. During the decision-making process, these companies realized they needed to be broader in their selection and look at a full lifecycle system. We will be announcing the first of these as a new client in the next few weeks, and we expect this trend to continue.

Shameless Plug

Lucernex’s has the ONLY Store Lifecycle Management (SLM) solution built from the top down FOR RETAILERS by RETAILERS. Before you jump to buy a point solution that does only one or two parts of the store lifecycle process, consider the massive savings and strategic advantage gained by implementing a SINGLE solution for market planning, site selection, project management, lease administration, retail rent accounting, lease analysis, capital project management and facilities management.

Lx Retail was purpose built for retail and is built on one platform with one database and one user interface – meaning low cost of maintenance over time and only one vendor to deal with.

Previous IWMS related Blogs

What is IWMS anyway?
IWMS? It’s Location! Location! Location!
The Power of Location Management
IWMS – Why so expensive?
IWMS in the “Cloud”
How Capital Project Management fits in an IWMS
What makes one IWMS easier to implement than another?
Why building real estate software in house is no longer financially feasible
Risks of upgrading Lease Administration Software alone or as part of an IWMS
What makes Store Lifecycle Management different from IWMS?

I recently attended the ICSC ReCON in Las Vegas. It was a wonderful opportunity to mingle with current and prospective clients as well as leaders in the real estate world. As Vice President of Product Management for Lucernex, I naturally have my ear to the ground regarding technology and tech issues and how they affect retail.

It was an exciting event this year with attendance much stronger than in recent years.

Still, it’s good to see retailers coming out of their recession-induced hibernation. Retailers are expanding again, and taking advantage of the current economy and leveraging the experience/knowledge gained about how particular store locations performed these past 3 years. Retailers are looking to technology for solutions to ensure that they are positioned properly to take advantage of current and future economic swings as well as the new FASB 13 regulations.

On our side, the vendor side, there has been a TREMENDOUS amount of activity the past 12 months. Mergers and acquisitions have really shaken up the industry, which has created some major implementation and delivery issues for legacy systems. I heard from many major retailers that they are struggling with their legacy products. They either cannot get them implemented, they’ve become too expensive for the limited features and capabilities they offer, or they just plain don’t do what they need!

Those issues are translating into a major headache  for the folks in the corner office.   These systems are no longer “nice to have” – they are mission critical, and it can be career-ending to make the wrong decision and spend hundreds of thousands, if not millions, of dollars on a failed project.   I listened to many stories of failures during my time on the trade show floor. The failures seem to always fall into one of two categories – it’s either a bad implementation of a good product, or a futile implementation of a badly selected “franken product”. Excessive attempts to customize an inflexible product have led to many tears.

On a positive note, there are new players in the industry who have significantly changed the landscape from when retailers last evaluated their Lease Administration and Store Lifecycle Management (SLM) systems.  These new players often have better tools, more experience, and have learned from the mistakes of old.   (I should note here that I count Lucernex in this latter group although truth be told, we are not really new!).   A consistent theme emerged when speaking with satisfied clients (and not just those of Lucernex!); quick, phased implementations and product flexibility without customization is the key to ensuring your end-users are happy and your company is getting the results it expected when it made the investment.

On a final note, hardware-wise I’m seeing fewer and fewer paper notebooks and more and more tablets. The comparison to previous years was striking. That lone person walking around the floor with an armful of binders stuffed with print outs (you know who you are!) looked out of date and disorganized compared to those with the slick presentations on their iPad or tablet. Retailers are making a major effort to leverage these new, portable and powerful technologies in deal presentations, site selection, modeling, demographics and even construction management..

Shameless Plug

Lucernex is leading the retail industry in converting outdated lease administration and store lifecycle management solutions to our cloud-based, market leading solution — Lx Retail 9. Built by Retailers for Retailers, Lx Retail combines all of the depth and capability of the best lease administration and rent accounting solutions (designed by the creator or SLIM) with the market leading store lifecycle management features Lucernex was founded on in 2000. And, since we took the time to do it right, it was built FOR RETAIL from the top down to manage the entire store lifecycle on one platform, one database and with one user interface.

Lucernex’s Lx Retail solution, being cloud-based, functions quite well on both iPad and Android platforms and will be fully optimized for both tablet platforms by year end!

Dallas, TX (March 31, 2011) – Lucernex Technologies, an innovative developer of business intelligence software for real estate management and development, today announced that it is a silver sponsor of the National Retail Tenants Association (NRTA). The sponsorship will give Lucernex more visibility for its suite of store lifecycle management solutions within the retail real estate industry including their FASB 13 ready Lease Administration and Rent Accounting Solution. It will also enable the company’s leadership to support NRTA’s expansion as a premier education and networking resource for industry professionals.

NRTA is a not-for-profit corporation that enhances the personal and professional education of commercial and retail real estate lease professionals, attorneys, lease accounting and commercial property management specialists. As a Silver Sponsor, Lucernex Technologies will receive placements on the NRTA website as well as in the organization’s newsletter in addition to increased presence at NRTA’s 15th Annual Conference this September in Orlando, Fla.

“NRTA is the nation’s leading educational resource for professionals in the retail real estate sector, and our relationship with the organization has been valuable to us throughout our company’s history,” said Jim Short, Director of Client Services, Lucernex. “By increasing our affiliation with NRTA as a silver sponsor, we are looking forward to having more communication with its members and providing more of them with world-class solutions for their day-to-day challenges. As our company continues to grow, we plan to also continue to grow our support and involvement in NRTA. ”

“We feel that our corporate sponsorship is a great way for sponsors to show their support for the educational mission of the National Retail Tenants Association,” said Paul Kinney, Executive Director, NRTA. “As a sponsor, Lucernex will have the opportunity to feature its products to 400+ lease administration professionals throughout the year and at our annual conference in September. Software systems continue to be an important part in the life of the retail lease administrator and they appreciate the opportunity to explore different applications prior to purchasing.”

About Lucernex
Founded in 2000, Lucernex Technologies provides corporate real estate professionals and real estate developers with powerful software tools that lower expenses and increase ROI through active real estate portfolio data management, whether applied to an existing portfolio or during the real estate development process. For more than a decade, Fortune 500 companies in the commercial real estate, hospitality, retail, construction and engineering industries, both in the United States and Europe, have been utilizing Lucernex Technologies software solutions every day to better manage the development lifecycle. As an innovative leader in Integrated Workplace Management System (IWMS) solutions and lease administration solutions, Lucernex continues to grow its customer base by applying its Web-based software expertise and real estate development insight to provide advanced tools and services for business. For more information, please visit www.lucernex.com.

Big changes are coming to lease accounting laws and these changes will ultimately impact how real estate leases are created and executed. The changes are going to be significant and far-reaching. Real estate professionals need to see the writing on the wall and be prepared with a plan of action to ensure their company’s existing and future leases comply with this new standard. This will require a fair amount of work on the part of a company’s operational, financial and managerial departments, but by 2012 all corporations – real estate and otherwise – must abide by these changes. Before I address effective ways to for real estate users to achieve leasing compliance, it is important to first understand why the laws of lease accounting are changing.

Current lease accounting laws were adopted 30 years ago and are outdated by today’s business standards. The biggest difference between the old and new laws pertain to off-balance sheet accounting. The proposed new law will bring all assets currently under lease onto the balance sheet and take into account international real estate portfolios, too. The new law will also include a single worldwide, leasing standard, which is important as real estate continues to go global.

For most companies, and especially those with large, international real estate portfolios the sheer thought of overhauling the leasing structure of all properties is overwhelming. But, thankfully, the implementation of advanced lease administration technology is available to support a company through this process and make the transition smoother. Not only will a lease administration program facilitate compliance to the new lease accounting laws, but it will also provide infinite benefits to any real estate company with significant leased locations. These include being able to compare multiple lease financials to support optimal decision making, standardize all leases in a portfolio to streamline the cumbersome process, and provide critical data for analysis.

There are important criteria to consider when adopting a lease administration software program: the program should be completely web-based; it should provide a system of record for all of the leased real estate assets including leases, subleases, purchase agreements, franchise agreements, equipment leases and more; there should be complete transparency to location information, critical dates and expenses; integrated work flow; pro-forma lease creation; and the integration of MS Excel Workbook.

Shameless Plug

The new laws promise to radically transform lease accounting and if you are a significant user of real estate, they will radically transform the way you do business, too. A lease administration software program will help deal with many of the initial challenges that accompany such a transition. But, how do you know which lease administration software program to implement? There are many on the market – some provide basic tracking of key dates and contract details and others, like Lx Contracts from Lucernex, offer extended features, advanced lease accounting and detailed lease analysis. I created the first Lease Administration product widely available back in 1983. Since then, many products have come and gone. As you plan for the upcoming accounting changes I encourage you to consider the product support and customer service that accompanies whatever solution you are using. I recommend the products available from Lucernex knowing full well that you will receive their reputable, well-known customer service to support the implementation and your long term success. In addition to our Lx IWMS and Lx Contracts products, Lucernex also offers its Lx LseMod Corporate version 15, designed by LseMod founder and Lucernex executive Jim Duport. Version 15 is coming soon and will also be able to support the new lease accounting laws. Together, the products work seamlessly and can be integrated with many other products to provide greater control over a company’s real estate portfolio.

In the last Blog I talked about the importance of an IWMS using the Location as the central organization point for all data.

By centering on the Location you can:

• Track all entities within your Portfolio or aggregate information to track your entire Portfolio
• Track all Center information including Leases
• Track all Facilities and equipment on a Campus
• Track each tax Parcel within the Location
• Track multiple planned Locations by market in multiple Programs
• Manage all collected data for multiple Sites of interest for every planned Location
• Manage as many Construction Projects as you want on one or more tax Parcels of the same or different Prototypes
• Maintain as many Facilities as you would like across one or more Programs
• Track all Spaces in each Facility, how they are used and the associated Leases.
• Run as many Capital Projects as you need
• Administer multiple Leases and subleases on a group of Facilities or on individual Facilities
• Track all real estate related Contracts for Equipment, Land, Services, etc….
• Maintain as many Franchisees information as required in the same or across multiple Facilities
• Track all Lease income and expenses on any Facilities or Location

What makes Location Centric Management most powerful is the infinite combinations of business arrangements it can handle. A few examples:

Example1:
Let’s say you company is a Convenience Store Retailer but also a real estate developer. You buy land that crosses two jurisdictions in an emerging market, put in one of your stores but also develop the surrounding property with a strip center, a hotel and two small office buildings.

• One location, multiple tax parcels, three facilities, one owned store created from a construction project, one center (also a facility) with multiple leases, two facilities for office building with multiple spaces and leases including some spaces with multiple leases. You used one of your prototypes to develop your store and it exists within your Rural Market Program. You can now launch capital projects across your entire Rural Market Program to automatically include this store. Every detail on each item discussed above can easily be viewed at the Location level with dashboard, alerts and reports to ensure a senior executive responsible for one or more locations or parts of a location (like Office buildings) can see everything related to the Location and drill down as needed.

Example 2:
Your company is a large insurance company with retail-like locations worldwide that provide a local office for clients to call and receive service from. You have three large headquarters, one of which you own that is a multi-facility campus, in 2 different countries plus 600 local offices that you manage the leases for.

• 603 locations. One location is a campus, built on 3 tax parcels across two jurisdictions. The campus has 4 facilities on it, one of which has one floor subleased to 6 different food vendors. Two locations have one building on them, each having one lease and multiple equipment contracts. 300 of the 600 local offices are simple leases with 5 year renewals. 200 of the others are in Asia Pacific and have 1 or 2 year renewals. The last 100 local offices were acquired in a takeover of a competitor and are now subleased.

While Location Centric Management can do all of that it also can manage simpler structures just as well without making it any more complex than a system that can handle only simple location structures.

The next obvious question is why wouldn’t a technology for real estate be location centric? The simple answer is that many vendors started out as point solutions targeting one area of the market then built up their solution to address the image of “IWMS” or customer needs. Think about how a house looks that began as a small colonial and then had multiple extensions put on, often hastily, to meet some immediate need. Is it going to look or function as well as the same size house designed up front to meet all the needs of its users? And how much time and money would it take to tear it all down and start over? It is much the same with IWMS technology, those vendors that started out looking at the entire lifecycle will be able to provide location centric applications, built on a single framework, that best address the end users needs without trying to wedge each users special needs in with customizations or elaborate configuration.

OK, now comes the part where I have to admit that, of course, this is my view as one of the visionaries (with Ken Brown) behind the Lx IWMS Location Performance Management software. Other vendors will argue that the Facility or Campus or Lease is the central entity. From their point of view I am sure that makes sense and many could likely write a more eloquent argument to make their case. What matters to someone choosing an IWMS solution is whether all the current or future business arrangements can be handled in any combination the customer can think of and, more importantly, is the application designed to handle those arrangements or will it need to be customized or heavily configured to meet those needs (which would indicate little flexibility to change and limitations on connections between the moving parts) or worse yet – is the technology vendor forcing you into managing your locations as they dictate, rather than leveraging the unique structure that has made you successful and is your competitive advantage. Also, what is the structure of the database? Is it one database and one code base or its it a complex interconnection of separately designed products and databases tied together with a front end concealing a lack of singular design vision. I will save the details of that discussion for another Blog!

Shameless plug

Lx IWMS was designed from the ground up as a 100% web-based location centric system with a single database accessed by a single front end programmed in a single code base by the same group of developers since 2000 when we were founded. Even our recent expansion of the suite to include complete lease and contract administration (led by SLIM Lease Administration designer Ken Brown) and Capital Project Management has been added directly into the original structure. We can handle any combination of uses of a location that any organization can dream up! See our IWMS competitor chart or give me a call to discuss how we match up to other IWMS vendors.

Joe’s Next Blog: “Why are some IWMS’s so expensive”, will be posted next week.

Previous IWMS related Blogs

What is IWMS anyway?
IWMS? It’s Location! Location! Location!

Upcoming Webinars

FREE WEBINAR: How to use Location Management Technology to quickly increase revenue and lower cost. Click here for more information

My last blog discussed the very loose definition of IWMS and how it tries to describe a wide array of very different vendors. In this blog I will discuss one type of IWMS, Location Management Software, and what the different end users may need to focus on when selecting a Location Management IWMS.

What are the three things that matter in real estate – Location, Location, Location. This old adage about real estate applies to commercial real estate technology as well. The location is what real estate is all about whether you are a 2000 store retailer, a 30 building corporation, a large hotel company or a multi-building campus – everything you do in relation to your real estate is based on a location. And, managing the performance of each location to perform optimally is the ultimate goal for each location whether it’s optimizing revenue or minimizing cost.

Each industry is going to have different methods to achieve these goals based on their business goals. A retailer may focus on same store revenue growth or new store development, a hotelier will focus on REVPAR growth while a corporate occupier (owner of leased) is likely to focus on space management, cost control per location (or employee) or implementation of technology to achieve savings.

The tools each of these different users needs is therefore as different as the decision makers selecting those tools. Not surprisingly, the different types of real estate portfolio owners have organized themselves differently to reflect both their differing business processes and the importance they place on the different areas of functionality.

A retailer or hotelier, for example, will have less need for a CAFM system and more need for demographics and sales prediction. Facilities management is important to this audience but real estate selection is the business driver and therefore the decision maker is typically a real estate executive when it comes to selecting technology or other tools.

A corporate real estate department will have far more use for CAFM and no need for sales prediction. While the real estate function is important, the decision for non-retail corporate companies will typically be driven by the Facilities Management group.

According to a 2009 IWMS Connect article, this difference across many organizations is starting to blur as these roles are beginning to converge into a more “workplace” driven function.

However no matter what type of user you are, all the data you collect, work flows you manage, reports you generate, schedules you manage, work orders you cut or demographics you run are all centered around a location. Shouldn’t the technology you choose to manage it center on the location as well?

By centering on the Location you can:

• Track all entities within your Portfolio or aggregate information to track your entire Portfolio
• Track all Center information including Leases
• Track all Facilities and equipment on a Campus
• Track each tax Parcel within the Location
• Track multiple planned Locations by market in multiple Programs
• Manage all collected data for multiple Sites of interest for every planned Location
• Manage as many Construction Projects as you want on one or more tax Parcels of the same or different Prototypes
• Maintain as many Facilities as you would like across one or more Programs
• Track all Spaces in each Facility, how they are used and the associated Leases.
• Run as many Capital Projects as you need
• Administer multiple Leases and subleases on a group of Facilities or on individual Facilities
• Track all real estate related Contracts for Equipment, Land, Services, etc….
• Maintain as many Franchisees information as required in the same or across multiple Facilities
• Track all Lease income and expenses on any Facilities or Location

Shameless plug