objectives and strategies rico cheung

Objectives and Strategies Rico Cheung

UNCOVERING OUR CLIENT’S NEEDSObjectives

•Client Centered OrientationFocus on identifying issues and providing innovative solutions consistent with Client’s strategic plan. Build in term flexibility, save valuable resources and protect schedule priorities. Your goals are our goals. Focus on Client’s success.

•Clear CommunicationCommitted to identifying and understanding roadblocks and issues early in the process through open and honest communication and make recommendations for Client’s long term success.

•Push the EnvelopeSet a new standard for quality of service, structure of the transaction, the financial aspects and expectations. Challenge the “traditional way of putting a deal together.” Perform all business at the highest possible level of integrity and level of excellence.

•Bring the Market to the RequirementRather than fitting Client into a specific facility and deal structure, make the structure and buildings fit into Client’s plans.

CLIENTObjectives

Client wants to determine the

• Right amount of Real Estate

• Right property types

• Right location

• Right time frame to support its business operations

“Strategic Planning does not deal with future decisions, but rather the future of present decisions”

GVA KIDDER MATHEWSOverview

In business for over 30 years, GVA Kidder Mathews has one of the largest independent brokerage groups on the West Coast

• 135 brokers performing • Over 1,000 leases and 350 sales transactions worth over $2.3 billion annually

Since they see more transactions, their clients benefit from superior market knowledge.

The firm also has more brokers with the prestigious SIOR and CCIM designations than any other firm in the Northwest. The brokerage group focuses their expertise in the following specialty groups: Industrial, Office, Retail, Investment, Multi-family, Technology, Life Sciences, and Corporate Services.

AtlantaBaltimore Bellevue Boston BurbankCaracasCarlsbad Charlotte Chattanooga Chicago ConnecticutDallasDetroit Inland Empire Jacksonville Los Angeles

Panama City Beach PhiladelphiaPhoenix Pittsburgh Portland Raleigh/Durham Richmond San Diego San Francisco San Gabriel Valley Santa Clarita Valley

Santa Barbara Sao PauloSeattle South Bay Tacoma Tallahassee Tampa TorontoVancouverVentura County Virginia NorthernWashington DCWilmington

AthensBelfastBergamoBerlinBirminghamBratislavaBristolBrusselsBucharestBudapestCardiffCopenhagenDublin

LeedsLisbonLiverpoolLondonManchesterMelbourneMilanMoscowMunichNew CastlePragueSofiaSydneyTurinViennaWarsaw

EdinburghFrankfurtGenevaGenoaGlasgowHelsinki

Maryland MexicoMinneapolis-St. Paul MontréalNew JerseyNew YorkNewport NewsNorfolk Orange CountyOrlando Ottawa

GVA WORLDWIDEOffices and Regions of Expertise

STRATEGIC REAL ESTATE PLANNING

GVA Kidder Mathews

• Positions your company for success

• Protects your investment

• Minimizes out-of-pocket costs

• Increases leverage during negotiations


What Can Clients Expect?

• Access to Life Science friendly capital sources

• A structured commitment aligned with Strategic Business Plan

• Data from GVA Kidder Mathews’ “Radar Screen”

• Less “hands on” time by Executive Team

• Expertise with project implementation


GVA Kidder Mathews Delivers:

• A structured commitment aligned with the Client’s milestones and growth projections

• Best possible project and tenant improvement financing available

• An efficient, seamless definition, acquisition, and implementation process

• Opportunities only available to GVA Kidder Mathews’ Clients


Review Corporate Goals

and Objective

s

Develop Real

Estate Strategy

Programming &

Conceptual Design

Identify & Evaluate Alternati

ve Locations

Select Optimal Location

& Financial Structure

Prepare Real

Estate Acquisitio

n Strategy

Design/Construction

of Improvement

s

Validation of New Facility


Project Phase vs. Space Type

Phase of Product Development

Research Development Manufacturing

Pre-Clinical Clinical Phase 1

Clinical Phase 2 Clinical Phase 3

Commercial

Type of Facility

Research Laboratory Process Laboratory Manufacturing

GLP GMP (Some Validation)

GMP (Incr. Validation)

Validated GMP


Company Development Life Cycle

Research Pre-Clinical Clinical FDA Approval Commercialization

Time

Frame

Costs

Sq. Ft.


• Assessment of current situation

• What are the corporate goals and objectives?

• Growth projections

• Evaluate/develop space standards

• Municipal/hazardous materials requirements

• Financing tenant improvements


Issues Which Impact Facilities

• Business plan/headcount projections

• Current standards/space utilization

• Product development milestones/critical time periods

• Production capacity planning/modeling

• Corporate philosophy, employee demographics, image, amenities

• Control/financing strategies

CORPORATE GOALS & OBJECTIVES

• Review overall business strategy

• Evaluate financial objectives

• Address product development programs

• Define growth/headcount projections

PRODUCT DEVELOPMENT

• Staffing growth due to development progress

• Staffing of different development programs

• Support staff/facilities: shared or dedicated

• Master plan the project

• Will Validation be required?

Programs & Progress

REAL ESTATE STRATEGY

Results of Your Planning Efforts

• Documented Real Estate strategy

• How much space & when it is needed

• How to pay for new space

• How to acquire new space

• Control strategies

Development


Traditional Sources

• Asset-based lenders

• Venture leasing/equity financing

• Credit-based lenders

Traditional Sources

• Real Estate investment trusts (REIT)

• Off-balance sheet programs

• Biotech developers/investors

Facilities Finance Alternatives


Financing Tenant Improvements

• Asset-based lenders

• Venture leasing/equity financing

• Credit-based lenders

• Real Estate investment trusts

• Off-balance sheet program

• Government incentives

Development

REAL ESTATE GROWTH ANALYSIS

10,000 NSF Lab/Lab Support

10,000 NSF Office

10,000 NSF Manufacturing

10,000 NSF Warehouse

REAL ESTATE GROWTH ANALYSIS

0

50

100

150

200

250

300

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Square Feet in Thousands

157,500

51,300

92,900

Research & Pre-Clinical

Manufacturing

Clinical

DEVELOPING THE STRATEGY

10,000 NSF R&D

10,000 NSF Office

10,000 NSF Production

10,000 NSF Storage/Warehouse


Increasing Your Leverage in Negotiations

• Select optimal occupancy plan

• Select optimal capitalization plan

• Pre-negotiations

• Use your Real Estate strategy to your advantage

• Qualify/team approach with landlords/developers

Acquisition


Protecting Your Investment

• Analyze financial impact of scenarios

• Key lease provisions

• Landlord waivers

• Non-disturbance agreements

• Sublease clauses

Acquisition

SITE SELECTION

Identify alternative locations

• Assessment of site potential

• Match buildings/project to grow plans

• Review of existing tenants

• Financial analysis of alternatives

• Quantify occupancy costs

• Initial build-out costs

• Cashflow comparisons

SITE SELECTION

Analyze Site Potential

0

50

100

150

200

250

300

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Square Feet in Thousands

157,500

51,300

92,900First Expansion

Initial Building

Second Expansion

SITE SELECTION

Site Services & Amenities

• Corporate image and quality of life issues

• Utility capacity and water quality

• Ingress/egress issues

SITE SELECTION

City Permitting Process/Use Restrictions

• Schedule – serious vs. parallel

• Hazardous materials restrictions – quantities & types

• Use permitting and restrictions

• Public hearings

FINANCIAL ANALYSIS

Existing Building

Existing Building

Tenant Sq. Ft. Shell Building with Standard with Wet Labs

Improvements Cost/Sq.Ft. TI's Cost/Sq.Ft. Cost/Sq.Ft.

Average Cost/Sq.Ft.

52,000 $115.58 $100.34 $76.78

Proj. Total TI Cost

$6,010,000.00

$5,217,500.00

$3,992,500.00

Less: Landlord Share

$990,000.00 $412,500.00

$275,000.00

Proj. Tenant' Share

$5,020,000.00

$4,805,000.00

$3,717,500.00

Estimated Monthly $1.15 $0.75 $1.65

Lease Rate

Net Present Value

$8,907,405.11

$6,971,499.87

$9,201,819.71

(10 years, 10%)

TENANT IMPROVEMENT ANALYSIS

Tenant ShellExisting Building

Existing Building

Improvements Building with Standard with Wet Labs

Sq.Ft. Cost/Sq.Ft. TI's Cost/Sq.Ft. Cost/Sq.Ft.

Office (30% private)

10,000 $25.00 $10.00 $10.00

Wet Labs

20,000 $110.00 $90.00 $30.00

Animal Facility

3,000 $120.00 $120.00 $75.00

Lab Support

9,000 $65.00 $45.00 $10.00

GMP Pilot Plant

5,000 $150.00 $150.00 $100.00

Warehouse

5,000 $5.00 $2.50 $2.50

Total

52,000

Average Cost/Sq.Ft. $80.19 $65.91 $29.37

CONTROL STRATEGIES

• Straight lease

• Lease with equity

• Joint Venture

• Sole ownership

• Sale leaseback

• Off-balance sheet lease financing

PLANNING & OPERATING MODELS

Business Objectives

Business Issues

Core Competencies

Business Planning Model

Operating Model

R&D Test

Customer Service

Manufacturing

Assembly

Distribution

Human Resources MIS Finance Real Estate

PROCESS

1 2 3 4 5 6 7 8

Understand current business status & corporate environment

Assess current portfolio & facilities

Interview business units & Real Estate department

Evaluate Real Estate site programming

Assess Real Estate market conditions

Develop financial strategy

Develop Real Estate occupancy strategy

Implement Real Estate plan

PEOPLE AND PROCESS COORDINATION

RESULTS:

• Effectiveness

• Saves Money

• Maximizes Value

• Efficiency

• Saves Time

Building Owner/ Property Mgr.

General Contractor

Validation Consultant

Legal

Equipment Vendors

Architect/Process Engineer

Owner’s Leasing Agent

City/ Government

Moving Company

3rd Party TI Financing

Develop & Analyze Alternatives

Analyze Needs & Develop Strategy

Evaluate the

Market

Engagethe

Market

Weighthe

Options

Negotiate the

Terms

Negotiate the

Terms

Documentthe

Agreement

Implementthe

Decision

Support ClientPost

Occupancy

Negotiate & Implement the Decision

ENGAGEMENT PROCESS

PROCESS, DOCUMENTATION & ANALYSIS

Analyze Needs & Develop Strategy

Evaluate the Market

Engage the Market

Weigh the Options

Negotiate the Terms

Document the Agreement

Implement theDecision

Support Client Post Occupancy

•Define client’s goals

•Understand client’s vision of real estate – how it supports business

•Develop project team

•Complete review of present facility and lease document

•Develop understanding of space needs

•Identify decision- making process

•Develop critical path for decisions

•Develop preliminary project timeline

•Develop strategy

•Prepare comprehensive market survey addressing trends, asking rates, lease comparables, etc.

•Survey multiple databases for all direct, sublease and options

•Survey ActiveUsers database for potential “shadow” matches

•Identify potential options – rank options against client

•Analyze each jurisdiction (labor, requirements, incentives, etc.) if search is between jurisdictions (i.e. multi-state)

•Identify economic issues among cities

•Prepare initial tour book

•Review and revisit the stay-put alternative

•Conduct building site tours

•Prepare evaluation matrix

•Select initial options to pursue

•Prepare RFP’s or proposals

•Solicit and gather RFP responses

•Complete quantitative and qualitative analyzes of the RFP responses

•Determine operational compatibility and preliminary fit plea

•Layout efficiencies for each option

•Select final alternatives with client

•Review & finalize strategy for parallel negotiation

•Prepare & submit counter proposals

•Negotiate alternative proposals in parallel

•Continue ongoing evaluation of all economic and operational factors

•Conduct final business negotiations with key short- listed) alternatives

•Select finalist

•Focus on:−Financial−Non-financial−Flexibility provisions−Incentives

•Negotiate and execute:−Letter of intent−Construction exhibit

•Finalize leasedocumentation

•Coordinate lease execution

•Prepare lease/contract abstract

•Coordinate outside services

•Final space plan

•Supervise completion of punch list

•Finalize renovation and/or building layout and design

•Prepare architectural drawings and construction documents

•Develop project budgets and project timelines

•Assist in selection of contractors and project/construction manager

•Support value engineering and analysis of required technology infrastructure

•Help negotiate contract documents

•Assist in the selection of the move coordinator

•Develop and present excessspace disposition strategy

•Present a financial recap of the transaction

•Create LeaseSummary / Memorandum for client

•Monitor costs and options

•Periodically review real estate strategy

BuildingImageQuality of ownershipBuilding amenities/servicesEmployee securityParkingEnergy efficiencySignage Air quality

LocationProximity to AirportAccessibility by employeesAccessibility by clientsArea amenitiesPublic transportationSkilled labor force

OperationalOccupancy dateProcess limitations

– Growth/scalabilityStructural considerations

– Column spacing– Floor load capacity

Space efficienciesAdjacenciesExpansion/contraction needsRenewal optionsData center (power/technical requirements)Haz.Mats./Code complianceElectrical/Emergency Back-Up PowerTechnology/communicationsHVAC requirementsCeiling heightOnsite storage needsLoading docks/overhead doors

FinancialCash flowTax positionP&L implicationsBase rent/sfOther occupancy costs/sfTimingFunding of capital improvementsSecurityTenant improvement allowance

Control StrategiesStandard leaseLease with equity sharingLease/PurchaseJoint VentureSole Ownership

ISSUES FOR CONSIDERATION: TYPICAL

Utilities/Services

Interruption of Services

Building Security

ADA ComplianceDamage & Destruction

Base Building

Work Letter

Alterations

HVAC

Non-Disturbance

Maintenance

Restoration Clause

Options: - Expansion - First offer - Termination - Renewal

Sublease Rights

Operating Exclusions

Base Rent(Rent per SF & Operating expenses)

Square footage

Lease Issues

FOCUS: THOROUGH EXAMINATION

• Strong advocacy & satisfied clients

• Superior market intelligence

• A team approach to address the increasing complexity and

handle the details for Technology and Emerging Company

projects.

• Superior negotiating results

WE DELIVER RESULTS

BENEFITS

CASE STUDIESStrategic Initiative

.

AMGEN, INC.34551 ArdenwoodFremont, CA

Tenant: Amgen, Inc.

Landlord: Digital Realty Trust

Total Square Footage: ±131,386 RSF

Total Consideration: $ 16,523,073

Transaction Date: May 2007

Sub-Market: Ardenwood, Fremont

Lease term: 8 years

Comments:

• Amgen had 4 years remaining on its lease and was about to commence a major capital project.

• Existing rental rate was 68% over market with a renewal option at the “greater” of existing rate or market.

•Restoration obligation required tenant to return Premises to original condition.

• After establishing long term business unit requirements, lease was extended to be co-terminus with adjacent facilities. Rental rate was reduced and renewal option language was revised to be 95% of market. Restoration obligation was removed.

•Total savings / cost avoidance totaled approx. $37,000,000.

CASE STUDIESStrategic Initiative

.

ABAXIS, INC.3240 Whipple RoadUnion City, CA

Tenant: Abaxis, Inc.

Landlord: Principal Financial Group



Transaction Date: January 2001

Sub-Market: West Union City

Lease term: 10 years

Comments:

Company needed at least 60,000 SF for manufacturing due to pending product approval plus additional office space

Helped narrow relocation search to East Bay where many current employee reside and because of the deep labor pool of technicians

Selected a building in a new 90,000 SF building in a 322,000 SF project giving the client expansion options to accommodate future growth up to 170,000 SF

Negotiated a lease with 2 year phase-in and a starting rent 35% below market rents in the project.

CASE STUDIESDelivering Results

.

GENOMIC HEALTH, INC.301 Penobscot DriveRedwood City, CA

Tenant: Genomic Health, Inc.

Landlord: Metropolitan Life



Transaction Date: September 2005

Sub-Market: Redwood City

Lease term: 6 Years

Comments:

Genomic Health had two years remaining on its sublease. It needed to expand its production operations, marketing, and customer service operation.

We negotiated an expansion and direct lease well below current market rates, including a $17/SF in TI allowance for both the existing space and the new space to be used at client’s discretion.

We also negotiated to have existing HVAC systems replaced at the landlord’s cost ($400,000)

Genomic Health saved over 37% on their occupancy costs over the new lease term.


.

ASCENDENT SYSTEMS2000 Bridge PkwyRedwood Shores, CA

Tenant: Ascendent Systems

Landlord: Prudential & Harvest



Transaction Date: July 2006

Sub-Market: Redwood Shores

Lease term: 60 Months

Comments:

Growing software company recently acquired by Research In Motion, Inc.

Selected a building to accommodate their large lab requirement which required significant power and HVAC.

Negotiated $17.50/SF TI allowance to be used at client’s discretion.

Locked in a low rate for the first year to align with company’s revenue projections.


.

LUCID ERA1510 Fashion Island BlvdSan Mateo, CA

Tenant: LucidEra

Landlord: ING Clarion


Total Consideration: $ 174,806

Transaction Date: October 2005

Sub-Market: San Mateo

Lease term: 24 Months

Comments:

Start-up software company looking for approximately 2,500 sq. ft. After examining their headcount projections, we recommended taking more space to allow for future growth.

Successfully negotiated a phase-in with 6 moths free rent on ±1,936 sq. ft.

WE ARE YOUR EYES AND EARS

Approvals

Invoice ReviewPayment

s

Commitmen

tChange Orders

Scope

Changes

Manpower

Contract

Rates

B E N E F I T S

• Tight control of invoice approval and payment process

• Early warning of cost, scope or schedule changes

• Innovative contracting procedures that reduce risk

• Minimize contractor and vendor disputes: control change order procedure

• Identification of value engineering opportunities

• Accurate financial and contract compliance auditing

• Concise and useful management reports (PTD & budget comparisons)

• Increased tax benefits from cost segregation

• Minimize Operating Committee involvement in construction process

Design Changes

Change Orders

Overruns

Delays

Dispute Claims

PMO

Fortune 500Stable Revenues/Earnings

Emerging, Growth CompaniesRapidly Increasing Revenues

Pre-Revenue CompaniesSales Imminent

BiotechnologyPre-Revenue

CapitalAvailability

ProductAvailability

BAY AREA REAL ESTATE: OLD PARADIGM

Fortune 500Stable Revenues/Earnings

Emerging, Growth CompaniesRapidly Increasing Revenues

Pre-Revenue CompaniesSales Imminent

BiotechnologyPre-Revenue

CapitalAvailability

ProductAvailability

BAY AREA REAL ESTATE: CURRENT PARADIGM

objectives and strategies rico cheung

Documents

clients success

clients needsobjectivesclient

clients strategic plan

clients long term success

deal structure

strategic business plandata

life sciences

level of excellence