Jones Lang LaSalle
Grubb's Linda Tresslar
By John Salustri
In the three years that have transpired since Sarbanes-Oxley became the law of the land, it has received its fair share of bad press, most of it revolving around the burdensome costs and, of course, the nail-biting reality of the CEO and CFO's names together on the bottom line. In fact, at one seminar presentation at this year's Mipim conference in Cannes, SOX was blamed directly--and it is generally agreed, falsely--for the recent ongoing push of REITs into privatization. But, less press worthy is the upside of the law, and yes there is some, both direct and indirect, such as a possible 30% increase in cost savings that await those who learn their reporting lessons. In a recent, exclusive interview Linda Tresslar, managing director and co-leader of national consulting for Grubb & Ellis, talks us through this out-of-the-box view of the three-year-old law.
GlobeSt.com: Have most people in the industry absorbed Sarbanes-Oxley into their daily routines?
Tresslar: Yes. The first two years of Sarbanes-Oxley was all about compliance and figuring out exactly what you were going to have to do, and there were hard dates you had to meet. Most people looked internally to make sure they had systems in place, and they started looking at vendor relationships to make sure their real estate-services vendor--or any kind of vendor--was providing information in a form and in enough detail and frequency that the company could comply. That took quite some time, especially within the real estate realm because many corporations don't track real estate in its entirety. Rather, they track it through business lines.
GlobeSt.com: That brings up two questions. The first is, do corporate real estate executives know what they own?
Tresslar: They certainly know about their active real estate. We're definitely seeing the realization that they need timely access to this information. It's not a luxury; it's a necessity. They're focused on price, but they are focused mainly on making sure the information they're getting from any vendor's systems is detailed enough and is delivered accurately and in a timely fashion.
GlobeSt.com: And that's question number two. To what extent were service firms blindsided by SOX in general and specifically, did you have to change your delivery system?
Tresslar: We certainly started by making sure we understood what our clients were being asked to provide and took a look at the systems we had in place. The nature of the information being provided hasn't changed. The thing that has changed the most for all of us in the industry has been the emphasis on the accuracy of the data and the speed of delivery. Clients are focused on their business operations, as they should be. So real estate is not a fast-moving asset for them. No one used to look at their five- or 10-year lease every quarter. Now they do. They're looking at an entire portfolio, whether they lease or own, and they're looking at it all quarterly.
GlobeSt.com: So does that mean that the law, despite all of the negative press, can actually help save money?
Tresslar: There should be an inherent savings if it helps you operate more efficiently. Those savings can range from 10% to 25%. It's not so much driven by the law, which is just asking any company to provide accurate, timely information to their investors. But Sarbanes-Oxley provides the impetus to look across your portfolio and at the value of those holdings. Just looking at a portfolio in that context helps the company rationalize why they're leased here, why they own this and the financial expectations from it.
GlobeSt.com: But certainly it's an indirect result of SOX.
Tresslar: It was certainly the impetus. But the Federal Accounting Standards Board also continues to make rulings and interpretations on many of these points. As a result of SOX and FASB clarifications on various industry points, such issues as leasing or environmental compliance are becoming more codified and more quantified. These demands are increasing the need for knowing your holdings on a timely basis across the portfolio.
GlobeSt.com: How different is the way you communicate that information now than it was four year ago?
Tresslar: As a company, we spend more time talking with them about real estate in the aggregate and the impact that one transaction may have on the overall portfolio. At one time a build-to-suit or lease requirement would have been fulfilled without much interaction. Now it involves a discussion of what's behind the requirement and the implications of leasing versus owning on the balance sheet. It's an opportunity to broaden the conversation.
GlobeSt.com: So SOX has provided the ability for service firms to forward their strategic planning services with their clients.
Tresslar: Yes. One thing Sarbanes-Oxley has done for everyone--clients and vendors--is that there are more people involved on both sides of the fence to make sure you are completely addressing what SOX intends you to do. It's not just getting the information. It's increasing the dialog.
GlobeSt.com: So is SOX worth the expense?
Tresslar: The overall cost burden is significant and it's hard to quantify what is just the cost to real estate. For small companies the costs have been a tremendous burden. For me, while the cost is a burden, it's a cost everyone has to bear. The challenge and the opportunity is that since you have to do this, find other value in it.
Copyright © 2006 ALM Properties, Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited.
Grubb's Linda Tresslar
By John Salustri
In the three years that have transpired since Sarbanes-Oxley became the law of the land, it has received its fair share of bad press, most of it revolving around the burdensome costs and, of course, the nail-biting reality of the CEO and CFO's names together on the bottom line. In fact, at one seminar presentation at this year's Mipim conference in Cannes, SOX was blamed directly--and it is generally agreed, falsely--for the recent ongoing push of REITs into privatization. But, less press worthy is the upside of the law, and yes there is some, both direct and indirect, such as a possible 30% increase in cost savings that await those who learn their reporting lessons. In a recent, exclusive interview Linda Tresslar, managing director and co-leader of national consulting for Grubb & Ellis, talks us through this out-of-the-box view of the three-year-old law.
GlobeSt.com: Have most people in the industry absorbed Sarbanes-Oxley into their daily routines?
Tresslar: Yes. The first two years of Sarbanes-Oxley was all about compliance and figuring out exactly what you were going to have to do, and there were hard dates you had to meet. Most people looked internally to make sure they had systems in place, and they started looking at vendor relationships to make sure their real estate-services vendor--or any kind of vendor--was providing information in a form and in enough detail and frequency that the company could comply. That took quite some time, especially within the real estate realm because many corporations don't track real estate in its entirety. Rather, they track it through business lines.
GlobeSt.com: That brings up two questions. The first is, do corporate real estate executives know what they own?
Tresslar: They certainly know about their active real estate. We're definitely seeing the realization that they need timely access to this information. It's not a luxury; it's a necessity. They're focused on price, but they are focused mainly on making sure the information they're getting from any vendor's systems is detailed enough and is delivered accurately and in a timely fashion.
GlobeSt.com: And that's question number two. To what extent were service firms blindsided by SOX in general and specifically, did you have to change your delivery system?
Tresslar: We certainly started by making sure we understood what our clients were being asked to provide and took a look at the systems we had in place. The nature of the information being provided hasn't changed. The thing that has changed the most for all of us in the industry has been the emphasis on the accuracy of the data and the speed of delivery. Clients are focused on their business operations, as they should be. So real estate is not a fast-moving asset for them. No one used to look at their five- or 10-year lease every quarter. Now they do. They're looking at an entire portfolio, whether they lease or own, and they're looking at it all quarterly.
GlobeSt.com: So does that mean that the law, despite all of the negative press, can actually help save money?
Tresslar: There should be an inherent savings if it helps you operate more efficiently. Those savings can range from 10% to 25%. It's not so much driven by the law, which is just asking any company to provide accurate, timely information to their investors. But Sarbanes-Oxley provides the impetus to look across your portfolio and at the value of those holdings. Just looking at a portfolio in that context helps the company rationalize why they're leased here, why they own this and the financial expectations from it.
GlobeSt.com: But certainly it's an indirect result of SOX.
Tresslar: It was certainly the impetus. But the Federal Accounting Standards Board also continues to make rulings and interpretations on many of these points. As a result of SOX and FASB clarifications on various industry points, such issues as leasing or environmental compliance are becoming more codified and more quantified. These demands are increasing the need for knowing your holdings on a timely basis across the portfolio.
GlobeSt.com: How different is the way you communicate that information now than it was four year ago?
Tresslar: As a company, we spend more time talking with them about real estate in the aggregate and the impact that one transaction may have on the overall portfolio. At one time a build-to-suit or lease requirement would have been fulfilled without much interaction. Now it involves a discussion of what's behind the requirement and the implications of leasing versus owning on the balance sheet. It's an opportunity to broaden the conversation.
GlobeSt.com: So SOX has provided the ability for service firms to forward their strategic planning services with their clients.
Tresslar: Yes. One thing Sarbanes-Oxley has done for everyone--clients and vendors--is that there are more people involved on both sides of the fence to make sure you are completely addressing what SOX intends you to do. It's not just getting the information. It's increasing the dialog.
GlobeSt.com: So is SOX worth the expense?
Tresslar: The overall cost burden is significant and it's hard to quantify what is just the cost to real estate. For small companies the costs have been a tremendous burden. For me, while the cost is a burden, it's a cost everyone has to bear. The challenge and the opportunity is that since you have to do this, find other value in it.
Copyright © 2006 ALM Properties, Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited.
posted by Jones Lang LaSalle NJ News Blog at 9:43 AM
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