The Corporate Real Estate Fairy Tales Series: Trash or Treasure? Why managing your corporate real es

Why is your real estate really a strategic asset that needs attention through its entire life cycle –from acquisition to disposition? The definition of strategic includes something that is carefully designed or planned to serve a particular purpose or advantage. You view your products as strategic because they are carefully designed to satisfy a need your customers have. Your human resources are strategic because they have the skills that make your products for your customers. So why not your real estate? Why not integrate your real estate into all of your strategic planning?

Let me illustrate with a story from my Corporate Real Estate Fairy Tales Series (based on a true story). A few years ago in a small Southern town with its Main Street and its tidy and imposing stone courthouse, sat our main character, Millie (pardon the cheeseiness) a sad old obsolete manufacturing mill; just another victim of the global marketplace monster that snuck up on her and sucked her lifeblood out, whisking her manufacturing to another lower cost market.

A faded For Sale sign sat outside the old mill waiting for someone to drive by and decide this was the perfect piece of real estate for them. Really? What were the chances of that happening?

On the other hand, what if a real estate sale was not a real estate sale at all? You might ask, how could Millie be anything but a real estate sale? Here is where our main character and her fortunes are about to change.

Just another piece of real estate, right? Not really, because the company that owned the asset recognized that it had strategic value as a product for a new owner. Could a century old structure really have relevance in a modern market?

Let me start at the beginning of the story. In a small rural North Carolina town in 1896 our heroine Millie was born as a bright shiny two-story mill clad in red brick and lighted by her large wood framed windows. The town that was her home became a textile center because of the railroads that extended through its heart. Millie felt proud when the RR whistle sounded and delivered cotton bales to her front door. She was filled with the deafening click and clack of the cotton spinning equipment. Millie was happy, because her workers, the people that lived in this town, produced products customers wanted and would pay their hard earned money for.

For many years Millie, her workers and the town prospered. Cotton bales came in on rail cars and left the mill packaged as undergarments for Americans. Of course, as is the case, every story has some sadness in it and when Millie was sold to a large textile corporation she was a little uneasy as to how they would treat her. Her new owners encountered the globalization monster that I alluded to before, bringing with it the flight of jobs to cheaper operating locales throughout the world. In the 90’s her corporate owner faced a financial crisis.

The company and Millie’s very existence as a mainstay in consumers’ lives was threatened by the high manufacturing costs in the United States. The company decided for it to remain competitive it would move all of its manufacturing off-shore, thereby shutting all of its mills in the United States.

By now Millie was old, her bright red brick faded and the paint peeling from her wood framed windows. Her weathered exterior sheltered a wood framed structure that was two stories; an inefficient layout in the world of modern manufacturing. Millie watched as other mills in her town were shuttered and her sadness and fear grew. Millie’s workers and her machines were not as loud and happy anymore. Millie worried that her time may be near. She worried her doors would shut and they would just slap a For Sale sign on her and hope that someone could figure out how to use her. Of course she really feared that she would be torn down and her place in this town’s history, her home would be gone forever.

The company that owned Millie also recognized the economic upheaval this would cause to its workers and the towns those mills were located in. To their credit and rather than become another poster child for off-shoring, the company brought in an expert, a white knight of sorts, with the expertise to find the strategic value in their soon to be shuttered real estate.

This is where the story takes a dramatic turn for the better as fairy tales are wont to do; what was a sale of a vacant old building became something totally different. The expert the company had hired started by asking questions; what if a spinning mill that made underwear became a mill for making other spun cotton products? What value did the idled and abandoned equipment add to the tired old mill? Did all those generations of workers have skills that added additional value to the structure and the equipment? What if you could partner with the town, the county and the state to put economic incentives in place to further drive up the value of the mill?

The answers to the questions transformed a real estate sale into an opportunity. Millie knew that her equipment could not only spin cotton into underwear but it could spin cotton into other products too. The cherished workers she had sheltered for all those generations had years of specific manual dexterity skills well suited to the spinning industry.

Armed with new ways to make Millie attractive the white knight knew his job was to become a cheerleader for the tired old Millie and gave her hope. He “spun” a new story around Millie. Millie may have been faded but he brought a shiny new package to drape over her shoulders. He brought the story to the governmental agencies tasked with economic development and got them so excited about Millie and her assets that they provided economic incentives to attract a new user. Millie felt she wasn’t done yet and she could have a new life if only the right buyer could be located. That is exactly what the white knight sought; he needed a targeted new user that could recognize all the capital and time that would be saved by stepping into a ready to go spinning mill.

The white knight, not wanting to waste time, identified 5 players that would find Millie with her assets interesting. An industrial gauze company up north took the bait. The old mill provided the industrial gauze manufacturer advantages he sought. Low start-up costs coupled with a trained workforce and governmental incentives were just what he needed to expand his business.

The white knight had saved Millie and had given hope to the town and to Millie’s workers. Millie’s owners also were able to hold their heads high since they could point to the positive end result of not looking at just the real estate angle of the story.

So as most fairy tales have a happy ending, so does this one. Millie had potential strategic value to more than her original owner and it took the white knight’s expertise to package that strategic value in a way that the new owner could understand and buy her.

If you take nothing else from this story remember that people do not buy real estate for the sake of buying real estate, they buy an idea. The moral of this fairy tale is that if you view your corporate real estate as having strategic value throughout its life cycle, you will not only add value to your operations while you use it but to your bottom line when you are done.