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Managing the Corporate Real Estate Portfolio: Ignore Incentives at Your Own Peril

It is now a best practice for companies with multiple sites and operations to periodically undertake an ambitious, wide-angled review of all locations and facilities.  By uncovering opportunities to realign their overall footprint and consolidate or expand targeted operations, companies hope to achieve significant operating economies, create opportunities for capital gains from dispositions, and optimize the location of key operations. 

If this describes you then I may have bad news: you may be missing a terrific opportunity to realize even greater benefits by disregarding the influence that public sector incentives can have on the value of your company’s real estate portfolio and your location decisions.  The advantages of an incentives portfolio review can be substantial.  A portfolio approach can move your company beyond project-by-project incentives efforts toward more “wide angled” strategies that may arise from leveraging multiple initiatives and locations.  Doing so also may help you avoid missed incentives opportunities due to the time pressures associated with certain real estate decisions. The scale of such an effort also can result in lower overall costs required to pursue and secure incentives; one key advantage is the ability to cost effectively pursue small projects for which incentives might otherwise been infeasible.  A proactive approach also positions you to receive regular alerts regarding new or changing incentives programs in jurisdictions where your company has  a substantial presence or in place that you may be targeting for future projects.  And lastly, the portfolio approach can maximize the value and utility of incentives for new jobs in “receiving jurisdictions” while minimizing potential incentives liabilities in connection with facilities being closed in “exit jurisdictions” when these are bundled as a single initiative typically within the same state (or municipality).

Institutionalizing an incentives system into an already very busy real estate management enterprise entails a focused review of a company’s existing portfolio; the development of action plans around the highest yielding opportunities; and smart execution.  This process is outlined in some detail below.

Four Steps to Realizing the Benefits of the Portfolio Approach
1. TARGET: Analyze the portfolio for high-yielding incentives opportunities and/or potential risks

Such an effort typically begins with an asset-by-asset analysis designed to uncover areas of significant opportunity or concern.

  • Review for Issues Arising out of Current Locations: Examine all existing incentives arrangements; correlate those with all anticipated relocations, expansions or consolidations and any other capital spending plans.

  • Confirm Assumptions that Drive Incentive Valuation: Quantify the number of jobs, the total payroll(s) and investments that may be created, or eliminated as a result of any anticipated initiatives.

  • Reach Consensus on the Criteria used to Compare and Rank Opportunities or Risks: These may include (among others) the overall level of projected incentives benefits; the extent to which legal commitments might limit a company’s flexibility; the costs to apply and receive benefits; and relative ease of the entire process.

  • Rank the Opportunities: Identify which initiatives will allow the company to capitalize the most on the value to be created, or to mitigate any risks that my result from the elimination of jobs and investment.

2. SELECT: Prioritize your targets

The next step involves stratifying each target according to agreed-upon criteria, and proposing actionable options that will enhance the location decisions and transactions that follow. 

  • Review Incentives Statutes and Regulations in each Jurisdiction: Identify and quantify available incentives programs using assumptions developed earlier and any available deal “comps” for each market. Identify factors that may influence the value and usability of potential incentives, including performance obligations and covenants in incentives agreements, compliance and reporting considerations.  Compare and rank the scenarios based on the agreed upon criteria.

  • Make Recommendations Regarding the Most Appropriate Targets: Highlight targets that generate the greatest potential value with manageable jobs, payroll and investment commitments and reasonable application costs, while also enabling flexibility should business conditions change dramatically.

  • Reach Consensus on Targets: Separate those meriting immediate attention from those of lesser priority

3. MANAGE: Create multi-tiered incentives tools to aid implementation efforts

Once target opportunities have been identified, processes must be put in place to ensure that incentives efforts are aligned with real estate transactions, staffing plans, etc. and that a clear set of protocols will govern all communications with internal and external stakeholders.

  • Prepare Project Plans: Flag any key dates that might define the critical path of the incentives process for each targeted opportunity.  Coordinate this schedule with any real estate and other milestones (for example, staffing plans or technology migration).
  • Develop Communications Plans: Coordinate all planned announcements with internal teammates (e.g., facilities planners, brokers, human resources officials) and external stakeholders.  A company’s government affairs team becomes an important resource at this stage.
  • Create Incentives Screens: Ensure that any other relevant incentives are identified and captured; scan for potential incentives opportunities that may become material to any future initiatives.
4. IMPLEMENT: Align and execute incentives, real estate and staffing, etc. tasks

For each chosen incentive effort the following tasks should be synchronized with related occupancy and talent acquisition/retention work streams.

  • Negotiate Incentives Benefits and Obligations: While interacting with public officials focus on the value of the incentives package as well as the governing contractual provisions.  Also be sure to coordinate with legal counsel and government relations team to ensure that attention is given to any legal, financial and political considerations. 
  • Prepare and Submit Application(s): Focus with particular care on important tactical decisions that must be made regarding the level of capital investment and employment and the various representations and certifications necessary to qualify for any benefits.  Conduct any necessary follow-on meetings with state and/or local officials.
  • Secure Approvals: The negotiated incentives will entail legal agreements with one or more public entities documenting the Company’s entitlements to the incentives and the associated obligations. 
  • Put Compliance Systems in Place: Each agreement will involve on-going substantive and reporting requirements to obtain and maintain benefits.  These compliance reports will continue over the lifespan of an agreement, which can often be as long as fifteen years.

The principles embedded in this systematic approach to incentives portfolio analysis are quite well-established and applicable to almost any process designed to optimize outcomes. If your company has a large and diverse footprint then chances are you have software that tracks owned and leased properties and analyzes the performance of each site by geography, business line, etc.  Your incentives advisor can help make these data actionable and ensure that you are focused on only the most impactful opportunities and are ultimately able to capture and preserve the promised benefits. 

AndrewShapiro is a Managing Director at Biggins Lacy Shapiro & Co., one of the largest, most highly regarded site selection and incentives advisory firms in North America. BLS & Co. helps manage the complexities associated with finding optimal location and securing incentives to support new ventures.

Follow Andrew here on LinkedIn or contact him directly at

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