Real estate management pain points an IT issue

By Shamus McGillicuddy, News Writer 26 Apr 2007 | SearchCIO.com

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As the CIO of Family Dollar Stores Inc., it's a failing Joshua Jewett knows all too well. The Matthews, N.C.-based discount retail chain has more than 6,300 stores -- opening 300 to 500 stores each year. Each store is leased, and the lease agreements run between 40 and 50 pages long.

It comes down to managing future growth. Joshua Jewett CIO, Family Dollar Stores Inc.

For Jewett, to say managing the information buried within all that paper is a daunting challenge is a gross understatement.

Jewett acknowledges there's a lot of process related to the management of real estate and a big opportunity for process improvement through the effective use of technology.

"In any given year, 20% of the stores, or more than 1,000 stores, might come up for lease renewal," he said. "There is quite a lot of paperwork to deal with on a monthly basis. Historically, all our leases have been on paper. That's pretty common in retail."

Josh Greenbaum, a market research analyst at Enterprise Applications Consulting in Berkeley, Calif., said the vast majority of companies with complex real estate portfolios have no enterprise applications in place to manage them.

"Nobody understands [leases]," Greenbaum said. "Vendors have never been able to find a way to automate the lease so that it can be used as a center for business process automation. When you bring the lease into an enterprise software environment, you have an amazing amount of firepower as a customer."

"They manage [real estate] with great difficulty," Greenbaum said. "The way it's done in the absence of enterprise software is lots of people are paid to pour over things like spreadsheets. They have lots of ad hoc processes in place. To a large extent, there's really a dearth of automated processes in lease management and facilities management. Efficiency gains are enormous and well worth the effort."

Greenbaum said there are several advantages to streamlining how a company manages its real estate portfolio.

A company may have multiple leases with property owners. Each lease has its own expiration date. Renewing those leases in a timely manner is essential, but difficult to do without automation. Missed renewals can lead to financial penalties or a lost lease.

Greenbaum said the technology is also valuable because it helps companies move quickly with real estate projects.

"These companies want to be able to find a site, get a lease and open a store in record time. That gives them tremendous advantage in terms of just their revenue capability," he said.

Jewett spoke to many of the leading enterprise application vendors on the market, but none had a technology that met his company's needs.

"There's not been a plethora of software offerings addressing this area so we have only been looking seriously at automating this part of the business recently."

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Eventually, Jewett did find software -- from Santa Monica, Calif.-based Accruent Inc. Accruent will take all the relevant data from Family Dollar's thousands of leases and input the information into its software. Then the processes involved in managing a lease, such as making rent payments and renewing lease agreements early enough to avoid deadline penalties, can be automated.

Accruent also offers market planning, site selection, project management and facilities management applications.

"The challenges of growth shouldn't be minimized," Jewett said. "Year over year, we have to find sites, manage the construction and development projects and effectively service hundreds of stores. There have been technologies that manage the lifecycle of inventory and the lifecycle of employees for years, but not the real estate lifecycle. This system gives us an opportunity to continue to grow and to do that efficiently."

Although Family Dollar had no enterprise application in place for real estate management until recently, Jewett said his company had a "pretty lean organization" to begin with. He said he doesn't expect a dramatic change in productivity as his company implements Accruent's technology.

"It comes down to managing future growth," Jewett said. "We've got so many current and new properties to manage that the challenge gets greater and greater and greater. Applying this technology allows us to be more efficient and to handle this ever-increasing volume."

Let us know what you think about the story; email: Shamus McGillicuddy, News Writer

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