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Corporate Real Estate Service Delivery Model
at Prudential Financial
CoreNet Global Chicago Discovery ForumMay 1, 2011
Kathy Winkler - Vice President, CRE
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Agenda Overview
Prudential Financial Company Background
History of CRE service delivery models
Current model
CRE service delivery model change agents/drivers
Mission and objective for the future
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Company Background
Prudential is a 135 year old firm providing services to help people grow and protect their wealth
Financial services leader with $784 billion in assets under management
Operations in United States, Asia, Europe and Latin America servicing individual and institutional clients
Products and services include International Insurance and Investments, Retirement Solutions, Investment Management , Individual Life and Group Insurance.
45,000 employees worldwide
As of 12/31/11
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Company Background
The Prudential Insurance company of America traces its roots to the Prudential Friendly Society, founded by John Dryden in Newark, NJ in 1875.
Prudential Financial became a publicly traded company in December 13, 2001
Mission
Help Grow and Protect Your Wealth
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Prudential Domestic BusinessesRetirement Solutions - Investment Division Investment Management
Equity Fixed Income Prudential Capital Group Real Estate Investors Mortgage Capital Group
Prudential Investments Mutual Funds Wealth Management Services Strategic Investment Research Group
Prudential Retirement
Annuities
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Prudential Businesses
Insurance Divisions Individual Life Insurance and Agency Distribution
Group Insurance
Prudential Real Estate and Relocation Services Residential Real Estate Brokerage Franchise
Corporate Relocation services
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Corporate and Other Operations
Corporate Functions Global Marketing and Communications
Human Resources
Law, Compliance and Business Ethics
Global Business and Technology Services
Financial Management
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Enterprise Services and Financial Solutions
Financial Information Systems Financial Planning and Reporting Financial Planning
Corporate Procurement
Corporate Facilities
CRE Strategy and Transactions
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Prudential - mid to late 1980’s 1985 - New CEO
Prudential is a Mutual Insurance Company with a domestic focus
Regional offices (Owned with single tenant design)Regional offices (Owned with single tenant design)Los AngelesHoustonMinneapolisChicagoJacksonvilleBoston Northern New Jersey Toronto
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Prudential - mid to late 1980’s
35 million SF
75% owned and 25% leased
125,000 Prudential employees
22 owned buildings
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Prudential - mid to late 1980’s Life Insurance
Property and Casualty Insurance
Healthcare (Individual and Group Medical and Dental) Prudential Home Mortgage
Credit Card Services
Banking Commercial Real Estate Investments
Residential Real Estate
Prudential Capital Asset Management Mutual Funds Management
International Insurance
Prudential Securities
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Prudential - mid to late 1980’s
Corporate Services and Buildings DepartmentFull service in-house resources
Architects
EngineersEngineersEngineersInterior Designers
Project Managers
CADD Operators
Interior DesignersInterior DesignersSpace Planners
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Prudential - mid to late 1980’s
Corporate Services and Buildings
Service Delivery Model Managed a large owned portfolio of space
Design and construction services provided by in-house staff (100+ full time employees)
Corporate overhead
No space/furniture standards
No charge-backs to the business units
Lease transactions decentralized and performed within the business units
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Prudential - early to mid 1990’s
Early 1990’s economic conditions decline
CEO takes another step toward decentralization
Cost constrains and new pressure to reduce expenses Business units accountable for their bottom line Business unit autonomy to make decisions about
service providers In-house service providers must recover their costs
and prove their value
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Prudential - early to mid 1990’sFacility Management Consulting ServicesIn-house Architectural Firm
Project ManagersYour Office Facility Says A Lot Abou Your Business…..
Architects
EngineersInterior DesignersSpace PlannersCADD OperatorsStrategic Facilities Planning Property ManagementSite Selection/Lease TransactionsSite Selection/Lease TransactionsSite Selection/Lease TransactionsLease Administration
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Prudential - early to mid 1990’sFacilities Management Consulting Services
Service Delivery Model Structured like a design firm- fee for service (75+ full time
employees)
Marketing in-house services
Competing with outside service providers
Measured on customer satisfaction results and recovery of our expenses (goal to break even)
Occupancy charge-back methodology in owned buildings
Lease transactions still decentralized and performed within the business units
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Prudential - early to mid 1990’s
Migration to less expensive rent
locations beginsOwned building
vacancy increases
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Prudential - mid to late 1990’s
1996 - New CEO and new leadership team
Centralized Corporate Services
Standard and Controls
Outsourcing initiatives
Formation of Corporate Real Estate
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Prudential - mid to late 1990’s
25 million SF
65% owned and 35% leased
83,000 full time employees
$540 million annual occupancy budget
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Prudential - mid to late 1990’s
Objective Dramatically reduce the cost of real estate for the enterprise
by improving space utilization, space and furniture standards, new policies and controls
Deliver $80 million in annual real estate cost savings by the year 2000
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Prudential - mid to late 1990’s
Corporate Real Estate
Service Delivery Model Focused on managing the real estate portfolio
Centralized group of core real estate functions with 50+ full time employees
Centralized all lease transaction activity
Space utilization metrics reporting
Measured on real estate utilization improvements
Development of furniture and space standards
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Prudential - mid to late 1990’s
Vice President,CRE
Vice President Strategic Planning
Admin Assistant
DirectorStrategicInitiatives
Vice President Properties
Vice PresidentDesign &
Construction
Vice PresidentFacilities Services
DirectorAsset
Strategies
DirectorBusiness
CaseManagement
DirectorSpace
Utilization
DirectorProject
Development
DirectorDesign
Services
DirectorFine Arts
DirectorProperty &
Lease Admin.
DirectorFF&E
Purchasing
DirectorReal Estate
Services
DirectorBuilding
Operations
DirectorFacilities
Enfineering
DirectorLocal Projects
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Prudential - early to mid 2000
Standards and policies are in place
Space utilization data collected
CRE has streamlined its operation
Objective
Develop an integrator role between Prudential and its business units
Establish a CRE client partner and business unit partner position
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Prudential – early to mid 2000Business Unit Partner
Act as a single point of contact to CRE for all real estate activities
Reports directly to the CFO of the business
Opportunity to learn the business from within the organization
Bridge the gap between the business unit and corporate adversarial relationships
Aware of business strategies in advance provides an opportunity to develop supporting real estate plans and implement upon announcements
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Prudential – early to mid 2000
Insurance Division Business Partner
3.7 million SF
13,500 full time employees
$72 million annual occupancy budget
30% vacancy factor
Supporting 9 profit centers
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Prudential – early to mid 2000
Insurance Division Business Partner
2000-2004Headcount reduced by 33%
Vacancy factor increased to 46%
Reduced space by 1.8 million SF - 51%
Reduced annual occupancy budget by $32 million – 44%
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Prudential - early to mid 2000 2001 Prudential become a public company
2002 New senior management in CRE
2004 Insurance real estate objectives met and I return to CRE
Objective Client Partner to Insurance Division (activities include
mergers& acquisitions, sales of businesses, new customer service center strategies, etc.)
Develop a Corporate Real Estate strategy for disposition of space in the Vacant Space Management Program (goal $40 million savings)
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Prudential – Mid to Late 2000Corporate Operations & Systems
Service Delivery Model Deliverables
Effective Partnering with Businesses
• Clear Service Delivery Model• Open communication that delivers the right messages to the right individuals• Timely response to
feedback
Transparent Cost and Recovery Model
• Published cost schedule• Businesses understand what we offer and buy the services they want
A Creative Environment
• Proactive focus on continuous improvement• Competitive solutions that support business initiatives• Provide quality technical expertise
Secure and Reliable Services
• Meet agreed upon service levels• Service availability matched
to business needs• Secure environment
MissionEnable Prudential to meet customer needs by leveraging
quality technology, risk management, and support services
Prudential’s Businesses/Corporate
Centers Expect
Enhanced Business Capabilities
• Agility and Flexibility• Support global expansion• Optimize resources• Support 3rd party business
Well Controlled and Ethical Solutions
• Protect Prudential’s interest and reputation• Safeguard assets/people• Appropriately mitigate operating risk and comply with regulatory requirements
Expertise and Processing
• Efficient services atpredictable costs• Effective tools that enable business activity• Relevant reporting thatfacilitates analysis and decision making
Relationship Management
Production
Governance
ResourcesOnshore/Offshore
Outsourcers VendorsEmployees
ResourcesOnshore/Offshore
Outsourcers VendorsEmployees
Finance & Metrics
Communication & Training
Framework/Policies/Guidelines
Components of Delivery
VisionBe a strategic partner who delivers highly valued shared
services
StrategiesWe provide subject matter expertise and cost-effective tools and processes to enable Prudential’s global growth and to achieve agreed upon service levels
We foster a diverse community of highly skilled, motivated operations and systems professionals who execute in a well controlled and ethical environment
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Prudential – Mid to Late 2000
Shared Services Global security
Print/Mail Accounts payable
Business continuation
Records management Procurement and vendor management
Food services
Executive transportation Corporate Facilities
CRE Strategy and Transactions
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Prudential - Mid to Late 2000
CRE Strategy and TransactionsClient Partner model
Strategic Planning
Occupancy analysis and alternatives, including Space Planning, Budgeting and Financial Analysis
Real Estate Transactions (Non-Investment)
Assess Markets, New locations, Lease Renewals, Space Dispositions, National Brokerage Representation, Temporary or Short Term (Less than one year) Space Needs
Space & Furniture Guidelines
Recommend workspace sizes, Furniture Selection Guide
Art Program
Management and Installation of Prudential’s Art Collection
International – Consulting Services
Occupancy Needs / Financial Analysis / Transaction Review / International Contacts / Portfolio Consulting
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Prudential - Today
Manage 9 million SF Domestically(2 million SF -leased/subleased to 3rd party tenants)
$210 million annual occupancy budget
300 locations
20,000 full time employees
140 lease transactions per year
9 CRE full time employees
ESFS - CRE Strategy and Transactions
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Prudential - Today
Vice President, CRE
Enterprise Strategy & TransactionsInternational Consulting
Broker Alliance ManagementDepartment Metrics & Reporting
Vice President, CRE
Office Management
Investment & International Divisions Strategy & Transactions
CRE Policies & ProceduresFurniture Program Management
Vice President, CRE
Insurance Division Strategy & Transactions
Home Office Space PlanningCADD/CAFM
Vice President, CRE
Process Management
Manager, CREDirector, CREDirector, CRE Director, CRE
CRE Strategy and Transactions
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Organizational Challenges Centralize or decentralize
Organize in multi-functional teams or by discipline
In-house or outsource
Define value proposition to business units
Consulting vs. mandate role
Provide priority to business units vs. enterprise
Prudential - Today
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Prudential – Future Since Prudential went public in 2001 our earnings per
share have grown at a compound annual rate of 30% until 2008.
In the economic downturn, our stock dropped from $100/share to $11/Share and is currently at $63/Share
On an after-tax adjusted operating income basis, our Financial Services Businesses earned $3.0 billion in 2010 or $6.27 per share of Common Stock
2008 - New CEO
Key Objective
Talent Management and Retention
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Prudential – Future
ESFS New Business ModelExpensesReview our cost structure and targeted efficienciesValue propositionUnderstanding customer needs, what services we offer that meet those needs and what is the value of those servicesMarket SegmentGroup of customers we want to target, including new customersMarket PositionIdentify competitors and potential strategic partnersCompetitive StrategyDevelop and sustain competitive advantage by means of cost differentiation, expertise and risk mitigation
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Change Agents
CRE service delivery model change agents/drivers
Senior management changes
Changes in economic market conditions
Real estate portfolio profile
Changing labor market
Domestic or International focus
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Prudential – FutureESFS Future Objectives ESFS Future Objectives Understand company directionPartner with business unitsPartner with service providers
Continuously review the service delivery model
CUSTOMER SATISFACTION
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