Governor McDonnell: “We must provide better services to the people of Virginia at a cheaper cost.” April 15, 2010

1. CB RICHARD ELLIS Presented to: The Commonwealth of Virginia Governor’s Commission on Government Reform & Restructuring - Simplification & Operations Committee Monday, July 12, 2010 Governor McDonnell: “We must provide better services to the people of Virginia at a cheaper cost.” April 15, 2010

2. Our delivery model is based on providing integrated, efficient solutions and global client satisfaction • Property and Facilities Management2.2 B sq. ft., $20B in controlled spend,7,000+ FM professionals worldwide • Project Management 2,900+ professionals, 30,000 projects annually • Transaction Management 2+ B sq. ft. managed, 7,000+ brokers worldwide in over 400 markets • Portfolio Administration250 professionals in US, 75,000+ leases maintained • Valuation and Advisory109,125 assignments CBRE is a Fortune 500 Global Commercial Real Estate Company • CBRE’S Presence in VA • 361 Employees; 6 Offices

3. Public Institutions and Education GroupHow we serve our clients • Strategic Planning/Business Case Development (focus on cost savings, revenue generation, asset reuse, etc.) • Portfolio Management • Portfolios (full range of services for leased and owned portfolios) • Government centers and facilities) • Public private partnerships • Joint ventures, ground leases, alternative financing structures • Facilities Management • Sustainability / “GreenGov” / Energy Savings • Strategic Sourcing to Maximize Leverage in Purchasing • Other CBRE Resources and Services, including: • Land Reuse, Economic Development Consulting, Development (Trammel Crow), Project Management, Lease Administration, Sale-Leasebacks, etc.

4. Partial Client List CBRE has met the needs of over 125 government and public sector clients. Federal Bureau of Investigation Federal Emergency Management Agency General Services Administration Los Angeles Unified School District Miami - Dade County Police Department United States Army Corps of Engineers United States Air Force Social Security Administration State of Arizona State of California State of Texas United States Courts United States Postal Service American Postal Workers Union Commonwealth of Pennsylvania Department of Homeland Security Environmental Protection Agency Federal Aviation Administration American Red Cross Atlanta Public Schools City of Los Angeles City of Phoenix Commonwealth of Virginia Department of Education Department of State Embassy of France

5. Top Public Sector Trends

6. Commonwealth of Virginia History with CBRE

7. Commonwealth of Virginia Real Estate Holdings • Over 360,000 acres of land in over 1,000 locations • 13,000 owned buildings and 117 million sf of space • 1,500 leases for 14.5 million sf with $140 million of annual rent • 7 million sf of leased office space • Annual transaction volume of 300-400 (leases, easements, purchases, sales)

8. Commonwealth of Virginia Statewide portfolio strategy in 2003 to improve operations Challenge: CB Richard Ellis retained to provide consulting services for an operational review and recommendations for improvements to the Commonwealth of Virginia for managing its diverse portfolio of real property assets statewide. • Solution: • CBRE developed an initial plan designed to demonstrate opportunities for cost savings and improved operations that included: • Assessment of the adequacy of the current database • Identification of best practices related to portfolio management • Review of the leased/owned portfolio statewide, to identify transactions, consolidations, collocations, etc. that would reduce costs • Review of agency mission and needs • Financial analysis that identified the potential for cost savings in the portfolio. • CBRE subsequently retained to perform portfolio management services

9. Commonwealth of Virginia Background • DRES was formed in 2005 to meet the challenge of establishing and operating a unified real estate portfolio management program, with the following enterprise-wide goals: • Increase co-location and bargaining power • Decrease total and per-person space allocations • Reduce total costs • Maintain agency security and operational needs

10. Commonwealth of Virginia 2003-2010 Timeline YearSFTransactions 2003 N/A N/A 2004 168,405 7 2005 630,692 47 2006 746,540 76 2007 535,415 64 2008 785,571 37 2009 556,330 61 2010 503,083 30 2003 CBRE awarded strategic planning contract 2004 CBRE awarded contract for portfolio and transaction management 2008 Contract rebid and awarded to CBRE 2009 Contract renewed with 1 year extension

11. Commonwealth of Virginia Case Study: Forest Office Park Challenge: Four Commonwealth of Virginia agencies occupied space in Forest Office Park in different buildings owned by the same entity. Each had a separate lease with varying rental rates, lease expirations, tenant improvement packages, etc. • Solution: • CBRE bundled the individual leases into a total 100,000 SF requirement, negotiating a lease that dramatically reduced the individual agency’s cost and provided the agencies with tenant improvement allowances • Provisions included predetermined favorable expansion opportunities to accommodate other state agencies, but also allows for contraction rights in future years • Two additional agencies have relocated to Forest Office Park as a result of favorable economics and two existing divisions have expanded • Overall savings of $1,154,500

12. Commonwealth of Virginia Case Study: Perimeter Center Co-location Challenge: Three agencies located in a building that had poor building systems. Governor’s Office directed DRES to vacate building. The DHP was approached by their landlord about a possible buyout to clear way for new Fortune 500 firm. Agencies each had important requirements including high parking ratios and large hearing and conference facilities. • Solution: • CBRE developed competitive RFP process, conducted in-depth investigations of several alternative buildings, and negotiated over $1 million buyout for DHP to fund their relocation • Ten Year, Eight Month Lease – first 7.5 months rent abated and $300,000 rent abatement in the 60th and 61st lease months for 154,222 SF • Negotiated a $3,650,000 total tenant improvement allowance including refurbishment allowance in year 5 • Overall savings of $8,197,500

13. Commonwealth of Virginia CBRE’s Value Add from 2003-2010 • CBRE completed 322 transactions resulting in: • Overall Cost Savings: $31,840,900 • Overall Cost Avoidance: $23,612,500 • $55,453,400 • Cost Savings: Occupancy cost of existing space reduced • Cost Avoidance: Occupancy cost increase avoided • Savings/Avoidance as % • of Total Lease Contract Value: 20.9% • Total Lease Contract Value: $265,842,900

14. Commonwealth’s Next Real Estate Opportunity: Facilities and Energy Management

15. SAMPLE CLIENTS • FM SCOPE • Building Management • Operations & Maintenance • Energy Management • Health, Safety, Security & Environmental (HSSE) • Critical Environments/Facilities • Supply Chain/Procurement • Office Services • FM APPROACH • Economies of scale – global leverage and procurement • Cost-savings management solutions • Enable client to focus on core business • Global coverage, consistency, and integration • Risk mitigation and continuity planning • Continual process improvements Facilities Management

16. SAMPLE CLIENTS • ENERGY SCOPE • Supply and demand side energy management • Energy and water efficiency • Resource conservation • Indoor environment quality • Site and building ecology • Training and communications programs • ENERGY APPROACH • Largest global energy management: 420 MSF Total Energy Space Managed, including 16,450 Locations Managed • $2.5 B in annual cost of energy managed (including $1.5M electrical) drives economies of scale: • Supply Side Purchasing: 3-8 % utilities cost savings • Operations & Maintenance Initiatives: 5-25 % utilities cost savings • Bill Management & Auditing: 2-5 % utilities cost savings • Energy & Retrofits: 10-40 % utilities cost savings • 70 Energy Professionals and 33 Green Knights • Energy Star Training Program (4,000 staff trained) • Over 160 MSF of Energy Star labeled buildings managed Energy Management

17. Facilities Management Clients • 15 million SF • 2,000 sites • US only • FM, PjM, TM, LA, SP • 50,000 sites • 60 countries • FM • 20 million SF • 92 sites • FM • 36.4 million SF • 697 sites • FM, TM, SP • 55 million SF • EMEA, APAC, LA • FM, PjM, TM, SP • 11 largest owned assets in EMEA • 9 countries • FM • 6.6 million SF • 132 sites • FM, PjM • 6.5 million SF • 160 sites globally • FM, PjM, TM, LA, SP • 40 million SF • 50,000 acres • FM, PjM, TM, LA, SP • 10 million SF • US only • FM • 7 million SF • 210 sites • 31 countries • TM,SP,PjM Legend: TM: Transaction Management FM: Facility Management PJM: Project Management SP: Strategic Planning LA: Lease Administration

18. Facilities Operations and Maintenance Metrics

19. 12-18% Savings Operating Expense Savings Initiatives Savings Levers to Achieve Run Rate Reduction • Utilities • Supply side: bundle portfolio, secure energy partner • Demand side: purchasing leverage, consumption reduction • Service Contracts • Rebid contracts • Consolidate vendors • Bulk purchasing of goods & services • Repairs & Maintenance • Implement work order system & other technology solutions • Perform scheduled preventive maintenance & utilize best practices • Payroll • Payroll review • Leveraging employees for other CBRE assignments • Employee strategy determined by client • ***Many state real estate departments have already implemented operating expense reduction initiatives. But there still may be plenty of savings opportunities to capture Operating Expenses

20. CBRE offers effective Energy Management & Sustainability Solutions • CBRE has benchmarked and surveyed more Energy Star & LEED certified properties than any real estate provider • CBRE maintains a centralized, client focused Energy Resource Center • Benefits of ERC Incorporation • Supply side purchasing: 3–8% utilities cost savings • Operations & maintenance initiatives: 5–15% utility cost savings • Bill management and auditing: 2–5% utility cost savings • Energy & water retrofits: 10–40% utility cost savings • Sustainability: GHG, resource efficiency, recycling.

21. In 2009, CBRE was selected to manage 40m SF for the Ontario Realty Corporation Select Account Initiatives • CBRE was selected via a competitive bid process to provide integrated real estate services  • CBRE to manage ORC's O&M spend of $309M annually as well as $145M in annual capital expenditure • CBRE’s Insight technology platform to integrate CMMS, Asset Management, Portfolio Optimization, Space Management, Project and Portfolio Management technology solutions • CBRE value proposition: Accountability, Risk Mitigation and providing a Strategic Focus • Key drivers for ORC included delivering value for money in all services, leveraging 3rd party resources, and developing a Sustainability and Energy Management program • Managed space includes Courthouses, Detention Centers, Critical Facilities, Laboratory, Hospitals, Office, Residential and Retail QUICK FACTS Contract Length: 10 years Size: 40 MSF in approximately 2,000 buildings and 50,000 acres across Ontario. Geography: Canada Services: Facilities and Land Management, Asset Management, Project Management, Portfolio Administration and Transaction Management Services

22. Other Selected Public Sector Case Studies

23. How can the Commonwealth evaluate opportunities for cost savings in its owned portfolio? • Real estate & facilities diagnostic • Establish objectives • Collect data (facilities spend, capital program, facilities department organization, select management interviews) • Site visits & peer interviews • Develop solutions • Test solutions against goals and objectives • Draft business case with costs, timing, risks, etc.

24. Recommendations to Commission • Engage private sector to assist in facilities management • Establish FM performance metrics (costs, employees, response times) • Space optimization and consolidation of owned portfolio space • Alternative workplace solutions - flexible shifts/work from home • Economies of scale in procurement and service contracts • Utilize technology • Energy management audits • Implement no cost/low cost initiatives • Sustainability initiatives • Implement best practices • Continue driving savings in leased portfolio • Identify sale/leaseback opportunities • Monetization of surplus property through disposition • Blend/extend and other lease renegotiation opportunities • Consolidate as appropriate back office functions across departments • Identify and eliminate redundant back office functions (e.g. call centers, accounting hubs, etc.) and excess space devoted to those activities. • Review portfolio space devoted to storing excess furniture, office supplies, computers, phone systems and other workplace supplies for efficiencies