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May 20, 2016

A&M's Real Estate Advisory Services (REAS) group was engaged to support Commercial Bank’s enterprise-wide cost reduction initiative by investigating real estate service provider contracts.

Client Mandate
Commercial Bank is a publicly held company that provides retail and commercial banking, trust, securities brokerage, mortgage and insurance products and services in several regions of the United States. Commercial Bank’s total portfolio encompasses over 16 million square feet of office and retail banking space, with a total annual spend of over $400.0 million. Commercial Bank outsources the majority of the management of its real estate to a large RE Service Provider under a Master Service Agreement. Commercial Bank undertook an initiative to save $10MM in FY 2011 across multiple spend categories, and the RE Service Provider’s related costs were reviewed as part of this overall initiative. A&M also reviewed Commercial Bank’s 5-year space reduction plan and identified internal champions for this program.  It is important to note that this project was not based on a specific issue, but included a forensic approach to conducting an analysis.

A&M’s Approach
A&M reviewed the RE Service Provider’s Master Service Agreement and compared it to industry benchmarks to identify opportunities for Commercial Bank in upcoming negotiations with the provider. A&M also reviewed the provider’s staffing at all levels compared to historical internal and external benchmarks. Finally, A&M performed an analysis of all pass-through contracts and spend, as well as a review of spend management.

As a result of A&M’s work for Commercial Bank, approximately $3M in qualified savings opportunities were identified separate of any savings through other “Branch Optimization” measures. Our work product:

  • Identified individual opportunities for cost savings, risk mitigation, and process improvements;
  • Presented a detailed spend analysis from 2008 - 2010 in support of cost savings opportunities;
  • Provided a comprehensive summary of the RE Service Provider’s Master Service Agreement and presented opportunities for Commercial Bank to reduce costs;
  • Analyzed “Key Performance Indicators” in the Master Service Agreement and advised how these could be modified to benefit Commercial Bank; and
  • Offered analysis of proposed “Branch Optimization” strategy and in-place cost reduction efforts.