SAP Solution in Detail

SAP REAL ESTATE MANAGEMENT IN mySAP ERP

 Copyright 2004 SAP AG. All rights reserved.

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice. Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. Microsoft, Windows, Outlook, and PowerPoint are registered trademarks of Microsoft Corporation. IBM, DB2, DB2 Universal Database, OS/2, Parallel Sysplex, MVS/ESA, AIX, S/390, AS/400, OS/390, OS/400, iSeries, pSeries, xSeries, zSeries, z/OS, AFP, Intelligent Miner, WebSphere, Netfinity, Tivoli, and Informix are trademarks or registered trademarks of IBM Corporation in the United States and/or other countries. Oracle is a registered trademark of Oracle Corporation. UNIX, X/Open, OSF/1, and Motif are registered trademarks of the Open Group. Citrix, ICA, Program Neighborhood, MetaFrame, WinFrame, VideoFrame, and MultiWin are trademarks or registered trademarks of Citrix Systems, Inc.

HTML, XML, XHTML and W3C are trademarks or registered trademarks of W3C, World Wide Web Consortium, Massachusetts Institute of Technology. Java is a registered trademark of Sun Microsystems, Inc. JavaScript is a registered trademark of Sun Microsystems, Inc., used under license for technology invented and implemented by Netscape. MaxDB is a trademark of MySQL AB, Sweden. SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver, and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary. These materials are subject to change without notice. These materials are provided by SAP AG and its affiliated companies (SAP Group) for informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP Group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty.

CONTENTS
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current Trends and Their Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SAP Real Estate Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Support for Multiple Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The SAP Real Estate Management Solution Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real Estate Acquisitions and Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real Estate Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technical Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Controlling and Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supported Business Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Space Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales-Based Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Service Charge Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Handling Service and Repair Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 5 5 6 7 8 8 8 9 9 9 10 11 11 13 15

EXECUTIVE SUMMARY
Real estate managers must handle a broad variety of revenuegenerating and cost-cutting tasks. SAP Real Estate Management, an application of mySAP ERP, is a full-featured, integrated solution for managing all types of real estate in all types of industries. With SAP Real Estate Management, you have better control of and greater insight into your real estate portfolio.

INTRODUCTION
Current Trends and Their Effects

As a real estate manager, your primary tasks include buying and leasing real estate, managing contracts, and overseeing the management of your real estate holdings. You face intensified challenges in fulfilling these tasks because of current economic developments, increasing market globalization, and growing capital market orientation. Recent economic development which has not always been positive has had a considerable influence on real estate management. For instance, you may be experiencing unusually high vacancy levels at numerous locations. To manage space effectively, you need a comprehensive overview of which spaces are vacant when and why. In addition, you are often responsible for drastically lowering the costs for using internal spaces to meet cost-reduction goals. Therefore, you need to improve the process flows of facility management and make them more uniform, while bundling purchase volume at the same time. And to help offset declining results in other areas of the company, you may be expected to balance things out. To do that, you become more and more involved with selling off parts of the real estate portfolio or restructuring it to free hidden reserves. Increasing market globalization places new demands on real estate management. Banks and retailers are increasingly investing in a network of subsidiaries that extends into other countries. That often makes real estate managers responsible for leasing new space or erecting new buildings in various countries. This entails becoming familiar with the legal requirements and economic conditions of each of these countries. At the same time, your company expects you to maintain an overview of all real estate activities and to produce reports on these diverse countries in a uniform manner. As a consequence of mergers and acquisitions, real estate portfolios are merged or redistributed. In this context, you must assess the new space requirements and make needed adjustments, including selling, leasing, and renovating assets.

Companies today place increased emphasis on the capital market in their decision making. Real estate management is not immune from this trend. Because investors constantly compare return on investment (ROI), you have to achieve a risk-return ratio for your real estate portfolio that can compete on the same level. Analysts compare rent revenue and common area maintenance charges (service charges) of real estate portfolios using benchmarks, so you need detailed reports and tools that help you optimize management processes.
SAP Real Estate Management

Support for Multiple Industries

SAP offers an integrated real estate management solution: SAP Real Estate Management. SAP Real Estate Management supports all phases of the life cycle of real estate assets. These phases include the acquisition or disposal of real estate, management of the real estate portfolio itself, both commercial and technical management, along with support processes like management accounting and reporting. SAP Real Estate Management is an application of mySAP ERP, SAPs proven, worldwide market-leading ERP solution. SAP Real Estate Management is closely integrated with the financials and logistics functions of mySAP ERP. It manages contracts for both leasing out and leasing in, as well as other real-estatespecific contracts; provides transparency in real estate management; and improves processes for all types of real estate leasing. It supports your investment strategies by assigning costs on a cause-effect basis and by offering transparent reporting on revenue and costs.

Many different industries and industry segments require real estate management, and each has unique needs. SAP Real Estate Management is flexible so it can handle the real estate requirements of many different industries, including the following: Airports need professional real estate management because a large portion of their revenue comes from leasing out retail space, warehouses, hangars, and concourses. Banks must manage both their headquarters and their networks of local banking offices. In addition, banks often manage real estate as a form of capital investment using separate companies. Building services provide comprehensive property management services, including security, cleaning, and maintenance, in a highly competitive market. Energy suppliers must manage properties for power plants, power lines, transformers, and customer centers in addition to administrative buildings. Facility managers focus on managing office space for a companys private use and on providing optimum working conditions for the employees occupying the offices all while ensuring a high level of service. Harbors lease out offices, terminals, sheds, container facilities everything that has to do with the turnover of stock to trading companies and shipping and forwarding agents. Housing authorities usually government agencies manage a large number of standardized leases and rely on costeffective management. Insurance companies focus on long-term investments in real estate. Office space managers emphasize the attractiveness of properties and the satisfaction of tenants to meet the goal of full occupancy. Manufacturers are starting to lease out property to outside contractors and suppliers, and they must manage their manufacturing facilities, warehouses, and offices. Postal services depend heavily on a highly efficient network of branch offices, logistics centers, and distribution centers.

THE SAP REAL ESTATE MANAGEMENT SOLUTION MAP

Public sector organizations must manage the usually large
real estate holdings of government and nonprofit organizations, such as universities, schools, parks, public buildings, and government agencies, while complying with the special legal and budgetary requirements that are often imposed on the public sector. Railways are beginning to manage their train stations along the lines of shopping centers, in addition to managing their track systems, warehouses, and maintenance facilities. Real estate investment trusts are expected to realize the highest possible returns on the combined deposits of the investors while holding risks to a minimum. Retailers require a perfectly functioning infrastructure of attractively located branch stores, modern warehouses, and strategically positioned, easily accessible distribution centers. Shopping center managers must present shoppers with an enticing palette of products and still meet the expectations of their retail tenants for highly professional services. Telecommunications firms primarily need to lease sites for antennas and other infrastructure in addition to office space. As Figure 1 shows, the SAP Real Estate Management solution map groups the typical processes and functions in the application into five main process categories (or key capabilities). Because the life cycle of a real estate asset begins with the acquisition being recorded in the real estate portfolio and ends with its disposal, the solution map begins here. This is followed by management of the relevant data of the real estate portfolio. Operative real estate management follows: first commercial management and then technical management. The supporting processes complete the picture, including management accounting (controlling), reporting, and especially important for large volume business correspondence. SAP Real Estate Management supports these processes because it is fully integrated with mySAP ERP. The mySAP ERP components that come into play include: SAP Real Estate Management mySAP ERP Financials, including its functions for: General ledger accounting Accounts receivable Accounts payable Asset accounting Controlling

Property Acquisition & Disposal Property Portfolio Commercial Management Technical Management

Buy

Build

Lease

Sell

Architecture Contract Management

Fixtures & Fittings Condition Adjustment

Usage Service-Charge Settlement

Partners

Terrier Third-Party Management

Sales-Based Rents

Accounting

Building Operations

Maintenance & Repair

Modernization & Refurbishment

Controlling & Reporting

Plan

Post & Settle

Analyze

Reporting

Correspondence

Figure 1: SAP Real Estate Management Solution Map

 mySAP ERP Operations, including its functions for:

Program and project management (for managing con-

Real Estate Acquisitions and Disposals

struction, renovation, and redevelopment projects)

Enterprise asset management and its counterpart customer

service (for managing services, maintenance, and repairs for your own properties and those of your customers) Procurement (for purchasing services and materials) In addition, SAP Business Intelligence (SAP BI), a key component of the SAP NetWeaver platform, provides reporting and analysis. SAP Real Estate Management can be seen from two perspectives. First, you can think of it as a solution for real estate management that is based on mySAP ERP and benefits from the integration with SAP standard components. Or you can think of it as a standard component of mySAP ERP that manages real-estate-specific information and contracts in particular. In addition, you benefit from built-in integration with other SAP third-party software: Integration with Adobe for generating mass correspondence A Microsoft Word interface for generating and changing individual correspondence Integration with SAP Easy Document Management and SAP Records Management for managing documents An interface to the internal SAP calendar and a Microsoft Outlook interface for integrated management of real estate dates and deadlines Business data toolset (BDT) for changing and enhancing the user interface Integration with SAP Exchange Infrastructure (an SAP NetWeaver component) for flexible integration of customdeveloped software and for linking to graphical software, such as Computer-Aided Design (CAD), CAFM, and geographical information systems (GIS).

The beginning and ending of the life cycle of a real estate asset largely determines the success or failure of the investment. Buying the right real estate at the right time at the right price is a prerequisite for managing real estate profitably. Errors made when buying real estate or during construction can only be corrected with great difficulty during the management phase. SAP Real Estate Management helps you acquire and dispose of real estate in many ways: When you purchase, build, rent, and sell real estate, SAP Real Estate Management handles all of the contracts. Using the asset accounting functions in mySAP ERP Financials, you can record the acquisitions and retirements to fixed assets. Using the program and project management capabilities of mySAP ERP Operations, you can manage construction, renovation, and redevelopment projects and monitor costs. mySAP ERP Operations provides procurement functions for handling bidding and the awarding of construction jobs. Leases are represented using SAP Real Estate Management. Using SAP Real Estate Management to acquire and dispose of real estate provides major advantages. First, the progress of the real estate portfolio can be seen from a fixed-assets perspective because it is integrated with asset accounting in mySAP ERP Financials. All contractual agreements are integrated with accounting and controlling functions in mySAP ERP Financials. Comprehensive project management is available with the program and project management in mySAP ERP Operations. You can track the values of real estate objects using the comprehensive reporting capabilities of SAP Business Intelligence.

Real Estate Portfolio

An aspect unique to real estate management is the large amount of important information associated with buildings and land that forms the basis for effective real estate management. To help you deal with this information, SAP Real Estate Management provides numerous functions for tracking information on the architectural aspects, fixtures and fittings, and usage of your real estate, as well as information on your business partners and land register information. For example, the architectural structures and internal fixtures of real estate objects are displayed flexibly and are integrated with enterprise asset management or customer service in mySAP ERP Operations. You can view detailed information on the usage of real estate. Information on business partners, their addresses, and relationships to each other is transparent and integrated with the accounts payable and accounts receivable functions of mySAP ERP Financials. And you can integrate the solution with external graphical software solutions, such as CAD, CAFM, or GIS to view building plans and site plans.
Commercial Management

The application can automatically adjust rent and other conditions, and it can automatically create adjustment postings, including retroactive postings. The application can also automatically calculate and settle service charges, taking advance payments and their adjustments into consideration. SAP Real Estate Management can automatically calculate sales-based rent and post the results in mySAP ERP Financials. Periodic postings, dunning, and payments are all easily handled because the application is integrated with the accounts payable and accounts receivable functions in mySAP ERP Financials.
Technical Management

Professionally executed technical real estate management is essential for preventing loss of value in a real estate portfolio. The technical complexity of real estate with all its facets different forms of construction, interior work, and building systems along with the large variety of attendant tasks and the high monetary investment all require extremely careful management. SAP Real Estate Management provides the following tools for technical real estate management: Space management and management of building services Management of maintenance and repairs Planning and overseeing renovations and improvements Using these tools, you can map unplanned maintenance measures and services from the initial notification of a problem through completion confirmation using enterprise asset or customer service functions in mySAP ERP Operations. You can also easily track regular maintenance and services against plans and maintenance task lists using the enterprise asset or customer service functions in mySAP ERP Operations. You can use the procurement functions of mySAP ERP Operations to handle the bidding process and award contracts to service providers. Integrated reporting places details on the costs of your maintenance and renovation projects at your fingertips.

Efficient commercial management is of central importance for ensuring long-term yields from your real estate portfolio. SAP Real Estate Management provides comprehensive contract management tools for automatically adjusting rent and other conditions, tools for service charge settlement and sales-based rent settlement, and accounting functions specifically for real estate, along with property management functions. With SAP Real Estate Management, you can manage contracts for all types of purposes: leasing out, leasing in, purchasing and selling real estate, and purchasing services and utilities. You can monitor deadlines and important dates because it is directly integrated with the SAP calendar and other solutions for date management.

SUPPORTED BUSINESS PROCESSES

Controlling and Reporting

Management accounting (or controlling) is an important instrument for planning, overseeing, and evaluating real estate profitability. Reporting on master data and flow data of the real estate portfolio is the foundation for informed decision making. SAP Real Estate Management supports you with controlling, reporting, and correspondence. You can use the SAP smartforms and Microsoft Word to create correspondence. You have controlling functions at your disposal for planning, posting, settling, and evaluating costs and revenues. And SAP Business Intelligence and integrated reporting functions provide reporting capabilities. SAP Real Estate Management greatly simplifies controlling and reporting: Because it is integrated with the accounting and controlling functions in mySAP ERP Financials, SAP Real Estate Management automatically assigns costs and revenues to real estate objects, eliminating redundant data entry. It provides a large variety of standard reports on contracts, conditions, vacancies, costs, and revenues so you dont have to develop your own. The application automatically creates letters for mass processes, such as rent adjustment, service charge settlement, or sales-based rent settlement, greatly reducing manual effort.

To learn more about SAP Real Estate Management, the following pages will help you clearly understand how important real estate processes are supported:
Internal Space Management

If you manage real estate for a large enterprise, then internal space management is usually one of your tasks. Internal space management consists of: Portfolio analysis Occupancy planning Provision of space Processing lease contracts and internal agreements Real estate managers have to deal with the users of the space and possibly with external providers of space. The following steps are an example of how you could handle that process with SAP Real Estate Management: 1. The first step is to map the framework agreement in SAP Real Estate Management. This agreement is usually worked out in consultation with senior management and specifies company-wide conditions for internal space usage. 2. Other departments in your company request additional space. 3. With the help of SAP Real Estate Management, you review the spaces available for internal use. You assign these spaces to the different organizational units as needed. You can also perform this step using CAD/CAFM systems that are integrated with SAP Real Estate Management. 4. If the space available does not meet internal needs, you try to lease the space you need from external providers. 5. The leased-in property is then added to the companys portfolio, which you manage using SAP Real Estate Management. 6. The framework agreement, which is integrated with the controlling functions of mySAP ERP Financials, maps all cost centers, projects, and orders occupying space within the company. For automated processes, you define the terms and conditions of the framework agreement, including occupancy duration, participation in service charges, and rules for condition adjustment, as well as renewal and notice rules for limited agreements.

7. You can use SAP Real Estate Management to monitor costs and revenues of spaces used internally in your company. 8. With SAP Real Estate Management, you manage the lease-in contracts that you entered into with external landlords. Part of this task is posting the recurring rent payments to these landlords.
Business Benefits User of Space Real Estate Manager Define framework agreement Request for space Perform space & occupancy planning Contract negotiation Assign building to real estate portfolio Update framework agreement
Controlling & management of framework agreement

Provider of Space

Business Benefits

Better use of available resources

Integration to CAD/CAFM systems

Respond quickly to needs

Record all contractual details

Here are the steps you would use in SAP Real Estate Management to handle the complex issue of notice from tenants: 1. The tenant submits notice for all or part of a contract. 2. After receiving the notice, you use SAP Real Estate Management to check if the notice is in agreement with the notice rules and periods that were agreed on in the contract. 3. Seamless integration to mySAP ERP Financials means that you can immediately check to see if the tenant has any open items by referring to the tenants account. 4. You send correspondence to the tenant to confirm notice and to inform the tenant of the status of the account. 5. Once the rental space is vacated, you enter the date and the state of the real estate object at handover in SAP Real Estate Management. 6. You release the security deposit paid to the tenant. 7. You advertise the vacant space for rent.
Business Benefits Saves money no payment of additional rent Tenant Real Estate Manager Business Benefits

Real estate portfolio transparency

Complete overview of payments made and payments due

Submit notice Check notice rules in contract Check open items

Flexible space and room management

Contract management

Transparent cost allocation

Accurate mapping & recording of lease

Figure 2: Internal Space Management Notice

Information transparency

Confirm notice Vacate rental object

Automated processes

Another of your tasks as real estate manager is that of dealing with the processes of giving and receiving notice. This process includes: Mapping notice rules Monitoring the period in which the tenant can give notice Giving notice on leases Processing of incoming notices

Increased customer satisfaction

Inspect rental object Release contract deposit

Reduced administration costs

Optimized rental process

Receive rental deposit Advertise vacant space

Seamless integration

Figure 3: Notice Business Process

10

Adjustment of Conditions

To optimize rent revenue, you need to make the most of options for adjusting rent and other conditions. This includes: Reviewing different adjustment options Adjusting the conditions Monitoring the payments changed by the adjustment With SAP Real Estate Management, you can use different methods to adjust the conditions of contracts and rental objects: Free adjustment (percentage or absolute value) Index adjustment, such as the consumer price index (CPI) Adjustment of operating-cost advance payments (as part of service charge settlement) Adjustment methods for residential market (Germany) You can apply rent caps when calculating the adjustment, make rent adjustments using percentages, and reverse complete adjustment runs. You can also evaluate the effects of completed adjustments on contracts on an individual basis. To adjust contract conditions with SAP Real Estate Management, you would follow these steps: 1. You negotiate a contract with the tenant, including the terms for later rent adjustments. 2. The tenant and landlord sign the contract. 3. Before you adjust the contract conditions, you run a simulation based on the adjustment rules stored in the contract. 4. After deciding to make an adjustment, you generate correspondence to inform the tenant of the forthcoming changes. 5. You receive the tenants acceptance letter. 6. You enter the tenants approval in SAP Real Estate Management. 7. You activate the adjustment of conditions. 8. The periodic posting run is carried out based on the adjusted conditions, and the tenant is debited the new condition amounts. 9. In the event of a retroactive rent increase or reduction, SAP Real Estate Management automatically generates followup postings for past periods.

Business Benefits

Tenant

Real Estate Manager Create contract & define adjustment rule

Business Benefits Accurate mapping & recording of lease

Information transparency

Sign contract Simulate possible adjustments Receive accurate & timely adjustments Communicate calculated condition adjustment Confirm condition adjustment amount Enter approval (if applicable) Activate adjustment Make periodic posting with new condition amounts Generate followup postings Efficient date tracking

Seamless integration

Documented administration procedures

Standard adjustment processing based on predefined rules

End-to-end processing

Optimize rent revenue

Figure 4: Adjustment of Conditions Sales-Based Rent

When your real estate portfolio contains retail space, then your tasks usually include managing sales-based rent contracts. This process involves: Negotiating contracts for sales-based rent Managing sales reports Calculating and settling sales-based rent SAP Real Estate Management provides extensive functions for handling sales-based rent. Reporting rules specify which types of sales have to be reported. Reporting rules are flexible, allowing you to distinguish different sales types: actual, planned, and statistical sales. Using this basis you can determine key figures. You use sales rules to specify how sales-based rent is calculated. The sales rules can be based on reported turnover (in retail shops, for instance), or on a measure of output (such as number of customers served at an airline counter), or even on consumption (like the number of meals served in a cafeteria).

11

A lease can contain any number and combination of different types of sales-based rent. You can manage minimum and maximum sales-based rent as separate conditions. You can manage advance payments in the same way. You can also run the settlement based on cumulative settlement values. In cumulative settlement, the reported sales from the previous periods are taken into consideration for each settlement (for example, the first quarter is settled, the second quarter is settled, and the sales results of the first quarter are taken into account). This helps to level peaks and lows during the settlement period.
Business Benefits Tenant Real Estate Manager Negotiate contract, define sales-based rent parameters Information transparency Sign lease Make periodic postings Report sales amounts Check for missing sales reports Enter missing sales & correct existing sales amounts Analyze sales results & correct values Carry out salesbased rent settlement Communicate settlement results to tenant Easy definition of key performance indicators (KPIs) Receive correspondence & check results Pay outstanding amount Adjust advance payments Success-dependent rent calculation Analyze sales results and determine key figures Accurate forecasting Complete overview of all sales reports entered, missing sales reports & settlements Simplified handling of all sales-relevant contracts Seamless integration Business Benefits

Accurate mapping & recording of lease

Efficient reporting of sales

In SAP Real Estate Management to manage a sales-based rent contract, you would go through the following steps: 1. You negotiate the lease agreement with the tenant and define rent in the contract as based on sales or other key figures. Reports provided by SAP Real Estate Management show comparable rental objects. 2. After you reach agreement on the terms and conditions of the contract, you and the tenant sign the contract, and the data is entered into SAP Real Estate Management. 3. During the term of the contract, you post the tenants periodic payments using SAP Real Estate Management. These include rent payments, as well as advance payments for sales-based rent conditions. 4. The tenant reports sales periodically, and these amounts are entered in SAP Real Estate Management. 5. You can view and analyze sales results for all contracts at any time. In addition, you can check for missing sales reports and inform the tenant accordingly. 6. The tenant can correct sales reports or provide missing sales data; you then adjust the data in SAP Real Estate Management to reflect this. 7. You analyze the sales reports received and make any corrections in the system. 8. Based on these sales reports, you perform sales-based rent settlement using SAP Real Estate Management. 9. The settlement results are communicated to the tenant via correspondence. 10. After reviewing the settlement, the tenant pays the sales-based rent. 11. The tenant pays any additional payments due or the application automatically generates a credit memo in the case of overpayments. 12. Advance payments for the following settlement period are calculated and adjusted based on the settlement result. 13. You analyze the reported sales to determine key figures so you can accurately forecast future periods.

Figure 5: Sales-Based Rent

12

Service Charge Settlement

When you have agreements with tenants on how to handle costs for the use and maintenance of real estate, then calculating and settling these service charges is another of your tasks as real estate manager. SAP Real Estate Management offers extensive functions for correctly assigning all service charges for leases and rental objects so that costs are passed on to the tenants occupying the space during a given period according to a number of different parameters. You can distribute apportionable costs to tenants for a particular settlement period, using the following individual control mechanisms: Categorizing of service charges incurred Time-dependent apportioning of costs based on flexible measurements (fixed values, consumption, percentage share, and so on) or based on conditions in the contract Time-dependent settlement participation of objects with the ability to exclude individual objects when assigning higherlevel objects Clearing of costs that are not directly apportionable to the tenant Determination of vacancy costs

13

Business Benefits

Tenant

Real Estate Manager Negotiate contract for services

Service Provider

Business Benefits

Reduce administration costs

Define service contract Define contract & service charge settlement parameters Sign lease Improve information transparency

Accurate cost allocation for services received

Make periodic postings Make payments for rental charges and operating costs

Negotiated contract terms

Carry out services

Increased transparency

Send invoice for services Enter and pay invoice Improve business processes & enhance operational efficiency Receive payment Collect the apportionable costs Carry out service charge settlement Adjust advance payments for operating costs Complete overview of costs & revenues Communicate SCS results to tenant Receive correspondence & check results Pay outstanding amounts/Receive credit note Activate new condition amounts

Collaborate with business partners

Seamless integration

Figure 6: Service Charge Settlement

Heres how you would calculate costs for the use and maintenance of real estate objects and pass on these costs to the tenants occupying the space, according to a number of different parameters: 1. You negotiate the contractual agreements for these services (such as janitorial services, gardening, cleaning, maintenance, and repair) with the individual service providers. 2. After completing negotiations, you conclude contracts for these services. 3. You negotiate the terms of lease contracts and the rules governing service charge settlement with your tenants. 4. When these negotiations are completed, you sign contracts with your tenants and map the contracts in SAP Real Estate Management. 5. Each month, you record customer receivables in the system for the payments due from tenants, including any advance payments for service charges. 6. Your tenants pay rent regularly, along with any advance payments for service charges. 7. During the settlement period, the various services and operations are carried out for the buildings by the service provider. For example, utilities supply water and electricity. 8. You receive invoices for these services. 9. You post these invoices with the relevant information for apportionment and pay the invoices. 10. The service providers receive their payment. 11. You enter the paid service charges regularly in the system, allocated to the real estate object, service charge key, settlement unit, and settlement period. 12. You perform service charge settlement based on the control mechanisms defined in the contracts and the posted service charges. 13. At the same time, SAP Real Estate Management enables you to automatically adjust the amount of the tenants advance payments, if necessary. 14. The application automatically generates correspondence informing the tenants of the settlement results and of any changes in advance payment amounts for the following settlement period.

14

15. The tenants check the accuracy of the settlement using these results. 16. The tenant pays any additional payments due or, in the case of overpayments, the system automatically generates a credit memo. 17. You activate the new advance payments for service charges in the lease contract in the system.
Business Benefits Simple entry of request for service & repair Tenant Real Estate Manager Define services required Define service agreement Request service or repair for real estate object Create service order Service Provider Business Benefits Optimization of prices, services, availability

Inviting bids from building services providers Negotiating and concluding framework agreements Requesting services contained in the framework agreement Monitoring the work actually done
SAP Real Estate Management can help manage services, maintenance, and repairs for your own properties and those of your customers because it is integrated with enterprise asset management functionality and its customer service counterpart in mySAP ERP Operations. You can directly analyze costs arising from these activities using reports in SAP Real Estate Management. Heres how you would manage repairs, maintenance, and services using SAP Real Estate Management: -1. You first decide which services you want to purchase. These services are normally those that are needed on a recurring basis and are performed in a similar way, such as elevator maintenance or air-conditioning repairs. -2. You request bids and negotiate contracts and prices with the service provider. You enter into a framework agreement with the service provider. This agreement has set conditions and a given time frame. The work is performed. -3. A tenant requests services from you or reports a defect that requires repairs. -4. You create an order informing the service provider which services are needed when. -5. The service provider accepts or declines the service order. -6. Having completed the service requested, the service provider confirms the activities carried out. The confirmation gives you exact details on the services performed, such as the replacement parts used. -7. Before accepting the activities, you check that the activities were carried out (using random sampling, for example). -8. You then create a credit note for the service provider by combining the activities with the prices defined in the framework agreement. -9. You settle the service order. 10. The tenant receives an invoice for the services provided, or the costs are settled during service charge settlement.

Improved customer satisfaction

Direct allocation of responsibilities, costs, and so on

Accurate mapping and recording of services Optimize maintenance planning & control History of all maintenance tasks with error locations, causes, costs and so on. Accurate cost recovery through complete integration

Accept service order Confirm activities

Integrated procurement of services & repairs

Accept activities

Receive credit note

Documentation of costs according to maintenance type

Settle service order Receive invoice or SCS results

More accurate forecasting of services required

Figure 7: Handling Service and Repair Requests Handling Service and Repair Requests

Another important task if it is not completely outsourced to an external provider is handling repairs, maintenance, and services for the buildings in your portfolio. Some of the activities this involves are: Gathering and defining all requests of your tenants for improvements or repairs

15

www.sap.com /contactsap

50 071 554 (04/12)