Corporate Real Estate

Chris OwensGeneral ManagerWorldwide Real Estate

TopicsMicrosoft Corp Real Estate (CRE) OverviewReal estate as competitive differentiatorManaging globallyThe New World of WorkLeveraging buyer value creationWorking in CRE (MSFT-style)Career Tips

TopicsMicrosoft Corp Real Estate (CRE) OverviewReal estate as competitive differentiatorManaging globallyThe New World of WorkLeveraging buyer value creationWorking in CRE (MSFT-style)Career Tips

My Career PathEducation

BA Economics – University of VirginiaMasters City Planning + MS Engineering – UC Berkeley

WorkContra Costa Transit (Concord, CA) - 4 years

Service PlannerFinance Manager

City of Redmond – 5 yearsLong Range Planning Manager

Microsoft – 15 yearsCampus plannerReal estate account managerDirector of OperationsDirector of Campus DevelopmentGeneral Manager

Plan

Deliver

Operate

Microsoft CRE Functions

Client requirements Market analysis Workplace strategy Portfolio strategy

DesignConstruct -

Lease - Integrate

Employee services Facility operations Environmental mgmtCapital renewal

RE&F FY11 Business Overview

Employee Satisfaction & Productivity Cost per Housed Head, per Sq Meter Square Meters per Housed Head Customer-Partner Engagement (CPE) Carbon Reduction Process & Policy compliance

Cost management – New Normal Generational & technological change Globalization of R&D Emerging market emphasis Vendor maturation Business HC changes

PERFORMANCE MEASURES

BUSINESS DRIVERS

SCOPE METRICS (GLOBAL)

FY08 FY09 FY10 FYTD11Number of Buildings 549 583 599 592Square Meters (M) 2,262,482 2,582,508 2,922,118 2,903,250Housed HC 120,866 121,038 124,101 121,756Managed Capital ($M) 974 1,326 487 458Managed Opex ($M) 1,224 1,408 1,607 1,715PERs Processed 655 548 731 251PER Approval Value ($M) 3,358 2,876 1,358 471

FY11 ORGANIZATIONAL COMMITMENTS

SusanWagner TBH Mike

DeMuro JayPittenger

GinaDyer

BobKaplan

Center of Excellence

•Workplace strategy• Environmental•Capital planning• PER Governance•Vendor management•Communications• IT systems•Data governance•Controls & compliance•Government relations•ROB management

EMEA Americas Asia Puget Sound

ORG STRUCTURE

Typical sub-structure

Portfolio optimization Drive Workplace Advantage globally Vendor model upgrade & GTM Grow collaboration with IT & HR Global customer satisfaction measures Strengthen Center of Excellence

AreaManager

AreaManager

AreaManager

FacilityManager

FacilityManager

FacilityManager

Execution

RegionalDirectors

BrianCollins

TopicsMicrosoft Corp Real Estate (CRE) OverviewReal estate as competitive differentiatorManaging globallyThe New World of WorkLeveraging buyer value creationWorking in CRE (MSFT-style)Career Tips

TopicsMicrosoft Corp Real Estate (CRE) OverviewReal estate as competitive differentiatorManaging globallyThe New World of WorkLeveraging buyer value creationWorking in CRE (MSFT-style)Career Tips

Managing GloballyYou’ve got to adapt to….

Client subculturesVendor capabilityStandards of business conductTeaming and collaboration challenges

TopicsMicrosoft Corp Real Estate (CRE) OverviewReal estate as competitive differentiatorManaging globallyThe New World of WorkLeveraging buyer value creationWorking in CRE (MSFT-style)Career Tips

TopicsMicrosoft Corp Real Estate (CRE) OverviewReal estate as competitive differentiatorManaging globallyThe New World of WorkLeveraging buyer value creationWorking in CRE (MSFT-style)Career Tips

46

Silicon Valley Campus – Lease/Vacant Comparison

Pricing: $115,600,000 - $119,100,000 $463 - $476 p.s.f.

Occupancy: MSFT lease, 10 year term Rent: $31.20 p.s.f. Annual escalation: 3.0%

Capital: Tenant improv. allow: $45.00 p.s.f. Leasing comm. Y1-5: 6% / Y6-10: 3% Capital reserve: $0.20 p.s.f. / 3% escl

Valuation assumptions: Going-in cap rate: 6.50 - 6.75% Un-levered return : 6.50 - 6.90% Levered return: 7.50 - 8.30% Residual value: 7.50% Debt: 65% LTV / 5.5% rate/ 25Y Amort

STABILIZED Key investor assumptions

Investor hold period for stabilized valuation is 10 years

VACANT

Pricing: $25,000,000 - $37,500,000 $100 - $150 p.s.f.

This range is estimated for an average sub-market (Santa Clara) and building of average vintage (10-15 years)

Pricing: $62,500,000 $250 p.s.f.

This range is estimated for an above-average sub-market (Mountainview) and building of recent vintage (less than 10 years)

47

Central US - Campus lease renewal comparison

Key investor assumptions

Valuation derived as of 1/1/2011, early lease renewal commencement date

Investor hold period for renewal valuation is 5 years

Limited investor market for the property

Pricing: $8,600,000 $71 p.s.f.Occupancy: MSFT renews for 5 years Market rent Y1-5: $13.00 PSF Annual escalation: 2.0%

Capital: Capital reserve: $0.20 PSF / annum Annual escalation 3.0%

Valuation assumptions: Going-in cap rate: 18.40% Un-levered return : 6.00% Levered return: n/a Residual value: $20.00 p.s.f.

RENEWPricing: $2,500,000 $20 p.s.f.Occupancy: MSFT vacates

Capital: Capital reserve: $0.20 PSF / annum

Valuation assumptions: Going-in cap rate: n/a Un-levered return: n/a Levered return: n/a Residual rate: n/a

VACATE

Comparison to CBRE $11,000,000 value approach Upon lease expiration (8/13), CBRE assumed 50% probability that MSFT would sign an additional 5 year renewal (JLL assumed 0%)CBRE assumed $15.36 NNN p.s.f. rent through to 8/13 expiration (JLL assumed $13.00 NNN p.s.f.)

Working in Microsoft CREWhy it’s GREAT

Directly affects 125,000+ workers productivity - dailyEnd-to-end business functionBIG budget/asset responsibilitiesTons of exposure to senior leadersPositive environmental impact

And How it’s HardLong term category in short term industryEveryone is a real estate expert

Skills you’ll need in Microsoft CREFinancial acumenProgram managementProject manage

Client relationship mgmtVendor managementSelf-confidence & autonomy

Career TipsEstablish your working capital

Deliver consistent strong resultsMake others betterDemonstrate leadership at all levels

Know yourself, define your futuresSeek feedback from multiple sourcesBe self-aware on your needs, passions & capabilitiesMaintain a plan, and execute on it

The more you know, the farther you’ll goPassion for technologyYour professionThe world around you – think exogenously!

And…..have a networking strategy - be known

© 2010 Microsoft Corporation. All rights reserved.This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.