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A Lease Harbor LLC Case Study: Whirlpool Corporation

June 1, 2006

Introduction

Whirlpool Corporation, the world's largest manufacturer of appliances, has a global real estate portfolio of more than five hundred locations. The company’s portfolio has grown rapidly due to expansion into new markets as well as acquisitions, most notably the recent acquisition of Maytag Corporation. Effective management of this large, diverse real estate portfolio requires a dedicated lease administration team utilizing powerful software capable of handling rapid growth as well as specific industry and company-level requirements.

For over five years, Lease Harbor LLC has provided Whirlpool with a system to manage its real estate portfolio. Whirlpool was an early adopter of Lease Harbor LLC’s first generation system and as Whirlpool’s needs expanded since 2000, Lease Harbor LLC was also expanding by building its second generation system, Harbor Flex. Whirlpool’s additional needs were aptly met upon upgrading to Harbor Flex in 2005 and they are now taking full advantage of the new features. This case study highlights the maturation of the relationship between Whirlpool and Lease Harbor LLC.

Background

In 2000, support for Whirlpool’s predecessor client/server system was being phased out and needed to be replaced. The evaluation and selection process took place during a time of great change in the software industry. There were numerous new software vendors offering lease administration systems as well as existing vendors trying to adapt their systems for delivery over the Internet. On the heels of the Internet bubble, many of these vendors were early-stage companies that were venture funded. Whirlpool needed to select a vendor that could satisfy its lease administration needs over the long term.

Whirlpool’s lease administration software system needed to:

  • Be based on current technologies that could evolve along with Whirlpool’s needs
  • Provide an efficient and accurate data conversion process
  • Have a short implementation period to provide the real estate team with continuity during the transition phase, including the processing of payments
  • Retain and improve upon many key features, including some very specific financial reporting requirements
  • Be easy to use
  • Support global user accessibility and flexible user security profiles
  • Track critical dates
  • Support an international user base
  • Include functionality to easily generate standard and ad hoc reports for senior management
  • Support a global payment process that could interface with Whirlpool's accounting system

Discussion

Whirlpool Corporation selected Lease Harbor LLC’s web-based portfolio administration system. To ensure the continuity of the Company’s ongoing lease administration during the transition, Lease Harbor LLC was asked to help manage a parallel transition to its system. The same approach was taken with Whirlpool’s recent transition to Harbor Flex, Lease Harbor LLC’s second-generation platform on which Whirlpool now manages its entire real estate portfolio.

Web-based System with Key Features

Due to a diverse, worldwide user base, a web-based system was a key requirement. Lease Harbor LLC’s web-based systems have alleviated Whirlpool’s need for ongoing, time-consuming and costly support of its original client-server system. All core lease administration features required by Whirlpool, including user account administration, payment processing and reporting are all handled through Harbor Flex’s single web-based user interface. Whirlpool requires a security model that allows each user to access only certain areas of functionality and then perform only specified actions within those areas. Harbor Flex provides the granular security needed by Whirlpool to handle user profiles ranging from partial, view-only access all the way up to system administrators having broad access to all features. Regardless of a user’s security profile, Harbor Flex also retains a complete time and date-stamped audit trail for every user action.

International Capabilities

Because Whirlpool has locations in multiple countries which must be stored in varying currencies and units of measure for size, built-in currency and size conversion features are critical. These features allow each lease to be stored in its local currency and size, while providing reporting and metrics that are automatically converted to U.S. currency and square feet. Currency exchange rates are automatically updated nightly to provide a high level of accuracy without any manual intervention. In addition to currencies and units of measure, each of Whirlpool’s global users may select their own preferred date format.

Payment Processing

Whirlpool’s business processes that govern real-estate related payments are supported, and largely automated, through use of Harbor Flex. Whirlpool implemented a two-way payment integration with its ERP system for payment of real-estate related expenses. Also included are the security options and features needed to allow for the separation of duties between users who enter payments and users who process, approve and post them. Payment files are exported in accordance with Whirlpool’s ERP system’s file import specifications. This includes automatically prorating payments and providing Whirlpool with payment batch filtering into related sets, such as time of month or location of lease. Once a payment file is processed, Harbor Flex imports the resulting check information generated by the ERP system. As a result, all cash disbursement and cash receipt history, including check information, can be accessed without having to exit Harbor Flex to query the ERP system.

Specific Reporting Needs

In addition to the specific payment processing requirements, Whirlpool had unique reporting needs. For example, users needed a report for calculating remaining expense obligations. However, they needed the report to exclude any expenses after the first available cancellation date. The report also needed to contain the net present value for each lease. Lease Harbor LLC used a feature called a “report pre-function” and built a custom report in Harbor Flex. The pre-function contains all of the complicated logic for determining the next cancellation option and computing the net present value. As a result, the report can be produced without the need for Whirlpool to do additional data manipulation or computations outside of Harbor Flex.

Sarbanes-Oxley

With the advent of the Sarbanes-Oxley Act, companies need to ensure that they are efficiently providing accurate and complete financial statements and disclosures. Whirlpool is taking advantage of new Harbor Flex features, such as straight-line expenses to support its finance department with the financial reporting requirements surrounding the real estate portfolio and its lease commitments. This feature allows Whirlpool to automatically calculate the straight-line expense amounts for all applicable cash basis expenses. The calculation is accurate and accounts for mid-period rent changes by automatically prorating them. Use of this feature also allows Whirlpool to run a report that calculates the deferred or prepaid balances for each straight-line expense calculation.

Conclusion

From core lease administration features with international capability, through payment processing and advanced financial features, the Harbor Flex system has proven to be a highly cost effective, comprehensive solution for Whirlpool’s real estate administration needs. As the relationship moves into its sixth year, Lease Harbor LLC continues to provide Whirlpool with a system that delivers value and innovation, while Whirlpool continues to effectively use Harbor Flex to solve its expanding business needs.


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