THURSDAY, JULY 02, 2009

Meeting the challenges of corporate relocation, expansion

by Timothy Monger and Kathleen Culp

Katie Culp

Timothy Monger

Although it sounds like a cliche, every corporate relocation and expansion does have its own unique set of needs. No one size fits all, in both finding the best location and the best set of incentives for the project at hand. Instead, every location advisory and incentives assignment must be tailored to fit the company's needs.

A number of factors must be discussed and dissected in exploring the options that best suit the company's needs, objectives and long-term growth strategy. That's why it's a wise investment to hire a team of professionals.

Besides expertise, location and incentive professionals offer objectivity in discussing a company's needs, and then provide a detailed analysis that outlines the benefits and drawbacks of all available options. Hiring experts also frees up management to focus on its core business. This is a better option than letting management get bogged down in the details that must be considered and digested.

Understanding the need

As the saying goes, fail to plan and you plan to fail. Every assignment needs to outline the objectives. What does the company want to accomplish? Relocating corporate headquarters has a much different answer than expanding manufacturing capacity or looking at a new distribution hub.

It's critical to look at both the mission of the project and the objectives of the facility. These factors also need to align with the company's strategy and long-term growth plans for the business. The best place to start is with a thorough needs analysis that addresses the issues from a strategic viewpoint.

-Project Initiation: This pinpoints the mission and objectives of the desired facility. It also helps to identify the necessary resources, internally and externally, to complete the assignment, establishes milestones necessary to complete the process in a timely manner, and outlines the location preferences.

-Investment & Financial Overview: Determining the capital investment is critical in seeking incentives, as is identifying the financial needs of the company for project completion. In today's environment, companies with cash have some real clout, too.

-Supply Chain: This applies primarily to manufacturing and distribution where the cost of raw materials, the value of finished goods and the transportation infrastructure are critical. Where the product is coming from and where it needs to go may greatly limit the acceptable locations.

-Human Resources: Employment varies widely by companies. For example, the company may need scores of accountants or engineers. The current staffing and employment projections determine immediate and long-term needs in the size of the building. Of course, wages and benefits must meet the company's budget.

-Utilities: This isn't just a cost issue, but one of capacity, too. Sewer and water are big concerns for many manufacturing facilities.

-Environmental: This ranges from a company's focus on green issues to a willingness to locate in brownfields.

-Governmental Affairs: The focus is not just on desired incentives, but also on ensuring that any incentives are usable. Little good is achieved when state income tax credits are received if the company will not be able to use them in the allotted timeframe. Discussing regulatory and permitting issues is important in establishing the timeline necessary to complete the project.

-Land and Building: The required size for both current and future needs limits options for current facilities and for potential build-to-suits.

Location, location, location

It's a tried-and-true axiom in real estate, but location is crucial. Finding the right location involves some detective work, based on the factors uncovered in the needs analysis. In most cases, 80 percent of the work in selecting potential locations is done before we even leave our office.

All the factors uncovered in the needs analysis are used to create a Request-for-Information that is sent to state and local development professionals. Critical issues are business costs - labor, transportation, taxes, utilities, and more - and the availability of a qualified labor pool necessary to fill open positions or to staff a new facility. Quality-of-life issues also are important to many clients, particularly in the case of a corporate headquarters relocation.

But location analysis still requires boots on the ground. A team that includes location advisory professionals offers invaluable insight in finding specific sites that meet the company's needs and requirements. They have relationships with a variety of industry and governmental officials at the local level, which can play a pivotal role in selecting appropriate sites and in developing the right incentives for the client.

Art of the deal

As prospective sites are reviewed, work begins on identifying and analyzing potential incentives. Preliminary research is done on incentives offered in various states and communities that fit the client's profile. State and local officials receive project information to begin their own assessment in preparing possible incentives. The analysis begins with summarizing and comparing the results presented by the various entities.

The incentives packages are reviewed so a short list of final locations can be identified, and a strategy for moving forward developed. Then, the serious work of negotiating incentives begins, involving comparison of offers and working on enhancements. After results are analyzed, the list of potential sites is pared further.

Once the final site is selected, the work on the incentives package is far from over. Applications must be prepared and submitted, and formal approvals must be reviewed, leaving nothing to chance.
Compliance also plays a role in maximizing any incentives package. Compliance management procedures are established so all necessary documentation is submitted, assuring capture of the incentives over the terms of the agreements.

In the end, the best fit for the company aligns its real estate with its business strategy, while maximizing profit potential, optimizing economic incentives, and mitigating risks.

Timothy Monger and Kathleen Culp are senior vice presidents at Colliers Turley Martin Tucker, and co-directors of Colliers Location Advisory & Incentives Practice based in Indianapolis. During the last three years, they have spearheaded assignments that covered 40 states, and they have negotiated nearly $200 million in economic incentives for clients.