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From Site Selection magazine, November 2009
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Omaha:
The Next Financial Capital

UnveilingPayFlexNewSign
Payflex employees celebrate the opening of their new $10-million headquarters in the Old Mill area of Omaha.
Photo courtesy of Payflex

For dozens of firms, if it’s good
enough for Warren Buffett, by
golly it’s good enough for them.

by ADAM BRUNS
W

hen a metro area has accounted for nearly half of its entire state's corporate facility locations and expansions since the beginning of 2008, it's hard to ignore.

That's the case in Omaha, where 25 of the 57 Nebraska projects tallied in the Conway Data New Plant Database since then have located. The city stands out even more for another reason: According to U.S. Labor Department figures on financial-services sector employment over the past 30 months, Omaha is one of the few metro areas in the entire nation to see growth, adding 1,100 jobs, which amounts to a 3.3-percent boost.

Omaha Financial Holdings is a holding company for a more well known firm: Mutual of Omaha. The company in 2008 signed a Nebraska Advantage Act agreement with the state that calls for a US$5.9-million project investment and the creation of 50 new jobs. So did 3MV Bancorp, for nearly identical amounts of both capital and jobs. And FirstComp Insurance, under the umbrella of Aspen Holdings, expanded its offices in the city in 2006 with a $12-million investment, and continues to grow there, now employing 400 of its overall 600 U.S. employees in Omaha.

More recently, Fidelity National Title Group signed a lease for 67,000 sq. ft. (6,224 sq. m.) at Noddle Companies' Aksarben Village mixed-use development, and TD Ameritrade committed to consolidating its area operations at a new campus in the city's Old Mill area. The firm will invest $50 million to build two new buildings and upgrade existing facilities at the site near I-680, and invest $30 million more in leasing other buildings. Expected to open in 2011, the campus may qualify for as much as $8 million in "Nebraska Advantage" state tax credits.

Other recent investors in the FIRE sectors (finance, insurance and real estate) include Applied Underwriters and PayFlex Systems USA, the homegrown company which has moved from its 20-year home in the city's Blackstone Building into a new $10-million headquarters, also in the Old Mill area, where nearly 200 employees (including 65 positions hired in 2008) worked as of late 2008 when the facility opened. Those positions include 35 jobs brought back to the U.S. from Pune, India. As of late 2008, the employee benefits administrator had grown revenue by 188 percent since 2005 and hired more than 150 people in that span. The company initially occupied 30,000 sq. ft. (2,787 sq. m.), but by September 2009 had already expanded into 70 percent of the 10,000 sq. ft. (930 sq. m.) on which it has an option.

"I am most proud of the 35 jobs we brought back from India to the U.S.," said Mark Huber, Payflex president and CEO, at the facility's opening. "The productivity of Greater Omaha's work force made the case for this business decision. Omaha and Nebraska have been good to us and I am delighted to return the favor."

Quality of Life Matches Quality of Work

"I came to Creighton University in 1979 and never found a reason to leave," says Huber in an interview a year later, as he describes the growth of the firm from 15 employees in 1999, when it was the remnant of an insurance brokerage operation. "We grew all in Omaha until 2006, when we did three acquisitions — one in Denver, one in Hagerstown, Maryland, and one here in Omaha. Right now we have about 350 people on staff — 250 in Omaha, around 70 in Maryland and probably 25 in Denver."

He says the company looked for a long time for a building, because it simply had outgrown the space where it had grown up. His team also used the occasion to solve some strategic issues. But Omaha's basics were solid.

"Omaha is a pretty low cost environment," he says. "Real estate is reasonably priced, personnel costs are reasonable. It has a major advantage over any other metro area because of cost and quality. There is a very good public school system, and a very robust parochial school system, which is not that expensive. That requires the public schools to really try to be good, because there isn't that much of a premium. It's a virtuous cycle — probably 300 of our people are high school educated, and we can provide them with very good paying jobs, because they're an educated work force. Omaha is very attractive from that perspective."

So it becomes a matter of being more attractive to Omaha.

"We wanted to be an employer of choice, so we selected a site on I-680, where 173,000 cars a day pass by, with 24-hour signage, so we have more exposure than we had in our previous location," explains Huber. The company also wanted to sublet space to a cook-to-order company for employee meals — another nod toward being an employer of choice.

"To make those kinds of moves was expensive," he says. "We have not been active at the chamber, but I called them up, said we were looking at expanding, and needed their help."

Greater Omaha Chamber of Commerce and Nebraska Dept. of Economic Development officials informed Huber of the tax incentives and agency financing options available to Payflex, as well as a state training program that would provide funds as employees came on board.

"We went from one part-time trainer to five full-time trainers," says Huber. "Their willingness to help us be successful and to help our people at not just jobs but careers had a huge impact on what we were able to do."

Payflex had other options.

"At our building in Hagerstown, we could have doubled our space," Huber says. "It's a decent place to run our type of operation and a decent place to do business."

But it lacks the educational benefits Omaha has, he says, and its relative remoteness made it less attractive than the "vibrant community" of Omaha.

"This seemed like a better place for a combination of doing business, raising a family and trying to live a life that has fun and excitement in it," Huber says. "People don't use that phrase talking about Omaha, but it is a good place to live."

But was bringing offshore work back from India really the best business case?

"The reason we did that is we can actually do it cheaper here," says Huber. "No one else believes it either, but that's fine."

Then he explains why.

"The software we've developed is very efficient. We pay more per hour to have the work done, but when you think about all the management that surrounds offshoring jobs, there is a lot of overhead associated with pushing it over there. But here's the biggest factor — we're not saving lives, but trying to make lives easier, and one thing involved in that is turnaround time. By the time you get information in, get it scanned, sent to India, and then get the work done, you end up losing a day and a half. Our turnaround time is a quarter of a day now. Now you have a competitive advantage."

'Like a Site We Would Have Built'

At the former ADT building in the Greater Omaha community of Papillion, Pentagon Federal Credit Union (PenFed), which already employs 284 at an accounting, data and call center in northwest Omaha it's operated since 1992, is establishing a second customer care operations center to handle mortgages and collections for its 900,000 members worldwide.

PenFed is growing nationally at 20 percent a year. The Papillion operations center will give the company room to grow locally for the next 7–10 years. The immediate $4-million investment will allow the company to recruit employees from two different parts of the metro area, and ultimately double its work force. Jim Kingsley, senior vice president of the regional service center in Omaha, says the response to early recruitment has been excellent, and looks for more of the same: "This center particularly will give me an advantage when I recruit for entry-level jobs, which tend to live around where you have the center," he says.

"This growth reflects the excellent labor productivity we have found in Omaha and operating cost savings in areas such as electricity, which is very important to us," said PenFed President and CEO Frank Pollard at the project announcement in July 2009, citing the organization's close work with the Greater Omaha Economic Development Partnership, which unites the economic development organizations of Douglas, Sarpy, Cass and Washington counties.

"We are excited about the opportunity to replace jobs in the community that we lost when ADT/Tyco moved their operations out of Papillion this spring," said Toby Churchill, executive director of Sarpy County Economic Development.

"Omaha business leaders had the opportunity to visit with Frank Pollack and his team at their headquarters in Alexandria, Virginia, twice, and we have paid several in-person calls to their offices here in Omaha in the past three years," said Phil Phillips, director of business retention and expansion at the Greater Omaha Economic Development Partnership. "Today's announcement is another example of how building relationships continues to pay off for both the company and our community."

PenFed serves over 911,476 members in the Air Force, Army, Coast Guard, Department of Homeland Security, Department of Defense, defense-related companies, and the Veterans of Foreign Wars. Speaking from headquarters in Alexandria, Deborah Johnson, CFM, director of corporate facilities and real estate development, says that beyond branches and a data center (in an undisclosed location), the organization's other main site is in Eugene, Ore., where it leases space. Of PenFed's current total square footage of 329,000 sq. ft. (30,564 sq. m., including the new center), PenFed owns nearly 80 percent. She says the Omaha operation started as a call center in Burnt Circle, then grew over the years and relocated to a 45,190-sq.-ft. (4,198-sq.-m.) building on Fort St. in Omaha.

"The bottom line was we have extra land at that site, so we could either build an addition, making it two to three stories where we were, or we could lease space someplace else, and be more diversified for disaster recovery reasons," she explains. "After reviewing our options for building on our adjacent land, we realized we would not have been able to get as much parking as we would have needed to support the square footage of the addition. We would have had to buy land across the street, and it didn't make sense for us to do that."

Made to Order

That determination was made in January 2009. So the company started looking around in Omaha and in Iowa. In March, Jeremy Fink of CB Richard Ellis informed the company of the looming availability of the ADT/Tyco facility, which Johnson flew out and visited on St. Patrick's Day.

"I started walking through, and thought it was just perfect for our needs," she says of the 44,582-sq.-ft. (4,142-sq.-m.) building, built in 2000. "It looked like a site we would have built. And it had a lot of parking. They advertised it as a 240-seat call center, but at one time they had more than 400 people, because they had 405 parking stalls."

Her notes show it could hold as many as 500 work stations. In addition to 240 cubicles worth of furniture, it also had a computer room with raised floor and a training room, "so it had everything we would need to walk in and operate out of it," says Johnson. It also was built to withstand 200-mph winds, which she says was attractive to her team. "I came back to corporate headquarters, told my executive staff about the building, showed them the drawings and pictures of interiors, and they said 'Buy it.' It was that simple. It also came with all the cabling. The only things I had to buy were the phone system and new carpet."

Johnson says PenFed just built its Alexandria headquarters two and a half years ago, and has enjoyed a 50-percent reduction in utilities cost because of the facility's geothermal system. Before the Omaha move, she got pricing on doing the same at the former Omaha facility. Now that PenFed has moved instead, "right now, we're not going to spend any more money, but that doesn't mean to say we wouldn't go back and consider it. We're very pleased with geothermal."

Johnson says less expensive operating costs and less expensive electrical power certainly are part of the attractiveness of Omaha for FIRE sector operations. And she says the annual visits from the mayor and the head of the chamber are meaningful.

Kingsley, a native Nebraskan from Grand Island who's lived in Omaha since 1985, says people are the primary reason FIRE sector companies like Omaha so much.

"We're able to recruit consistently quality employees who come in, are easily trained, adapt well to what we want to do, and they stay. We've had a good experience with the work force, and that's why we're here."


Story in Pictures

“College sports, quality art museums and performing arts — Omaha has what it takes to be a real city, but is not bogged down with some of the other trappings of a big city … we have ‘rush half-hour.’ ”
— Mark Huber, president and CEO, Payflex
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