< Previous8 SEPTEMBER 2018 SI T E S E L E C T IO NEditor’s note: This article was developed from the Research Roundtable program at the IAMC Spring 2018 Savannah Professional Forum. The speakers were Sherri Parman, Partner, Capstan Advisors; Ken Hagaman, Director, Real Estate, Anixter Inc.; Bill Stark, VP Engineering/Real Estate, Essendant; and Greg Saylor, Senior Manager – Global Real Estate, Kimberly-Clark Corp.OverviewWhile a major trend in the business world is for decentralized, highly autonomous business units, the trend is being accompanied by centralized, shared services organizations. This centralization of services is causing corporate real estate (CRE) leaders to focus on the best model for structuring and managing relationships with brokers and service providers. There are three main models: a best-of-breed model where the CRE team manages multiple brokers and service providers across the globe; a regional model with one or two preferred providers per region; and a global master services model. Each model has pros and cons based on an organization’s internal resources, number of transactions, and complexity of services required. And these models aren’t fixed. A company can have one model for North America and Europe with another model in Asia, and companies’ models can evolve over time. Companies must decide on the nature of their service provider relationships.After deciding to create a brokerage master services agreement (MSA), companies must make the following decisions:• One firm or more? Exclusive or preferred? It is accepted that there is no single firm that is the best in every market or property type. Companies must look at the pros and cons of more service providers versus fewer. By having multiple service providers, an organization has a best-of-breed model. The challenge is managing all of these providers, and managing the data and reporting.A further decision is whether to have an exclusive relationship or preferred relationships. While service providers will ask for exclusive relationships, companies are almost always going with preferred. Reasons for wanting preferred relationships are that a service provider may not be strong in a particular market and you want to be able to go outside of the contract.• Delivery model? There is a range of delivery-model options. In each option the key things that have to get done are strategy, transaction management, and transaction delivery and brokerage. The primary models are best broker, preferred brokerage company, corporate services, and reimbursed transactions team. Drivers for deciding on the model include the amount of internal resources available, the volume and type of transactions, and the amount of commissionable work. After making decisions on service provider relationships and the delivery model, the focus shifts to the RFP process and the MSA contract.Typical steps for the RFP process are:• Development of sourcing strategy• Request-for-proposal (RFP) development• RFP process and contract negotiations• Transition, governance, and implementation RFP processes can take a great deal of time for both companies and service providers. Advice for companies includes presenting your RFP as an attractive opportunity for service providers and narrowing it down to only five to seven participants who have a legitimate opportunity to win. Also, develop a “lean” RFP that focuses on how the service provider is going to deliver the services. In the process, ensure that service providers get to know the company’s resources, personality and culture. Different ModelsThe best-in-class model is appropriate in some situations, but is difficult to execute at scale.One attendee said he has previously used the best-in-class model. With a best-in-class model, a company identifies the best broker in a market for a particular type of transaction. In most situations, Master Service Agreements: Identifying CRE Best Practices“Even if your intent is to steer all of your business to one provider, you want a preferred agreement, not exclusive, and you can get it. Don’t let a service provider tell you that you can’t.” — Sherri Parman10 SEPTEMBER 2018 SI T E S E L E C T IO Nthere is a wide variety of local brokerage firms to choose from. Thus, there are typically options available. But as his company grew in size and complexity, and as the company made acquisitions, he concluded that the best-in-class model was simply too difficult to manage and was not sustainable, especially for a company with a great deal of small transactional work.This attendee’s company has shifted from a best-in-class model to a preferred model for the U.S. and Canada, Europe and Latin America. However, Asia, Africa, and the Middle East are still the “Wild West.” In those markets the best-in-class model is still in use for specific transactions.A dual provider model can have significant advantages.More than a decade ago another attendee’s company had decided to move to a single service provider. In talking with multiple providers, the company found that they liked some bits and pieces of one provider but didn’t like other things. There was not one provider that completely met the company’s needs. So, the company ended up going with dual providers; one is primary and one is secondary. This model has worked well and has remained in place.Then, even with that model, when entering a new market, the company still looks for the best provider for that particular market. For large global companies a true global master service agreement can be the best option. In 2005 one of the companies represented at this program centralized its global real estate, which was primarily in North America and Europe. From 2005 to 2015 the company evolved from a best-in-market model to a pool of preferred providers, which was mainly two or three large firms, depending on the region. At that time, several factors caused the company to rethink its services model:• The company experienced compliance issues as some regions weren’t following global processes.• Reducing overhead costs became a company imperative.• The company announced a major global restructuring program.Based on this confluence of factors, the corporate real estate team saw an opportunity to do something different and take real estate to the next level. They concluded that managing services market-by-market or region-by-region wasn’t adequate to truly impact costs.At that time, the real estate team developed a vision for the total real estate lifecycle, on a global basis. They put in place a structure through an MSA with an outsourced provider to handle all the tactical details, freeing up the CRE team to execute on the broader vision.To select the service provider and create the MSA, the company engaged a consultant to guide the process. The consultant helped the company develop and execute the RFP and understand the strengths and limitations of each service provider. Ultimately, the company accepted that none of the providers can do everything but selected the one provider that fit best. The company still retained the ability to keep competition in each market by having full autonomy to select the field broker. This structure is working well. The challenges now are meeting the aggressive savings targets and dealing with increased transaction volume. But the account team at the service provider has given the company the resources to scale up globally.www.iamc.orgSavannah Forum Research Roundtable attendees applaud a presenter. S I T E S E L E C T I O N SEPTEMBER 2018 13When the World Takes NoticeWhen video surveillance provider NUUO US Inc. went searching for a new location for its North American headquarters, the Taiwanese company did not have to hunt very far.From its former home base in Orange County, California, NUUO searched Southern California, from Bakersfi eld to San Diego, before it found exactly what it wanted: a site in Chino in San Bernardino County within Inland Southern California.“We wanted to be closer to where our customers are based, and percent of our employees live within Inland Southern California,” says Frank Wei, general manager of NUUO US. “ is gets us closer to our workers and our customers.”NUUO manufactures video-centric surveillance systems for logistics businesses and industrial manufacturers — companies that normally operate large warehouses. As those businesses, along with advance manufacturing, in Southern California have moved from Los Angeles and Orange County to newer locations in San Bernardino County, NUUO has followed.“Chino has its own unique location advantages because it is on highways and . You can get around quicker here. Chino is more like the middle south of this market,” says Wei. “ is move is about being able to provide local manufacturing for the North American market and being able to be more customizable.”Having now operated in San Bernardino County for two years, Wei says NUUO is preparing to expand again.He is not alone. All over the county, foreign-owned companies are making the decision to INVESTMENT PROFILE:SAN BERNARDINO COUNTY, CALIFORNIAAccess to markets, skilled workers lures foreign rms to San Bernardino County.by RON S TARNERr on. s t ar ner @ site s ele c tion.c omImage: Getty Images14 SEPTEMBER 2018 SI T E S E L E C T IO Ninvest into new facilities and business operations in places like Chino, Ontario, Victorville and Rancho Cucamonga, among other cities.Airport, Seaports Beckon the WorldWhat’s driving them to these interior SoCal locations is a combination of factors, says Jim Short, business development director for NUUO US. The primary advantages of locating in San Bernardino County, he says, include:• Proximity to the Ports of Los Angeles and Long Beach, just an hour away.• Easy access to Ontario International Airport, which offers Southwest Airlines flights and UPS shipping services, as well as competitive parking fees.• Access to 16 universities and colleges within a 10-mile radius, as well another 15 to 20 more colleges within 20 miles of Chino.• Reasonable costs for sales taxes and electric power.• 70 percent of local water comes from wells; the other 30 percent comes from other sources in SoCal; and none is ported in from Northern California.• “The economy is very stable here, and clearing customs is easy at LAX.”• “Housing is more affordable here. Commute times are better. Workers look at those variables.”• “We can service our clients in both Hawaii and the East Coast cities from here.”• “Demographically and logistically, this location makes the most sense for us.”With 20,000 sq. ft. and 10 employees in Chino, NUUO is poised to expand more, says Wei. “We have 220 employees globally,” he notes. “We have locations in Southeast Asia, the Philippines, Australia, Thailand, Indonesia, Vietnam and South Africa. We definitely plan to expand again; we want to add other product lines in the U.S.”Soua Vang, economic development manager at the San Bernardino County Economic Development Agency, says that foreign direct investment plays a significant role in the county’s economy. “We have at least 800 foreign-owned enterprises here,” she says. “This adds considerably to our tax base and employment. Over 23,000 jobs are created by foreign-owned enterprises in the county; they pay about $1.3 billion in wages locally per year.”A young, diverse, multilingual and highly educated workforce attracts international employers to the county, says Vang. “Our median age is 32,” 138769541021. Japan2. Canada3. France4. Germany5. UK6. Mexico7. Sweden8. China9. Australia10. SwitzerlandSource: San Bernardino County EDA Sources of FDIin San Bernardino CountyComposite Image courtesy of Jonny Therrell and Getty Images S I T E S E L E C T I O N SEPTEMBER 2018 15age is 32,” she says. “Many languages are spoken here. The culture is very welcoming of newcomers from all countries. California is diverse, but we are especially diverse in San Bernardino County.”Market access and population growth attract business too, she adds. “We are the preferred choice for investment in the region,” Vang says. “We have available land and the existing buildings to accommodate growing firms. Employers are supported by regional universities and technical schools. And, with affordable housing costs, this is a great place to live.”Time Differential Leads to DollarsVang points to another success story: Uyemura Americas in Ontario. A manufacturer of specialty chemicals for electronics, the firm boasts revenues of $500 million annually.“We wanted a presence in California to reach our West Coast clientele,” said Laura Hanna, administrative lead for Uyemura. “Also, since we already have a tech facility in Connecticut, it just made sense to have a presence on both coasts. Being in San Bernardino County allows us to have more extended and flexible hours to serve our customer base. When it’s 5:00 p.m. on the East Coast, it’s only 2:00 p.m. in California.”She adds that, “in our Ontario office, the staff is comprised of the accounting and engineering teams. We oversee our outsourced manufacturing and tech/R&D teams. Ontario is centrally located to our staff, and the proximity to Ontario Airport is desirable.”Vang says the county plans to keep pushing for more international businesses. “We have signed agreements with the city of Wuxi, province of Jiangsu, China, and Taoyuan, Taiwan,” she says. “Our goal is to sign additional memoranda of understanding with two cities in South Korea: Incheon and Busan. We align with many industries in South Korea in food and beverage and aerospace.”Vang says the county’s FDI attraction strategy is multi-faceted. “We pitch our county to foreign investors based on our strategic location, population growth, market access and other factors,” she says. “We seek to build and nurture international partnerships, especially where there is industry alignment. We partner with others in the region, such as the World Trade Center of Los Angeles. They refer leads to us. We also participate in networking events such as SelectUSA. That enables us to introduce the Being competitive for international business means that, in today’s world, you must also provide a globally competitive transportation network.That’s where James Ramos comes in. As president of the San Bernardino County Transportation Authority and San Bernardino County Third District Supervisor, he oversees a massive operation whose sole focus is making sure that people and goods are able to move quickly and efficiently through the county from Point A to Point B.In a recent interview, he discussed some of the larger infrastructure projects that are taking place in the county.Tell us about SBCTA and its role in the county’s transportation planning.JAMES RAMOS: The San Bernardino County Transportation Authority (SBCTA) is the regional transportation planning agency for the county. Responsible for managing Measure I, the half-cent sales tax for transportation improvements within San Bernardino County, SBCTA plays a key role in making sure people and goods move effectively to and through the region. SBCTA works with its partners at the federal, state, local and nonprofit levels to develop and deliver projects on freeways, interchanges, railroad grade separations, transit and active transportation corridors, and arterial and local roads. As one of the sub-regional partners of the Southern California Association of Governments, SBCTA develops planning detail for inclusion into the Regional Transportation Plan, a key planning document for the pursuit of state and federal funding for the region.What are the most important recent projects that will further support business growth and goods movement in the region?RAMOS: As part of a fairly robust program to address congestion and enhance accessibility of goods going to and from Southern California ports, SBCTA is actively delivering the I-10 Corridor Project. After recently clearing 33 miles of the I-10 Corridor, the heaviest traveled freeway in the county, the project team is nearing the start of a Design/Build effort for the first phase of this Express Lane consideration. Phase 1 of the project represents a 10-mile section on the west end of San Bernardino County and will include two express lanes in each direction, new bridges and ramps, pavement rehabilitation, and a variety of other improvements. Adding this alternative for motorists will improve operation of the general-purpose lanes which will help the daily THE NATION’S LEADINGGLOBAL TRANSPORTATION CORRIDORContinued on next page16 SEPTEMBER 2018 SI T E S E L E C T IO Ncommuter, improve access to local businesses, and reduce congestion for goods movement that uses San Bernardino County as a gateway to the rest of the country. Another signi cant driver to future development in San Bernardino County is the Redlands Passenger Rail Project. Capitalizing on the introduction of a passenger train that can run cleaner, quieter and more ef cient than traditional commuter rail, the future Arrow service will offer increased frequency generating greater potential for transit-oriented development along the 9-mile corridor in the east valley of San Bernardino County. And, in light of a recent grant from the state, SBCTA is exploring the implementation of a zero-emission vehicle that can use the existing rail infrastructure, a rst of its kind in North America. Working with our neighboring counties, we could see the expansion of the system to the Metrolink Corridors, further enhancing the development potential throughout the county.What is the total investment at this time in the county’s infrastructure and how do you see our region in comparison to other SoCal areas?RAMOS: The roughly $5-billion capital improvement program at SBCTA represents a major investment into the ongoing growth of the region. By leveraging the resources from Measure I to garner more state and federal investment, SBCTA continues to look for ways that we address today’s congestion challenges while anticipating the inevitable demand generated by its expanding population. Neighboring one of the largest transportation agencies in the world can make for unique challenges when it comes to funding priorities. Nonetheless, SBCTA continues to deliver on its promises to the voters while managing the outlook for transportation for one of the fastest growing regions in the country. This is accomplished through effective planning, innovative approach, and a commitment to excellence. Those qualities were recently recognized by the state as San Bernardino County was awarded more than a quarter billion dollars in grant funds for the I-10 Corridor, Redlands Passenger Rail, and US 395 Widening projects.This investment pro le was prepared under the auspices of San Bernardino County government. For more information, contact the county Economic Development Agency at 909-387-4700. On the web, go to www.sbcountyadvantage.com.benefi ts of the county to prequalifi ed foreign investors.”Japan, Canada Send Big InvestorsTrade works both ways. Vang notes that the top sources of FDI in the county, in order, are Japan, Canada, France, Germany, UK, Mexico, Sweden, China, Australia and Switzerland. e fi ve biggest trade partners with the county, she adds, are Canada, Mexico, the Netherlands, Japan and China.“We believe in measurable results,” Vang says. “We conduct targeted outreach eff orts and do a thorough analysis to determine where we have industry alignment. at is how we build eff ective relationships.”NUUO’s Wei says he likes the county’s approach. “ is is an up-and-coming area. We recommend it to others,” he says. “We worked closely with the EDA when we were looking for a site. ey gave us a lot of numbers and insight on each city. ey gave us information on incentives and the square feet of real estate available.“When we are ready to expand, we plan to do so right here in this region.” County ofCounty ofSAN BERNARDINOSAN FRANCISCOLOSANGELESSANDIEGOContinued from previous pageNext >