From Site Selection magazine, January 2002
Proactive Coaching Is One
Service Provider's Forte
textbook case of a corporate real estate service provider meeting -- and exceeding -- client expectations might well resemble work that the Atlanta-based Walker Companies recently completed for Continental General Tire (CGT) Co. The Walker Companies (www.walkerco.com), a provider of real estate management, location consulting and development services, is a 2001 recipient of the Site Selection/William Dorsey Service Provider Award. Ten such awards were presented to commercial real estate service provider companies at the International Development Research Council's Texas World Congress, in Dallas, in October 2001.
In the late 1990s, CGT had embarked on a mission to reduce transportation costs and maximize efficiency at its distribution facilities. The Walker Companies' role initially was to organize some logistical studies to determine where distribution centers should be located nationally. The firm turned to strategic partner Operations Associates, a Greenville, S.C.-based technology and facilities planning firm, for additional expertise in this area.
"There are certain points, or 'centroids,' were you are going to realize the lowest shipping costs when you're serving a broad range of customers, and the goal is to reduce those outbound transportation costs," says Raymond Walker, president of The Walker Companies (TWC). "And you factor in where the manufactured products are coming from," which in this case is a tire manufacturing plant in Charlotte, N.C. In the Southeast, CGT leased a 262,000-sq.-ft. (24,400-sq.-m.) distribution center in Norcross, Ga., but the lease was due to expire, and analysis pointed to the need for a much larger center in the region -- one that would be 758,000 sq. ft. (70,500 sq. m.) initially and expandable to 1 million sq. ft. (93,000 sq. m.). The facility would employ 10 office personnel and about 40 warehouse workers.
Start the ClockIn 1999, TWC was tasked with locating a site for a new distribution center in the metropolitan Atlanta area, overseeing development and construction of the project and bringing it online by the time the lease on the existing facility expired in June 2000 -- just a year from being given the assignment. The client had expressed a keen interest in locating the facility northeast of Atlanta but was resigned to other locations in the area if one of them was arguably more suitable. In determining the type of facility the client would require, TWC again turned to Operations Associates (OA) for analysis and insights into making operations more efficient and incorporating those insights into facility design.
With the possible exception of a couple of existing buildings, it became apparent that the new facility would need to be a build-to-suit, and it was time to prepare the request for proposal. Most agents would develop a two- or three-page document to which developers would respond with a proposal. "That leaves a tremendous amount open for interpretation in terms of the specifications and the quality of the materials and other factors," says Walker. "It's almost impossible to know what a number a developer uses is based on. The goal is to define what the quality and the character of the building is going to be and to make sure everyone is bidding apples to apples.
"Because we have a development services group and an engineer in-house, we do a much more in-depth request for proposal," adds Walker. "We took OA's floor plan, and we engaged Macgregor Associates Architects to do a 20 percent complete design of the distribution center. Working with our engineer and the architect, we developed a very comprehensive set of specifications."
Keeping Leverage Where it BelongsAnother added value introduced at this stage in the process was TWC's creation of a development agreement that spelled out the terms and conditions with which the contractor or developer would have to build the building, including timing, liability issues, scheduling and lease agreement details. "There are always things you want to negotiate up front on behalf of your client rather than by default using the developer's standard lease form," says Walker. "By integrating those things into the bid, we have all the leverage before the developer is selected, which clearly is in the best interest of the client."
Adds L. Brett Chambless, TWC vice president, who served as project manager on the Continental General assignment, "These types of things create tremendous value for the client beyond the numbers. Some of the players that were in the hunt were national developers, and they tend to be more insistent on doing things their way. Well, we might think something should be done a little differently," he says. "I tell people this all the time: The document can be as or more important than the numbers in terms of your flexibility, your rights and your obligations and all the what-ifs. We do take a lot of pride in working very diligently on these documents, working with our attorney at our cost, to help get that going."
How Gainesville Came From BehindOperating cost analysis revealed that of the five finalist sites, Gainesville, in Hall County -- the only northeast Atlanta area location -- had the highest projected total operating costs for the first year of operation. The competing sites were in Clayton County -- the lowest-cost location -- and DeKalb, Fulton and Henry Counties, mostly south and east of Atlanta. The main reason for the higher costs in Hall County was the county's -- and Gainesville's -- inventory tax, which gave TWC another opportunity to deliver.
And deliver it did. Negotiations resulted in getting Hall County to modify its inventory tax from 20 percent abatement to a current level of 60 percent abatement; the taxable inventory rate is diminishing 20 percent per year. The county had been making noises about eliminating the inventory tax, and the CGT project likely expedited that process. The deal was also structured such that if rate reductions were not in place, other tax credits would kick in to make the Gainesville location competitive with the others.
"Through negotiating the incentives, we were able to establish parity between this location and the other finalist locations," says Walker, all of which had to have rail-serve capability. "The client wanted to be northeast of Atlanta -- that's where their work force was, and it's where they have a higher demand for wholesalers coming in to pick up product. They had told us on day one, if there was any way we could locate the facility in the northeast corridor, that's where they wanted to be."
The Hall County site, in the Gainesville West Industrial Park, won the project, and at a remarkable rate. The new distribution center weighs in at 90 cents per square foot less than the older facility it occupied -- and the lease rate is fixed over the life of the lease.
Besides the tax situation, the Gainesville site had other strikes against it, including a creek running through the property. The developer, John W. Rooker & Associates, figured out a solution that would keep the site in the running without having to endure time-consuming permitting delays. "Having to ask the landlord of the existing building for a three- or four-month extension while that was sorted out would have been a very tough situation," says Chambless. "The landlord has got you -- and he took that position with us. So we had the clock working against us."
Adds Walker, "The client couldn't believe that we figured it out. They figured they'd end up on the south side of town. It was almost like pulling a rabbit out of a hat. Not only did we make a good economic deal, but we put the distribution center right where they wanted it to be." "Raymond Walker and his people did a very good job on the [location] analysis and in working on the logistical issues with respect to the building, and on the architectural work," says Mike Worthington, CGT's treasurer.
"And they were very helpful working on some issues associated with the building we were leaving," says Worthington. "They were proactive in doing that; we didn't have to drag them there and get them to help us -- they jumped right into the fray. Being proactive like that was typical of The Walker Companies, and it was very helpful." Worthington says the service provider's "being proactive and sensing out issues and bringing them to our attention early on" made the difference.
Every multi-million-dollar project has opportunities and challenges, says Walker, who sees his role in such projects as that of a coach. With Chambless as quarterback in the CGT assignment, Walker's goal is to make resources and experts available along the way so as "to advance the ball down the field, managing a whole range of issues in the process. Not only is it a challenge, but it's a lot fun when you can produce a result that is way beyond the client's expectations."
But The Walker Companies' work is just getting started. "The best testimony we have is that we are using them again for a similar project in Ohio," says Continental General Tire's Worthington, who will be looking for a comparable service experience in the Buckeye State. "Getting involved in related ramifications of the project -- not just putting up a building -- but everything that surrounds it, that's the 'proactvity' we want."
Continue to Sidebar: Going the Extra Mile -- and Then Some
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