3. Review of Scope of Work - Current Situation
Introduction
Business
Environment
Stagnating revenues in the last years
Need to structure company activities
Real Estate Cost Savings Recommendation
Founded in 1965 in California
Providing passivation services among others
Pioneered the Citric Acid method
Rob and Scott Maitland
Headquartered
in California
Small crew
based in North
Carolina
4. Introduction
Business Environment
Business
Environment
Real Estate
Real Estate Cost Savings Recommendation
Key Question
Should Cal-Chem relocate their Headquarters to NC?
Operating Costs
5. Microeconomic factors
Business
Environment
Manufacturing
Facilities
Manufacturing
Employment
Key Question
Business
Environment
Operating
Costs
Introduction Real Estate
Real Estate Cost Savings Recommendation
Business
Environment
GDP Growth
6. California has over 4 times as many manufacturers
as North Carolina
1 California 40,497
2 Texas 19,754
3 New York 17,094
4 Ohio 15,325
5 Illinois 14,630
6 Pennsylvania 14,607
7 Florida 12,788
8 Michigan 12,697
9 North Carolina 9,389
10 Wisconsin 9,115
Business
Environment
Key Question
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
Business
Environment
Operating
Costs
Introduction Real Estate
Real Estate Cost Savings Recommendation
U.S. Census Bureau
0
2005 2006 2007 2008 2009
# of manufacturing Facility
Cal
NC
7. However the entire Southeastern U.S. is
comparable to California
Business
Environment
Key Question
6,000
5,000
4,000
3,000
2,000
1,000
Business
Environment
Operating
Costs
Introduction Real Estate
Real Estate Cost Savings Recommendation
45,000
40,000
35,000
30,000
25,000
20,000
2005 2006 2007 2008 2009
# of Manufacturing Facility
Cal
SE
SE = NC, SC, VA, TN, FL
U.S. Census Bureau
0
2005 2006 2007 2008 2009
# of facilities opened
Cal
SE
8. Comparison of Manufacturing Employees
Statistics
Business
Environment
Key Question
Business
Environment
Operating
Costs
Introduction Real Estate
Real Estate Cost Savings Recommendation
http://www.bls.gov/
9. Real GDP Growth by Region 2011
Business
Environment
Key Question
Business
Environment
Operating
Costs
Introduction Real Estate
Real Estate Cost Savings Recommendation
10. Real GDP Growth by Region - continued
Contribution to % change in
Business
Environment
real GDP
Key Question
Business
Environment
U.S. GDP Breakdown
Operating
Costs
Introduction Real Estate
Real Estate Cost Savings Recommendation
0.6
0.5
0.4
0.3
0.2
0.1
Bureau of Economic Analysis
18%
59% 22%
Far West
Southeast
Other
0
Scientific
services
Healthcaree food services
Far West
Southeast
11. We attained industry specific data from several
industry associations.
• “Pharmaceutical companies have been moving into North
Carolina, but I do not know if they moved the production
facilities with them…. FDA issue the permits, they may have
more information”
– Christopher Gauthier, executive director of North Carolina
Business
Environment
Key Question
Business
Environment
Operating
Costs
Introduction Real Estate
Real Estate Cost Savings Recommendation
Pharmaceutical Association
• “The Southeast has been steadily increasing its food
processing capacity and we will probably not see an end to
that soon”
– Anna Ondick, Southern Association of Dairy Food Manufacturers
12. Buy Options
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
Real Estate
Real Estate
Current Property
Lease Options
13. California Real Estate Options
Introduction
Business
Environment
Current Property
Real Estate Cost Savings Recommendation
14. Real Estate – Current property in CA
Introduction
Business
Environment
• 3.7 miles to El
Monte Airport
• 28.9 miles to
LAX
• 2.4 miles to
I-10
• ~10 miles to I-5
Real Estate Cost Savings Recommendation
15. Real Estate – Current property in CA
Introduction
Business
Environment
• Tax Assessment
Property Value
– $ 530,265
• Estimated Market
Value
– $800,000
• Property Size
– 6900 sq. ft.
Real Estate Cost Savings Recommendation
http://lalife.com
http://www.city-data.com
16. Comparable properties in South El Monte
Introduction
Business
Environment
• Property 1
– $ 818,000
– 7,440 SF
• Property 2
– $ 817,900
– 6,888 SF
• Property 3
– $ 870,000
– 6,000 SF
• Property 4
– $ 580,000
– 5,625 SF
Real Estate Cost Savings Recommendation
http://www.loopnet.com
17. North Carolina Real Estate Option
Introduction
Business
Environment
Buy Options
Lease Options
Real Estate Cost Savings Recommendation
18. 122 U.S. 70 Hillsborough, NC 27278
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Hillsborough, NC
– $450,000
– 7,700 sf
– $58.44 price/sf
• 28.1 miles from airport
• 7.1 miles from I-85
http://www.trianglecpe.com
19. 1201 Brandt Street, Greensboro, NC 27407
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Greensboro, NC
– $600,000
– 8,790 sf
– $68.26 price/sf
• 12 miles from Airport
• 1.2 miles from I-40
http://www.loopnet.com/
20. 4900 Thornton Road Raleigh, NC 27616
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Raleigh, NC
– $350,000
– 4,358 sf
– $80.31 price/sf
• 20.6 miles from airport
• 1.8 miles from I-540
http://www.trianglecpe.com/
21. 104 Meadowood Ave, Greensboro, NC
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Flex property
• 2,500 sq. ft.
• $7.00 /sf/year
– $ 17,500/year
• 7.8 miles from Airport
• 1.8 miles from I-40
http://www.cityfeet.com
22. 2621 Rowland Road, Raleigh, NC
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Flex property
• 6,000 sq. ft.
• $10.00/sf/year
– $ 60,000/year
• 17 miles from Airport
• 2 miles from I-540
http://www.loopnet.com
23. 3916 Forrest Avenue, Efland, Orange
County, NC
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Industrial Property
• 5,708 SF
• $7.88 / sf / year
– $44,979
• 31.6 miles to RDU airport
• 1.2 miles to I-40
http://www.showcase.com
24. Comparable lease prices in South El Monte, CA
Introduction
Business
Environment
No significant difference
in the price / SF /year
Real Estate Cost Savings Recommendation
25. Real Estate Savings
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Sale of Property in CA
– $ 800,000
• Annual Rent of Lease in Chapel Hill
– $ 45,000
• Perpetuity of Rent in Chapel Hill
– $ 450,000
Possible gain over time of:
$ 350,000
26. Salaries Utilities
Business
Environment
Taxes
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
Cost Savings
LA vs Chapel
Hill/Greensboro
Corporate Tax
Advantages
Property Tax
Advantages
LA vs Chapel
Hill/Greensboro
Accumulated Cost Savings
28. Cost Savings - Salaries
Annual Salary / Industrial Maintenance Employee
Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
$46,000
$44,000
$42,000
$40,000
$38,000
$36,000
$34,000
$32,000
Los Angeles Chapel Hill Greensboro Raleigh
Possible maximum annual savings with 20 estimated industrial
maintance employees of:
$ 105,000
Bureau of Labor Statistic http://eslmi23.esc.state.nc.us/ew/EWResults.asp
29. Cost Savings – Corporate Tax
Corporate Tax Paid on $ 400,000
$40,000
$30,000
$20,000
$10,000
Business
Environment
Corporate Tax Rate
Net Income
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
8.80%
6.90%
10%
8%
6%
4%
2%
0%
California North Carolina
Assumption of a 20% Profit Margin and $2 million in revenues –
possible annual savings on corporate tax:
$ 8,000
$35,200
$27,600
$-
California North Carolina
https://www.ftb.ca.gov/
30. Cost Savings – Property Tax
Annual Property Tax by County
Current tax Based on a $ 450,000 property value
Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
8000
6000
4000
2000
0
Los Angeles
County
Guildford County Wake County Orange County
Possible maximum annual savings with total property value
of $ 530,000/$ 450,000:
$ 3,800
North Carolina Department of Revenue
http://maps.assessor.lacounty.gov/mapping/viewer.asp
31. Cost Savings – Utilities
Utility cost on average 18% cheaper in Greensboro
than in Los Angeles
Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
100%
84% 82%
100%
50%
0%
Los Angeles Chapel Hill Greensboro Raleigh
Assumption of utilities as 6% of $2 million in revenues –
possible annual savings on utilities:
$ 22,000
US Census
104%
32. Cost Savings – Accumulated
Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
California North Carolina
Corporate Tax
Utilites
Salary
Possible Cost Savings for moving to Chapel Hill:
$ 145,000
33. Possible Relocation Costs
Transaction fees for selling property
Relocation of key employees
Training for new employees
Relocating equipment
Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
New corporation
34. Cal-Chem does not qualify for any local
subsidies
Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
Location Initial Capital
Investment
# of Jobs
Created
Hourly
Wage
Other
requirements
Wake County $3 million 40 n/a n/a
Statesville,
NC
$1.5 million 50 $15.73/hour 50% of
Health
benefits
Garner, NC $10 million 50 n/a $1100 of tax
base per
gallon of
sewer
allocated
Source: Interviews with Economic Development Offices. See Appendix
35. Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
Recommendation
Comparable Business
Environment
Comparable Real Estate
NC provide annual cost savings
of $145,000
36. Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
Recommendation
Cal-Chem should relocate to
North Carolina
One-time Savings/Cost $ 750,000
Perpetuities of the annual savings
Salaries $ 1,054,000
Corporate Tax $ 76,000
Property Tax $ 104,000
Utilities $ 192,000
Rent $ -674,686
Total $ 751,314
Total including one-time Savings/Costs $ 1,501,314
38. Introduction
Business
Environment
• Other real estate locations
• Industry projection
• Current customers
• California employment
Projection
• NC employment projection
• Manufacturing Closings
• Food and beverage
manufacturers
Real Estate Cost Savings Recommendation
Appendix
• Salaries
• Utilities
• Taxes
• Interviews
– Econ Development Office
– Commercial Real Estate
– Local County Offices
– Trade Association
– Sewage Office
39. Salaries
• LA Industrial Maintenance Worker
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
– $42,320 / employee
• Chapel Hill Industrial Maintenance Worker
– $37,050 / employee
• Greensboro Industrial Maintenance Worker
– $39,260 / employee
http://www.bls.gov/oes/current/oes499071.htm
40. • Interviews with OWASA and Duke Energy
– No useful information
– Said it depended on use and couldn’t generalize
– Depends on specific location within county
• On average utilities are cheaper in NC than LA
– 16% cheaper in Chapel Hill
– 18% cheaper in Greensboro
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
Utilities
41. Introduction
Business
Environment
Real Estate Cost Savings Recommendation
Taxes
• Property Taxes
– Guildford County - .7804 / $100 of property valuation
– Iredell County - .4850 / $100 of property valuation
– Wake County - .5340 / $100 of property valuation
– Orange County - .8580 / $100 of property valuation
– Los Angeles County – 1.13% of total value
• Corporate Tax
– CA - 8.8% vs. NC - 6.9%
43. Interview with Jenny Mizelle
• Holly Springs Economic Development Office
• Incentives are looked at on a case by case basis
– Typically $3 million capital investment
• Capital investment is anything that is taxable
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
– 40 new jobs
• Incentives given in the form of grants
– If approved companies receive 20-80% of taxes back over
2-10 year period
44. Interview with Michael Smith
Statesville Economic Development
• Incentive requirements
– Need to offer over $15.73 /hour salary·
– Provide 50% of health benefits to employees·
– $1.5 million dollar investment in new taxable assets·
– $3 million for the county·
• Incentive
– Performance based, given back part of taxes over a 5 year
period·
• Other Advantages
– Located at the intersection of I-40 and I-77·
– Proximity to Charlotte Douglas Airport and Piedmont Triad
Airport
– Triad location of FedEx distribution hub
– Property tax: .4850/100$ property value
45. Interview with Tony Beasely
Garner Economic Development
• Incentive Requirements
• Incentive
• Advantages
46. Interview with Commercial Associates Real
Estate
• Price
– Depends very much on location and layout of building
(E.g. 1500 sq ft building in Raleigh 1350$/month)
• Buy or lease
– Did not want to make any suggestion but said it depends
on our business model
• In general
– Wanted me to come to her with specific locations from
their website in mind
919 – 878 - 6504
47. Interview with North Wake Commercial Realty
• Price
– Did not have any properties that would fit our purpose
• Buy or lease
– Did not want to comment on that
• In general
– After realizing that they do not have anything suitable for
us he was not very helpful
919 – 554 - 2855
48. Interview with L.A. Realty Partners
• Price
– L.A. Realty Partners is offering office spaces/buildings and
could therefore not give me a quote on a suitable property
• Buy or lease
– She was leaning towards buying property because of
reasonably low prices at the moment as well as good
conditions for line of credits
310 – 407 - 3400
49. Interview with California Commercial Real
Estate Services
• Price
– They do offer advice/consulting as well as other services
but do not actually sell property
• Buy or lease
– She said it very much depends on what the business
owner wants
• In general
– She was helpful but not going into detail unless I would
make an appointment with her
949 – 794 - 0000
50. We tried to get number of building permit issued
from county offices
• There were no national organization that
consolidated building permit data
• We interviewed the revenue department of the
three largest counties in NC
– Wake and Guilford counties do not differentiate between
commercial/industrial building permits
– Mecklenburg county has a website that tracks building
permits issued
• We could not get a good general picture of North
Carolina’s business environment through permits
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
51. We hoped local trade association kept track of
the number of local manufacturers
• We contacted four local trade associations
– North Carolina Beverage Association
– Southeastern Food Processors Association
– National Pharmaceutical Association, Cary chapter
– North Carolina Pharmaceutical Association
• None of them tracked the number of manufacturers
in state
• Christopher Gauthier, executive director of NCPA,
told us FDA may keep track of these numbers.
– He also observed there are pharmaceutical companies
moving in to NC, but he doesn’t know if they actually have
factories in state.
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
52. Interview with Heidi Lamay – Orange Water and
Sewer Authority
• Different rates for commercial and residential
– Hard to say which one is higher due to different structure
of the rates
• There is no definite regulation on the price of
utilities
– Different rates in not only part of the State but also in
parts of the Counties
919 – 537 - 4293
53. 3820 Burlington Rd., Greensboro, NC
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Flex property
• 5, 000 sq. ft.
• $4.95 /sf/year
– $ 24,750/year
• 15 miles from Airport
• 3.7 miles from I-40
http://www.loopnet.com
54. 6120 Brookshire Boulevard, Charlotte
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Flex property
• 2000 sf
• $6.90/sf/yr
• 8.9 miles from Airport
• 2.4 miles from I-85
http://www.showcase.com/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJGU5ZTRiOWYxLWQ0OTUtNDI0Yy1hMGI4LThjYzVmNzQzMzc0ZH9DKarHwVJxXsaS06W2WVKVrlUW
55. 8431 Old Statesville Road, Charlotte
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• Flex Property
• 1800 sf
• $7.25/sf/yr
• 12.3 miles from Airport
• 5.7 miles from I-85
http://www.showcase.com/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJDE1OTU4ZjJhLTNkYjgtNDdjZS04OGY0LWFhZTJlZDE5ZWI2YjrtwNrxPwJdxeeWvrL2c1RPNAEZ
56. 2405 Charles Boulevard, Greenville
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
• 2016 sf
• $10.71/sf/yr
• 5.1 miles from Airport
• 4.0 miles from U.S 264
http://www.cityfeet.com/cont/north-carolina-commercial-real-estate
63. Industry Growth Year
Pharmaceuticals 7-8 % 2011
Biotech 10 % 2011
Food & Beverage 1-1.5 % 2011
U.S. GDP Growth 1.7 % 2011
Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
Supporting research
http://www.ift.org/food-technology/daily-news/2011/march/30/us-food-beverage-market-to-continue-slow-rebound.aspx
http://www.ey.com/GL/en/Newsroom/News-releases/Beyond-borders_global-biotechnology-report-2011
http://www.zacks.com/commentary/17173/pharmaceutical-industry-outlook-march-2011
http://www.dailymail.co.uk/news/article-2092744/Annual-GDP-growth-U-S-worst-recession--things-looking-stronger-quarter.
html
As of 2011 Forbes ranks North Carolina #3 in their „Best States for
Business“ Ranking while California is ranked 39th
65. California Manufacturing Employment
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
Market
2006
# of Employees
2009
# of Employees % of US Market % Change
Southern
California 904 764.7 6.50% -15.41%
LA 5 County Area 800.1 669.3 5.70% -16.35%
Northern
California 591.1 511.2 4.30% -13.52%
LA County 463.1 389.3 3.30% -15.94%
# of employees listed in thousands
67. NC Manufacturing Employment Projections
Area Current 2018 % Change
NC 515,730 449,170 -12.9%
Durham/Chapel Hill 33,130 33,230 0.3%
Wake County 30,280 28,010 -7.5%
Iredell County 50,560 45,440 -10.1%
Guilford County 36,130 29,540 -18.2%
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
68. The closest data we found was from the US
Census
• The US census keeps track of number of
manufacturing facilities in each state every year
• California closes 2% more facilities than NC while
having more than 4 times the number of facilities
• California closes 4 times more facilities than NC
Introduction
Business
Environment
Real Estate Cost Savings Recommendation
Source: U.S. Census Bureau
NC CA diff
2009 10.0% 11.7% 1.7%
2008 8.1% 9.8% 1.8%
2007 8.3% 9.9% 1.6%
2006 8.4% 9.7% 1.3%
2005 7.9% 10.6% 2.7%
NC CA
2009 937 4,725
2008 770 4,040
2007 792 4,090
2006 809 4,019
2005 775 4,534
69. California has closed more facilities than the South
Business
Environment
Introduction Sow
Macro Micro Next Steps
Key
Question
Real Estate Cost Savings Recommendation
U.S. Census Bureau
6,000
5,000
4,000
3,000
2,000
1,000
0
2005 2006 2007 2008 2009
# of facilities closed
Cal
SE
71. Potential Buy Options
Introduction
• $450,000
• 7,700 sf
• $58.44 price/sf
• Hillsborough, NC
• $600,000
• 8,790 sf
• $68.26 price/sf
• Greensboro, NC
• $350,000
• 4,358 sf
• $80.31 price/sf
• Raleigh, NC
Business
Environment
Real Estate Cost Savings Recommendation
http://www.loopnet.com/
Notas del editor
Take all out boxes and put in dates next to arrows (Check)
First three bullets (Check)
>Maybe Mention:
New management
(somehow) Explain what it passivation
Should Cal Chem relocate their HQ to NC?
Maybe put map here too
Make it more compelling – SmartArt
Map that we are comparing CA to NC
Show that at the end to wrap it up
Look at Michigan – or is it relevant for southeast because there are no other south east states in the list (except florida)
No decimals – simplify the slide
No apologetic tone - spoke to associations
More compelling
Start with that one – than show property
http://lalife.com/address/2102_Merced_Ave_South_El_Monte_CA_91733
http://www.city-data.com/los-angeles-county/M/Merced-Avenue-38.html#googleMap
Start with map!
Show another way of estimated market value
Show two or one but be consistent
http://lalife.com/address/2102_Merced_Ave_South_El_Monte_CA_91733
http://www.city-data.com/los-angeles-county/M/Merced-Avenue-38.html#googleMap
“Overview map first” to show that we are in NC now
Maybe still a table
Show “summary” maybe in a chart
DCF for lease!!
Spreadsheet screenshot after this with the recommendation scenario… DCF in it? Perpetuity for the lease as well… too show a NPV as final number!!!
Add a slide about cost to move, other expenses, employees, etc… after the cost savings -. Show cost incurred
BLS logo in top right corner, find Raleigh and take Chapel Hill out
SOURCE????
Base it on property val in counties we chose
Add Raleigh? Maybe put in gas price as well?
Wont hit marks
Earlier to compare to buying first than lease – and a transitional slide to go to lease
Building in greensboro – maybe one in Chapel hill – not two in Raleigh
Switch it to opening states
Earlier to compare to buying first than lease – and a transitional slide to go to lease
Building in greensboro – maybe one in Chapel hill – not two in Raleigh