3. Review of Scope of Work - Current Situation
Founded in 1956 in California
Stagnating revenues in the last years
Providing passivation services among others
Need to structure company activities
Pioneered the Citric Acid method
Small crew
based in North
Carolina
Headquartered
in California
Rob and Scott Maitland
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
4. Key Question
Should Cal-Chem relocate their Headquarters to NC?
Business Environment
Real Estate
Operating Costs
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
6. California has over 4 times as many manufacturers
as North Carolina
California
Texas
New York
Ohio
Illinois
Pennsylvania
Florida
Michigan
North Carolina
Wisconsin
40,497
19,754
17,094
15,325
14,630
14,607
12,788
12,697
9,389
9,115
45,000
# of manufacturing Facility
1
2
3
4
5
6
7
8
9
10
40,000
35,000
30,000
25,000
20,000
Cal
15,000
NC
10,000
5,000
0
2005 2006 2007 2008 2009
U.S. Census Bureau
BusinessBusiness
Recommendation
Introduction
Real Estate Operating
Cost Savings Real Estate
Key Question
Environment
Environment
Costs
7. However the entire Southeastern U.S. is
comparable to California
6,000
40,000
35,000
Cal
30,000
SE
25,000
20,000
# of facilities opened
# of Manufacturing Facility
45,000
5,000
4,000
3,000
Cal
SE
2,000
1,000
0
2005 2006 2007 2008 2009
2005 2006 2007 2008 2009
SE = NC, SC, VA, TN, FL
U.S. Census Bureau
BusinessBusiness
Recommendation
Introduction
Real Estate Operating
Cost Savings Real Estate
Key Question
Environment
Environment
Costs
8. Comparison of Manufacturing Employees
Statistics
http://www.bls.gov/
BusinessBusiness
Recommendation
Introduction
Real Estate Operating
Cost Savings Real Estate
Key Question
Environment
Environment
Costs
9. Real GDP Growth by Region 2011
BusinessBusiness
Recommendation
Introduction
Real Estate Operating
Cost Savings Real Estate
Key Question
Environment
Environment
Costs
10. Real GDP Growth by Region - continued
Contribution to % change in
real GDP
U.S. GDP Breakdown
0.6
0.5
18%
0.4
0.3
Far West
0.2
Southeast
59%
22%
Far West
Southeast
Other
0.1
0
Scientific Healthcaree
services
food
services
Bureau of Economic Analysis
BusinessBusiness
Recommendation
Introduction
Real Estate Operating
Cost Savings Real Estate
Key Question
Environment
Environment
Costs
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
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
BusinessBusiness
Recommendation
Introduction
Real Estate Operating
Cost Savings Real Estate
Key Question
Environment
Environment
Costs
12. Real Estate
Real Estate
Current Property
Buy Options
Lease Options
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
13. California Real Estate Options
Current Property
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
14. Real Estate – Current property in CA
• 3.7 miles to El
Monte Airport
• 28.9 miles to
LAX
• 2.4 miles to
I-10
• ~10 miles to I-5
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
15. Real Estate – Current property in CA
• Tax Assessment
Property Value
– $ 530,265
• Estimated Market
Value
– $800,000
• Property Size
– 6900 sq. ft.
http://lalife.com
http://www.city-data.com
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
16. Comparable properties in South El Monte
• 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
http://www.loopnet.com
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
17. North Carolina Real Estate Option
Buy Options
Lease Options
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
18. 122 U.S. 70 Hillsborough, NC 27278
• 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
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
19. 1201 Brandt Street, Greensboro, NC 27407
• 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/
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
20. 4900 Thornton Road Raleigh, NC 27616
• 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/
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
21. 104 Meadowood Ave, Greensboro, NC
• 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
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
22. 2621 Rowland Road, Raleigh, NC
• 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
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
23. 3916 Forrest Avenue, Efland, Orange
County, NC
• 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
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
24. Comparable lease prices in South El Monte, CA
No significant difference
in the price / SF /year
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
25. Real Estate Savings
• 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
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
26. Cost Savings
Salaries
Taxes
Utilities
LA vs Chapel
Hill/Greensboro
Corporate Tax
Advantages
LA vs Chapel
Hill/Greensboro
Property Tax
Advantages
Accumulated Cost Savings
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
28. Cost Savings - Salaries
Annual Salary / Industrial Maintenance Employee
$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
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
29. Cost Savings – Corporate Tax
Corporate Tax Paid on $ 400,000
Net Income
Corporate Tax Rate
10%
8%
6%
4%
2%
0%
8.80%
6.90%
$40,000
$35,200
$27,600
$30,000
$20,000
$10,000
$California
North Carolina
California
North Carolina
Assumption of a 20% Profit Margin and $2 million in revenues –
possible annual savings on corporate tax:
$ 8,000
https://www.ftb.ca.gov/
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
30. Cost Savings – Property Tax
Annual Property Tax by County
8000
6000
Current tax
Based on a $ 450,000 property value
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
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
31. Cost Savings – Utilities
Utility cost on average 18% cheaper in Greensboro
than in Los Angeles
100%
100%
84%
82%
Chapel Hill
Greensboro
104%
50%
0%
Los Angeles
Raleigh
Assumption of utilities as 6% of $2 million in revenues –
possible annual savings on utilities:
$ 22,000
US Census
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
32. Cost Savings – Accumulated
$1,200,000
$1,000,000
$800,000
Corporate Tax
$600,000
Utilites
$400,000
Salary
$200,000
$0
California
North Carolina
Possible Cost Savings for moving to Chapel Hill:
$ 145,000
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
33. Possible Relocation Costs
Transaction fees for selling property
Relocation of key employees
Training for new employees
Relocating equipment
New corporation
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
34. Cal-Chem does not qualify for any local
subsidies
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
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
38. Appendix
•
•
•
•
Salaries
Utilities
Taxes
Interviews
–
–
–
–
–
Other real estate locations
Industry projection
Current customers
California employment
Econ Development Office
Projection
Commercial Real Estate
• NC employment projection
Local County Offices
• Manufacturing Closings
Trade Association
• Food and beverage
Sewage Office
manufacturers
Introduction
•
•
•
•
Business
Environment
Real Estate
Cost Savings
Recommendation
39. Salaries
• LA Industrial Maintenance Worker
– $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
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
40. Utilities
• 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
41. 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%
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
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
– 40 new jobs
• Incentives given in the form of grants
– If approved companies receive 20-80% of taxes back over
2-10 year period
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
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
• 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
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
54. 6120 Brookshire Boulevard, Charlotte
•
•
•
•
•
Flex property
2000 sf
$6.90/sf/yr
8.9 miles from Airport
2.4 miles from I-85
http://www.showcase.com/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJGU5ZTRiOWYxLWQ0OTUtNDI0Yy1hMGI4LThjYzVmNzQzMzc0ZH9DKarHwVJxXsaS06W2WVKVrlUW
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
55. 8431 Old Statesville Road, Charlotte
•
•
•
•
•
Flex Property
1800 sf
$7.25/sf/yr
12.3 miles from Airport
5.7 miles from I-85
http://www.showcase.com/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJDE1OTU4ZjJhLTNkYjgtNDdjZS04OGY0LWFhZTJlZDE5ZWI2YjrtwNrxPwJdxeeWvrL2c1RPNAEZ
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
56. 2405 Charles Boulevard, Greenville
•
•
•
•
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
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
63. Supporting research
Industry
Growth
Year
Pharmaceuticals
7-8 %
2011
Biotech
10 %
2011
Food & Beverage
1-1.5 %
2011
U.S. GDP Growth
1.7 %
2011
As of 2011 Forbes ranks North Carolina #3 in their „Best States for
Business“ Ranking while California is ranked 39th
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-strongerquarter.html
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
65. California Manufacturing Employment
2006
# of Employees
2009
# of Employees
% of US Market
% Change
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%
Market
Southern
California
# of employees listed in thousands
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
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
NC
10.0%
8.1%
8.3%
8.4%
7.9%
2009
2008
2007
2006
2005
CA
11.7%
9.8%
9.9%
9.7%
10.6%
diff
1.7%
1.8%
1.6%
1.3%
2.7%
NC
CA
2009
937
4,725
2008
770
4,040
2007
792
4,090
2006
809
4,019
2005
775
4,534
Source: U.S. Census Bureau
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
69. California has closed more facilities than the South
6,000
# of facilities closed
5,000
4,000
3,000
Cal
SE
2,000
1,000
0
2005
2006
2007
2008
2009
U.S. Census Bureau
Introduction
Sow
Business
Key
Environment
Question
Real Estate
Macro
Cost Savings
Micro
Recommendation
Next Steps
71. Potential Buy Options
•
•
•
•
$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
http://www.loopnet.com/
Introduction
Business
Environment
Real Estate
Cost Savings
Recommendation
Editor's Notes
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 – SmartArtMap that we are comparing CA to NCShow 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 propertyhttp://lalife.com/address/2102_Merced_Ave_South_El_Monte_CA_91733http://www.city-data.com/los-angeles-county/M/Merced-Avenue-38.html#googleMap
Start with map!Show another way of estimated market valueShow two or one but be consistenthttp://lalife.com/address/2102_Merced_Ave_South_El_Monte_CA_91733http://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 chartDCF 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 leaseBuilding 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 leaseBuilding in greensboro – maybe one in Chapel hill – not two in Raleigh
