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Groundwork, Homework, Site Work, Clockwork

There is a lot of work involved. A deliberate analysis and a solid road map will lead you to a welcoming community, well suited to the new operation.

Nov 09
(page 2 of 2)
Performing the Site Work
Once you have a short list of target communities, it's time to start looking for available real estate.

Notify search channels in your targeted communities (real estate brokers, economic developers, etc.) of your requirements. Be clear and direct with the information you request and the format in which you request it. This will make life easier going forward. Be sure to ask about:

Utility availability, redundancy, and cost

Access to site/building

Environmental issues and restrictions

Zoning and neighboring land uses

Site/building history

Technology amenities such as fiber or uninterrupted power supply

Whether the site/building is in an incentive zone

Flood zones

Refine earlier analysis. For example, earlier in the process you considered the demographics of whole communities. Now you can refine those statistics to consider the demographics surrounding a specific site.

Select two to three sites/buildings in each community.

Visit short-listed sites/buildings. A picture may be worth a thousand words, but you'll need a lot more than that to make an informed decision.

Prepare financial pro formas on at least your top three sites/buildings. Be sure to include sites/buildings in at least two different communities. Even if there is a clear leader at this point, it's advisable to have a Plan B. By now you should be able to include some estimates of potential economic development incentives in your pro formas.

Note that some projects are constrained by the availability of specialized facilities. Plug-and-play call centers, data centers, and mega sites are examples. For these projects, it may be necessary to reverse the sequence, starting with site identification rather than market evaluation, or melding the two.

Run It Like Clockwork
At this point, you're ready to enter serious negotiations. One could write pages of checklists for this part of the selection process, both for the real estate negotiations and the incentives negotiations. Instead, here are a couple of key concepts to keep in mind:

Closely coordinate all activities. Timing is everything at this stage. Real estate negotiations must be coordinated with economic development incentives negotiations. Incentives frequently have a "but for" clause attached to them, e.g., you have to attest that "but for" the incentives, you would not put your investment in a given location. If you have already locked down the real estate, it will be very difficult to make the "but for" case.

Conduct your own market research. Have a good knowledge of average real estate prices in the area. Seek out "comps," i.e., details on recent, similar property transactions. Knowledge is power - and leverage. Likewise, learn what you can about economic development incentive packages awarded in the past to projects similar to yours.

Preparing for Challenges
Surprises invariably emerge. Whether they derail or delay a project is a matter of planning. Being alert to potential challenges may help you avoid or minimize their impact. Considering the following points before encountering an obstacle can help keep a project on track:  

Keep consensus on the management team. Despite your best laid plans, internal team conflicts may occur due to personal biases or the sense that the process has begun to favor one group's needs over another's. This is when you can point to the careful work done in the planning stage and remind everyone of the overall goals of the project and the objectivity of the analysis process.

Stay focused over time. During most projects, there comes a time when management is distracted with other issues and not able to move forward as quickly as planned. Be realistic when forecasting the amount of time your internal team can devote to the project, and expect the unexpected.

Maintain confidentiality. Rumors move fast and can distract your work force, tip your hand to competitors, and damage relations with your host community. Use a project code name instead of the company name, and remain anonymous for as long as possible. Using an outside consultant enables you to stretch this period of anonymity, but at some point you will need to reveal your identity to move the project forward. Stay in touch with your legal counsel throughout the process and be ready to put an NDA (non-disclosure agreement) in place when you need to share confidential information.

Things will change - Adjust course as needed. Favored locations outside the project scope, changes in the competitive landscape, and financial changes are common examples. Consider each of these challenges separately, and determine whether altering the scope adds value or is merely a distraction.

No location is perfect. Top ranked cities may be geographically remote, lack the lowest electricity rate, or possess other undesirable attributes. The key to success is being able to quantify the trade-offs and understand their impact on your operation.

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