Imagine that a company has secured a contract to provide goods to a major customer and must be up, running, and producing those goods within 18 months in the United States. This company could be headquartered in California, New York, or Germany — virtually anywhere around the globe. This company is faced with a myriad of questions. Where do they locate? How do they identify the site? What infrastructure will they need? What are the workforce needs? What size and type of building is required? Who will design the building? Who will build the building? Are there environmental issues on the site, and if so, who will address them? And this is just the beginning.

An economic development project must be managed thoughtfully, methodically, and strategically. This is an intricate, detail-oriented process. The team and the timing are everything, and much care should be given to think through both of these aspects of the deal.

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First, let’s start with the right team. The team needs to be created early in the process. The company’s executive team, a site selection consultant, an attorney leading the economic development team, a broker, engineers, architects — all of these people are key to have involved in picking the right site. The company needs a team that works well together, that trusts each other, and that has a great track record for results.

Meegan Spicer, who is director of Site Selection and Incentives Advisory at Duff and Phelps, says, “The biggest factor determining ultimate success of the team is the level of communication between the various team members (i.e., legal, real estate, site selection consultant, tax, human resources, etc.). Weekly standing, structured team calls are the best way to do this. Identifying a lead person with strong project management skills and leveraging those skills are critical to keeping the team on track. Oftentimes this is someone at the company or the location consultant. Each professional involved in the project needs to always be mindful of what’s best for the overall project to achieve its goals. You can’t get too focused on just your particular area of expertise because everything is interdependent. The devil is in the details on these deals. The more communication and attention to detail on the front end, the fewer issues on the back end of the deal.”

The biggest factor determining ultimate success of the team is the level of communication between the various team members (i.e., legal, real estate, site selection consultant, tax, human resources, etc.). Meegan Spicer, director, Site Selection and Incentives Advisory, Duff and Phelps A company’s economic development team will often consist of an internal team and an external team. The internal team will be made up of company executives who are tasked with bringing options to the board of directors or other governing body of the company to ultimately make the site selection decision. Staffing of the internal team is a big deal, and it must be handled with the greatest of care. Typically, the core internal team will consist of the CEO or president of the company, the CFO, the COO, the general counsel, and perhaps the director of real estate (or someone in a similar role). This team should, as necessary throughout the process, include and incorporate continuous input from company human resources, tax, and logistics and supply chain representatives as well.

Next comes the external team. This team also should be assembled early in the process. As previously mentioned, this will be a larger team that consists of a group of site selection consultants, a legal team, the broker, engineers, and the architect. The site selection consultants may begin their work first, and then the other members of the team are brought in when the sites are narrowed down to a smaller list. The external team should work and execute the process flawlessly together. This may initially be difficult with the diverse array of viewpoints and experiences that will constitute any large team. A company may be well served by coordinating regular “all hands” calls, both at the project’s outset and throughout the project, in order to clearly delineate and manage tasks and responsibilities within the group.

Addressing Complex Legal Issues
When a company is coming into a particular location for the very first time, and especially if it is coming into the United States for the first time, there will be complex legal issues that must be considered. The legal team should consist of an economic development lawyer, as well as his/her supporting legal team (i.e., corporate, tax, employment, environmental, and real estate attorneys) with specialist support in areas such as immigration, antitrust, or intellectual property as needed.

Peter Fennelly, president of Charleston, S.C.-based Bridge Commercial (an industrial real estate brokerage), says, “The ‘best team’ for a company to put together for a strategic location move or expansion into a new market should include a solid combination of internal and external stakeholders. For the internal stakeholders, it is best to have leadership representing executive decision-making covering legal, finance, and human resources. For the external stakeholders, it is best to have qualified legal professionals with economic development and real estate transaction experience, highly competent real estate professionals with specialization in the desired product type, and other qualified team members identified based on need (geo-tech, environmental, land planning, architecture, construction, etc.).”

The site selection consultant will work diligently with the legal team on the many complex issues surrounding the selection and the launch of the project at the site. To narrow down the site possibilities, the consultant and the company will evaluate workforce availability, energy costs, infrastructure, tax matters, environmental issues, highway and/or rail and/or port access, etc., working in conjunction with the legal team as issues and specialized questions arise.

For example, the site selection consultant may identify a great site in one state, but the site may be lacking a necessary rail spur. The consultant will share this with the company and the legal team, which can work on seeking support from the rail carrier and the state to fund all or a portion of this rail spur by way of an incentive. Similarly, perhaps an interchange is needed to make a site work for a company. The internal and external site selection teams can then work strategically to help secure the necessary financial and other support of local governmental officials and agencies to commit to the timely completion of the interchange. By the site selection consultant, company executives, and legal team working closely together and communicating the pros and cons of potential sites, a preferred site may overcome its obstacles.

When a company is coming into the United States for the first time, there will be complex legal issues that must be considered. Once potential sites have been identified, the legal team’s real estate attorney can begin title work and due diligence on the site. An “ideal site” is not ideal if there are environmental issues that cannot be overcome without a material time delay and a significant price tag that derails the budget for the project. Such make-or-break environmental issues should be identified before the project gets too far along. If all team members work together, everyone is focused on the company and making sure potential sites are vetted to ensure they are worthy of consideration.

I envision an economic development project like spokes on a wheel. The center is the company and its project. The spokes originating from the center are (to name a few and in no particular order) the site, environmental issues, tax matters, workforce issues, corporate matters, economic development incentives, infrastructure needs, timing, and real estate matters. The very best teams do not have a secret sauce (other than a commitment to the project and the goals of the company). Egos must be left at the door, and the entire team must be committed to providing the very best service possible.

Expect Complexities
A deal is never done until it is really done. Projects go on hold all the time. Projects may be announced and then the company merges with another company. The acquirer does not know if it will continue with the project the former company recently announced. In this scenario, an entire executive team at the company may now be gone and replaced with the leadership of the acquiring company. You may need to ask for an introduction to the new executive team before the other team exits. Within companies, departments, divisions, and individuals are vying for commitment of funds to do large projects. A project may be in the works and then suddenly go dark. Funds may have been diverted to another part of the company because of an unforeseen business need that arose.

The bottom line is that the project will take many twists and turns before it comes to fruition. Be ready for those. No project starts out anticipating these complexities, but a team must be structured with the potential for complexities in mind, and the entire team must be flexible to facilitate the dynamic and changing needs of the deal.

A local broker with much experience with large and mid-size industrial deals, Bob Barrineau, a senior vice president at CBRE in Charleston, S.C., says, “There are several things that most site selection processes should have as a foundation. From the beginning, there should be clear drivers for the decision, and these should be discussed and weighted in order of importance.” Bob further explains that “as far as timing goes, it is best to work backward from the date you wish to be operational. The entire team must know the time end date and the consequences for missing the date. Depending on the complexity of the project, design and construction can take as long as two years. Concurrently, the company has to vet different locations, negotiate incentives, plan and finance necessary infrastructure, and close out their previous site if there is one.”

Timing Is Everything
When does a company involve site selection consultants to work with its internal real estate and legal team, if at all? When is too early, and most importantly, when is too late?

Alexandra Segers with SSOE Group says, “The site selection phase will lay the foundation for the project, followed by the design and construction phases. If the core team consists of the right experts, they will be able to manage all phases successfully, supported by carefully selected designers, contractors, and consultants. Any oversight, for example, during the site selection could lead to major project delays and increase in cost.”

Remember, if a company is seeking economic development incentives (and large projects typically are), then timing is everything. Incentives are used for competitive projects to incentivize a company to locate in a particular state — i.e., to beat out the competition. This means that attorneys must be engaged in the incentive process while the project is still competitive with one or more states or even another country. Once the real estate deal is done (lease signed, dirt under contract, etc.), then there is no longer a need for governmental entities to incentivize a company to locate in a particular community and state.

Once the location process has narrowed down to two or possibly three sites, and conversations are started with local governmental representatives, questions will be asked of the company such as, “What is your anticipated capital investment in both real and personal property over the next five years?” “How many new jobs do you expect to create in the next five years (and what are the anticipated wages associated with those jobs)?” The company may not be fully prepared for those questions. However, once those numbers have been given, they are not forgotten.

The company must to be very careful and conservative with projections. Nothing good happens when a company shares highly aspirational numbers that it may not hit. States, naturally, have stringent clawbacks for companies that do not meet capital investment and job creation targets. Companies must be cautious and careful when sharing these numbers, and make sure they are numbers the company will not only meet, but also exceed. Those numbers will appear later in the contracts that lock in the company’s incentives, so the numbers must be realistic. Remember, the company will be measured by these numbers and will face tough consequences if it fails to meet the targets.

Economic development counsel and site selectors have very different roles, and they are not competitive; they are complementary. With counsel and site selectors working together with the company, the project has its best likelihood of timely success.

According to Jubal Smith, a managing director of JLL’s Business Incentives and Site Selection Practice in Dallas, “Two time clocks govern every economic development project — one is the project timeline expected by senior company officials and the other follows a legal path dictated by state and local statutes. Oftentimes, these two clocks do not move in sync, resulting in unexpected project delays or even derailment. With proper planning by a core company team partnering with experienced consultants keenly aware of local and state legal deadlines and procedures, critical timeline derailments both legal and non-legal may be avoided.”

A company should put together its best team early and work effectively with the team to ensure timely success. It will be an eventful and trying ride, but worth the rewards when the deal comes together in the end. The company wins. The community wins. A well-assembled, cooperative team can make the process more rewarding for all involved.