LOCATION STRATEGY & INCENTIVES OVERVIEW

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1 CBRE CONSULTING LOCATION STRATEGY & INCENTIVES OVERVIEW VEDA 2014 Fall Conference October 8, 2014

2 ABOUT CBRE CBRE is the world s premier full-service real estate services company. Operating globally, the firm holds leadership position in virtually all of the world s key business centers. The firm is a publicly traded, Fortune 500 company. Our global HQ is in Los Angeles. CBRE has 44,000 employees in 42 countries. CBRE Consulting CBRE Consulting provides strategic advisory services. The team comprises 300 consultants globally in 20 countries. The team handles approximately 150 new business prospects per year, including active location analysis assignments around the globe. In support of real estate transactions, a core service area focus is on location strategy and economic incentive services. Agnostic on industry, property type, and geography. 2

3 LOCATION STRATEGY & INCENTIVES Business leads and company requirements come in through real estate brokers in markets across the Americas. No set geography. LOCATION STRATEGY & INCENTIVES Location criteria, prioritization, and ranking of criteria vary by project, industry, and company. o o For example, a data center, back-office, distribution center, manufacturing plant. No one-size fits all model Determine the optimum location based upon: PARTIAL CLIENT LIST Labor Cost Labor Availability Operational Needs Supply Chain Real Estate Costs Business Climate/Incentives Negotiate the most financial beneficial incentive package to reduce start-up and operating costs.. 3

4 PERCEPTIONS OF COMMONWEALTH Virginia Upsides: Location: Virginia has a lot to offer. Ranks high on Tax Foundation data. Diverse regions. Wide diversity of options (Northern VA, Richmond, Norfolk, Charlottesville) Talented workforce. Global access. Port of VA very well positioned for post Panamex. Economic Incentives In the greater DC Region (MD, VA, DC), VA considered most aggressive and biz-friendly. VA s use of cash grants (GOF, VEDIG, VIP, for example) as its primary discretionary program is highly competitive even across the U.S. GOF = Powerful. Provides cash upfront (forgiveness over a 3 5 year period). VEDIG and VIP = Very useful as post performance grants (paid over 5-years) By comparison, DC s only incentive (the QHTC) is a series of abatements and exemptions of local taxes including corporate income, sales, RE, and personal property (5-10 yrs.). MD using a combination of income tax credits and cash grants (MEDAF or Sunny Day). EDAF or Sunny Day can be comparable to VA s GOF and VEDIG, VIP programs. VA has much less regulation than DC and MD. Negotiating projects and documenting legal agreements in VA is much more simplified and streamlined compared to DC and MD. 4

5 PERCEPTIONS OF THE COMMONWEALTH Virginia Downside: Location: Often overlooked by NC vs. SC options to the South. Perception: Northern VA is its own State. Then the rest. Cost considerations (labor, real estate) generally higher than Southeast. Economic Incentives: A GOF s downside is the need for a 1-for-1 local match. A County s decision on local incentives (if any) can hamper VA s ability to compete. For ex, Fairfax and Arlington County prefer to use public infrastructure investment as the GOF match. If a Company is focused on a building where this is not needed, VA s GOF proceeds will be small. Suggestion: Ease off the 1-for-1 match in special competitive circumstances so VA is has more control of winning a project. VA was one of the first state s to allow its data center incentive program to apply to tenants as well as owner operators. Most states only give data center incentives to owner operators. Program has high minimum thresholds include $150m CapX and 50 new jobs. The CapX threshold usually is not a problem. The jobs threshold is problematic for data centers. As of today, VA has one of the highest job thresholds than other states who have data center incentive programs. When VA created its data center incentive program, it was 1 of 4 states targeting data centers. Today, VA is 1 of 19 states. VA s program is not as competitive. Suggestion: Lower or eliminate the jobs threshold to make VA more competitive 5