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Tampa Bay Area
Business Observer Friday, Oct. 27, 2017 4 years ago

Hitting the Gas

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Following a secretive search process, a new Hillsborough plant will create 350 jobs and occupy a spec industrial building.
by: Kevin McQuaid Commercial Real Estate Editor

Newmark Knight Frank Senior Managing Director Rick Narkiewicz had worked with Chromalloy Gas Turbine Corp. for years, ever since he'd cold-called the company and helped it find a 9,000-square-foot space needed for a short-term expansion.

So he wasn't at all surprised in early 2016 when his primary contact at the Palm Beach Gardens-based firm asked him to do site selection throughout Florida for a joint venture the company was entering.

The new venture required roughly 200,000 square feet, Narkiewicz was told — a curiously large amount of space for a startup. It sought an existing building, but would consider new construction if the location was right.

Narkiewicz was told to scout out sites in Hillsborough, Pinellas and Pasco counties, among others. Other commercial real estate brokers would be exploring sites in other states, though he wasn't told which ones.

Specific building requirements and ample parking were critical. So was secrecy.

“Just don't ask me a lot of questions,” Narkiewicz says his contact told him.

Such was the process Chromalloy and joint venture partner Siemens employed in looking for a headquarters for Advanced Airfoil Components LLC, which will build gas turbine parts for Siemens when it becomes operational late next year.

In starting its search, the company planned to invest nearly $140 million and hire up to 350 engineers, technicians, assemblers and others, according to a press release issued in Germany this past summer -- a deal that would, if it reached fruition, represent one of the largest economic development victories along the Gulf Coast in the past five years.

Neither Chromalloy, a division of the Carlyle Group, nor Siemens officials replied to telephone calls and emails seeking comment.

As president and CEO of the Tampa Hillsborough Economic Development Corp., Craig Richard is accustomed to receiving telephone calls from state officials regarding large, multinational prospects.

In many cases, the calls are an extension of corporate fishing expeditions to test proverbial economic waters, or aimed at pitting states against one another in an effort to glean the most financial incentives.

So when Richard heard from Enterprise Florida officials that a manufacturing prospect had targeted Hillsborough County among various locales, he was both hopeful and a little skeptical.

State officials dubbed the prospect Project Liberty. Richard thought the EDC had a shot. Chromalloy, he knew, had existing operations in both Tampa and Oldsmar.

But there were hurdles — significant hurdles.

Chromalloy and Siemens would be asking for financial incentives at a time when the notion of supporting expanding or relocating corporations was under fire from legislative leaders.

Florida House of Representatives Speaker Richard Corcoran, in particular, blasted state investments in companies like Sanborn Studios and Digital Domain for failing to generate jobs or returns. Gov. Rick Scott, meanwhile, contended that incentives were necessary to spur further investment by companies and add jobs.

As the state's fiscal year dimmed this spring, it appeared that Enterprise Florida's ability to dole out financial assistance could disappear.

Then there was the competition.

“We knew they were looking in several other states,” Richard says.

Siemens, in a press release, indicated the partnership was searching “multiple Southern states” for locations. Alabama, South Carolina and Georgia were all rumored to be vying for the plant, though Richard was not told specifically what other states were in the hunt.

Acting swiftly, Richard and others persuaded Hillsborough County Commissioners to consider a seven-year tax break for Advanced Airfoil and other incentives.

If approved, the $3.5 million ad valorem break and “Qualified Target Industries” tax refund would be spread over a decade, beginning in fiscal year 2019.

In early June, Hillsborough commissioners voted unanimously to provide the incentives.

“Incentives don't make a bad deal good,” Richard says. “They simply make a good deal better. Companies that do business here know the many benefits our market has to offer.”

Company officials toured the area, and shortly after the commission vote, Richard learned Hillsborough County had alone along the Gulf Coast made Advanced Airfoil's short list for potential sites.

“That was a turning point for us,” he says. “Look, we knew this could be a great fit for the Tampa area. And when companies come and visit us, we know we have a great shot at landing them.”

Although sustained industrial activity in the Interstate 4 corridor, between Tampa and Orlando, seemed to warrant going forward with a new project on a speculative basis, Duke Realty Corp. Vice President of Leasing Tim Perry remained somewhat nervous.

Building without tenants in place, even in a market like Tampa, was a risky proposition. Businesses might decide the company's Tampa Regional Industrial Park's 32-foot-clear ceiling heights weren't high enough, or the high-speed sprinklers too advanced, or parking inadequate.

Companies might also balk at the size of Duke's initial 337,447-square-foot offering in its 117-acre business park. Given the size needed by many logistics firms in the I-4 corridor, the building might not be large enough.

As the building's construction ramped up this past winter, on schedule to complete construction in May, Perry didn't have a single tenant in place.

Like Narkiewicz, Perry was kept largely in the dark regarding Siemens and Chromalloy's identity. He knew the business that was kicking the proverbial tires at Tampa Regional had something to do with turbines; he knew it required a large amount of square footage.

“I thought it was possibly a jet engine maker, maybe a GE or Rolls Royce,” he says. “They asked for extreme confidentiality. I didn't know who it was for a long time.”

Atypically, the prospect asked Perry and Duke to sign a non-disclosure agreement about three months after it first contacted the real estate investment trust.

“It was a case of taking the tact that I'd believe it once the lease was signed,” Perry says.

But sign they did.

Earlier this summer, Advanced Airfoil inked a nearly 211,000-square-foot lease that will keep the company at Tampa Regional through at least 2030.

On Sept. 1, the company took possession of the space, and Siemens contractors began fitting it for their needs.

Siemens USA CEO Judy Marks, in an early October statement announcing the deal, says it will allow the company to “streamline our supply chain” and “pursue performance gains for our gas turbines.”

Perry says he's elated to have a tenant of the caliber of Siemens, which generated nearly $24 billion in revenue in the U.S. last year.

“I think their presence solidifies the future of the park. To have Siemens, I think that says something about the project's future viability.”

Shortly after the completion of the Advanced Airfoil deal, Duke realty signed Ralph's Transfer to 63,362 square feet in Tampa Regional, bringing the spec building to 82% committed within four months of its completion.

Perry says Duke Realty is already focusing on the future development of a pair of 442,910-square-foot buildings — that also will be built spec — that will round out Tampa Regional.

Advanced Airfoil represents one of the largest deals involving a spec industrial building in Tampa history.

For Narkiewicz, it's the largest deal he's ever worked on. He's gratified, too, that the high-tech manufacturing jobs will be coming to Tampa, and to a building owned by one of his clients.

“The building just checked all their boxes,” he says of Tampa Regional. “It's 1.5 miles off the interstate, there are 50 restaurants within five miles, there's a great labor force in place for this use, it has the clear height they need for their machinery and we made the parking work for them.

“The execution, between the companies, the Tampa EDC, the state and Duke, was fantastic on all sides.”

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