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Relocating:
Philip Morris USA, Prudential moves boost real estate
Directory
of Residential Real Estate Firms
A selection of firms that can help navigate Virginia’s
executive home & estate marketplace
by
Peter Galuszka
Virginia Business
June
2003
When
Michael E. Pfeil commutes to work, he takes a one-hour-long
express train ride — one way — from his home
near Princeton, N.J., to Philip Morris USA current headquarters
near Grand Central Station in the middle of New York
City. From there it’s a 30-minute walk or a $5
cab ride. If he misses the express train, the local
takes about 30 minutes longer. In the evening, he repeats
the process.
But
now that Philip Morris plans on moving its headquarters
to Richmond, Pfeil’s commute can be cut to as little
as 10 minutes, depending upon where he and his family
decide to buy a home. He’s one of the 680 Philip
Morris USA headquarters staff who is expected to take
up new offices in the former Reynolds Metals building
in Henrico County just west of the Richmond line by
next June. “I will definitely have a shorter commute,
even if we move to the mountains,” Pfeil says.
At
least in terms of commutes and housing prices, the recently
announced relocation is good news for the Richmond area.
Even better news came in late April when Richmond-based
Wachovia Securities announced it would likewise relocate
employees from New York-based brokerage units of Prudential
Financial to Virginia’s capital. Published reports
claim 1,000 employees will move, although a Wachovia
Securities spokesman says the number hasn’t been
decided.
The
announcements underscore what has long been a fact of
life in corporate America. Mergers, consolidations and
globalization continue, despite the weak economy. Uprooting
executives, families and companies remains a fairly
commonplace event and can involve most areas of the
Old Dominion. And when firms do pack up and move, they
are aided by small armies of relocation specialists
and real estate agents who are experts in keeping the
transition smooth and costs in check.
Indeed,
real estate agents, relocation officials and local merchants
are agog. Philip Morris’ relocation means that
scores of highly paid mid- and high-level managers,
with salaries averaging about $130,000 a year, will
be looking for houses, schools and amenities. At least
14 senior level executives are involved. Local real
estate agents are seeing stars in their eyes. “People
think their ship is coming in,” says one Richmond
Realtor. “They’re already counting their million
dollars in commissions. This is just like Motorola in
the mid-1990s (the chipmaker’s planned factory
failed to materialize) but this time, it will be real.”
Leading
the way for the Philip Morris move is Relocation Resources
International, a relocation firm based in Massachusetts,
and Fairfax-based Long & Foster Realty. Realtors
from Long & Foster are already scouring neighborhoods
for higher-end housing. They’ve even bused Philip
Morris employees from New York to Richmond for housing
searches and conducted information sessions in New York.
At Philip Morris’ Park Avenue headquarters there’s
a “Richmond Room” where employees can pick
up visitors’ guides and information about good
neighborhoods.
Richmond,
of course, isn’t the only part of the state with
work-related transfers. Thousands of military, federal
government workers and civilian contractors come and
go each year in Hampton Roads and Northern Virginia.
Richmond, Lynchburg and Roanoke all boast of global
firms, such as Dupont or Framatome or ITT Industries
that handle much corporate relocation.
For
now, however, the focus is on Richmond because of the
back-to-back additions of Philip Morris and Prudential.
While Richmond can’t boast of the haute culture
of the Big Apple, it does have some big advantages.
Real estate industry calculations show that a salary
of $130,000 in Richmond can buy a lifestyle that would
require a salary of $355,000 in Manhattan. Housing is
much less than it is in the New York area. A luxury
four-bedroom, 3,500-square-foot house within a 90-minute
commute to Philip Morris’ Manhattan offices can
cost $850,000, while a comparable house with only one
third the commute time in the Richmond area can cost
roughly half as much. Property taxes are much less,
too. One home in Princeton, N.J., where some top Philip
Morris executives live, is on the market for a cool
$5.25 million. Annual property taxes are a stunning
$59,779. A similar property in Goochland County, for
instance, would require annual taxes of only about $35,000.
Having
dealt in such a fast-paced market, the cigarette company
officials will likely prove to be smart buyers. “They
know the cost of living is less, but they know not to
pay too much,” says Monica Dirom, a Long &
Foster Realtor at its Grove Avenue office. She’s
helping Philip Morris USA chief executive and chairman
Michael E. Szymanczyk search for homes. Szymanczyk now
lives in Darien, Conn., one of the most expensive areas
in the U.S., where housing averages more than $957,000
for a single family home. He’s likely to be looking
in the upper end of Richmond’s real estate market
since his cash compensation last year was nearly $2
million.
Even
though a weak economy has cut average corporate moves
by about 20 percent of late, the need to place executives
in far flung spots is still strong because business
has become more global, and costs are an ever more important
factor. Philip Morris, for example, expects to save
about $60 million a year by moving to its new headquarters.
The cigarette maker needs to save money because its
products are taking big hits from discount cigarette
makers and a flurry of health-related lawsuits.
“What
drives relocation is cost and talent pool,” says
Kay Kutt, regional vice president for global business
development at Paragon Decision Resources Inc. Often,
these are opposing themes within corporations but they
both play critical roles. Companies do need to cut costs
as they respond to the need to reach out to domestic
and international markets. At the same time, they must
try to keep employees with critical talents happy as
they move. Oftentimes, though, “where the CEO wants
to be located is the driver,” says Kutt, whose
customers include Abbot Laboratories and Caterpillar.
Relocation companies offer employees information about
their new homes including the state of the real estate
market, schools, standardized test scores for schools
and information about retail shopping, recreation and
cultural activities. Typically, relocation companies
arrange for workers and their spouses to stay in local
hotels on house-hunting trips, organize real estate
agents and temporary housing and help with moving companies.
What
companies offer can be diverse and often follows where
the firm can get the biggest tax break. Some companies,
for instance, are generous with meal allowances and
let workers stay for months in temporary quarters. Some
allow more trips back to visit families before their
moves than other firms. Besides tax breaks, a company’s
generosity is often motivated by its goals. “One
question is whether you are moving people who are key
for talent development,” says Kutt.
International
moves are more complicated since visas, greater distances
and customs and foreign tax regulations are involved.
So are inconveniences. One executive of a shipping line
told of a family whose heirlooms and other personal
items were being moved from Europe to the U.S. in a
shipboard container. A freak wave swept the entire container
overboard in the middle of the Atlantic.
In
Philip Morris’ case, about 680 employees, from
mailroom workers to the CEO, are all being offered jobs
in the Richmond area. Real estate agents say that the
cigarette executives are stunned to find they can buy
a house in Richmond’s West End or in the Fan and
be in their new headquarters in a matter of minutes
rather than hours. Hence, many are already looking for
homes in close-in areas, such as the River Road corridor,
the Windsor Farms subdivision, the newer subdivision
of Wyndham in western Henrico County and at larger properties
in the Manakin Sabot areas of eastern Goochland County.
Some real estate agents, however, say that there’s
a shortage of high-end property in the Richmond area
— an opinion other agents reject. Horse farms may
be attractive to some, but some say houses over $500,000
in price have become less available. “I have less
land now than I have in the 20 years I’ve been
fooling with real estate,” says Frank Carter, of
Goochland’s Carter Realty Co. In late April, for
instance, there were only 13 houses for sale for more
than $500,000 in Goochland, Carter says. A Web search
shows that in the Princeton, N.J. area, 40 houses worth
more than $1 million were available.
To
be sure, there are trade-offs with the move to Richmond.
The capital area doesn’t have the excitement, shows,
concerts, dramas, restaurants or sports that New York
does. Philip Morris’ CFO Dinyar Devitra has an
apartment at the Beresford on Manhattan’s Central
Park West, one of the most sought-after addresses in
the U.S. Two-bedroom apartments with views of Central
Park regularly sell for $2.3 million. Devitra’s
neighbors included comedian Jerry Seinfeld and actress
Nastassia Kinski. For his part, executive Pfeil says
that he’s found Richmond housing prices surprisingly
high — perhaps a reflection of the tight market
at present.
Shopping
has long been an especially weak point, although Richmond
is due to see two new shopping malls open this fall
with toney store such as Saks Fifth Avenue, Lord &
Taylor and Nordstrom. That news has made moving to Richmond
more appealing to some Philip Morris families. It’s
also family friendly. “We thought there were great
family services, and the public school options are very
good,” says Howard A. Willard, senior vice president
for youth smoking prevention. Pfeil says he’s been
traveling to Richmond for 20 years, but never realized
that it had a good number of trendy, upscale neighborhoods
such as Carytown with small boutiques. The city also
has more of an academic atmosphere than he thought.
Meanwhile,
Wachovia Securities addition of many Prudential Securities
workers will only make the Richmond real estate market
hotter. The Richmond investment house now has about
1,700 workers downtown and in Henrico County. Cheaper
costs are a reason for the move, which won’t be
completed for 18 months.
Already,
the cigarette maker’s move is drawing national
attention. “PHILIP MORRIS, QUITTING PARK AVENUE,
AIMS TO SELL STAFF ON SOUTH’S EASY LIVING”
read a recent headline in The Boston Globe. The article
notes Richmond’s choice location two hours from
mountains, the ocean and Washington. What’s more,
Virginia is so tobacco friendly that state cigarette
taxes are only 2.5 cents per pack, the lowest in the
nation. And unlike in New York, Philip Morris workers
will be able to smoke their free cigarettes on the job.
With Joan Warner in New York
Return
to Virginia Business - June 2003
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