Looking for prospects
Recent moves give officials more clout in recruiting corporate headquarters

by Elizabeth Cooper
for Virginia Business
May 2007

Fifty-six years ago housewife Lillian Hochberg began making handbags and belts at her kitchen table while placing ads for the products in Seventeen magazine. She created a mail-order company called Vernon Specialties after her hometown, Mount Vernon, N.Y. A decade later it became Lillian Vernon Corp.

Over the years, the company’s corporate offices moved around but never strayed far from its namesake city in the New York suburbs. Last fall, however, Lillian Vernon (now also the legal name of its founder) relocated its headquarters to a 62-acre site in Virginia Beach where its distribution center has been since 1989. In all, the company transferred 15 employees and 45 positions to its International Parkway facility.

The move came after Sun Capital Partners Inc. purchased Lillian Vernon last year and decided to cut costs and increase efficiency. “We viewed the facility here with 1 million square feet, and it was cost effective to move”, says Michael D. Muoio, the president and CEO of Lillian Vernon, which has annual revenues of $175 million. “More important, the interaction between our teams being in the same building has produced tremendous results. There was a remoteness before. Now you just walk down the hallway and are able to resolve issues.”

Lillian Vernon is not the only company in recent years to stake out a spot in Hampton Roads for its corporate base. Wolseley PLC, the parent company of Ferguson Enterprises, has established its North American headquarters in Newport News. French shipping company CMA CGM is building its North American head­quarters in Norfolk’s Lake Wright Execu­tive Center. And Dominion Enter­prises, a successor to Trader Publishing Co., has added its headquarters to the downtown Norfolk skyline. These moves give local economic development officials extra clout as they try to persuade other companies to move their headquarters to the region.

It’s not an easy job. Relatively few companies relocate, and those that do tend to move to larger, centrally located metro areas that already have a mix of Fortune 500 firms. With only two Fortune 500 companies — Smithfield Foods and Norfolk Southern — calling Hampton Roads home, some wonder how effectively the region can compete, not only with the likes of New York and Los Angeles, but also with such areas as Richmond, Charlotte, Baltimore, Jacksonville and Charleston, S.C.

These days the competition is tremendous. John R. Lombard, director of the E.V. Williams Center for Real Estate and Economic Development at Old Dominion University, says Hampton Roads can attract more regional headquarters, but he thinks chances are small for reeling in a Fortune 500 or Fortune 1,000 firm. “Hampton Roads, despite having a population of 1.6 million, is still a tertiary market,” he says. “Businesses locate in very large markets with well-developed service sectors and large populations,” he adds, noting that a lack of similar corporate headquarters creates a stumbling block for many companies. “Headquarters like to be with other headquarters.”

Even so, those stumbling blocks can be surmounted once companies learn about the region and its amenities. At least that’s the opinion of Jones Hooks, president and CEO of the Hampton Roads Economic Development Alliance (HREDA). Creating an awareness of all the area has to offer is his organization’s biggest challenge. “For so long, Hampton Roads was looked at solely as a military or port-related region,” he notes. “Right here in Virginia, there are people who don’t think of us as the large metro area we are with all of the support infrastructure necessary for headquarters … People from outside of Virginia think of Northern Virginia and Richmond.”

To change that mindset, HREDA, which markets 15 Hampton Roads localities, has launched an advertising campaign in the Wall Street Journal and has stepped up recruiting efforts at national and international trade shows.

taffers also recently met with site selection consultants in Atlanta and the Virginia Economic Development Partnership to highlight the region’s assets. “We’ve got so much significant product here for headquarters operations to consider,” says Hooks.

There’s Newport News’ City Center, Virginia Beach’s Town Center and downtown Norfolk’s new business towers, as well as suburban tracts in Chesapeake, Virginia Beach and Suffolk. “We have assets for corporate campuses and a good product mix for corporate headquarters whether it be North American headquarters, regional headquarters or district headquarters,” he says.

Hooks would like to see more Fortune 500 companies come to Hampton Roads, but he doesn’t think the region’s lack of big firms is detrimental. “The idea is you create synergy by having more Fortune 500 companies in an area,” he says. “I’m not sure it’s a negative that we don’t have more. We have two. There are other places around the country that don’t have any.”

Lillian Vernon executives were well aware of the region’s amenities because of the company’s distribution center in Virginia Beach, “Hampton Roads has a lot going for it,” says Muoio. “It’s a progressive community. Government is very supportive and welcoming to business and industry, and there’s attractive work force availability.”

Muoio also extols the region’s transportation infrastructure, especially the Port of Hampton Roads. “Transportation is a huge factor,” he notes. “You’re not fighting New York traffic on I-95. There’s a solid transportation infrastructure here. We’re able to get our containers to the Norfolk port. eventy-five percent of our customers are within three shipping zones from Hampton Roads, so it’s the logical place to be.”

(Lillian Vernon announced in late March that the loss of call-center and distribution business from Time-Life would affect about 230 employees. Lillian Vernon hopes many of the employees can return as seasonal workers during its holiday selling season. The company has 800 full-time employees and around 3,000 seasonal workers.)

The port is slated to become even busier and more lucrative with the completion later this year of the $450 million container terminal that A.P. Moller-Maersk Group is building on the Portsmouth waterfront. “For Maersk, the world’s number one shipping company, to make this kind of investment is a good indicator that this is the place to be,” says Gary McLaren, deputy director of the Virginia Economic Development Partnership. “That facility will be a world-class port when it comes on line.”

The area’s highway infrastructure is another story. Although Hampton Roads’ transportation issues come nowhere close to matching the congestion challenges faced by Northern Virginia, New York or Boston, the area’s traffic woes are still a factor for companies seeking to relocate executives. “It’s a difficult region to get around,” says Hugh Keogh, president of the Virginia Chamber of Commerce and former president of Forward Hampton Roads, the forerunner of the HREDA. “The emerging regional cooperation in the area is a major step in the right direction, but the real impediment is the transportation situation. Until the revenues are in place, you can’t do anything.”

But the region could see congestion relief soon. Under a road plan approved by the General Assembly and Gov. Timothy M. Kaine last month, the region will have the ability to raise about $200 million a year for transportation projects with new taxes and fees. If seven of 12 localities agree to the plan, a transportation authority would use the money on key projects identified in the Hampton Roads 2030 Long Range Transportation Plan.

Some local boosters believe Hampton Roads could add to its Fortune 500 roster within the decade. “Between now and 2010, we may land one,” predicts Robert T. Williams, CEO of Harbour View Partners and a former Portsmouth city manager. Before that can happen, though, he says, the area needs a site that appeals to a major corporate headquarters, an attractive quality of life and plenty of support from the state, regional and local governments.

Williams, the force behind Suffolk’s Harbour View development, believes those elements are being put in place, pointing to Suffolk’s recent purchase of 57 acres of surplus waterfront property on Tidewater Community College’s Portsmouth campus. The city plans to develop the property as an office park to support Suffolk’s flourishing high-tech corridor. “It’s an excellent site, and a quality of life is beginning to develop in the area with a planned community, a world-class golf course and retail facilities,” he says.

But rather than attracting outside companies, ODU’s Lombard says the region might do better to focus its attention on helping the growth of existing businesses. “Headquarter relocation is a very rare event,” he says. “If it’s a homegrown business, the likelihood is that the headquarters will be here as well.”

That’s already true for EchoStorm Inc., a defense contracting firm started by two brothers in 2003. The company, which supplies the military with near-real-time video data services, is undergoing a $4 million expansion that will bring 100 new high-tech jobs to northern Suffolk by the end of the year and anticipates that revenues will exceed $50 million in 2007. EchoStorm, which now has more than 50 employees, up from 12 just a little more than year ago, also recently moved its headquarters into the new Bridgeway Technology Center III building. It is located amid a cluster of defense contractors who have set up shop to serve the U.S. Joint Forces Command’s complex along the I-664 corridor.

While EchoStorm prepares to open offices in Northern Virginia and the Silicon Valley, Hampton Roads will remain its home. “Suffolk will continue to be our headquarters,” says EchoStorm President David Barton. “We’re in a central location to a lot of the customers we deal with, and we can market ourselves to employees across Hampton Roads.”

Economic development officials hope to find more companies with similar attachments to the region. McLaren is confident they will succeed. “I don’t see an Achilles’ heel,” he says. “Hampton Roads’ future is very bright.”