Friday, November 12, 2010

Executive Office Space - is it right for me?

“Should I consider space in one of Atlanta’s executive office spaces, or do I need my own space?” This question is presented to me fairly often in some form or fashion, and there are clear-cut circumstances in which an executive center is the best answer.

Executive Office Space Defined
First, what IS an executive suite space? It’s a way for small or young enterprises to lease commercial office space and enjoy its benefits – professional image, nice reception area, conference room, break room, etc – without the enterprise having to carry the costs of these benefits all on their own.

Here’s how executive office space works: An executive suite provider leases a fairly large space – say an entire floor of a building – directly from a landlord. The suite provider then builds this space out with a large break room and common areas, a nice reception area and shared conference rooms, and a bunch of small to medium-sized rooms with locking doors. They then sublet the rooms for short duration leases. On a dollar per square foot basis, the executive office space is more expensive than one sees in a direct lease. BUT the rate includes the shared spaces and many of the operating expenses one pays directly to vendors in a standard lease (more to come on this topic), making for a good business case.

In regards to the operating expenses included in executive office space rent, consider the list below. These are all items you will/might need to have for your office to function, and they are all made available for you in an executive office space.
      • Areas that add to your square footage requirement in a direct lease
        - Reception Area
        - Conference Room
        - Break Area
     • Products and Services you’ll need in a direct lease
        - Voice Service
        - Data Communications Service (internet, metro Ethernet, etc)
        - Phone System
        - Utilities (may be included in direct rent)
        - Furniture
        - Voice and Data cabling
        - Refrigerator and Beverage Service

When does Executive Office Space make sense?
Executive office suites primarily warrant consideration for companies needing generic office space who are in one of the three situations listed below.
  • Early stage high-growth companies. The small spaces work because there won’t be many employees at first and the short term is key because nobody can say for sure when things will take off and you’ll outgrow the space. When the company does take off, small isolated rooms will no longer suffice and the dollar-per-square-foot equation will no longer make sense, so you should expect to transition out of the executive space eventually.
  • Businesses with low HQ headcount. One example is companies whose workforce reports to onsite client assignments – they’ll benefit because they can rotate a small number of people in and out of their own space as dictated by project requirements. Another example is an outsourced CFO or COO, or a remote salesperson. These people need a base of operations, a place for their assistant to work, and professional meeting space.
  • Companies who can’t make a long-term commitment. Sometimes the owner’s personal circumstances or business model require flexibility. Other times the business financials are such that a direct landlord wouldn’t consider the company to be credit-worthy.
Conversely, executive office suites will generally not make sense if you have specialized space needs or you need more than 3 rooms. Specialized space needs may include a lab space, warehouse space, or infrastucture to support high-end computing systems. And 3 rooms is a decent rule of thumb maximum because there is a crossover point at which it does make economic and operational sense to absorb the cost of your own reception, conference, and break areas.

How to Proceed?
To determine what’s right for you, discuss your specific situation with a professional tenant representative. Your interests and theirs will be aligned, as the tenant rep would represent your interests (not those of the execuite center) and economics of the tenant rep's world will cause them to direct you towards the best product for your needs.

If executive office space makes sense for you, then that tenant rep can help you identify your best options, contact the area representative (you’ll be better off dealing with the area representative versus the onsite contact), and assist you in pricing and contract negotiations. At the end of the day you'll know that you evaluated all the options, worked in the most efficient manner through the best possible channels, and got the best possible rate and terms.

Here’s to your success!
John
404.547.2009

Monday, October 18, 2010

Energy Use: When should a separate power meter be required?

There's a fundamental flaw with many commercial leases in regard to power consumption - there are two separate matters that need protection, and the wording I frequently see protects neither.

The two issues are availability and consumption.  Consume more power than is available and you'll have a brown-out or a true outage, while higher than expected consumption kills utility budgets. 

The flaw is that the boilerplate text in many leases proposes a billing solution to an availability issue or vice versa. It's kind of like our government making a company pay a fine rather than helping that company fix the problem that led to the fine.

A little background
It's important to understand what is measured how.  Availability measures how much energy a building can provide at any moment in time, and is measured in kilowatts (kW).  Consumption measures how many units of energy a party consumes in a given period in time, and is measured in kilowatt hours (kWh). I tell people to think of it as a car lease... availability equates to the car's top speed, and consumption equates to the number of miles one travels in a month.
Think of it like a car lease.

It's also important to note that power clauses only appear in certain lease types. The leases we're talking about here are those in which the rent the tenant pays to the landlord includes power.  And not all such leases will contain a power clause because most tenants don't fall outside of a landlord's acceptable norms. I see this language more because technology clients tend to use lots of machines (go figure!).

Finally, note that for our puposes commercial power bills are primarily a function of (1) how many kWh you consume and (2) your peak instantaneous demand (kW) during the period. Having two variables complicates everything... the relative monetary importance of these two can swing in either direction.
And now for the challenge
Any time I've seen power addressed in a boilerplate lease, the landlord proposes to specify a kilowatt (kW) per rented square foot (SF) threshold.  If the tenant exceeds this kW per SF number, then the landlord can install a power meter on the tenant's space and can collect for power consumption overages. 

Going back to my car lease analogy, that's like saying that the if the driver exceeds 125 miles per hour then the leasing company can begin charging for consumption above the threshold.  Unfortunately, this approach leaves both the operations and billing concerns exposed:
  • Operations (availability).  The immediate effect of how fast I drive - a.k.a. my instantaneous kW usage - shows up as circuit overloads.  But the typical language doesn't address this issue by slowing me down or "beefing up" the engine... it imposes a billing-related solution.
  • Billing (consumption).  If we address how far I drive by installing a power meter, what is billed?  Am I charged for all miles driven above that speed and only those above that speed?  That likely won't do the landlord too many favors, as "peaks" are typically very short in duration.  Do you charge me for all excess consumption from that point forward?  Great... but in excess of what?  Consumption is measured in kilowatt hours (kWh), not kilowatts, so you can't charge me for consumption in excess of "X" kW/SF. 
If I'm laying this out right, it should seem pretty straight forward.  But it's not historically been done this way.  I recently asked a seasoned (and highly effective) real estate attorney with a well-known Atlanta firm if he's seen a kWh trigger in a lease before... he never had.  Then I asked my power and utility consultant connections about it and they were surprised to hear that leases address availability (kW) but not consumption (kWh). 

My experts did give me a caveat worth noting:  In data center environments, they do project kWh consumption, but they do so by assigning a utilization factor to the equipment's potential load to project kWh consumption.  In other words, they budget themselves to run at x% of peak all day every day, where X is a high number.  (Or in plain english, they guess based on historical data!) Perhaps the take-away here is that the leases I'm talking about should assign a load factor to equipment... but they don't.

The Solution
Rather than tracking potential loads of all installed equipment and negotiating a percentage of potential load to establish triggers for protect against outages and/or big power bills, I favor the idea of protecting operations (availability) and billing (consumption) separately.
Power Consumption = kWh

Availability: Find out what the tenant needs and/or what the building can offer (kW/SF) and determine in advance what will happen if utilization comes within x% of this level.  How do we determine how much of it is the tenant's fault?  If the tenant is at fault, what happens?  Will the tenant have to cap their consumption, install load distribution equipment, etc?  Will the building's capacity have to be increased?  Who will pay?

Consumption:  Determine the tenant's highest anticipated kWh consumption level and/or the building's kWh norms and agree to a base level for any excess billing.  In essence, agree that "If we go above this consumption level, then you can meter us and bill us for anything above it."

At the end of the day two factors will then be monitored... usage peaks (kW) AND consumption (kWh).  I recommend that they be monitored at the building level until the landlord becomes concerned, and then they drill down to the tenant level.  Operations is thus protected from service interruptions, and the landlord is protected from power bill increases.

An afterthought
It may be helpful if I expand a little on my biography here, because I do have some special insight into this topic. After getting my EE degree from Ga Tech, I spent four years designing power meters for Schlumberger's Electricity Management division.  I'm no longer an expert, but I certainly know a bunch of them!

I welcome your thoughts.

Here's to your success!

John
John@LynxRE.com

Thursday, August 19, 2010

The 3D Explosion

The 3D wave is coming. It’s hitting theaters, televisions, games, cell phones, and even event tickets. My client base has seen a dramatic shift into this space as well... I’m now working with multiple companies doing 3D animation, 3D production, and 3D post-productions, including Render Farms. Here’s what I’m seeing from my commercial realtor (and general consumer) standpoint:

3D Movies. 3D movies will see continuted growth. Wall Street Journal just published an article about RealD, the leading manufacturer of 3D theater projection systems. Here are a few statistics from the article, which you can find in its entirety here:
  • There are currently around 6,000 3D-enabled screens in North America. Extrapolation using RealD’s market share and analyst predictions for their growth indicates that this count will rise to over 45,000 within 5 years.
  • DreamWorks Animation SKG now produces all of its movies in 3D
  • 11% of box office revenues in 2009 were for 3D viewings… up from 2% in 2008.
  • As of this August, eleven 3D films have been released in theaters YTD.
3D Television. 3D television is available now and it looks great. I was recently in an electronics store and sat down to try out the new 3D television with active glasses. It was an amazing picture and I highly encourage you to check it out. I myself am not an early enough adapter to fork over the $3,000 he quoted for the TV and disc player, nor the ~$175 per pair for electronic glasses.

3D Cell Phones. I have personally viewed the “glassless” 3D cell phone display (stereoscopic is the technical term) that was deployed on a cell phone in Japan in 2009… it’s impressive but wasn’t ready for prime time at launch (Click here for a write up). And Sharp claims that they’ll begin producing their own more advanced version in 2010 (info here). I’m told that these stereoscopic displays can also be deployed in  a wall-sized versions as well.

3D Gaming. I spoke informally with an MMO gaming client yesterday about their predictions for the 3D gaming world and was told that it’s absolutely expected that people will one day play online and console games on 3D monitors. In fact, Nintendo has already issued a press release (click here) stating that it will release a portable 3D DS system in the 1st quarter of 2011. And guess what? It will use the glassless screen that I mention above!

3D Printing.  My next door neighbor is a principal in the company that prints the athletic event tickets for a collegiate sports team here in Atlanta.  He recently showed me this year's game tickets... in all their 3D glory!
3D Government Applications. The Military and NASA are already using 3D technologies for reconnaissance (and more, I’m sure).

A Concern. There's a concern I personally wonder about, and I have to admit that it may be isolated because no else has raised it to me.  Is technology about to bump up (again) with what our bodies can handle? My wife gets motion sick in minutes when watching 3D in theaters and on television.
 
I’m not implying that the world will ever go 100% 3D, but I do have to wonder if this will be a widespread issue and what affect it may have on adoption rates.
 
What does all this mean to the technology world?  In a word, everything for those who adopt.  To elaborate, theaters need new projection systems, homes need new TV's, producers need new cameras, post-producers need more powerful render farms, and on and on it goes...
 
Here's to your continued success! 
John
404.547.2009
John@LynxRE.com

Thursday, July 22, 2010

Secure the space you can't yet afford

I'm currently engaged in multiple transactions in which a buyer has found THE property they want to buy but they're not financially ready to secure the commercial mortgage they need.  The problem in some cases is that if the buyer simply goes away with plans to tie it up when they're ready, the building may be sold out from under them.  In other cases, the building plays an important part in raising the funds to pay for the building.  There are creative solutions to this scenario so long as a couple of key components are in place.

The key components are critical:
  • the buyer must have a definite and convincing plan for paying for the building by a certain date, and
  • the buyer must be willing to risk monetary loss if they don't get to that financial place.
How does this work?  I'll share three stories here.

Story 1: Needs space now to meet an existing demand
I represent a buyer who has clients teed up and waiting but is unable to meet that demand without a space in which to conduct business and meet with clients. These clients will spend hundreds of thousands of dollars per year for the buyer's services, with great operating margins. 

The buyer isn't able to secure a commercial mortgage because they've been investing heavily to get to this point and this new media company hasn't been around for years to have an operating history.  And the buyer doesn't want to lease because technology installations make a relocation unattractive.  Plus, they strongly prefer to own and they know now is a great time to lock in a purchase price.

This buyer finds the perfect space... it's vacant and available for sale only at a steep discount.  Now what?  The seller is expecting a purchase offer with earnest money and a 60-90 day close period. The buyer can do earnest money but not the loan.

The answer is a lease-purchase agreement with a build-up of earnest money.  The seller leases the property now and puts down a standard lease security deposit.  This arrangement covers the seller's costs in the short term.  At a certain point in the lease - after the buyer has recovered from relocation costs - an earnest money payment is added to the rent.  This earnest money is accumulated over X months and will be applied to the purchase price at closing or will be forfeited if the buyer doesn't complete the purchase in a set time period.  The buyer should also be prepared to convert the security deposit to additional earnest money if the sale isn't completed.  This twist gives the seller security from day 1 and will help motivate the "recovery" period before the earnest money payments kick in.

This arrangement works because (1) it covers the seller's costs on the vacant space, (2) it compensates the seller for lost sales exposure if the buyer doesn't buy, and (3) if the buyer doesn't buy, the seller is certainly looking at a more favorable market in a couple of years.

Buyer 2: Needs space later and needs to raise funds
I represent a seller in a transaction in which a buyer had accumulated a good sum of money (6 figures) towards a building purchase, but this sum didn't cover the equity needed to secure a commercial mortgage.  As a charitable organization, this buying organization needed to raise funds to complete the purchase but they needed a "poster building" to attract donations. 

The buyer found the absolute perfect building (my client's).  The building was occupied by the client but the client would vacate upon sale.  The significance of the occupancy is that the seller was covering the operating costs through their own business use.

What the buyer did was to provide their entire warchest as earnest money to secure the property.  They then went through a standard inspection period followed by an unusually long closing period of several months.  They used these months to promote the vision and show the property to donors.  It was a gutsy move because their warchest was nonrefundable at the end of the inspection period, but they've flourished in their fundraising and they'll soon be proud owners of a great new headquarters building.

Story 3: Needs space now, Business windfall later
In a huge gamble, a startup production company needed a building in which to do television filming and other production-related work.  As with Story #1, they anticipated a huge payout once the business was up and running, but they couldn't get the business up and running without a facility - a very large on in their case.  What they did was similar to story #2, except they did it with a vacant building.  They made a full-price offer, put up an unusually large amount of earnest money to secure the building, and then scheduled the closing 12 months out.  With a seller who doesn't need the space themselves, this is a great solution.  Once the earnest money goes hard it covers a good portion of the expenses for a year.  If the buyer doesn't buy, the seller gets back an improved building that's been customized for a rapidly-growing industry in Georgia.  And most importantly, if the buyer doesn't buy the economy will be one year farther through the recession!

These are only three of many creative solutions to problems of this type.  Feel free to call if you're in a similar situation... I'd love to help!

Friday, July 9, 2010

Data Center – Solo or Colo?

So you need a new data center. The question is, “Should I build my own or go with a collocation facility?” The answer: it depends.

There’s no denying that the demand for data center space is on the rise. The world is becoming increasingly digitized through trends such as mobile computing, cloud computing, social media, email proliferation, HIPPA, and IP Voice applications. The most recent “wow” statistic I heard was that corporate data storage demand will increase by more than 650% over the next 5 years. And all of that data has to reside somewhere.

Solo
I get frequent calls from organizations who want a space that includes a data center or that is primarily a data center. Their hope is that they’ll find a move-in ready space and dodge the data center build expense. To be honest, they can dodge a tremendous part of the expense… an existing vacant data center will have power and cooling systems, fire suppression system, power and data feeder reliability (probably), raised floor (if applicable), a generator, and possibly racking and wire management, saving them tens or hundreds of thousands of dollars. The part that surprises is that 2nd generation (aka pre-built vacant) space will likely require them to lease more space than anticipated or be prepared to spend large sums modernizing a the power and cooling systems.

2nd generation data center space will almost always have been built more than 5 years ago. The miniaturization of electronics during that time has allowed manufacturers to fit more gear in less rack space, resulting in much higher power consumption AND heat generation per square foot of data center space. It’s entirely realistic that a 2nd generation space will need 2-3 times that of what the 2nd generation space was built to provide. OR a user will need to spread out their gear so that they don’t overload the power and cooling systems, resulting in them having to lease more space than they really need. If either of these scenarios is acceptable, then solo may well be an option.

There is a challenge with finding 2nd generation data center space… it’s not always well-promoted, and there are varying degrees of accuracy in what is conveyed. Non-technical real estate agents don’t always realize the value such facilities offer, so they don’t promote them when they’re part of a larger space. They ARE out there, they’re just not promoted (click here for a blog entry listing such spaces in Atlanta). Regarding accuracy, I’ve personally had agents tell me that something is a 2nd generation data center even when it’s been completely gutted!

Colo
For those lacking the capital or expertise to update (or build) their own “solo” facility, collocation is a great option. There are over a dozen facilities around metro Atlanta alone that are move-in ready, offering turnkey solutions to meet any need. Whether you need to host your web site in someone else’s server, need a few rack units to locate your own server, or need a caged area that’s totally yours, these providers can accommodate you. You’ll get connectivity, physical security, primary and backup power, cooling, and constant improvements… all at the hands of another. And while their dollars per square foot equation will look high, I regard it to be a sound investment.

A few of Atlanta’s collocation providers include (in alphabetical order to be fair!) AT&T, Colocube, InterNAP, Level3, MCI, Peak10, Quality Technology Group, SAGO, SAVVIS, SunGard, TelX, TW Telecom, NationalNet, Xilogix, XO, and others. Each has its own facility type and “sweet spot,” so you’d still be wise to engage someone who can narrow the list depending upon your need.

Next Step
Your best next step is to engage a commercial agent who can understand your needs and drivers and who is aware of what the solo and colo markets have to offer. If a good 2nd generation option is there, they’ll be able to find it. If your needs point to colo, they can pair you with the best 2-3 fits and provide their own insight along the way.

I’d love to be that resource… call or email anytime!


John
404.547.2009
John@LynxRE.com

Thursday, June 10, 2010

Georgia's Tax and Economic Development Incentives

Economic Development incentives and Tax considerations are a hot topic nowadays, and I’ve been asked more than once to summarize what’s available in Georgia. Every time I name a few, there’s an immediate and universal desire to see if they may be applicable to one’s organization. No good business person likes to leave money on the table. So here it is… a summary of the tax considerations for companies that consider locating (or remaining) in Georgia.

For those who like to scan ahead, I'm going to go from state to local to Federal offerings and begin each group with the topics most related to real estate.

STATE LEVEL CONSIDERATIONS
Geographical-Based Credits. I’ll start with my favorites as a commercial real estate agent: Opportunity Zones and Lesser Developed Census Tracks. To be eligible for these, you must relocate into a parcel in the affected area. You can do so as a Tenant or Buyer, but you’ll need an agent who knows how to verify specific parcel eligibility with certainty.

Opportunity Zones. Georgia has established a list of economically “blighted” areas… areas that have great potential but need companies to blaze the path for others. To incent this to happen, certain specific areas have been pre-approved for a $3,500 tax credit per new job added. That’s not entirely unique, but what IS unique is that (1) you only have to create 2 new jobs to be eligible and (2) the credit is completely usable because it’s applied to payroll tax withholding (as opposed to corporate tax liability, which is tougher… read on).

Less Developed Census Tracts. Based on Census data, Georgia has identified areas that need development and has offered the same key benefits as the Opportunity Zones… $3500 per job… threshold of five… applied against payroll taxes. Note that these areas are currently based upon 2000 Census data. Many geographical doors will close when the 2010 Census data comes out.

The map to the right (and up) shows a high-level overview of both OZ’s an LDCT’s around metro Atlanta.

Job Tax Credits. Companies in designated industries may be able to claim job tax credits based upon where they locate their business and how many jobs are added. The credits range from $750 per new job to $4,000 per new job. And they get these credits every year for 5 years. A few of the targeted industries include distribution, technology, manufacturing, telecom, and processing.  One caveat is that the credits can be tricky if you lack a high Georgia corporate tax liability... there's a balancing act between you credits and liabilities. The map below shows the tiers, which determine the credit amount and the number of job adds required to qualify.

Quality Jobs Tax Credit. Create at least 50 jobs and pay wages of 110% or more of the county’s average and you’re eligible to receive a credit of $2,500 to $5,000 per job per year for up to five years.

Mega Project Tax Credit. Employ at least 1,800 net new employees and either (a) invest $450M or more or (b) have an annual payroll of $150M or more and you’re eligible to receive a $5,250 per job per year credit for the first five years of each new job’s existence.

Retraining Tax Credits. Reclaim up to 50% of a company’s investment in training as a tax credit when your employees go through an approved training program. There’s a $500 per employee annual cap on the credit.

Child Care Tax Credits.
• Build a child care facility for your employees and you may be eligible for tax credits equaling 100% of the construction costs.
• Provide or sponsor child care for your employees and get a credit for 75% of your direct costs.

Port Tax Credits.
These credits are available to taxpayers who increase imports or exports through a Georgia port by 10% over the previous year. This credit bonus can be used with other Credit Programs like the Job Tax Credit.

Tax Exemptions
• Sales and Use Tax. A qualified equipment purchase or lease is sales tax exempt when the equipment is used in the manufacturing process. In some circumstances, several other types of expenses (capital, material, and utility) can be exempted.
• Inventory Tax. Keep lots of raw material, work in progress, or finished goods on hand? Certain counties will exempt up to 100% of it under the right circumstances.

Finding and/or Creating Employees.
• Hiring Assistance. Georgia’s Department of Labor will help you post openings, review and screen candidates, schedule interviews, and even host job fairs.
• Quick Start Training. Qualifiying companies’ new employees can receive customized skill-based training at no cost to the company. The state program provides the space, instructors and materials.
• HOPE Scholarship and Grant. Most of us are aware of the college scholarship program for high school graduates with a B or better average. The HOPE Grant program allows “older” folks to pursue a degree or certificate program at no cost in a Georgia technical college or school. Need to grow your employees’ capabilities? Here’s a way to do it cost-effectively.

Small Businesses and Entrepreneurs. Some benefits and incentives are aimed specifically at small and start-up businesses:
• Accelerated Depreciation. Make capital investments of less than $410,000 and you can write off as much as $102,000 that same year. You can go above $410,000, but the benefits begin reducing.
• Loan Guarantees. In certain rural communities, the state will guarantee amounts between $35,000 and $250,000 to help cover your start-up costs. You’ll have to put in 10% equity, but it’s a great deal!

Incentives for existing companies to grow. If you’ve been in the state for three years or more, consider these:
• Job Tax Credit. Claim a one-time additional tax credit for every net new job added now through 2011.
• Investment Tax Credit. Get a tax credit for 1 to 8 percent of a qualified capital investment if you’re in manufacturing or telecommunications. The percentages vary with what you invest in and where you are.
• Optional Investment Tax Credit. Anticipate consistent large annual increases in your income tax liability? Use this credit in lieu of the Investment Tax Credit and you can get a tax credit for 6 to 10 percent of your investment.

R&D Tax Credit. Is your R&D expense greater than your gross receipts? You may be able to claim 10% of the difference as a tax credit.

Favorable Income Tax criteria. Companies should note that they only pay Georgia income tax based upon revenue that is generated in Georgia. A $50M global gaming company with 5% of their subscribers based in Georgia, for example, would only be liable for corporate income tax on $2.5M in revenue.

LOCAL INCENTIVES
In addition to monies that the State puts on the table, Counties, Cities, Community Improvement Districts (CID’s), and Tax Allocation Districts (TAD’s) may come into play. County, City and CID incentives are offered strictly on a case by case basis, whereas TAD benefits, by their nature, are available for all takers considering a property within the TAD.

Counties and Cities can offer many incentives, a few of which include:
  • Economic Opportunity Funds. Monies set aside to assist with corporate recruitment.  Effectively a grant.
  • Small Business Loan Programs. Some Development Authorites function as actual lenders to help small businesses get up and running.
  • Bond Financing (for large facilities in certain verticals).  Certain entities can issue bonds and then use these funds to help ease an organization's transition costs.
  • Property Tax Abatements.
  • Employee Education Grants
  • Permit and Zoning assistance (reduced fees and expedited processes).
  • Development and Occupation Fee discounts.
  • Utility Discounts.
  • Project Resources.
Community Improvement Districts are voluntary membership organizations in which companies in an area (district) pool their monies to improve their area. They’ve been very successful in attracting resources to multiply their contributions and tackle the projects that make their area more attractive to incoming business. And of course they work hard to bring desirable companies into their districts. While they lack the breadth of “touch” that a city or county may have, there are things that they can do to help make an area more attractive.

Tax Allocation Districts are intended to spur redevelopment. Tax benefits are offered within a very specific list of plats to incent developers to purchase and redevelop in that area. When the redevelopment is complete, the property generates significantly more revenue for the taxing authority and the government’s investment pays off! TAD’s tend to be promoted at the City and County level, so you’re best off engaging a resource – like a commercial real estate agent - who knows how to find them.  Some of these TADS are able to issue bonds to fund grants to help developers even further.

FEDERAL INCENTIVES
Renewal Communities.  This is a federal tax incentive given to developers who rehabilitate a commercial property in a predefined/targeted area.

New Market Tax Credit Program.  An initiative to leverage up to $15 Billion (with a "B") of private investment into highly impoverished communities... both urban and rural.

Closing Note
You need professional help!  You'll quickly recognize that there is a LOT of potential savings outlined above... enough to dramatically impact any company's P&L statement.  That's the good part.  The bad part is that it's complicated... you mustn't take any of the information above as the "end all" on these topics.  There are requirements and caveats for just about every one of these incentives, and a mis-step can be very expensive.  I once witenessed a CPA's expert correct a state employee on a mutal exclusivity the state employee didn't know about. 

If you're likely to go down one of these paths, please contact me.  I'd be interested to hear about your project, and I'll do all I can to pair you up with the appropriate expert.

-John
404.547.2009

Wednesday, May 12, 2010

Scrum Software Development and the Gamers Who Use It

I’ve heard of the Scrum development method but never learned how it works or what makes it different. Last night I joined the Georgia Game Developer’s Association (GGDA) for a review of how CCP Games is using Scrum for their various products. As a commercial real estate agent who works with software companies, I was curious to know more about their worlds and how their methodologies affect space requirements.

Before I talk about how it works, there are a few things worth knowing:
  • Scrum is a process, not a product. The term is borrowed from a rugby analogy, where a team works as a unit to move a ball down the field by fluidly passing it back and forth. Some choose to capitalize all the letters (SCRUM), although the term is not an acronym.
  • Scrum is not just applied to software development. It is reportedly a process for any new product development, but you’ll want to note the next bullet point as a qualifier.
  • Scrum is ideally suited to projects in which variables change constantly and/or the desired end product evolves through the process. It is fast-paced, very flexible (it can turn on a dime), and appears to offer many small victories that keep morale high along the way.
As I learned from CCP’s great overview, the basic philosophy is that a massive project is broken into a many small projects and the small projects are assigned to teams. All teams work in concurrent two-week blocks, with deliverables at the end of each block. When the time block ends, all of the teams convene to deliver their results and to address inter-dependencies and/or changes to the overall project. When the meeting is over, the teams go back to work… on their NEXT two-week deliverables.

There three are roles that are played on a team. The ScrumMaster is what I like to call a “blocker.” His or her job is to identify and eliminate any obstacles to the team’s ability to deliver, whether the obstacle is internal or external to the team. The Team Members are the ones who create the deliverable. The Product Owner plays the role of the customer to whom the deliverable is owed. The Product Owner may be a part of the team but doesn’t have to be.

CCP implemented Scrum globally around 2005. When I asked if the implementation was tough, the reply was that in the USA is was easy because CCP’s team was small and was beginning a new project (World of Darkness, not yet released). In China and Iceland, the implementation was not a simple task because those teams were working on mature products (ex: Eve online) with larger teams and established business practices to rewrite. In short, it’s much easier to start with Scrum than to switch to Scrum.

For anyone considering Scrum, the rewards appear to warrant the process.  Team members remain motivated because there are many victories along the way.  Teams are largely self-directed, so there is a sense of being in control of one's destiny.  Product development can be adapted "on the fly," so the end product will be the RIGHT product.  Frequent product updates are easily accomodateded, keeping customers engaged. And the sense of family I've observed is among the best I've ever seen.  The challenge?  Management must be willing to live with "managed chaos." But looking at the results, it works!

Oh, and on the real estate side:
From a real estate perspective, this method is best served by a pod layout. Each team will have a highly collaborative (i.e. “open”) and somewhat isolated work area. The team members can speak to one another without ever getting up, and may well be able to see each other directly. There will then be collaborative spaces for scheduled and/or impromptu meetings, and there will be at least one very large room for ALL the teams to come together at once. Throw in a few executive offices and you’re there!

Tuesday, April 6, 2010

Electronic Gaming: More Than You Think

I recently helped one of my gaming industry clients locate their new North American Headquarters. They’re making a “game on a chip” system that will help cable operators move into the gaming space via their set-top boxes. Since I can’t always share exactly who I’m working with, I frequently don’t say anything at all. But this time it was fine for me to tell people they were in the gaming sector. And the number one response I got was, “Are you working with one of those casino companies?” The casino question didn’t offend me at all, but it did surprise me the first couple of times. And (more importantly) it revealed to me that many people aren’t aware of what the gaming space encompasses.

So I thought I’d give a gaming overview based upon companies I’ve worked with, companies I’ve met with, and articles I’ve read recently.

First, the gaming sectors everyone thinks of:
  • Console games (Wii, Xbox, and PlayStation) almost always come to mind. You buy a system, buy a game, put them together, and play to your heart’s content.
  • Portable gaming devices (PlayStation Portable, DS, and iPod Touch) are also frequently thought of. You buy the platform then you buy (or download for free) the game, and you play on the go.
  • PC games are those you buy at the local computer store (or download off a web site), load onto your PC and play at will. You’re running on your local copy of the system, although you may be able to interact with others via a web connection.
  • Casino games are the games that people play when they can’t make it to a gambling venue. They may be online, they may be a freestanding box at a gas station, or they may in fact, be in a casino. Unless they’re in a casino they’re not played on the same cash basis that you’d see in a casino… that would be illegal gambling.
And now for some sectors most people don’t think of:

  • Massively Multiplayer Online (MMO) games. These are games you play AT your PC, but they’re not necessarily played ON your PC. You’re entering an online world in which you’re playing against other people scattered around the country or globe… literally. The characters you shoot are other people. The alliances you form are with other people. Eve and World of Warcraft are two well-known examples. Hi-Rez Studios’ February 2010 release of Global Agenda has also been garnering a great deal of press… along with some debates over how to classify it. 
  • Employee Evaluation Games. I met with leaders from a company last week who have developed a game that companies can use to predict future job performance by assessing assesses thought processes, motivators, and behavior. Why not? If one can create an electronic world that generates enough stress to yield people’s “real” reactions, then there’s a consistent process, biases are minimized, and money is saved. What a great idea! I’ll contextualize my belief in this idea through a real-world experience: When I entered the sales world, the large company I was applying for had me take an onsite written test for mental acumen. When I passed that they put me through a live, onsite, full-day role-playing evaluation. In the live event, two or three evaluators spent the day with three or four candidates trying to measure how we’d react in real-world situations. It was expensive for both the parties (their money, my time), but the company felt that it reduced their “false positives.” However, there was commonly debate by those who didn’t pass over the subjectivity of the day-long exercise.
  • Employee education. The human mind absorbs more when it’s fully engaged. What better way to teach someone that through a fun training exercise that’s completely documented and completely consistent? It would beat the heck out of the computer-based modules I went through years ago.
  • Student education. If it’s good for employees, how much better for the upcoming generation that already thinks in terms of computers and games? 
  • Social Games. This one’s peculiar, but it works, and the best way to illustrate is through Foursquare.  Foursquare tracks its users location via Smartphone GPS and logs which of its users go to participating destinations. Whoever goes there the most or spends the most time there becomes the mayor of that place. It’s like an affinity program with goals, competition, and recognition… making it a bona-fide game in my book.
Finally, here are a couple of games and changes coming:
  • A cool change. It’s been predicted that MMO games may one day offer a user-facing camera. Why? So that the avatar can mimic the facial expressions of its owner.  THAT will be fun to see.
  • Is this a game? I recently read about a college professor predicting that there will be internet-ebabled toothbrushes within five years. The thinking is that if it tracks our brushing habits and can report on them, then we’ll become more conscientious brushers. And if we demonstrate good hygiene, the manufacturers may even reward us with coupons or other incentives. I wouldn’t classify this as a game, but the professor (and article) did. So again, even WHAT is considered a game is on the table. For those who are skeptical about this direction, consider that one can already purchase internet-enabled bathroom scales that track one’s weight and can even post it on Twitter.  I'm  not looking forward to the day when I receive my first tweet of someone's body weight...
  • Why not teach REAL Guitar?  Boston-based Seven45 is scheduled to release Power GIG: Rise of the Six String in the fall of 2010.  This game, modeled after Guitar Hero and Rock Band, will have a real electric guitar as a controller and will offer color or "chord" mode.  In chord mode, the player will use the actual finger positions, thereby teaching them to play for real.  In fact, the game will reportedly teach players the basics for all of the instruments in the game.
As an aside, I've found that it's easiest to describe these companies to landlords as software development companies with a very creative product and culture.  The end result is the same in regards to space type, and I don't have to answer questions about casino equipment!

Finally, for a great review of the companies involved in Georgia's gaming industry, click here to go an interactive version of the map to the right.  The map lists a great number of the Savannah and metro Atlanta gaming companies.

I know I’m leaving a lot off here, so I’ll invite your comments here or via email (John@LynxRE.com). But I hope this overview is helpful!