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byline: Elizabeth Cooper

Revitalization of Newport News neighborhood shows city’s agenda

Spiraling crime, poverty, dilapidated buildings, decrepit thoroughfares and an overall sense of despair have long defined Newport News’ East End. 

Former NFL quarterback Aaron Brooks, however, has a plan to change that. The Newport News native, who grew up in East End public housing projects, has teamed with Virginia Beach developer Armada Hoffler 

Properties and the Newport News Department of Economic Development on a $48.2 million revitalization project designed to pump energy and pride into the economically distressed neighborhood. Known as Brooks Crossing, the mixed-use development will encompass a 12-block area bordering Jefferson Avenue, once one of the city’s most prominent commercial corridors.

The ambitious undertaking was unveiled in 2008 but lay dormant during the recent recession.  With improving financial markets, the project is back on track. Construction on the initial phase — a police precinct with 911 call center, a medical office building and a financial institution — is set to begin next spring. In preparation, the city has put up $11 million for street improvements, demolished obsolete public housing and renovated a century-old building into affordable residential units.

Although the full build-out will take nearly a decade, developers and city leaders believe the project will revitalize the East End and give a shot in the arm to development throughout the city. “Anytime you reinvigorate a section of the city, it helps the overall city,” says Lou Haddad, president and CEO of Armada Hoffler Properties.

Industrial leader
Located midway between Williamsburg and the Hampton Roads hub of Norfolk and Virginia Beach, Newport News is known for its “new blue-collar” environment. The city has the highest industrial base in Hampton Roads and statewide is second to Richmond in machinery and tool tax revenues. Many of its 180,700 residents work in skilled trades at Newport News Shipbuilding, Virginia’s largest industrial employer, and at manufacturers Canon Virginia Inc. and Liebherr Mining Equipment, which are expanding their local operations.

Economic development officials believe the city’s support for existing businesses is key to expansion. “We probably have in the last 15 to 20 years begun to see economic development as not just chasing businesses but making sure the community is attractive and ready for the type of development that will keep it moving forward and sustainable,” says Florence Kingston, the city’s economic development director. “Organic growth within the community and augmenting that with new businesses is more sustainable in the long run.”

Canon plans to spend $27 million to upgrade equipment and add employees, bringing its total capital investment in Newport News in the past four years to more than $371 million. Liebherr Mining Equipment, manufacturer of the world’s largest dump trucks, is spending more than $45 million to upgrade its plant infrastructure and will create 176 positions during the next four years.

With such a large industrial base, the city is more than 90 percent developed. That’s one reason officials are eager to get Brooks Crossing off the ground. “You’ve got to come back in and use these opportunities to clean up underdeveloped parts of the city,” Kingston says. “New construction and new business activity should restore pride and excitement in that community. Developments will be the stimulus that shows people good things are coming to this part of the city.”

It’s a long-range goal, though, warns Haddad. “That area of the city is underserved. Reversing that trend and demonstrating to businesses and the community that they can be successful here are not overnight processes. We have to show potential businesses that this is a good place to do business. That involves getting phase one started and being successful.”

While the first retail leases for Brooks Crossing are expected to be signed this fall, investors tend to be reluctant to blaze a trail in newly revitalized areas. “People don’t want to be pioneers,” Kingston says. “Part of the challenge is getting some commercial buildings started so retailers know something is happening there and make a commitment.” 

New Apprentice School

Article image
Photo by Mark Rhodes

Nearby areas, however, are expected to soon be a hub of economic activity. Newport News Shipbuilding, a division of city-based Huntington Ingalls Industries, will open its new Apprentice School bordering the East End later this year.

The 80,000-square-foot facility replaces a 1940s-era building inside the shipyard. Founded in 1919, the school educates about 800 students serving four- and five-year apprenticeships in 20 shipbuilding disciplines. The new school building is part of a $72 million, mixed-use redevelopment project on a 6-acre downtown site featuring affordable housing, retail, a parking garage and a green area. The state provided $25 million to build the school, while the city kicked in $17 million to buy the property and construct the garage and infrastructure. Armada Hoffler bankrolled $30 million for the residential and retail components.

The new school will change apprentices’ educational experience, while the entire project will be a catalyst for downtown redevelopment, says Newport News Shipbuilding President Matt Mulherin. “It’s a huge opportunity for the city to bring people back downtown,” he adds. “Everybody is looking forward to see how this functions. I have a sneaking suspicion it’s going to be successful.”

Apprentices are being groomed to fill jobs likely to be vacated by more than 900 employees nearing retirement. Mulherin believes many will retire once the Navy’s newest nuclear aircraft carrier, the USS Gerald R. Ford, is completed in early 2016. “The good thing about these shipbuilders is they like to see ships completed, so I believe a lot will retire when the Ford is delivered to punctuate their careers.” Before then, these master shipbuilders — employees with 40 or more years of continuous service at Newport News Shipbuilding — are mentoring newer co-workers. Their guidance, along with the Apprentice School and other training, is essential for preparing the next generation of shipbuilders. “We spend about $50 million on training,” Mulherin notes. “That training helps bring along our workforce to make sure they’re ready.”   

Newport News Shipbuilding employs about 22,700 professional and trades employees throughout its waterfront complex. That number is expected to reach 23,000 by the end of the year, with no anticipated layoffs on the horizon.  “We typically hire with a longer view of employment,” Mulherin adds. “That’s predicated on the work we foresee in the future and signing contracts.”

Still, defense cuts are looming. “Any time you hear that discussion, there is concern,” Mulherin acknowledges. “But it’s not immediate. We’re talking about contracts into the future.” The company, he adds, hedges its bets on the Navy’s need for aircraft carriers. “The U.S. Navy is aircraft carrier-centric by its own admission. That speaks well for our product line.”

Corporate research center
Newport News’ technology sector could get a considerable boost with a $250 million mixed-use development that would bring a corporate research center adjacent to the Thomas Jefferson National Accelerator Facility. W.M. Jordan Co. CEO John Lawson purchased the 43-acre site at the intersection of Oyster Point Road and Jefferson Avenue from the College of William & Mary in 2010 to support expansion of the Jefferson Lab. He soon realized that what he calls the “most valuable land on the Peninsula” could be used to convert scientific discoveries at the Jefferson Lab and nearby NASA Langley into practical uses.

“With all the science produced at the Jefferson Lab and NASA, there are not nearly enough opportunities to commercialize that science,” Lawson says. “We need more social-type activities and opportunities for entrepreneurial people and scientists to get together and discuss ideas.”

Lawson gets his inspiration for the facility from the Virginia Tech Corporate Research Center (CRC) in Blacksburg, which houses 150 companies. The CRC would operate the Newport News facility.  Lawson has partnered with the Virginia Tech Foundation, owner and operator of the CRC, the City of Newport News and S.J. Collins Enterprises, a Georgia retail developer, on the mixed-used project.

Construction on the first phase, including 300,000 square feet of retail, 150,000 square feet of office space, a fitness center and three multifamily residential buildings, is slated to begin in October.  It should ready in the spring of 2015. Lawson says all retailers at CRC, including grocer Whole Foods, will be new to the Peninsula.

According to Lawson, the retail and multifamily piece of the project would bring about 750 jobs to the Peninsula, while a corporate research center, which would be built in the project’s second phase, would add approximately 2,000 jobs. Lawson anticipates phase two taking five to 10 years to build.

The center also would augment Virginia Tech’s presence on the Peninsula. This fall, the school teamed with the University of Virginia to open an 8,000-square-foot education center in Newport News. The Eastern Regional Center offers classes under U.Va.’s School of Continuing and Professional Studies.

University making its mark
Meanwhile, 53 years after opening in Newport News as a two-year branch of the College of William and Mary, Christopher Newport University is winning national accolades for its academic programs and facilities. In its 2013 Best Colleges Guide, U.S. News and World Report ranked CNU as one of the top three up-and-coming regional universities in the South, as well as one of the best public and best overall regional universities.

Much of the credit goes to CNU President Paul S. Trible Jr. The former U.S. senator began his tenure in 1996 and set out to enhance academics, facilities and civic involvement. In the last decade, the university has undergone more than $1 billion in capital construction. This year, CNU opened Luter Hall, its largest academic building, and Pope Chapel, named for Smithfield Foods President and CEO Larry Pope, who donated $1 million for the construction of the university chapel.  Smithfield Foods has also made two, $5 million donations to the university over the past decade.

The booming construction matches the 700 percent explosion in applications during the past decade, including more than 7,000 for this year’s 1,200-member freshman class. The quality of applicants also is soaring with average SAT scores increasing by more than 200 points. “Few schools, if any, in America have had such a dramatic increase in quality so quickly,” Trible says.

Despite the surge in applications, CNU has no plans to increase enrollment, which hovers around 5,100. “We’re not interested in getting bigger. We just want to get better and better,” Trible says.

Along with state support, CNU has cultivated an array of private contributors willing to help the university offer a private school experience at public school costs. This summer plumbing supplier Ferguson Enterprises announced that it will donate $12 million to the university over the next 30 years, the largest gift in CNU’s history. The funds will be used for community service programs, scholarships and the Ferguson Center for the Arts.

“When we began the transformation of CNU, we rejected the notion of an incremental program,” Trible says. “We’re in the business of dramatic transformation. Everything would be done at the highest excellence.”

That’s a distinction economic development officials are eager to see replicated in the East End. “I get calls from people several times a month who grew up in that community and hear about plans to redevelop it and would really like to come back,” Kingston relates. “It’s important for the community to stay behind it to sustain success.”

​For The Cavalier, a facelift trumps the wrecking ball

Bruce Thompson, CEO of Gold Key/PHR Hotels & Resorts, continues to take on major projects in Hampton Roads, including the renovation of The Cavalier Hotel. The city of Virginia Beach has pledged $18 million for the project.

Bruce Thompson, CEO of Gold Key/PHR Hotels & Resorts,
continues to take on major projects
in Hampton Roads, including the
renovation of The Cavalier Hotel.
The city of Virginia Beach has pledged
$18 million for the project.

After two decades of replacing outdated oceanfront hotels with upscale, contemporary buildings, developer Bruce L. Thompson is about to take on the biggest project of his life:  a nearly $260 million plan that includes  the  renovation of one of Virginia Beach’s most iconic properties, The Cavalier Hotel.  

The founder and CEO of Gold Key/PHR Hotels & Resorts purchased the 86-year-old Cavalier Hotel earlier this summer. Sitting on a hill overlooking Atlantic Avenue with its name etched into a manicured lawn, the stately brick hotel had hosted an array of dignitaries before falling into disrepair. Owned for more than 50 years by The Disthene Group — a Buckingham company that mines the world’s largest deposit of kyanite — the property went on the market this year after a circuit judge ordered the dissolution of the private firm after a prolonged family dispute about minority shareholder rights.

One of the beach’s most ardent boosters, Thompson, and his partners in Cavalier Associates LLC, paid $35.1 million for the venerable hotel and its surrounding property, including a more modern sister hotel on the oceanfront and an adjacent beach club pavilion.  The partners are John Lawson, president and CEO of W.M. Jordan Co. in Newport News; Robert Howard, chief investment officer of Gold Key; and the Ruffin Family Trust.

They plan to spend $84.5 million to renovate both hotels, $70 million to construct a new oceanfront tower, $54 million to build 100 homes around the original hotel, $10.2 million for a parking garage and site development and $5.5 million to refurbish the beach club. According to Gold Key spokeswoman Elizabeth Weller, Thompson and his partners are meeting with bankers and are confident that they will be able to secure funding to finance the project. Lawson and Thompson have worked together before on another public-private project, a $79 million oceanfront Hilton Hotel project, with Lawson’s company investing in and building the project.  

To renovate The Cavalier, Thompson made clear that he would need economic help from the city again. In July, on a 7-1 vote, the Virginia Beach City Council approved an $18 million financial package that will help restore and preserve the 22-acre site. Renovations to The Cavalier could get under way this fall. The move was controversial, because $8.2 million of the money is supposed to come from the city’s Economic Development Incentive Program, and it would be the largest such grant in the city’s history.

The outdated grand dame may seem out of place among the modern high-rise hotels and resorts that Gold Key has positioned along the resort strip, but Thompson believes The Cavalier still has value and should be spared from the wrecking ball. “This is our community,” he says. “We’ve prospered here. If we can use our resources to preserve this asset for the community, we have a responsibility to do so.”

When it comes to business, Thompson — known in some circles as Virginia Beach’s answer to Donald Trump — is a realist. If the city had refused to help finance The Cavalier’s renovation, he would have considered razing the hotel and constructing a timeshare development on the property. “It’s in horrific condition,” he notes. Still, demolishing the landmark would not win him any popularity contests. “I don’t want to be that guy.”

The city’s support for Thompson’s plan shows the leverage the developer wields in Virginia Beach. Twenty-seven years after entering the vacation ownership industry with 30 employees and 170 hotel rooms, Thompson has built Gold Key into a dominant force in the resort city. With more than 2,300 employees, Gold Key controls half the rooms on the oceanfront and generated a record $175 million in revenue in 2012, says Thompson. “Every time we look at other markets to buy or build assets in, we look around our backyard and find there are still plenty of opportunities here. It certainly reduces the risk of trying to learn another market.”

New Gold Key developments continue to spring up on the resort strip, including the $70 million Oceanaire Resort, and 31 Ocean, a $72 million mixed-use development designed to transform the oceanfront into a year-round destination. The project, which opened earlier this year, includes an office tower, retail space and 178 fully leased apartments. On that project, the city is spending an estimated $40 million on roads, including a traffic circle, and some utility work.  “We need more year-round activity,” Thompson says. “We want to stimulate the economic base and bring in diverse retail.”

To spur year-round business at the oceanfront, Thompson has worked with the city to develop both a $180 million entertainment complex on the former Virginia Beach Dome site as well as an 18,000-seat sports arena. The entertainment center faces an “uncertain future,” according to Robert Hudome of the Virginia Beach Department of Economic Development, while Dallas, Texas, developer Michael Jenkins finalizes finance agreements. The sports arena was also put on hold after the NBA’s Sacramento Kings opted not to pursue relocation to Virginia Beach.

Thompson contends there is demand for both an entertainment center and a sports arena. “If an arena already had been in place, I’m confident we would be talking to that team today and clearly would have been able to secure the franchise. Once we have a facility like that, we’ll be back in the hunt again.”
Meanwhile, Gold Key’s ninth oceanfront property, a 14-story Hilton Garden Inn, is scheduled to open next spring. Plus, Gold Key is preparing to start construction early next year on a $126 million, 23-story luxury hotel and conference center in downtown Norfolk. The hotel represents a $64 million Gold Key outlay, along with a $42.5 million public investment and a $19.5 million garage paid for with parking revenues.

Thompson is counting on an improving economy to boost his first venture in his native Norfolk. Along with the anticipated revitalization of the Waterside Festival Marketplace, the hotel project, which would offer a high-tech, 50,000-square-foot conference center, is expected to add $150 million of new development and create more than 1,000 jobs downtown.  “There’s a clear need in the market for a modern hotel and conference center,” says Thompson.

Not everyone agrees, especially other downtown hoteliers. The Norfolk Hotel Motel Association, along with The Norfolk Waterside Marriott and the Sheraton Norfolk Waterside, urged City Council to delay the project’s approval, citing concerns about the impact of a new hotel on a market still recovering from the economic slump.  Both hotels noted a decrease in military and government travel during the recession and expressed concern that a potential sequestration could cause a further decline.  

Scott Adams, though, thinks the facility — coupled with a revitalized Waterside — could spark a revival in downtown Norfolk.  The Baltimore-based Cordish Cos. is working with the city to revive Waterside with new restaurants and live entertainment. “It brings another Class A amenity to downtown,” said Adams, Hampton Roads regional president for CBRE. “A lot of our clients say they can’t find a room when they come to downtown. This new hotel will not only have premium rooms but also a high-end restaurant on the first floor.”  

He adds that the new hotel also could draw more businesses downtown, putting the area on par with Virginia Beach’s thriving Town Center. “There’s a tremendous momentum at Town Center,” he says. “Town Center has done a great job with an energy that’s palpable.” Much of that energy surrounds the center’s new 14-story office tower and apartment complex set to open next year. Clark Nexsen Architecture & Engineering, currently located in Norfolk, will anchor the facility, leasing 80,000 square feet for its corporate headquarters. “When you have a strong, Hampton Roads-based business, it gives Town Center more momentum to attract other businesses,” says Adams.  

According to Adams and other local brokers, businesses are starting to seek premium space after biding their time during the economic downturn and fears over sequestration. “People were scared for so long about the word sequestration that there was a lull in activity,” says Tom Dunn of S.L. Nusbaum Realty Co. However, some defense contractors, such as Newport News’ Huntington Ingalls Industries, have been authorized to proceed with major military contracts. “Sequestration is still out there, but things have started moving.”

Craig Cope, vice president and city manager with Liberty Property Trust in Virginia Beach, also is starting to see more of an appetite for space. He says more companies are looking for upward of 10,000 square feet to lease. “That’s something we’ve not seen in a while. Some of it is pent-up demand. Some of it is pure coincidence,” he adds. “Six to eight companies are in the market for larger space. That’s unusual.”

But it’s still a tenants’ market, although the trend appears to be stabilizing after six years. Stewart J. Sacks, of Stewart Title and Settlement and president of the Hampton Roads Association for Commercial Real Estate, says there’s a sense that  the area has touched bottom.  “… Landlords are withholding some incentives. Tenants are factoring in the cost of a move, and more are willing to work with their existing landlords.”

Meanwhile, a new realty company entered the market as four associates of S.L. Nusbaum Realty struck out on their own to form the Franklin Johnston Group. Led by Chairman and CEO Wendell Franklin, Taylor Franklin, Tom Johnston and Steve Cooper, the Virginia Beach-based firm will focus on apartment development and management. “The renter market is not just predicated on people who can’t afford to own a home,” says Johnston. “People on all socioeconomic levels are renting. We wanted to develop products to meet all levels of demand.”  With a majority of its apartment communities in Hampton Roads and the Richmond regions, the firm expects to have more than 6,000 units from Northern Virginia to Charlotte, N.C., by the end of 2013.
The Franklin Johnston Group also is supporting Thompson’s goal of making the Virginia Beach oceanfront a year-round destination: the company leased space in 31 Ocean’s Sidney Kellam Building.   

In Hampton Roads, Virginia Beach is definitely a draw, which explains why Thompson is keen on not just restoring The Cavalier to its former luster, but transforming it into a five-star resort.  Think wedding chapel, spa and a celebrity chef.  As Thompson told the City Council, he wants to make Virginia Beach proud.  The project would help the region shake off a sluggish economy and prove that it knows how to show off and have a good time. 

 

 

A new day at the port

Testing uncharted waters was tempting, but in the end the Virginia Port Authority’s Board of Commissioners decided to stick with the familiar. After considering bids from private firms to operate the Port of Virginia, the board opted to keep Virginia International Terminals at the helm.

Nonetheless, it won’t be business as usual as VIT and VPA embark on a process to streamline their operations and eliminate duplicate functions.

“It’s a more efficient way for us to do business,” says Joe Ruddy, the new CEO of Virginia International Terminals. “There will be a more defined role for each of the organizations so there isn’t that sort of spillover. There’s a lot of work to do in fleshing out the process. We’ve come a long way, and we want to get this right.”

The port already has lost some employees recently because of attrition and retirement.  Ruddy says VIT will evaluate positions as it moves through the restructuring process. “We’ll deploy human assets where they’re most needed, put people in the most streamlined functions and assess what the best use of manpower is,” he says.

Ultimately, port customers can expect improved service, including better dissemination of information, Ruddy says. He expects all port users, including labor, to benefit as the port undergoes realignment and reorganization. “We will do all these things to just come up with a better mousetrap,” he says.

Coping with uncertainty

Two decades of traveling to every state and living around the country ultimately drew Kevin Murphy back home to Hampton Roads.

“I got a good grasp of what goes on around the country and a greater appreciation of where I was from,” he says. Returning home, he moved into downtown Norfolk, purchasing a 100-year-old building where he lives and operates his business, Basketball Products International, which sells basketball equipment for competitive play.

He’s glad to be back in Hampton Roads and participating in the revitalization of downtown Norfolk where he serves as president of the civic league. “There’s diversity of opportunities here for both recreational and professional activities. It’s a cross section of America here.”

Stories like Murphy’s resonate with Hampton Roads civic and business leaders who are trying to attract a new breed of entrepreneurs to the Southeast’s eighth largest metropolitan region. That’s especially critical in the face of sequestration. With cuts looming, there’s a sense of urgency that Hampton Roads can no longer count on the massive defense industry to power its economy.

Home to the world’s largest naval base, Naval Station Norfolk, and a multitude of defense contractors — as well as the nation’s largest concentration of active-duty and retired military personnel — Hampton Roads already is feeling the pinch of sequestration. Amid budget uncertainties, some companies are downsizing and delaying expansion plans. Forcing more than a trillion dollars in automatic budget cuts to defense and domestic agencies during the next decade, sequestration could damage a region where 46 percent of the economy in 2012 came from defense spending.

New ODU economic forecast
Old Dominion University’s 2013 Economic Forecasting Project initially projected sequestration could trigger the loss of more than 17,500 jobs across Hampton Roads this year, with the total impact to the region’s spending power estimated at more than $2 billion.

Recent budget changes, however, are expected to reduce the severity of sequestration in the region. They include $670 million for the overhaul and continued construction of aircraft carriers at Newport News Shipbuilding and $287 million for the maintenance of other Navy ships at local shipyards. ODU’s new forecast is a loss of almost 6,900 jobs and a nearly $800 million reduction in gross regional product.

That’s still a large hit to the region, says Gary Wagner, an ODU economics professor, who worked on the project. “Defense is such a big component of what makes up Hampton Roads that I’m not sure any other sectors of the economy can pick up that much slack. It would take a pretty remarkable growth in non-defense activities to make up for sequestration.”

That’s a tall order, acknowledges Norfolk Mayor Paul Fraim. Nearly 730 defense contractors in Norfolk conduct business at some level with the federal government, receiving 17,600 federal contracts worth $15 billion from 2000 to 2011.  “No other segment of the economy contributes more than 17 percent to the city’s economy,” Fraim notes.

With that in mind, residents throughout the region are becoming more cautious about spending. “Less spending by citizens means less tax revenue,” Fraim adds. “That comes at a time when we’ve already done considerable belt tightening. There’s not a whole lot more we can do other than cut services.”

Some retail businesses have begun to see sales fall.  A survey of the 3,000 members of The Retail Alliance of Hampton Roads taken shortly after sequestration went into effect on March 1 found that 87 percent of respondents expect a negative impact on the region from sequestration, with 52 percent already seeing a drop in sales. In addition, 52 percent expected to reduce their budgets, while 27 percent anticipated having to lay off employees.  Retailers report the belt tightening was based on the threat of sequestration, not the actual impacts, Ray Mattes, president and CEO of the Retail Alliance, says. 

Diversification pays off
Some regional companies have been through this type of federal downsizing before. When the U.S. Joint Forces Command closed its Suffolk operation in 2011, Johnny Garcia knew it was time to diversify. Garcia, founder and president of SimIS, a Portsmouth modeling and simulation company, branched out from the defense industry into health care and manufacturing. The move appears to be paying off. “We’ve formed great partnerships with health-care companies and medical schools,” he says. “That’s where the growth has been.”

Although SimIS also has an office in Northern Virginia, Garcia plans to keep his home base in Portsmouth. “I love being in Hampton Roads,” he says. “It’s a rat race in Northern Virginia. Down here it’s family first, and the people are more approachable.”
Nonetheless, he acknowledges that the region must make better use of its resources, starting by weaning itself from government dependence. “We have to learn to adapt. Our environment isn’t run by the government,” he says. “Innovation is done by businesses and communities.”

That’s a message the Hampton Roads Partnership has been broadcasting since its inception 16 years ago. Bringing private and public sector leaders from the area’s 17 localities together, the partnership focuses on building Hampton Roads’ assets through cooperation. “We have unique things in Hampton Roads,” says Donna S. Morris, the group’s interim president and CEO.

Ticking off a list that includes a natural deep water harbor, a plethora of historical attractions, the oceanfront and agriculture, Morris says the region does not need to focus on comparisons with other metropolitan areas.  “If we just build upon the assets we have, we will not have to compete with our peers.”

Better regional cooperation
Fraim believes that regional cooperation is improving as localities’ economies become more intertwined. “City boundaries are less meaningful,” he says. “The competitive edge between cities is not as sharp as it once was, and we’re seeing that we’re only as strong as our weakest city.”

Norfolk has formed a partnership with Virginia Beach and Chesapeake to explore sharing city services. The initiative has the potential to save the cities more than $15 million annually. “It could be purchasing equipment or employee benefits,” Morris says. “It gets down to efficiency, saving money. By bringing them together, they’ll start talking about other opportunities to work together.” 

That’s easier said than done in a region where no one organization or municipal government speaks for Hampton Roads’ 1.7 million residents. “Cooperation among governments is very difficult for us because we’ve got cities adjacent to each other. It’s not like we have one dominant city within a county,” Morris notes.

Leaders, though, are coming together to discuss issues important to the region as a whole.  According to Fraim, that includes relieving the area’s congested roads, bridges and tunnels, improving education, supporting the Port of Virginia and building an arena to attract a major league sports team. “As it becomes more apparent how closely connected all our economies are and how our well­being depends on each other, cooperation is important.”

Developing startups
Along with encouraging cooperation among the area’s cities and counties, the Hampton Roads Partnership also advocates growth of locally owned businesses, along with technology-based economic development. Projects, such as the Economic Gardening Program, target entrepreneurs with the intent to stimulate new industries in Hampton Roads. “We’ve got a pocket of neat things going on,” Morris says.

Programs in Norfolk and on the Peninsula have brought together entrepreneurs, engineers, designers and business people to develop viable startup businesses. “Hopefully we’ll see more companies grow out of this region. We want them to stay here and grow here and grow new jobs.” 

And lessen the region’s dependence on the defense sector. “We always have a threat in the region when we become very heavily dependent on the federal government,” Morris says. “We have to look at growing other major economic drivers to make ourselves less dependent. I wish we could say we’ve done a real good job over the past 16 years, but it’s 46 percent of our region’s economy, and it was less than that when we formed the partnership.”  In fact, Hampton Roads’ dependency on Department of Defense spending was only at 26 percent in 1996.

While some contractors are gravitating to the private sector, many provide specific services unique to the defense sector. UHP Projects Inc. in Newport News is one of only six companies in the nation with the expertise to maintain the nonskid deck coating on Navy ships. “We can’t take our expertise and go into private industry to do this,” says Mickey Boyer, the company’s president. As sequestration bore down on the military, the firm closed locations in Baltimore and St. Croix, reduced operations in Louisiana and cut its overhead in Virginia by 50 percent. 

Navy contract work, however,  had picked up considerably by early April, primarily with 2012 budget money being spent.  “We do not plan on the 2013 cutbacks being felt until the third quarter,” Boyer says. “We are not sure why 2012 money has recently started flowing.”

UHP has started investing and hiring and hopes to rebuild to past production levels.  Expansion, however, will be confined to Virginia, with other locations not being scheduled to open until 2014.

UHP has diversified into the commercial and industrial sectors, but Boyer cautions that will not immediately make up for losses in the marine division.

Coordinated efforts urged
Promoting new industries is a step in the right direction, says ODU’s Wagner. He would also like to see the region’s economic development efforts become more integrated with city and county economic development departments pooling resources more often. “Our region has to be viewed as competing relative to other regions,” he adds. “If a business is located in Chesapeake, its benefits are not just isolated to Chesapeake. The region is very integrated. People live in one city and work in another.”
Fraim can attest to that within Norfolk. “About half of the jobs in the city are filled by residents from outside the city,” he notes.

That’s one reason he and other leaders want to expand Norfolk’s light rail system into Virginia Beach and other points. “From the beginning, light rail was supposed to be a starter line,” the mayor says. “In order to truly be a regional system, it has to get to at least one other city.” Virginia Beach voters approved a referendum last November for City Council to adopt an ordinance approving all reasonable efforts to bring The Tide to the city. City and regional leaders believe it would benefit residents and enhance the region’s economy.

In early April, a private development group proposed extending The Tide east into Virginia Beach without federal funds on a schedule four years ahead of current projections. The group includes former Hampton Roads Transit President Philip Shucet, Truland Transportation, AECOM and Jacobs Engineering. The city is reviewing the proposal.

Ultimately, sequestration could be a silver lining for Hampton Roads by spurring leaders to broaden the region’s economic landscape. “If anything, it causes you to focus on what needs to be done,” Morris says. “You hate to get to that point where you have to feel pain before you decide to do something, but our dependency has put us in a situation where we’re forced to make decisions about things we’ve put off.”

Projects forge ahead

While sequestration has forced some businesses to postpone expansion plans, several high-profile projects in Norfolk and Virginia Beach have gotten the green light.

Norfolk is working with Gold Key/PHR Hotels and Resorts to build a 300-bed hotel and conference center in the downtown district. The $126 million facility would include $42.5 million in public funding for the conference center and $64 million in private investment for the hotel.

Meanwhile, more than four years after securing approval from Virginia Beach City Council to build a 360,000-square-foot entertainment complex, Dallas developer Michael Jenkins secured funding from a private equity group to start construction on the site of the city’s old convention and concert hall, the Dome. He plans to build a $180 million five-story complex at the oceanfront, featuring entertainment, retail and restaurants, and creating nearly 1,200 full-time jobs. The city will put up $38 million to build three parking garages for the complex.

Norfolk Mayor Paul Fraim says the hotel and conference center will draw more visitors to the region. The plan, approved by council in early April,was opposed by owners of the Waterside Marriott and Sheraton hotels, who wrote a letter to the city council saying the project would dilute the market.

Meanwhile, Virginia Beach’s plan to build an 18,500-seat arena as a way to persuade a professional sports team to move to the city has been put on hold. The city’s rumored target, the Sacramento Kings of the National Basketball Association, appear to be headed for Seattle instead. The city decided it could not ask the commonwealth for financial assistance on the arena without having a major-league team committed to playing there.

Roll up your sleeves

In the past, people attending conventions in Virginia Beach could look forward to networking, presentations and maybe some down time to enjoy the sun and sand. These days, convention delegates could find themselves picking up trash along the Chesapeake Bay, feeding the homeless or cutting grass at a local youth shelter.
Community service projects ― as well as the chance to inspire team building through cooking classes, wine-tasting seminars and outdoor recreational activities ― are part of a growing trend at meetings and conventions. In a down economy, organizers say audiences want more out of a conference than listening to speakers in a sunless meeting room. “People want to come together and be part of something bigger and better,” says Marti Balcom, president of the Balcom Group, a meeting planning company in Heathsville.

Some groups schedule a day of service in the host community. Others focus on a specific project.  The National Association of Workforce Development Professionals meeting in Virginia Beach signed 800 postcards to send to military men and women serving overseas. “Sending 800 postcards really feels like a big impact and brings the group together,” adds Balcom, who organized the meeting in 2011.

Giving back to the host city is often the extra incentive to attract busy executives. “For us it’s the biggest trend — giving-back projects, what they can do for the community,” says Al Hutchinson, vice president of convention sales and marketing at the Virginia Beach Convention and Visitors Bureau. “It’s the world we’re living in right now. That’s who we are and what we do in America, and conventioneers are no different. They want to find a way to help our community.”

That’s a plus for Virginia Beach, which has seen fewer conventions make long-range reservations. “Instead of folks booking three or four years out, they’re waiting and booking within a year,” Hutchinson says. Economic concerns, along with the potential effects of sequestration, have especially impacted government travel, which accounts for 19 to 20 percent of annual room nights in the resort city.

The convention and visitors bureau has developed a website — One Beach One World — that lists outreach opportunities for groups meeting in the resort city. “Some groups just want to make a financial contribution because they have limited time,” Hutchinson adds. “Some groups want to create a hands-on activity.”
Delegates have donated toiletries or books to homeless shelters, while some organizations have contributed to local charities. “It helps meeting planners attain their corporate social responsibility goals. We want them to meet in Virginia Beach but also make our community a better place to live.”

The story’s the same for the Alexandria Convention & Visitors Association. Last year, it launched Alexandria Cares, a community service program that encourages corporate groups to include service activities along with their business meetings. The ACVA, which booked $3.8 million in meetings and group travel during fiscal year 2012, finds that companies are shunning lavish events in favor of community service projects.

Groups meeting in Alexandria may spend time outside the conference room bowling with underprivileged children, decorating historic sites for the holidays and building bicycles for needy families. “We are very proactive in the corporate social responsibility environment,” says Robin D. Roane, the ACVA’s senior sales manager. “If an organization needs something unique regarding a corporate social responsibility activity, we can certainly create that.”

VOLUNTEER Hampton Roads has been a major beneficiary of the trend toward corporate social responsibility. “We get a lot of corporate meetings where a company will take everybody out of the conference for a half day and do volunteer work,” says Kate Meechan, corporate relations director for the nonprofit volunteer clearinghouse. “The business is seen as giving back, and employees have a chance to do something altruistic on company time.”

Volunteerism not only promotes good will, it can play a critical role in the company’s bottom line. “The whole corporate social responsibility side of business has gone from being a nice thing to do to a need to do,” Meechan adds. “Consumers are able to see every aspect of business on the Internet. They can see if a business gives back, if it’s socially responsible.”

Team-building activities, whether working on a volunteer project, preparing a four-course dinner, or racing kayaks on nearby rivers, are becoming key features of off-site meetings, too.  Marketers say these activities build camaraderie among participants and, as an added bonus, offer a distinctive experience representative of the host region. “Team-building is a trend,” says Tim Bugas, director of sales and marketing for The Homestead in Hot Springs. Corporate groups often take a break from meetings with games of paint ball and capture the flag. Others flex their competitive muscles on kayak or canoe races on nearby waterways. “They’re looking to try to get outdoors a little more versus being in the classroom,” adds Bugas. 

The Homestead’s Canyon Ranch Spa Club, slated to open in May, will tap into the corporate wellness trend. Canyon Ranch nutritionists will be available to lead conference sessions promoting healthful lifestyle choices. “Companies recognize that they have to keep employees not only happy but healthy,” Bugas says. The resort is seeing meeting participants request trail mix, fruits, juices and vitamin water instead of sodas and cookies during refreshment breaks. “It’s not so much chocolate cookies anymore. Those are gone — not all the time — but the majority of the time.”

Meeting attendees at the 12,000-acre Primland resort in Meadows of Dan can enjoy exercise, fresh air and team-building as they participate on a high-tech treasure hunt along Blue Ridge Mountain trails. Geocaching, in which participants use GPS receivers to find hidden canisters, has become a popular exercise for groups at Primland, which hosts about 80 meetings each year.  “Even more so than meeting, they want team building,” notes Dana Puckett, Primland’s in-house group sales manager. “It gives them a chance to interact outside the work area and help each other as a team.” 

Other groups opt to boost team morale in the kitchen. “Food is a great uniter,” says Maria Kopsidas, owner of Cookology, a Dulles Town Center culinary school. “People have been doing cooking classes for a while, but we changed it up and made it into a corporate environment.”

There’s even a bit of Iron Chef-style competition. In one Mystery Basket team bonding activity, participants are divided into project management groups and use a “mystery” basket of ingredients to plan and prepare a meal within 90 minutes. Judges then choose the winning team. “It creates camaraderie,” Kopsidas notes. “They became a group of potential friends and not just colleagues.”

Fortune 500 companies, including Exxon Mobil, IBM, Hewlett-Packard and Fannie Mae frequently host meetings in Cookology’s kitchen for lessons mixed with a dash of team building. “We create this really fun situation involving food and wine that mirrors their potential work environment,” Kopsidas says. “It gives people insight to potential leadership ability.”

For groups preferring to let someone else do the cooking, marketers are touting their region’s culinary offerings. “We ensure delegates leave Alexandria with a memorable meeting experience,” says Roane. Alexandria, which hosts small- to medium-size conventions, offers visitors the chance to partake of a progressive meal at three or four restaurants while simultaneously taking a walking tour of the historic district, the third oldest in the nation. “One of the things we take pride in is we can provide the ‘wow’ factor for delegates.” 

In Roanoke, meeting organizers may include time for participants to take in Virginia Tech athletic events or mountain music in nearby Floyd, hike on the Appalachian Trail or bike on the greenway.  “We promote the hub-and-spoke philosophy where people come in for meetings and want to see what else is in the region”, says Landon Howard, president of the Roanoke Valley Convention and Visitors Bureau.

Guests these days, he adds, often extend their business travel to take in an area’s sights. Statewide, about one in five travelers extend their trip for leisure, according to fiscal year 2011 data from TNS Travels America. Bookings for meetings in the Roanoke Valley are currently three to five years in advance, the most in recent history.

The convention and visitors bureau is getting positive feedback from visitors who attend meetings in the city. “When they walk through the city with a badge on, it’s very common for local people to welcome them and offer to assist them,” says Catherine Fox, the bureau’s director of tourism and communications. 

Still, while community service, team-building and leisurely activities are becoming essential to the meeting experience, the typical convention setting is not likely to fade away. “Place and space are really important,” Balcom says. “That’s the challenge. How do you take your meeting outside the meeting environment but still accomplish your goals? I don’t think we’ll ever be able to replace the conference environment.”

Young city hits 50

A mixture of celebration and administrative headaches greeted new City Manager James Baker when he moved into his sixth-floor City Hall office just two weeks after Chesapeake marked its 50th birthday. While the city is hitting its stride as an economic and educational powerhouse, it also is navigating a number of pesky issues, including troublesome construction projects, simmering tensions between elected officials and city staff, and school budget shortfalls.

Formed on Jan. 1, 1963, with the merger of the small but bustling city of South Norfolk and bucolic Norfolk County, Chesapeake’s initial purpose was to prevent encroachment on its forebears from neighboring Norfolk and Portsmouth. Since then, the city has grown from 78,000 people to more than 225,000 residents spread out across more than 353 square miles. It’s also collected its share of accolades. Last year, 24/7 Wall St. named Chesapeake America’s sixth Best Run City, while Bloomberg Businessweek.com placed it 21st on its inaugural list of America’s best cities in 2011. Not bad for a city just hitting the half-century mark.

Maintaining that momentum now falls to Baker, who comes to Chesapeake after spending five years as the county manager of York County, S.C., a suburb of Charlotte, N.C. He’s facing myriad challenges amidst the city’s yearlong birthday celebration. Before tackling them, Baker plans to listen to the many voices in city government as well as the community.

“The most important thing I can do is listen to the elected officials, community leaders and the staff,” he says, noting that delays and cost overruns on the city’s new animal shelter along with unusable modular jail units built way over budget have eroded trust between City Council members and city administrators. Restoring trust won’t happen overnight, but listening to both sides is imperative, Baker says. “To be an effective council and staff, you have to sit down and see each other as partners. The public doesn’t differentiate between the roles of elected officials and staff. They look at it as a unified whole.”

Spats at City Hall, however, have not kept Chesapeake from prospering amidst the economic downturn. According to the city’s 2012 Annual Report, more than 800 jobs were created in 2011 as the result of $163 million in business investment from new and existing companies. It was the city’s fourth consecutive year of economic growth, momentum that Economic Development Director Steven Wright hopes will continue as Chesapeake embarks on new road and bridge construction projects, opens new commerce parks and endeavors to draw new businesses to the city. “We’re constantly looking for opportunities and strive to maintain a certain level of diversity, including new, large, domestic, international, women-owned and minority-owned businesses,” he says. “It insulates us against some of the problems others have had in the past few years.”

Home to large employers
With its assortment of available tracts and suburban office parks, Chesapeake is home to 20 percent of the region’s largest employers, including Dollar Tree Stores Inc., QVC Chesapeake Inc., Cox Communications Inc. and General Dynamics Information Technology. The Greenbrier corridor includes Hampton Roads’ largest business district with more than 19 million square feet of commercial space.

NewsWright points to the quality of labor throughout the region, as well as nearby port facilities and Chesapeake’s strategic placement as the only city bordering every other municipality in South Hampton Roads as factors that set it apart. “When a company is trying to move people or products through South Hampton Roads, more chances than not, they will come through Chesapeake,” he says.

Economic development officials target industries that offer diverse products, from manufacturing to call centers. “Casting a wide net is the ongoing philosophy of the city,” Wright says. “Chesapeake has effectively targeted the right businesses because we have the resources for those businesses in the city.”

Those include the city’s status as one of the safest of its size and a strong pipeline of labor, constantly replenished by people exiting the military and graduating from the region’s colleges and universities as well as people commuting from bordering communities in North Carolina. “We try to go after all businesses that make sense for the city,” Wright says. “We believe all jobs are important, all businesses are important.”

That’s where teamwork can prevail, Baker points out. “Every jurisdiction right now wants to see economic development, but those are things that are accomplished or not accomplished as a team. My job is coordinating things. If I take the position that I can solve all the problems by myself, I won’t make a good manager.”

The city’s largest private employer is Chesapeake Regional Medical Center, which has more than 2,400 employees. Anchored by the 310-bed Chesapeake General Hospital, it includes outpatient diagnostic and surgical centers, a physician group and an assisted-living facility. Chesapeake Regional is also a partner in a Nags Head, N.C., hospital. The medical center is seeking a successor to President and CEO Wynn Dixon,  who retired at the end of 2012. 

Presence of many foreign firms
Cooperation among economic development officials, City Council and other departments no doubt helped Chesapeake attract a diverse network of businesses, including many from overseas. More than 75 international firms representing nearly 20 countries have offices in Chesapeake, the most in Hampton Roads. Last June, Sumitomo Machinery Corp. of America announced a $13 million expansion that will transform its Chesapeake facility and U.S. headquarters from assembly/distribution to assembly/manufacturing. The move shores up jobs previously thought to have been lost to overseas markets.

“They tried to manufacture their product in China but really weren’t getting the efficiency they wanted,” Wright says. “When they decided to bring those manufacturing jobs back stateside, they chose Chesapeake.”

With nearly half of the region’s international companies calling Chesapeake home, the city serves as a virtual United Nations. In addition to Sumitomo, international firms that have set up shop in Chesapeake include Denmark’s Maersk Distribution Services, Inc., Japan’s Usui International Corp. and Germany’s INIT Innovations in Transportation Inc. A leader in intelligent transportation systems, INIT Innovations grew its five-person office in Chesapeake into the corporation’s North American headquarters.

To attract similar businesses and continue on an upward trajectory, Chesapeake officials realize they must not only maintain but enhance the city’s roadways and bridges. The $140 million, privately built South Norfolk Jordan Bridge opened in October, giving the region its first fully electronic toll facility. The mammoth 5,375-foot-long structure towering above the Elizabeth River replaces a dilapidated bridge which had closed in 2008. Then in November, the city closed on the $150.7 million Chesapeake Transportation System Senior Toll Road Revenue Bonds and $152 million subordinate loan by the Virginia Transportation Infrastructure Bank to help fund the $410 million Dominion Boulevard Improvement Project.

Slated to be finished by January 2017, the project includes 3.8 miles of road improvements and will replace the Steel Bridge with a four-lane, 95-foot fixed span structure. A top priority for city and state officials, the Dominion Boulevard upgrades are expected to improve travel between Hampton Roads and North Carolina.

Growth in southern Chesapeake
Road improvements also present opportunities for growth in southern Chesapeake. “With construction beginning on the new bridge, we think it’s a good time to develop economic opportunities along that corridor and aggressively market it to new businesses and investments,” Wright says, noting that the city also plans to develop new commerce parks in Greenbrier and along the I-664 corridor in Western Branch.

The 120-acre Oakbrooke Business and Technology Center in Greenbrier, owned and operated by the city’s Economic Development Authority, will house the regional FBI headquarters, which will move from Norfolk to its new 131,000-square-foot facility this fall. In Western Branch, Cinemark Theatre opened at Chesapeake Square Mall in late 2011, sparking renewed interest in the facility and surrounding area, which had been losing shoppers to upscale retail developments in neighboring Suffolk. “All indications are the new movie theater has done exactly what we hoped it would — bring in new investment and interest to Western Branch,” Wright says.

South Norfolk residents would like to see more investment take place in their community, which has been unable to capitalize on several redevelopment initiatives. While there’s no shortage of civic pride in the largely blue-collar neighborhood bordering downtown Norfolk, the area has languished in recent years. Some residents believe South Norfolk, which began as an   town in 1919 and became an independent city three years later, took a hit that it never recovered from when it merged with Norfolk County to form Chesapeake.

“A lot of people have lived in South Norfolk their entire lives,” says Kevin Amick, the former president of the South Norfolk Civic League and a candidate for City Council last year. “They have seen money that has gone into the expansion of Chesapeake, but little has come back here to keep the infrastructures up.”

South Norfolk residents’ hopes rose when the city announced plans to build BelHarbour Station at SoNo, a mixed-use development of offices, condominiums, apartments and a marina. When the economy went into a downward spiral, however, the project fell into foreclosure without ever breaking ground.

In late 2011, SeaGate Terminals, based in Atlanta, bought the BelHarbour Station parcel and sought council’s permission to rezone the property for heavy industrial use.

Many South Norfolk residents, however, didn’t want the waterfront property to become an industrial complex. Instead, they preferred for it be used for a project that would spur economic development, similar to Portsmouth’s Old Towne. In the end, council voted to rezone the property, allowing SeaGate to operate a shipping and cargo business.

Amick, however, takes the rezoning in stride. “That decision has been made,” he says. “There’s nothing to do but move forward.” He’s optimistic, though, that improvements to the borough’s historic Poindexter Corridor will usher in new businesses, noting that a Dunkin’ Donuts scheduled to open early this year will be South Norfolk’s first major franchise.

Schools face budget crunch
The city’s continued growth depends in part on a first-rate school system, with city leaders pointing to Chesapeake Public Schools’ 100 percent accreditation rate for six years running. “A big part of economic development in Chesapeake comes from our schools,” says Superintendent James Roberts. “People move to the community because of the schools. We’re absolutely focused on the instructional program and hire excellent people who can carry out the program and who want to work in Chesapeake.” With the highest on-time graduation rate and lowest dropout rate in the region, the school system’s focus is likely to remain intact.

The school system, however, is struggling to deal with a $60 million decrease in its operating budget during the past five years, including a $40 million reduction in state funds.  In response, Chesapeake schools have eliminated programs, increased class sizes, cut positions and delayed replacing school buses and technical equipment. “It’s primarily a state issue, but it has hit K-12 way too hard,” Roberts contends. “They did some things to us that are not temporary.”

While the school system offered some older employees retirement incentives to stave off layoffs and put off renovating aging facilities and building new ones, the superintendent is still wary about the future. “I hope we’ve hit bottom,” he says. On a bright note, the system added about 170 students to its rolls this year, the first increase in five years. 

Financial constraints, however, have not kept Chesapeake schools from achieving recognition. In 2012 the U.S. Department of Education named Norfolk Highlands Primary one of 269 National Blue Ribbon Schools based on academic excellence or progress in student achievement. The international baccalaureate, technology and science and medicine programs at three high schools have been successful despite the additional drain on the system’s coffers.

On the personnel side, Kathryn B. Galford, a sixth-grade English teacher at Greenbrier Middle School, was named the 2013 Virginia Teacher of the Year, placing her in the running for the National Teacher of the Year award. “The most important thing we do is hire people that can get the job done both in the classroom and in the support system,” Roberts says, noting that many of Chesapeake schools’ 6,000 employees spend their entire careers in the school system. Roberts believes that Galford will be a top contender in the National Teacher of the Year competition, with a good chance of bringing home the top prize.

If so, the city may have to add another celebration to Chesapeake’s golden anniversary festivities.