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byline: Joan Tupponce

The value of diversity

Hampton Roads continues to diversify its economy while combating the effects of defense spending cutbacks. Currently, military spending represents more than 40 percent of the local economy.

“That’s more than it should be,” says Chuck Rigney, Portsmouth’s director of economic development, “We are fortunate, in the sense, that Hampton Roads has the world’s largest concentration of military and the country’s largest number of military commands outside of Washington D.C. The effect is that we have somewhat of an economic protection with those assets.”

But sequestration — across-the-board federal budget cuts — is causing ripple effects in the region’s economy.

“The threat of sequestration has caused the green light to go to yellow and sometimes put a stop on government spending and contracts in the area,” Rigney says. “It has put a chill on our economy. Everybody that [supplies] the military, such as major Department of Defense contractors, are holding back or waiting for work that would routinely be greenlighted, but nothing is routine anymore.”

Old Dominion University’s Economic Forecasting Project reported in January that Hampton Roads’ real gross regional product rose 2.2 percent last year and is expected to grow less than 2 percent this year.

The region is finding ways to diversify in order to remain healthy, Rigney says. “We want to make sure we can broaden our economy.”

In December, for example, two international companies, Germany-based Becker Hydraulics and Italy-based Pacorini announced plans to move into the region.

Becker Hydraulics will invest more than $500,000 in a manufacturing facility in Chesapeake’s Cavalier Industrial Park, creating 10 jobs. The company will produce hydraulic hose systems as well as fuel and bio-diesel hose assembly lines for various industrial applications. Pacorini, a logistics company serving the coffee industry, also will  invest more than $500,000 in a Suffolk facility and create 10 jobs.

Bright spots for Portsmouth last year included national retailers such as Kroger Marketplace opening in areas of the city that previously were blighted or in need of shopping opportunities.

The city’s Old Town and downtown areas also are seeing a surge in multifamily housing, creating a higher density of people living and working in that area.

The Naval Medical Center Portsmouth and Portsmouth-based Norfolk Naval Shipyard continue to grow, and the city’s technology sector is expanding, Rigney says.  “That’s an increasingly targeted area,” he adds.

The Portsmouth Marine Terminal on the west bank of the Elizabeth River reopened last fall after being closed since 2011. The Port of Virginia is talking with a handful of ocean carriers about moving  additional smaller-vessel services into the terminal. “It’s becoming a player in helping bring additional cargo into the port,” says Rigney.

Hampton announced new business and expansion projects last year involving more than $106 million in capital investment and 2,085 new jobs.
“We’ve had over 760,000 square feet of commercial space sold, leased or renovated,” says Leonard Sledge, the city’s director of economic development.

One of the city’s biggest wins was the $25 million expansion of Alcoa’s Hampton Roads operations. The company will add equipment for a new production line and modify existing machinery to produce lighter-weight jet engine blades. Once production ramps up, the company expects to add at least 75 employees over three years.

Liberty-Source PBC will invest $1.56 million to begin operations at Fort Monroe, creating 596 jobs. The company will provide finance, accounting, human-resources, customer-care and support services for customers such as AOL.

Another Hampton deal involved the relocation of the national sales center for Newport News-based Ferguson, a major wholesale plumbing distributor, to the Hampton Roads Center’s central campus. The move could bring as many as 350 jobs to Hampton in the next three years.
Another win for Hampton was the opening of Faneuil Inc.’s customer contact center at Peninsula Town Center. The 22,250-square-foot facility represents a $2 million capital investment, creating up to 400 jobs.

Peter Chapman, Norfolk’s deputy city manager, says 2014 also was a “dynamic year” for the city. “Several major projects are under construction and emerging districts are taking off and defining their character,” he says. “Also, manufacturing is on the rise.”

One of the projects under construction is The Main, a $126 million Hilton hotel and conference center at the corner of Granby and Main streets. Also downtown, the former Waterside marketplace on the Elizabeth River is being transformed into an entertainment complex called Waterside Live!

Simon Premium Outlets is planning a 351,000-square-foot outlet in Norfolk this year. The $75 million investment will include up to 120 retail stores and will create 300 construction jobs and 800 permanent jobs.

In Suffolk, the arrival of Pacorini will contribute to the city’s growing reputation as a coffee industry hub. The company picked a 150,000-square-foot warehouse in the Northgate Industrial Park for its newest location. Locally, Pacorini will support the operations of Green Mountain Coffee Roasters, maker of Keurig’s K-cups, in Isle of Wight County.

Meanwhile, Massimo Zanetti, the largest private-label coffee producer in the U.S., is moving a production line from Canada to its Suffolk facility. The company will invest $4 million and hire 15 employees.

The Ohio-based J.M. Smucker Co., which owns Folgers, also will expand its liquid-coffee concentrate facility in Suffolk. The $4 million project will add 15,000 square feet.

One of the city’s largest new projects is Friant and Associates. The office furniture manufacturer is building a 357,000-square-foot manufacturing and distribution center.

The Newport News Economic Development Authority is riding the tide of growth as well. “We are causing and facilitating diversification of our economy,” says Florence Kingston, the authority’s director of development.”

The city received a new enterprise zone designation in December, which will allow it to offer new and expanding companies state incentives for job training to go along with local incentives.

One of the city’s largest deals was the $152 million expansion of Germany-based Continental, a major automotive supplier. Continental will make turbochargers at its Newport News site and boost production on its gasoline high-pressure injector, fuel rail and pump assembly lines. The project will create 525 jobs during the next three to four years.

The city also is assisting Liebherr Mining Equipment in its $53 million expansion, which is expected to create 174 jobs by 2017. The company, which makes coal-mining trucks, is doubling production. The project also includes a new training facility and additional office space.

The city is working with the Thomas Jefferson National Accelerator Facility as it prepares to compete for a medium-energy electron ion collider, which is expected to advance the study of sub-atomic matter interaction. The lab’s competition for the project is Brookhaven National Laboratory on Long Island.

Virginia Beach saw a rebound in industrial and retail activity last year. The city expects to add more than 1,400 new jobs by assisting in the expansion of 29 companies and recruiting 13 new businesses. “We have had $70 million in new capital investments,” says Warren Harris, the city’s director of economic development. “We are working with companies that will increase the per-capita income of our residents.”

One newcomer, Canada Metal (Pacific) Ltd., a manufacturer of marine and industrial products, is investing $3 million to establish its first U.S. manufacturing operation, creating 70 jobs over three years. “This company aligns perfectly with our aggressive growth in advanced manufacturing,” Harris says.

Last year the city opened the fifth phase of Town Center, adding more than 213,000 square feet of office space, 290 apartment units and a 927-space parking garage. It also leased 27,000 square feet of space to national retailers such as Anthropologie.

San Diego-based Green Flash Brewery broke ground on its first East Coast craft-beer brewery in the city’s Corporate Landing Commerce Park. The $20 investment project was announced in 2013.

Harris also notes the city is negotiating with a private-sector partner, which is investing $200 million, in developing the planned 500,000-square-foot Virginia Beach Arena.

“The city put in $53 to $78 million of infrastructure improvements around the site,” Harris says. “Our goal is to be up and opened by the fall of 2017.”

Boosting efficiency

Philadelphia attorney Tim Bak became very familiar with Suffolk when he was helping California-based Friant and Associates search for an East Coast location.

Bak traveled to the Hampton Roads city five or six times during 2014. “The company looked all up and down the East Coast, from Georgia to New Jersey,” he says. “We talked to each state and looked at the ports and existing warehouse space in each of those areas.”

Founded in 1990 and based in Oakland, Friant and Associates designs and manufactures customizable office systems. The company started its search for an East Coast location in 2013. Being on the East Coast was important to the company. “It’s hard to be on the West Coast and support our East Coast dealers and customers,” says Paul Friant, the company’s president and CEO.

After looking at all of the variables, the company narrowed its search to Virginia and Maryland. It toured existing space in Baltimore. “That looked good, the pricing was right, and there were incentives from Maryland,” Bak says.

The site selected in the CenterPoint Intermodal Center in Suffolk, however, will be a new 357,000-square-foot facility, and that factor appealed to Friant. The building is owned by the developer, Chicago-based CenterPoint Properties. Friant is the long term leaseholder. The company hopes to be open by early summer.

“It will be a clean canvas for us,” Paul Friant says. “It will be a building with all of the newest technology — state-of-the-art machinery.”

Suffolk’s central location on the East Coast and its proximity to the Port of Virginia also were pluses. Friant imports furniture components as well as some finished pieces from China. “But most of its manufacturing is done in the U.S.,” Bak says, noting the company’s 300,000-plus-square-foot manufacturing facility in California.

The process of receiving imports from China and distributing merchandise from California to customers on the East Coast hasn’t run as smoothly as the company would like. During its tours, Friant was impressed by the efficiency of the Port of Virginia. “The West Coast port is not as efficient,” Bak says. “We are looking to keep the product flowing through. There is time sensitivity. If time is tight, we need an efficient port to get things in quickly.”

The Suffolk location also is expected to benefit from the impending expansion of the Panama Canal, which will double the canal’s capacity. Companies like Friant will be able to ship products on larger ships. “They will be able to get more product to the East Coast with a shorter route through the Canal,” says Kevin Hughes, Suffolk’s director of economic development.

Timeliness is crucial to the company’s reputation for customer service. Friant prides itself in its quick turnaround on orders. The company offers customers two shipping schedules: one option is five days and the other is 10 days.

The company liked the fact that the outside space in CenterPoint was large enough to allow drivers to pick up a container from the port, park it at the facility and then pick up and transport another container. “It’s more efficient to leave it and get what goes out,” Bak says.

After the company narrowed its search, negotiations went back and forth between the company and the two finalists. The decision to come to Virginia was due in part to the state’s ability to put a deal together and have staff ready to assist the company with hiring and locations. “How fast they came back to us with information was really important,” says Paul Friant. “We had a positive relationship.”

The VEDP and the city teamed with the Port of Virginia and the Hampton Roads Economic Development Alliance to secure the project. Gov. Terry McAuliffe approved a $200,000 grant from the Governor’s Opportunity Fund, and the company will receive benefits from the Port of Virginia Economic and Infrastructure Development Zone Grant Program. Additional funding and services to support the company’s employee training activities will be provided through the Virginia Jobs Investment Program.

The company’s $17.4 million investment will create 166 jobs over three years. “We will start with at least 75 employees and move up to 166,” Bak says.

The new jobs in advanced furniture manufacturing are expected to help diversify Suffolk’s industrial base. “We’re excited about that,” Hughes says.

Bak is complimentary of the way negotiations were handled by the city and the commonwealth. “They were very professional and knowledgeable,” he says.

Killer customer service

Bringing international companies to Loudoun County is an ongoing focus for Buddy Rizer and his staff in the Department of Economic Development.

That’s why they are excited about Germany-based Biogrund’s decision to open its U.S. operations in the county. “We have been proactively seeking international companies,” says Rizer, noting he’s also pleased that Biogrund is a pharmaceutical firm. “We hope to grow that category. We haven’t had many pharmaceutical companies come here. We think this will be a good jumping off spot for us.”

The deal is an offshoot of the county’s “sister county” partnership with Main-Taunus-Kreis in Germany, a district that sits between Frankfurt and Wiesbaden. The two areas share similarities in landscapes and lifestyles. “Loudoun is very close to our area in Europe,” says Felix Specht, managing director of Biogrund U.S. Inc.

Biogrund’s parent company is located in the small town of Huenstetten, Germany, not far from Frankfurt. The company works with pharmaceutical and related companies in developing and producing of solid oral dosage forms such as film and sugar coating.

Loudoun began working with the parent company in 2011 after learning it was interested in opening a U.S. office. “Coming to the U.S. was very important,” Specht says. “There are a lot of big, multinational pharmaceutical companies that have development in the U.S.”

The county wasn’t on the company’s radar in the beginning. It first looked at locations in New Jersey. “Most of our customers were situated there,” Specht says, noting that the company also looked at Chicago and the Philadelphia area. Loudoun was the fourth location to be considered.

The company liked Loudoun’s central location on the East Coast with access to major interstates and airports. “You can cover both the South and the North,” Specht says. “We have a lot of customers in the New Jersey area, and it’s easy to get to them in a three-hour drive. You can visit two to three customers.”

Biogrund sells in Virginia and the Carolinas as well. “We also serve customers in California,” Specht says. “We are trying to cover all of the U.S., but we are beginning on the East Coast.”

During its selection process, Bio­grund contacted the economic development office in each area it visited. Loudoun’s customer service stood out, Specht says. “They were willing to meet with me immediately. They offered us fantastic service.”

The county assisted the company in finding a location along with contractors it would need to build a facility. Loudoun officials also helped link the company to other services in the area.  “I think Loudoun County is very special,” Specht says. “It’s more important for a smaller company that is coming into the U.S. to get good service rather than have tax benefits. Whenever we have a problem, we can call Loudoun, and they will support us. I don’t believe any European country would give that good support to a company coming to the area.”

Rizer believes Loudoun makes perfect sense for Biogrund and other international companies. “We have the infrastructure that companies need to get started, and [Washington] Dulles International Airport is here,” he says.

Biogrund made a $2 million investment, building an approximately 7,000-square-foot lab and manufacturing facility in the county. It started with four employees — two that were hired in addition to Specht and his wife, Barbara, who works with customer service. “A decision was made to invest low and then invest again after three to five years,” Specht says. “We will be hiring another two people this year. We could have up to 20 employees in five years, but it’s difficult to say.”

Biogrund’s parent company has approximately 60 employees in Germany. When it opened in 1999, it also only had two to three employees. “When I started with the company in 2004 it had 10 employees. I was the eleventh,” Specht says.

An uneven year

Last year ended with mixed reviews for economic development in Northern Virginia. Prince William and Loudoun counties turned in strong years while Fairfax and Arlington experienced a slowdown.

Fairfax, however, has begun 2015 with a bang. In February, the Inova Health System announced that it will lease the 117-acre Exxon Mobil campus to create a complex for the Center for Personalized Health.

The varied results in the region stem from the ongoing effect of sequestration — across-the- board federal budget cuts begun in 2013. To combat the drop in federal spending in a region dense with government contractors, Northern Virginia counties are diversifying their economies and looking to new industry sectors.

Each Northern Virginia county has had its brush with sequestration, but some fared better than others. Prince William County followed its record-breaking year of 2013 — when it posted $1 billion in capital investment — with yet another strong year, more than $500 million in capital investment and 382 new jobs.

“It was our fourth-best year of capital investment since 1977,” says Jeff Kaczmarek, executive director of the county’s Department of Economic Development.

The county, however, isn’t immune to the effects of sequestration. “Our federal contractors — well over 200 in the county — are definitely concerned about sequestration. Their biggest concern is the uncertainty. People don’t know what the impact will be on them,” Kaczmarek says.

Like its neighboring counties, Prince William is constantly diversifying its economy, growing in areas such as technology, life sciences, game design and logistics. It is also seeing an increase in cybersecurity, data centers, and modeling and simulation companies.

Last year the county opened two technology incubators: the Virginia Serious Game Institute at George Mason University’s Prince William campus and the Prince William Science Accelerator.
Virginia Serious Game Institute houses five startups involved in modeling and simulation for a variety of industries, including health care, defense and education.

The Prince William Science Accelerator focuses on aiding companies involved in life sciences. “Our first tenant in the accelerator, ISOThrive, was recruited from California,” Kaczmarek says. “It makes a prebiotic compound that helps with the digestive system.”

The county also crossed the 2-million-square-foot mark in total data-center space last year.

Loudoun County recruited and assisted 188 prospects last year. It announced 39 project wins, accounting for almost $250 million in new investment. The county saw growth in information technology and communications technology as well as health IT and personalized medicine, aviation and logistics services, and agriculture.

“We are very proud of a big deal we closed on our rural side.” says Buddy Rizer, director of Loudoun’s Department of Economic Development. Last year Black Hops Farms LLC announced it would convert 15 acres of former pastureland into a hopsyard and also build a new processing facility for hops, an important ingredient in craft beers.  The new plant will be the mid-Atlantic’s first commercial-scale hops production and processing facility. In addition to developing its beer industry, Loudoun is home to 42 wineries that together have an estimated $136 million economic impact on the county.

The data-center industry in the county continues to grow, with more than 5.6 million square feet of space. Loudoun’s 56 data centers generate an estimated $60 million in revenue each year. Last year Texas-based CyrusOne, which provides data-center facilities, began building the first phase of a project that will reach 400,000 square feet when it is completed.

The county was also able to attract the U.S. Department of Interior, which moved its offices from Fairfax. The $2 million investment will bring in 400 jobs. Loudoun also competed with Maryland to retain cybersecurity company Telos Corp. The company will invest $5 million to expand its headquarters and create 160 jobs.

The big news in Fairfax is the Inova announcement. It plans to develop a complex devoted to treatment of diseases through therapies geared to each patient’s genetic makeup. Inova’s Translational Medicine Institute will move to the new site.

Gerald L. Gordon, president and CEO of the  Fairfax County Economic Development Authority, says the move puts the county on a worldwide stage. The center will attract top researchers as well as critical research dollars, he says.

“We have never had that attractive element in the economy before. Now all of a sudden we have a research magnet,” says Gordon.

The big payoff will come when the discoveries made by researchers are commercialized. “There will be companies being established and jobs being created,” Gordon says.

Fairfax saw its pace slow down last year. Job growth numbers — 6,803 new jobs — were still positive but were not as high as in the past. “The federal government still remains the largest buyer of goods in the world and it has slowed,” says Gordon.

Because of the slowdown, federal contractors in Fairfax are becoming effective at “translating their skills to private applications and growing those applications,” Gordon says.

The county began diversifying decades ago. It has many major companies — such as Volkswagen Group of America, Capital One and Hilton Worldwide — that are unrelated to federal contracts. Most of the county’s growth last year was focused in Tysons Corner because of the opening of four new Metro stations. A fifth metro station opened in Reston. “That has spurred a great deal of growth,” Gordon says.

Thanks to the county’s approval of a master plan that allows for unlimited densities around a Metro station, new buildings being constructed are higher than in the past. “Before we had buildings that were 17 to 18 stories in Tysons Corner and now we have several with 25 to 30 stories,” Gordon says.

The opening of the Metro stations enticed Intelsat S.A., a provider of satellite services, to move its administrative headquarters and 400 jobs from Washington, D.C., to Tysons. “What they told us was, ‘No Metro, no way,’” Gordon says.

In Arlington, Christina Winn, director of business investment for Arlington County, considers 2014 to be a transitional year. Business is down from 2013, but the county attracted and retained businesses occupying 1.1 million square feet of space (attracting 2,000 jobs while  keeping 3,000 others).

Currently one-fifth of the county’s real estate space is vacant. “We expected that because of Defense Base Realignment and Closure [BRAC], sequestration and budget impacts,” says Winn. “We lost the equivalent of four [military bases]. That would have devastated most communities. But overall Arlington is resilient. We still have job growth.”

Arlington’s workforce increasingly is mobile, working from locations other than an office. Although businesses still are looking for new office space, “they are looking for smaller spaces,” she says. “We are not getting users taking larger spaces.”

The county is filling the vacant spaces with high-growth entrepreneurs and emerging technology companies. “These are generally companies that have experience,” she says. “They have product lines, and they want to expand their product lines or they want to do business with the government.”

TandemNSI, a public-private partnership between Amplifier Ventures and Arlington Economic Development, provides these companies with connections to national security agencies that will need innovative technology products.

One of the county’s largest deals last year involved retention of the Corporate Executive Board (CEB), a member-based advisory firm. CEB will invest $150 million and create 800 jobs in addition to the 1,200 people it already employs in Arlington. 

The $50 million Crystal Tech Fund venture capital firm officially launched in April in Arlington’s Crystal City neighborhood. The project, founded by Paul Singh, CEO of Disruption Corp., focuses on backing post-seed startups with investments ranging from $250,000 to $1 million.

Since its opening, the fund already has helped more than a dozen companies and is planning to double its workspace. “Paul Singh’s vision is to build a productivity center for entrepreneurs, which he hopes will eventually become a sustainable model for other cities,” Winn says.

 

Putting new ideas to work

When Defense Point Security CEO George McKenzie attended last year’s Best Places to Work in Virginia ceremony, he walked away with an award and several new ideas.

During the event he heard other company executives talking about the benefits of establishing walking paths for employees. He took that idea to heart when his company moved its headquarters to a new 3,500-square-foot office in Old Town Alexandria along the waterfront.

Employees now have access to parks, grassy areas and walking paths. 

“We also purchased a massage chair,” he says, noting he heard about that benefit at last year’s luncheon as well. “We thought that was an interesting idea. We bought one and put it in the break room. People love it.”

That innovative approach to employee relations helped Defense Point become the top small company on the Best Places list for two years in a row.

Last year was another solid year for the Alexandria-based cybersecurity firm. It won not only its first but also its second government prime contract. Previously, the majority of its work involved the company serving as a subcontractor.

The company’s services range from security engineering to incident response. A specialty is digital media analysis (computer forensics), which provides timely information that can help determine whether a security incident has occurred.

Defense Point is continuing its subcontractor contracts with the Centers for Medicaid & Medicare Services as well as the Department of Homeland Security. Last May it opened an operation in Chandler, Ariz., to support immigration and customs enforcement.

The majority of the company’s nearly 100 employees are located on customer sites. Twenty employees are housed in the new operation in Chandler.

The company ranked No. 745 on the 2014 Inc 5,000 list of fastest-growing private companies in the U.S. “It was our first time being on the list,” says McKenzie.

He believes that Defense Point is able to attract top talent because of its attractive benefits package. The company pays 100 percent of the premium for medical insurance for employees and their families. “Through negotiating with our health-care broker we have been able to maintain 100 percent medical premiums,” McKenzie says, noting the recent rise in health-care costs, which are “going through the roof.”

The company has a “community-first” outlook with regard to its employees. “We are big on healthy community members,” McKenzie says. “If we can help them maintain their medical coverage, they will be more loyal to us and better active members of the Defense Point community.”

The company additionally provides an in-house gym and access to its computer lab area, which is open 24 hours a day, seven days a week.

Defense Point continues its Shield Award program, where an employee is recognized for outstanding performance each quarter, as well as its fellows program for its technical leaders and subject-matter experts. The program covers many different areas of cybersecurity. “One of our directors also created a study group for Certified Information Systems Security Professional (CISSP), the most well-known cybersecurity certification,” McKenzie says. “We developed an online video series that he and other members of the study group put together.”

The company also has created Capture the Flag, a game on Defense Point’s website with practical cybersecurity exercises. Players gain points for each question answered correctly. “Anyone can log in and play. The goal is to bring up education so more people understand the threat,” McKenzie says.

Defense Point’s corporate culture emphasizes teamwork even though employees work in different locations. Employees get together once a quarter for events. Last year the company held a golf event in Alexandria, for example, that included miniature golf and a family barbecue. “In Arizona, we did something similar,” McKenzie says. 

The company will often fly several employees out to Arizona to attend events and also fly employees in Arizona to Alexandria. “We go back and forth to perpetuate the vibe,” McKenzie says. “As we grow and have geographically dispersed employees we want to make them feel like they are part of the company. They need to see the faces of leadership. They need to know there is a company behind them that is there to help them.”

Best Places to Work 2015 list of small employers

Upward trajectory

President and CEO Bob Eisiminger ranks the spirit of the team at Knight Point Systems LLC in Reston as one of the company’s biggest strengths. He points to the outpouring of kindness after one of the company’s employees was involved in a serious motorcycle accident some months ago. The man was flown to a shock trauma unit in Baltimore for his recovery.

“When people found out he was in an accident … and they knew he was taking an extended leave of absence, eight people stepped up to donate their leave to him so he could stay on full-time employment for as long as he could before going on short-term disability,” Eisiminger says. “That says a lot about our team.”

The company has been on an upward trajectory for several years now. It was ranked 1,280 on the 2014 Inc. 5,000 list of fastest-growing private companies in the U.S., moving up from No. 1,507 in 2013. It has grown from around 140 employees last year to more than 200 today. “We continue to grow,” Eisiminger says.

This year marks the second year that Knight Point has taken the honor of top company in the midsize class on the Best Places to Work in Virginia list. Before last year, the company also topped the small company category for two straight years.

Everyone at the company continues to focus on Knight Point’s “10X” initiative that aims at revenues of $400 million and 1,000 employees by the end of 2022. At the end of 2013 the company had revenues of $68 million. In December, Eisiminger expected the company to finish 2014 with just over $100 million in revenue. “If we continue on that trajectory, we will hit our goal by 2022.”

He is proud that employees, at the company’s headquarters and at field locations, continue to be excited about “10X.” “They realize with ‘10X’ comes more opportunities and job security,” he says.

Most of the company’s employees are located in Virginia, Maryland and Washington, D.C. It also has an operations office outside of Charleston, W.Va., and operations in Stennis, Miss.; Ogden, Utah; Philadelphia; and Oklahoma City.

This year Knight Point won 13 new contracts; most of which are prime contracts. “We have had a bunch of wins,” Eisiminger says. “We are refining processes that help us manage our customers and relationships.”

One of the company’s goals is to grow as a service business with the ability to scale up or down as customers’ needs increase or decrease. “It’s about buying what you need when you need it and then being able to turn it off,” he says. “Having that ability is appealing to a lot of customers.”

Offerings range from cloud services to cybersecurity. In June 2014 the company became Cisco Gold Certified, giving it a higher level of expertise within the industry. “We did it in record time,” Eisiminger says of the certification. “It shows when we put our minds to something, we can do it. Cisco certification is a big part of working with service-type contracts.”

Knight Point is one of the few companies that offer a pension and profit-sharing plan. Each year it contributes the equivalent of 7 percent of each employee’s paid salary into his or her plan. “We contribute the whole amount that goes into the plan,” Eisiminger says. “In order to be in the plan, you have to be with the company for two years.”

Employees are vested immediately when they enter the plan. If they stay with the organization, their money continues to grow in the plan. “If they leave the organization, they can take that money and roll it into an IRA, and there would be no tax consequences,” Eisiminger says.

The company is constantly trying to increase the diversity of its team. “We are always looking for women and diverse candidates for IT,” he says. “It is still a male-dominated industry, but that is changing slowly but surely.”

Eisiminger recently attended an onboarding session for new hires. Fourteen out of the 15 new hires were women. “I was glad to see that,” he says.

Eisiminger, a disabled veteran and West Point graduate, continues to serve on the board of the Wounded Warrior Amputee Softball Team. “We want veterans that have lost an arm or leg to know that life without limbs is limitless,” he says of the organization’s mission. “We are also involved in Hero Dogs, a program that trains and places service dogs with injured or disabled veterans. Giving back is not just something to do. It’s the right thing to do.”

Best Places to Work 2015 list of midsize employers

Raise a cheer

Mugs of German beer topped off an October ribbon-cutting ceremony for Germany-based IMS Gear Virginia Inc. in Virginia Beach. The company was celebrating a new 112,000-square-foot manufacturing facility that will help expand production of the gears it makes for power car seats.

That market is increasing, says company President Guenter Weissenseel. “More and more cars have electric seats” for drivers. That means seats for the “passenger market are still growing. That could double in the next three to four years.”

The company already has 65 percent of the U.S. automotive gear market, and Weissenseel expects to see that percentage trend upward. By last fall the company was producing more than 1 million gears per month. “Our business has multiplied five times in the last five years in Virginia Beach in both production numbers and revenue,” he says. “And, we are going to be growing 40 percent in volume in 2015.”

The new plant replaces the company’s original 34,000- square-foot plant in Virginia Beach that opened in 2000. IMS Gear is leasing the facility from The Miller Group, which developed the property.

While the company is pleased with the strides it has made in Virginia Beach, it did consider other locations for the recent expansion. It looked at Chesapeake and Norfolk as well as Gainesville, Ga., where it has another plant that manufactures gears for brakes, power steering and window regulators. It also considered a couple of existing buildings in Virginia Beach. “We asked ourselves, ‘Do we stay in Virginia Beach or go somewhere?’” Weissenseel says.

The company opted to stay based on the city’s willingness to work with IMS Gear Virginia in 2000 and again with this recent expansion. “We also had 60 to 70 people here, and we didn’t want to lose them,” Weissenseel says.

The company has created more than 150 new jobs to support the expansion. “In 2009 we had 54 employees in Virginia Beach, and now we have 210,” notes Weissenseel.

The Oceanside location is a perk for employees who visit from the company’s parent IMS Gear in Germany. “There are lots of things to do here,” he says.

IMS Gear is based in Donaueschingen in Germany’s Black Forest region. Johan Morat founded the company in 1863 to manufacture precision instruments for the cuckoo clock and watch industry. Maximilian Zimber-Morat, great-great-grandson of the company founder, visited the Virginia Beach facility for the recent dedication. 

It is one of 10 IMS Gear manufacturing facilities around the world — six in Germany plus one in Mexico and one in China in addition to the Georgia and Virginia plants in the U.S. According to Weissenseel, the company expects sales this year to be “around $480 million.”

IMS Gear was very localized to the Black Forest region before it began selling outside of Germany in the 1990s. “We moved outside to become a global player,” Weissenseel says.  “A lot of our customers asked us to be located where they were.”

Those customers included Siemens in Georgia. IMS Gear opened its facility there in 1995 in the same building that housed Siemens.

The company currently is focusing on international growth in Europe, the U.S., Mexico and China. The U.S. is the largest market for the products made at IMS Gear Virginia. When dealing internationally “you need to understand that every country works a little differently. Every country has its own rules,” Weissenseel says. “It takes time to understand the rules.”

Companywide, 70 percent of the business comes from the automotive market. “That is where we want to grow,” Weissenseel says. The company also makes gears for blinds, forklifts and aircraft as well as for automotive hatches on cars. In the Europe market, it makes gears for electric bikes.

IMS Gear depends on the work of tradesmen, but Weissenseel fears there could be a shortage of qualified workers in the future, especially in the U.S. “Somewhere we have lost our trade schools,” he says. “We need to train our kids again and tell them it’s okay to get your hands dirty. It’s okay to be a toolmaker.”

There is still an emphasis on learning a trade in Germany, he adds. “If you want to go to Germany with the company, you have that ability. We have 200 apprentices in Germany. Out of the company’s 2,600 employees, 8 to 9 percent are apprentices learning hands on.” 

Economy in Germany’s Black Forest region
Germany’s Black Forest region is located in the southwestern section of the country. Clockmakers in the region have been making cuckoo clocks since the 1700s. The area has a variety of companies involved in the manufacturing of semiconductors and injection molding. The state of Baden-Württemberg is home to companies such as automotive corporation Daimler  AG, Porsche, optics company Carl Zeiss AG and software firm SAP AG. The area around Stuttgart is a hub for companies devoted to research and development.

Economy in Virginia Beach
Major industries in Virginia Beach include advanced manufacturing, biomedical, life sciences, defense, information services, maritime and logistics. The city was named one of America’s manufacturing boomtowns in 2013. This year Vancouver-based Canada Metal (Pacific) Ltd. announced a plan to open a manufacturing plant in the city, its first site in the U.S. The company manufactures and markets marine and industrial products. Last year the city announced 50 new business relocation and expansion projects. In October DOMA Technologies, a cloud-based data and document management company, announced plans to create 150 jobs in the city in an expansion. The company was awarded a multi-million dollar contract from the U.S. Department of Veterans Affairs. In addition, construction has already begun on a 58,000-square-foot brewery, tasting room and beer garden for Green Flash Brewing Co. It will be the San Diego-based brewery’s first East Coast location. It’s scheduled to open in 2016.

A ‘buyer’s market’

Commercial insurance rates are falling, thanks to a two-year absence of catastrophic East Coast storms and stable investment returns for insurance companies.

“This is a buyer’s market,” says Walter Smith, state president of BB&T Insurance Services. “Rates have become more competitive. Consumers that have enjoyed a good loss history have seen more advantages over the last two to three years.”

Rates began sliding last fall and are now “flat to somewhat soft,” says John Middleton, president and COO of Richmond-based Tabb, Brockenbrough & Ragland (TB&R), a member of the Dawson Cos. platform of AssuredPartners Inc. “We see that trend holding.”

Although two hurricanes menaced Hawaii this year, neither had a big impact on the U.S. insurance market. “They were in smaller areas that were not as dense with population,” says P. Marshall Fleming, president and CEO of Bankers Insurance in Henrico County. “We really haven’t had many catastrophes other than the tornadoes in the Midwest in 2014.”

Even though the overall forecast is positive for the months ahead, a few industry groups won’t see substantial rate decreases, including health care, energy and habitational (multi-unit dwellings, apartments, etc.) “Some rates in more high-hazards classes of business such as construction, because of the nature of the business, will be higher than typical office risks as well,” Middleton says.

Directors and officers coverage as well as marine insurance and workers’ compensation also may be subject to higher rates. “From a product standpoint, employment practices liability’s pricing is also still firm,” Middleton says.

Hutch Mauck, president of Scott Insurance, which has offices in Lynchburg, Roanoke and Richmond, is carefully watching workers’ compensation because of “the continued increases in medical costs,” he says. “That could put some return pressures on workers’ comp over the longer term, although it’s too early to tell.”

Uncertainty over the renewal of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) also is affecting workers’ compensation, according to the 2014 Marketplace Realities report by Willis Group Holdings. The Terrorism Risk Insurance Act (TRIA) was first passed by Congress in 2002 and reauthorized in 2007 as TRIPRA. The federal backstop program, set to expire Dec. 31, created an insurance market that could provide terrorism coverage.

“If Terrorism Risk Insurance Program Reauthorization Act is not renewed, then that coverage will have to be sought in the open marketplace,” says H.B. Whitmore, president and managing partner of Willis of Virginia Inc. The company has offices in Richmond, Reston and Norfolk. “Essentially it’s acting as reinsurance or a backstop, and if it’s not renewed, that would be a large loss of capacity, which could impact rates. We are negotiating stand-alone terrorism coverage as an option for our clients in case it doesn’t get renewed.”

A bill extending TRIPRA was passed by the U.S. Senate in July but had not been acted upon by the House by the time this issue went to press.

One of the hottest-selling products in the insurance market is cyber liability coverage. Major recent data breaches in the retail and financial industries — think Home Depot and JP Morgan Chase — have brought “widespread public awareness of the damages” that can occur, says Middleton of TB&R. Home Depot’s breach affected more than 50 million credit and debit cardholders. JP Morgan’s affected more than 75 million households. “There are still a lot of companies that don’t have it, but they are certainly interested in it,” Middleton says.

Smith of BB&T also is seeing a lot of activity on cyber liability. “That is a real exposure area that people need to be concerned with,” he says. Smaller companies may not see cyber liability as a big threat, but they shouldn’t overlook it, he adds. “Hackers are going after the most data they can get typically. They are going after bigger companies, but smaller companies usually have less internal security.”

Rates for cyber liability remain competitive. “In general, rates are nearly flat, but there may be some modest reduction,” Whitmore of Willis of Virginia says. “However, because of recent breaches in point-of-sale [POS ] large-box stores and retailers, we are seeing some decreased capacity. POS large-box stores and retailers may see as much as a 20 percent increase.”

His company is working with companies of all kinds to assess, identify and quantify their cyber risks. “We are helping bring together the legal side, IT, security and purchasing. We are looking at vendor contracts,” Whitmore says. “We are doing a lot of sophisticated modeling to help companies estimate their losses and any potential regulatory fines. That’s an exploding area for us because people are realizing they are at risk.”

Other insurance coverage being added to company portfolios includes professional liability and environmental liability. They are becoming more popular as rates become “more affordable and terms continue to broaden,” Mauck of Scott Insurance says.

There has also been a growing interest in insurance products related to pandemics, especially by multinational companies that have operations in areas where disease outbreaks like Ebola can occur. “We haven’t had any calls about it as of yet,” says Middleton.

Companies looking for commercial insurance won’t have any trouble finding coverage because of an ample amount of available capacity. “We’ve also seen some new insurance companies such as Berkshire Hathaway entering the marketplace,” says Mauck.

Competition among insurance companies for new business is heating up and producing rate reductions for accounts with the best loss ratios. Unfortunately, those new business rate reductions aren’t in the cards for companies that are just renewing their coverage. “That is a trend that started last summer,” says Middleton. “When you see that trend, it’s problematic for the rest of your clients.”

There is a way, however, for all companies to keep their commercial insurance costs low. The key is to lower company losses. “Companies’ loss activity drives their cost,” Mauck says. “We are trying to help buyers find creative ways to manage their losses.”

Fleming of Bankers Insurance believes that pristine commercial insurance clients will see low single-digit increases in the first part of the year. “I would not be surprised to see rates drop from around 4 percent to 1 to 2 percent or have no increase,” he says. “I believe during the year they will slide down and flatten out.”

Smith agrees that rates for companies with good loss ratios will decrease. However, the same doesn’t hold true for companies with the worst loss experience. “They will continue to see an increase relative to their individual performance,” he says.

Look, Mom: no hands

Autonomous or driverless vehicles may be a new buzzword within the auto industry, but the technology behind those vehicles isn’t new to Michael Fleming, CEO of TORC Robotics LLC in Blacksburg. The company has been working with the technology since it opened its doors in 2007.

“The autonomous technology is not yet being used by consumers, but it is coming,” says Fleming. “ … It’s the same technology we are working on and have deployed.”

The year TORC opened, it partnered with Virginia Tech to compete in a challenge sponsored by the Department of Defense Advanced Research Projects Agency (DARPA). Teams were tasked with developing a fully autonomous vehicle that had to travel 60 miles of urban and off-road environments in less than six hours. “We were competing with 89 teams from around the world,” Fleming recalls. “We were one of three teams [Carnegie Mellon and Stanford were the other two] that finished the challenge. That was our claim to fame.”

Since then the company has been working with the Department of Defense as well as the transportation and mining industries. Fifty percent of its revenue comes from defense projects. The remaining 50 percent is related to commercial customers. “We also work with agriculture, but we focus on the other three [defense, transportation and mining] sectors,” Fleming says.

Fleming was a graduate student in engineering when he started his company. He began with four partners, all Virginia Tech engineering professors and graduate students. The five had been working on a robotic project at Virginia Tech when they discovered that industries were interested in their technology. “We were working with technology that is decades out. They came and said ‘we would like to buy it,’” Fleming says. “I said,  ‘Let’s spin out a company.’”

The DoD has used the company’s technology in its military vehicles (humvees and mine-resistant ambush protected vehicles) in Iraq and Afghanistan. The mining industry is implementing the technology in open pit mines that already use autonomous excavators and haul trucks.

TORC has grown from five to 40 employees. It currently has three facilities in Blacksburg. The company continued its expansion in August by breaking ground on a new 20,000-square-foot robotics building that is scheduled to open next March. “We will be able to consolidate into one central facility,” Fleming says. The project is adjacent to the company’s 22-acre, off-road test site and Virginia Tech’s “Smart Road,” which is used for transportation testing. “It will serve as a training and demonstration facility. It will allow us to test our products and also allow customers to travel to us … It’s something we have needed for a while.”

TORC recruits employees from Virginia Tech and other institutions such as Carnegie Mellon, Cornell University and Massachusetts Institute of Technology (MIT). “Most of our employees have advanced degrees, masters and Ph.D.s,” Fleming says. “We are an engineer, technology-heavy company.”

He says the private company’s revenue has been on an upward swing, although Fleming doesn’t release figures. “Since 2010 we have grown 60 percent each year in revenue,” Fleming says.

International companies began showing interest in the technology for both defense and commercial applications in 2009 at a time when TORC had high demand from U.S. customers. “A lot of times when you are in rapid growth, it can be very painful, so it was important for us to be focused on our priorities,” Fleming says of the decision at that time to not focus on international markets. “We didn’t see as much demand on the international side.”

By  2012, though, that mindset changed because there was international demand, particularly in the military and defense sectors. “We became engaged with the Virginia Economic Development Partnership. We have been working with them for several years now,” says Fleming.

International business currently accounts for less than 15 percent of overall revenue, “but we see it growing.” 

The company works with Australia and Singapore but also has customers in Europe. “We are now seeing a demand from South America. We also work with the Middle East through partners,” says Fleming.
He finds that customers in Singapore are aggressive in adopting new technology. “They are forward thinking,” he says. “They are very business savvy. I have a lot of respect for our customers there.”

It’s important to build relationships in Singapore. “That’s not always done in a conference room,” he says. “It’s also done over lunch and dinner and by having our partners in Singapore come to Virginia.”
Most of his customers are fluent in English. “There is not much of a language barrier,” he says. Before doing business in a foreign county, Fleming says, it’s important to research the culture. “You want to become well versed. The most important thing is to be polite and spend more time listening than talking,” says Fleming. 

Economy in Blacksburg
Startup businesses in Blacksburg and Montgomery County are on the rise. This spring four local startups in Blacksburg – Fitnet, a mobile fitness app; Heyo, which provides a social marketing platform for small businesses; LawnStarter and VirtualU, which works with 3D scanning and human avatars – secured $4.1 million of angel and venture financing to grow their companies. The Virginia Tech Corporate Research Center, adjacent to Virginia Tech, has grown to more than 150 research, technology and support companies. Local entrepreneurs founded about 60 percent of the companies in the park. Major employers in Blacksburg include Virginia Tech, Dish Network, Moog, which manufactures motion control products, aerospace company Alliant Techsystems and the Montgomery County School Board.
 

Economy in Singapore
Singapore is one of the world’s largest exporters. The country has a large petroleum and petrochemical industry as well as a prominent manufacturing sector that includes digital and electronics manufacturing. Tourism and financial business services also factor in the country’s economy. One of the country’s growing economic sectors is biotechnology. Major employers include Pan Pacific Hotel Groups, Singapore Airlines, Shell Eastern Trading (a supplier of liquified natural gas) and agribusiness group Wilmar International Limited.

Danville markets former mill site as technology park

The 80-acre site that was once a center of textile manufacturing in Danville for more than 100 years is now primed to be a center of technology.

Dan River Technology Park, which includes several existing structures, has its own electrical substation, unlimited water supply and is hooked into nDanville’s high-capacity broadband services.

“It has unmatched electrical and fiber infrastructure,” says Telly Tucker, the city’s director of economic development. “The transferability capacity is one gig per second. We tested how quickly data could be sent from Danville versus Northern Virginia, and it was quicker from Danville.”

The city Industrial Development Authority owns the site, once home to Dan River Mills, and would like to sell or lease the property. It offers up to 1.9 million square feet for future development.

“All options are on the table, leasing, build-to-suit and land lease as well as selling,” says Tucker. “We will consider selling to one user or multiple users. That’s one of our options. We have so much flexibility with this site because of the infrastructure.”

One option for the site would be a data center. The city, which is known as an established technology location, is home to the first Cray XMT2 supercomputer located outside a government agency or university campus.

Because it is located on a different power grid than most facilities, Danville is a strategic disaster recovery location for major cities on the East Coast. That helps it avoid problems with blackouts or brownouts. “It’s also more than four and a half hours from Washington, D.C., so it’s out of the threat of terrorism to D.C.,” Tucker says.

Danville is marketing the site to domestic and international companies.

“We’ve been marketing it for a few months,” Tucker says. “We have seen some interest. Several prospects have called, and some have taken site visits. If we can land an anchor tenant, it will be more attractive to other tenants. We probably have a higher likelihood of multiple companies coming in and having a multi-tenant facility.”