Week of January 19, 2004
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Lowe's Also Expanding Locally


Former TruServ distribution center
Home Depot is leasing a little more than half of an 840,000-sq.-ft. (75,600-sq.-m.) facility (pictured) that previously served as a TruServ distribution center.
Home Depot Picks Hagerstown, Md.,
for 230-Employee
Distribution Center
By JACK LYNE, Site Selection Executive Editor of Interactive Publishing


HAGERSTOWN, Md.Home Depot (www.homedepot.com) seems to find Hagerstown, Md., (www.hagerstownedc.org) a most hospitable home. The world's largest home-improvement specialty retailer and the second largest U.S. retailer, the Atlanta-based company announced last week that it will open a 454,000-sq.-ft. (40,860-sq.-m.) distribution center in the northeast Maryland city, creating 230 new jobs.
        The announcement follows last year's decision by Your Other Warehouse, Home Depot's plumbing distribution subsidiary, to open a major Hagerstown retail operation. That project is on a similarly hefty scale, covering 450,000 sq. ft. (40,500 sq. m.).
        Home Depot's newest Hagerstown sally will establish a center distributing door hardware, faucets and other bathroom fixtures and accessories. The project is part of the firm's aggressive 2004 expansion plans - which, coincidentally, were announced on the same day that the Hagerstown center went public.
Gov. Robert L. Ehrlich Jr.
Gov. Robert L. Ehrlich Jr. (pictured) called Home Depot's decision "a testament to the outstanding business climate, skilled work force and excellent quality of life offered by Maryland and Washington County." Incentives likely testified, too.

        "Home Depot's decision to locate its new distribution facility in Hagerstown is a testament to the outstanding business climate, skilled work force and excellent quality of life offered by the state of Maryland and Washington County," Gov. Robert L. Ehrlich Jr. (R) said in announcing the project.

Incentives: At Least $405,000
But another major factor also likely testified in helping sway the decision: a state and local incentive package that "made it very economically attractive for us," said Home Depot executive Kent Knutson.
        "We're very pleased with our agreement with Washington County and the state of Maryland," Vice President for Government Relations Knutson explained in announcing decision. "The governor's economic development team and county officials have been extremely supportive and made Hagerstown the clear choice for our new distribution center."
        State and county officials didn't provide full details about all of the incentives that were offered. They did say, however, that Home Dept will receive US$405,000 in assistance for what they described as the project's "first phase." (Home Depot officials didn't discuss any further Hagerstown expansion plans in announcing the distribution center.)
        The company's subsidy package includes $330,000 in two conditional loans: $300,000 from the Maryland Department of Business and Economic Development (DBED at www.choosemaryland.org) and $30,000 from Washington County (www.washco-md.net). Those loans, however, will convert to outright grants if the distribution center meets its stated hiring goals.
        In addition, the DBED is providing a $75,000 employee-training grant.
        "Washington County provides a great location for Home Depot," said Board of County Commissioners President Gregory I. Snook.

Hagerstown as 'Hot Spot'
Like Home Depot, a number of other expanding companies of late have liked the Hagerstown area's location. The city sits some 71 miles (114 kilometers) northwest of Baltimore and is near both I-81 and I-70.
        "It's clearly a hot spot," Home Depot's Knutson said of the area's business pull.
        FedEx Ground is one of the biggest fishes in the recent local catch. Last July, the Memphis, Tenn.-based company picked a site just outside Hagerstown for a new 335,000-sq.-ft. (30,150-sq.-m.), 400-employee Mid-Atlantic processing center. State and local officials provided $1.7 million in incentives for that project, part of FedEx Ground's $1.8-billion distribution expansion. (For more details, see the July 21, 2003 Project Watch.)
        But the area likely got an even stronger shot of good news last October: Ending months of speculation, Volvo announced that it's investing $150 million in its 1,200-employee Hagerstown Mack truck plant.
        State and local officials had feared that the 1.5-million-sq.-ft. (135,000-sq.-m.) power-train operation would shut down and relocate to Pennsylvania, South Carolina or Mexico. Instead, Volvo designated the operation as its Center of Excellence for the North American market. The state and local assistance package for the Mack plant expansion totaled almost $5 million.

Lowe's Local Center Also Expanding
More recently, state and local incentives facilitated an expansion by Lowe's, the world's second-largest home-improvement specialty retailer - and Home Depot's biggest rival.
        The Wilkesboro, N.C.-based firm announced in early January that it's enlarging its Hagerstown distribution center. Lowe's currently serves seven Mid-Atlantic states from a 60,000-sq.-ft. (5,400-sq.-m.) reload operation.
Bob Nardelli
Expansion-happy Home Depot has made capital investments of almost $10 billion since January of 2001, Chairman, President and CEO Bob Nardelli (pictured) pointed out. The company's 2004 capital-investment budget totals $3.7 billion.

        The company will replace that building with a much larger facility, a $17.8-million, 228,061-sq.-ft. (20,525-sq.-m.) distribution center. The facility will be built on a 52-acre (21-hectare) site in CSX Valley Park.
        Lowe's is receiving almost $400 million in state and local assistance for the project, which will create 10 new jobs in flatbed distribution. All of the subsidies are in conditional loans that become grants if Lowe's meets investment and job targets. The DBED is providing a $150,000 loan, while Washington County is offering $50,000, and the city of Hagerstown is proffering $45,000.

Closed Center Gave Home Depot an Opening
A company that moved out, though, provided a major impetus for Home Depot to move in.
        The distribution center will set up in leased space that makes up a little more than half of an 840,000-sq.-ft. (75,600-sq.-m.) facility that previously served as a TruServ distribution center. (Lease terms weren't disclosed.) TruServ closed the 295-employee operation in January of 2002 in a cost-cutting move. The distribution center closing was the company's 12th since the 1997 merger of True Value, Coast to Coast and ServiStar.
        Real estate investment fund New Boston Fund Management Services bought the facility from TruServ in July of last year for $28 million. Since TruServ's shutdown, the building has stood vacant.
        For Home Depot, though, the closed facility represented a prime opening for saving time, said Knutson. The building can be quickly converted into one of the retail giant's distribution operations. Home Depot, in fact, hopes to get its new operation online by as soon as this February, Knutson explained.
        That setup speed reflects Home Depot's ambitious 2004 expansion plans. The company's capital-investment budget for this year totals $3.7 billion. That allocation will include building 178 new stores and additional distribution operations, store modernization and maintenance, and technology, company officials said.
        Home Depot's sizable 2004 expansion budget continues its posture of recent years.
        "Since January 2001, we have invested nearly $10 billion in business growth and transformation efforts that are now a fundamental part of our structure," Chairman, President and CEO Bob Nardelli said in announcing the company's 2004 sales and earnings targets.
        Those targets are as aggressive as the time frame for getting the Hagerstown center up and running. Home Depot, said Nardelli, expects sales growth between 9 and 12 percent this year and earnings growth of between 10 and 14 percent.




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