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Pepsi-Cola Corporation

Pepsi-Cola Corporation
The Day They Came to Town.

Historical Background:

I received a phone call from Paul Martini, the District Manager of Pepsi North America Concentrate Division in Valhalla, NY. He was looking for between 150,000–500,000 SF of warehouse space in the Harrisburg, PA, or Newark, NJ, or Philadelphia, PA areas. Not only did Pepsi require an ample amount of space to start, they also needed room for expansion in case they started a bottling operation. The facility would need a walk-in cooler and a flammable room. The target date to occupy the space was September or October, 2001.

Needs Assessment:
The property needed to be further defined, but at this point we knew it was a minimum of 150,000 SF with at least 15 docks. It also needed to have the ability to expand, at a minimum, by 125,000 SF.

My Role:
The need to help them understand the market and current conditions, such as rates and supply, became a significant part of my role in this transaction. The need for market information was intense.

April 25, 2001:
I met with Paul and his supervisor, Lazlo “Latzi” Molnar to tour properties within the targeted Harrisburg region, which became the front-runner over Philadelphia and Newark.

May 21, 2001:
Southpoint, in Carlisle, a First Industrial Realty Trust property, was shaping up nicely as this 182,500 SF became the building of choice.

There would also be a larger building (approximately 300,000 SF) to be built at a later date (by First Industrial) into which Pepsi would be relocated (about 0.5 miles away) if bottling operations became necessary.

Until that decision was made, the 182,500 SF would suffice as their distribution center.

July 3, 2001:
A major environmental situation developed. An environmentally contaminated site over two miles away was troubling Pepsi’s Risk Management.

Even though the Pepsi building had sewer and public water, any future inferences of contamination (perhaps by a competitor), especially for a bottling operation, in such close proximity to the contaminated site could be a public relations nightmare.

After a lot of work and in-depth analysis of the situation, the site was abandoned.

At the same time this setback occurred, Pepsi was purchasing Quaker Oats. Now it made more sense to wait and see what the distribution needs for Gatorade and other Quaker items were, in addition to the Pepsi products.

This was unfortunate for all of us as we had invested so much time and energy, but they had to do what was best for the business and it appeared that the time to revisit this project would be in the fall.

September 28, 2001:
The site search resumed, after the summer pause. For a period of about three weeks the requirement was directed toward Allentown and away from the Harrisburg area. Unfortunately, for me, Pepsi already had a broker relationship in the Allentown market. I wished Paul well and told him I was still available if it came back to Harrisburg. For those three (3) weeks I was uninvolved in the process. Then I received a call–it was coming back to Harrisburg. A great call to get!

October 27, 2001:
We toured Harrisburg again, updating our past information and quickly narrowing the search to two buildings–one in the Upper Allen Industrial Park on the West Shore, the other on I-81 north of Harrisburg, at Route 39.

By all accounts, the West Shore building should have worked the best and it was the one on which we focused the hardest.

As things progressed we ran unto some issues, which made me think we didn’t want to have all our “eggs in one basket” again.

I called the second choice building owners (at Route 39 & I-81) and asked if they would like to run a “parallel path” to the first choice building.

They agreed that Pepsi was a tenant for whom they were willing to do this.

November 16, 2001:
The conversation on both buildings continued, one openly and actively and the other quietly being pursued as the alternative choice. There was a definite intensity by the “second place” owners. So much so that we opted to have conference calls two to three times a week (even on Saturdays) to keep the parallel path moving.

As it turned out, our first choice required additional sprinkler protection due to the flammable room. All of a sudden, due to that cost, our second choice was pushed into first place. The hard work everyone invested paid off. Pepsi didn’t have to go through the agony of another lost building with no alternative. The switch was made and Pepsi was able to move their project along with no delay.

January 14, 2002:
The lease was signed and I was now gathering more information on labor rates and employment statistics. I even went to a Saturday morning job fair sponsored by the distribution tenant in the adjacent building, to gather the latest information on labor rates and to get a general sense for the availability of different classes of employees: fork lift operators, general
warehouse workers, and managers.

March 8, 2002:
The walk through took place and the punch list was developed. Pepsi moved in shortly after and their overall company distribution plan was starting to fall into place. I was still actively talking with Paul every 2-3 days.

Until all the questions were answered, the level of service never decreased. Paul was an excellent individual with whom to work, Pepsi was a great client to service, and we developed an excellent relationship that continues to this day.


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