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COMMERCIAL REAL ESTATE

The Real Estate Makeover

Logistics Plus had been homeless for too long. But how much home did it need?
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When it was launched in 1996, Logistics Plus had no need for an office. Its sole customer for several years was GE Transportation Systems, and founder Jim Berlin and two partners worked at the client's facility in Erie, Pennsylvania. They shared an office. They shared a desk. Occasionally, they shared a chair. "Our address was a PO box," says Berlin. "I used to joke that our headquarters was 6 inches by 10 inches."

As the workload grew, the company started hiring. Within a couple of years, six employees were working from that same GE office. "We put desks all around the perimeter, butting up against each other," recalls Gretchen Seth, senior vice president for international operations. "We were thinking that the next option would be bunk desks." By the late '90s, Logistics Plus had staff on-site at two more large customers. Still, the business had no home -- and no real company culture.

Around 2000, Berlin decided to expand the business. In addition to embedding with a few major accounts, Logistics Plus would seek smaller jobs from a wide array of clients. That meant the company needed a place of its own. Berlin's first move was true to form: He crammed his staff into a trailer that a local trucking company let him use for free. "There were seven people in a space that could maybe fit four," says Seth.

The Space Chase

Berlin finally accepted the need for a real headquarters. Figuring the company required from 12,000 square feet to 15,000 square feet, he made the rounds of office parks and standalone buildings. Then, one day, a friend told him about Union Station, a block-long, three-story, 100,000-square-foot building that sat like a rotting tooth in one of Erie's most blighted neighborhoods. Still a stop for Amtrak, it was one of the first art-deco train stations in the United States. But over 30 years of virtual abandonment, the structure had grown filthy and decrepit. Holes gaped in the ceilings. Dead animals decayed on the floors. Berlin led a group of employees on a three-hour top-to-bottom tour. As they stood on the roof gazing out over the city, Berlin was smitten. "I asked, 'Am I crazy? Or am I [expletive] crazy?' "

Expletive crazy, they all agreed. But Berlin felt drawn to this building. After seven years of homelessness, he wanted Logistics Plus to have a place with unique character and deep roots in its industry. "And as my son said, the cool factor is off the charts," says Berlin. He decided to buy the place.

But cool doesn't cut it with lenders. When Berlin applied for a mortgage, the bankers asked how he would manage payments. In response, he whipped out a chart displaying sales growth from zero to $20 million and a client base that had expanded from one to more than 200 companies. Stamp that "approved."

After years of spending nothing on real estate, Berlin bought the station for $2 million and spent another $1 million restoring it. The building came with some land that might rise in value if the neighborhood improved, and he hoped it would buff the company's prestige with clients. But Berlin had no real expectations of a return on his investment.

Still, as Berlin labored on the building, his enthusiasm grew, and he began looking for ways to improve his immediate neighborhood. The company hired artists to paint murals on two faded, peeling bridges that abut the station. Berlin paved several vacant lots. And he installed floodlights on the roof to illuminate Griswold Park across the street, which was dark, dangerous, and full of trash. After teams of Logistics Plus employees cleaned up the mess, Berlin spent more money to lure a farmer's market there. He even sprang for the port-o-johns. The company's investment in the area to date is about $100,000.

Location Is Everything

"We feel like the Beverly Hillbillies," says Seth, exulting in the 12- by 18-foot office she now has to herself. Today, the Logistics Plus headquarters is a bustling place, with 70 employees who talk face to face instead of communicating almost exclusively by phone and e-mail. One hundred and thirty remain embedded with clients in 15 countries, making the station critical to a cohesive identity. Berlin brings staff members to Erie as often as possible so they can absorb the company's culture, perhaps best expressed by an 800-foot-long model railroad that chugs along just below the office ceiling.

The building also wows customers. "In the rest of the world, train stations are still the hubs of everything, so this has been great for our reputation overseas," says Berlin. "Our people tell potential clients that we own this place, and they're like, 'Whoa! You guys must be big and important.' "

Logistics Plus rents out the station's first floor, which is at 60 percent occupancy. A brewpub, a photography studio, a Republican Party outpost, and other tenants don't provide much rent, but that may change as the area gentrifies. The Logistics Plus renovations have also attracted the attention of city officials. Erie is building 143 townhouses and condos around Union Station, largely in response to Berlin's efforts. "Jim is one of the reasons we've targeted tens of millions of development dollars toward that neighborhood," says John Elliott, CEO of the Erie County Economic Development Corporation.

The new real estate costs have cut into profitability. But Berlin isn't concerned. Logistics Plus was doing $20 million in business when it bought the building and is now at more than $70 million. "So, if we even paid $350,000 in mortgage costs this year, that is only half a percent of our income," Berlin says.

Of course, buying the brick beast was never about making money. It was about establishing identity. "You walk through, and you see the history of a building," says Bonnie Eccles, Logistics Plus's manager of material sourcing. "And you see the history of this company."

Last updated: Mar 1, 2009

LEIGH BUCHANAN is an editor-at-large for Inc. magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture.
@LeighEBuchanan




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