Challenge

Caterpillar Logistics Services, Inc. (CAT Logistics) provides world-class supply chain solutions and services to its parent company, Caterpillar, Inc., as well as over 65 other leading corporations throughout the world. In 2003, CAT Logistics engaged CBRE to identify land sites in the greater Tokyo area, to accommodate a 500,000 SF built to suit for a new distribution facility. CAT Logistics sought this facility to provide supply chain solutions for Shin Caterpillar Mitsubishi, as well as other key clients.

CBRE was appointed to identify a land site, evaluate development options, assess capital markets, and negotiate the best all encompassing deal for CAT Logistics.
There were numerous challenges through the entire process, including cultural differences in business dealings, negotiations, deal structure, building design, and construction, as well as limited land availability, language barriers, and currency conversions

Solution

After two years of searching for a site, a location was selected on Shin Caterpillar Mitsubishi’s (SCM) campus in Sagamihara. SCM is a 40 year old joint venture agreement between Caterpillar and Mitsubishi Heavy Industries, Ltd. Upon identifying the site, CBRE strategically evaluated whether Caterpillar should build the facility on their own and sell it in the capital markets or secure a developer to purchase the land, build the facility, and lease it back to Cat Logistics. Caterpillar decided building the facility on their own was not the most effective option, which prompted CBRE to begin the process of identifying qualified developers to develop the building.

Traci Buckingham & Reid Mackay led the team to identify the most appropriate developers for a project of this magnitude. CBRE was engaged to determine the land value, as SCM would be selling the land to a developer. CBRE created an iprojects site, where the most recent documents could be accessed from one centralized location. This allowed anyone on the team to access the most recent documents, which included RFP’s, Site Plans, Building Design and Specifications, Proposals, Financial Analysis, Lease Drafts, Team Contact Information.

In November of 2005, Traci and Caterpillar’s Real Estate Director, traveled to Tokyo to interview the eight candidates. The whole process was a team effort, as Traci & Reid worked with all parties to establish a mutual understanding and respect for the differences in cultures and business conduct, through deal negotiations and structure. The initial interviews were conducted for the purpose of allowing the developer to present their capabilities, while Caterpillar Logistics presented the scope of the project.

Once Caterpillar Logistics finalized their building design and specifications, a Request for Proposal was crafted and submitted to the developers in late November. There were numerous conference calls with all of the developers to answer various questions regarding the deal structure and differing construction design and engineering between Japanese Standards and U.S. Standards.
In January of 2006, all proposals were received. Traci worked with Beth McGee of the CBRE Financial Consulting Group in Chicago, to create a financial comparison of the proposal in Yen and U.S. Dollars.

The developers were short-listed and in February of 2006, another trip was made to Tokyo to conduct second interviews with the four finalists. After the second round of interviews, all four were requested to revise and submit their final proposal. In March of 2006, the field was narrowed to two finalists, AMB and LaSalle Investment Management. After numerous rounds of negotiations, AMB was selected as the developer in May of 2006. Lease negotiations were lengthy, in order to combine American and Japanese lease language.

Benefit

CBRE exceeded the client’s expectations by negotiating a very aggressive deal for Caterpillar Logistics, Inc., resulting in Cat Logistics signing a 15 year lease with AMB. The ground breaking ceremony was in December of 2006 and Cat Logistics will occupy the building in November of 2007.

Two CBRE offices, 6,000 miles apart, were able to work together and navigate the client through both the real estate process and the cultural differences.

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