Virginia’s Hampton RoadsRegional Overview

4th Quarter 2009

Meet HREDA

The Hampton Roads Economic Development Alliance (HREDA) promotes Virginia's Hampton Roads as the premier location for capital investment and business expansion. As the region's lead economic marketing organization, the Alliance aggressively pursues new business opportunities throughout the world.

The Alliance’s goal is to match your business needs with the assets found in Virginia’s Hampton Roads. To that end HREDA will…

• Provide a manager dedicated to your project

• Work confidentially and without charge

• Guide and support you through the planning, expansion and/or relocation process

• Coordinate visits highlighting fifteen (15) localities

• Connect you to business leaders in the region

• Advise you on financial incentives

• Serve as your liaison with the State of Virginia Economic Development Partnership and numerous business services

• Become your one-stop source for information and cost comparisons

• Act as a liaison between you and the best local legal and financial advisors

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General Overview

• 2nd largest Metropolitan Area between Washington D.C. and Atlanta, GA

• Centrally located along U.S. East Coast

• Civilian labor force of over 800,000

• Over 96,000 students enrolled in the region’s 8 universities and 4 community colleges

• Offers close proximity to key U.S. markets

• Unobstructed ice free harbor with 50 ft deep channels located 18

miles from the open ocean

Sources: U.S. Census Bureau; State Council for Higher Education for Virginia, Port of Virginia

Aerospace and AviationCorporate and Professional OperationsMaritime and LogisticsModeling and Simulation

Industry Clusters

Population

Source: U.S. Census Bureau

Total Population: 1.6 million

James City

62,414

Williamsburg12,481

Gloucester38,656

YorkCounty61,027

Newport News179,614

Poquoson11,829

Hampton145,494

Southampton18,480

Isle of Wight35,472

Suffolk82,302

Chesapeake220,111

Virginia Beach433,746

Portsmouth100,577

Norfolk234,220

Franklin8,877

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Infrastructure

Distance & Delivery Time from Hampton Roads to Major U.S. Cities

City Distance Delivery Time (in days)

Miles Kilometers Motor Carrier Rail

Washington, DC 193 310 1 2

Philadelphia, PA 387 622 2 3

New York, NY 435 700 2 3

Atlanta, GA 597 960 2 4

Boston, MA 571 918 2 4

Dallas, TX 1,376 2,214 2 4

Detroit, MI 732 1,178 2 5

Chicago, IL 899 1,146 2 5

Miami, FL 959 1,543 3 5

Houston, TX 1,382 2,224 3 7

Hampton Roads is linked to domestic markets by one of the country's most modern highway systems. Interstate 64, a major east-west route, encircles the metropolitan area and connects Hampton Roads to I-95, a principal north-south route. Additionally, U.S. Routes 58 and 460 connect Hampton Roads to I-95 and I-85. To the east, the Chesapeake Bay Bridge Tunnel saves 90 miles to the New York/New Jersey corridor and gives coastal highway traffic direct access to Hampton Roads.

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Average Commute Time (Minutes)Atlanta,

GACharlotte,

NCNew York,

NYWashington,

DCU.S.

AverageHampton Roads, VA

30.7 25.1 34.8 33.4 25.3 23.3

Sources: Virginia Port Authority; U.S. Census Bureau; 2008 American Community Survey

Port and Rail

Hampton Roads is served primarily by the rail transportation giants Norfolk Southern and CSX and is home to Norfolk Southern’s corporate headquarters. The Ports at Hampton Roads create a perfect entry location for these railways to distribute throughout the East Coast and the Midwest. Efficient connections with other rail systems and motor carriers provide easy and affordable access to the rest of the U.S.

Rail ServiceThe Port of Virginia•has the lowest pilferage rate on the U.S. East Coast

•handled 2.0 million TEUs in 2008, a 2% decrease from calendar year 2007

•has 20 shipping lines offering weekly service to Europe and Asia

The Hampton Roads region hosts one of the country’s largest geographic foreign trade

zones (FTZs)

Sources: The Virginia Port Authority; Norfolk Southern; CSX 5

Airports in Hampton Roads serve 4.7 million passengers annually with low-fare service and over 200 daily flights through Norfolk International Airport (ORF) and Newport News/Williamsburg International Airport (PHF).

Also serving northern Hampton Roads is the Richmond International Airport (RIC).

= Nonstop flights

= Direct flights (same plane, max 2 stops)

6Sources: Norfolk International Airport, 2009; Newport News/Williamsburg International Airport, 2009; Richmond International Airport

Hampton Roads

Air: Passenger

Labor Pool

Civilian Labor Force Statistics August 2009

Civilian Labor Force 842,634

Employment 786,915

Unemployment Rate 6.6%

With approximately 13,000 military personnel exiting annually,

and over 30,000 military spouses, Hampton Roads has a continuously replenishing labor force.

Estimated total labor of over 800,000

7Sources: Virginia Employment Commission; 2009 Hampton Roads Statistical Digest; U.S. Department of Defense

Skilled Workforce with a “Can-Do” Attitude

Military Labor Statistics Active-duty Personnel (2009)

Navy 79,192

Army 7,384

Air Force 12,846

Coast Guard 1,738

Total 101,160

Employment and Wage Information

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Wage Rate Comparison

Metro AreaMean Annual

Wage Rate (All Occupations)

New York, NY $54,850

Newark, NJ $50,680

Los Angeles, CA $47,600

Baltimore, MD $47,030

Philadelphia, PA $46,450

Atlanta, GA $44,170

Charlotte, NC $42,490

U.S. Average $42,270

Hampton Roads, VA $38,790

Sources: Virginia Employment Commission (Nonfarm Employment August 2009); U.S. Bureau of Labor Statistics (Wage Rate Data – May 2008)

The Average Wage Rate in Hampton Roads is 8% below the U.S. Average

Hampton Roads offers companies a diverse economy plus competitive wage rates

Major Private Sector Employers

9Source: HREDA Research

Note: This list is a sampling of major employers in the region (based on the number of employees) and is not intended to be a complete list.

Employer Name City Employees IndustryNorthrop Grumman Newport News Newport News 19,000 ManufacturingSentara Healthcare Norfolk 17,000 ServicesNorfolk Naval Shipyard Portsmouth 7,500 Government / MilitaryRiverside Health System Newport News 7,050 ServicesSmithfield Foods, Inc. Smithfield 5,000 ManufacturingNASA Langley Research Center Hampton 4,000 Government / MilitaryBank of America Norfolk 3,600 FinanceDominion Enterprises Norfolk 2,800 ServicesChesapeake Regional Medical Center Chesapeake 2,500 ServicesMeasurement Specialties, Inc. Hampton 2,428 ManufacturingCanon Virginia, Inc. Newport News 2,235 ManufacturingBAE Systems Norfolk (Norshipco) Norfolk 2,200 ManufacturingGwaltney of Smithfield, Inc. Smithfield 2,100 ManufacturingPortfolio Recovery Associates Norfolk 2,032 ServicesSTIHL Inc. Virginia Beach 2,016 ManufacturingGEICO Direct Virginia Beach 2,000 FinanceAmerigroup Corporation Virginia Beach 1,737 FinanceFHC Health Systems (Value Options Inc.) Norfolk 1,700 ServicesHSBC (Household International, Inc.) Chesapeake 1,200 FinanceMANCON, Inc. Virginia Beach 1,200 ServicesInternational Paper Company Franklin 1,100 ManufacturingCox Communications, Inc. Virginia Beach 1,000 Services

Colleges and Universities (8)

University / College Enrollment (2008-2009)

23,086

7,892

6,325

5,427

4,904

4,460

1,381

807

Education

Strong public education plus numerous post-secondary educational centers ensure that Hampton Roads can offer companies an educated and labor ready workforce

Percentage of population (25+) with high school education or higher

Attainment Level Hampton Roads U.S. Average

At least a high school diploma 88.3% 84.5%

Some college (no degree) 23.2% 19.5%

Associates Degree or

higher35.4% 34.9%

Nearly 15,000 degrees, representing a variety of different fields, were conferred by Hampton Roads’ colleges and

universities in 2009, an increase of 2% over 2008.

10Sources: SCHEV; U.S. Census Bureau

Community Colleges (4)

College Enrollment (2008-2009)

26,898

10,557

1,628

3,307

Cost of Doing Business - Tax Overview

Sources: VEDP; Research Institute of America, State and Local Taxes – All States Tax Guide, 3/20/2007 and 5/15/2007); The Tax Foundation; Forbes Magazine; Pew Center on the States

Virginia does not impose a unitary tax on worldwide profits

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Corporate Income Tax

• Tax rate of 6%, not raised since 1972

• Has a three-factor apportionment formula of payroll, property and sales (with sales double-weighted)

• The double-weighted sales factor has the effect of reducing tax liability for firms with significant sales to customers outside Virginia

• Tax credits for job creation and investment in economically stressed areas

• No franchise or net worth tax

Sales and Use Tax

• The total tax is 5 percent (4 percent state and 1 percent local)

• A seller is subject to a sales tax on gross receipts derived from retail sales or leases of taxable tangible personal property

• Manufacturers do not pay tax on purchases used for production; distributors do not pay tax on items purchased for resale

Corporate Income Tax Rate Comparison

Virginia 6.00%

U.S. Median 6.90%

South Atlantic Median 6.90%

Virginia was the 4th most corporate tax-friendly state, as reported in 2008 by The Tax Foundation.

In 2008, Forbes Magazine named Virginia as “The Best State for Business.” It was the third consecutive year Virginia received this distinction.

In 2008, The Pew Center‘s Government Performance Project recognized Virginia as “Best Managed.” Virginia was one of only three states to receive this title.

Cost of Doing Business - Labor Costs

StateWorkers’

Compensation Rate (Per $100 of Payroll)

Unemployment Insurance Tax per

Employee

California $6.09 $284

Florida $3.89 $96

Georgia $3.75 $127

Maryland $3.08 $145

New Jersey $4.92 $557

New York $4.77 $292

North Carolina $3.24 $335

Pennsylvania $4.09 $374

South Carolina $3.71 $146

Virginia $2.08 $91

U.S. Average $3.90 $157

Virginia’s Unemployment Insurance and Workers’ Compensation rates are among the lowest in the U.S.

Virginia is an Employment At Will and a Right-to-Work State

Union Membership

Type of Workforce

Hampton Roads U.S.

Total Workforce 3.4% 12.4%

Total Private Sector 2.5% 7.6%

Private Sector Manufacturing 3.9% 11.4%

Public Sector 6.2% 36.8%

Sources: Union Membership and Earnings Data Book (2009 Edition); Virginia Economic Development Partnership; U.S. Department of Labor; Actuarial and Technical Solutions., Inc. 2009) 12

Labor Costs

Geographic Region

Total Percentage of Benefits

Paid

East North Central

(WI, IL, MI, IN, OH)

30.1%

East South Central

(KY, TN, MS, AL)

28.5%

Middle Atlantic(NY, PA, NJ)

30.7%

Mountain(MT, WY, NV, UT, ID, CO, AZ, NM)

27.4%

New England(ME, VT, NH, MA,

CT, RI)31.5%

Employee benefits paid as a percentage of payroll in Virginia are among some of the lowest in the U.S.

Source: Bureau of Labor Statistics, Employer Costs for Employee Compensation, September 2009 13

Geographic Region

Total Percentage of Benefits

Paid

Pacific(WA, OR, CA,

HI, AK)29.3%

South Atlantic

(WV, VA, MD, DE, DC, NC, SC, GA, FL)

27.9%

West North Central

(ND, SD, NE, KS, MN, IA, MO)

29.0%

West South Central

(TX, OK, AR, LA)

27.7%

South Atlantic Percentage of Benefits Paid

Legally Required Payments: Federal & State Payroll Taxes, Unemployment Compensation, Workers’ Compensation InsuranceBenefits Paid for Time Not Worked: Paid Holidays, Paid Time Off, Payments for Vacation Time, Sick Leave Pay, Paid Breaks, Family & Medical Leave Pay

Medical Benefits Payments: Sickness/Accident Insurance, LTD/Wage Continuation, Medical, Dental & Retiree Medical Insurance Premiums, Vision Care, Life Insurance, Prescription Drug CoverageRetirement and Savings Benefits: 401(K) & Similar, Defined Benefit Pension Plan, Cash Balance or Other Hybrid Plan, Administration Costs, Profit Sharing, Stock Bonus/ESOPMiscellaneous Benefits: Overtime and premium, Shift differentials, Nonproduction bonuses

Legally Required Payments

8.1%

Payment for Time Not Worked

6.6%

Medical BenefitsRelated

Payments7.4%

Retirement & Savings

3.3%

Miscellaneous Benefits

2.6%

Incentive Advantage

Governor’s Opportunity Fund Discretionary funds

Virginia Jobs Investment Program Customized recruiting and training assistance for companies

Sales and Use Tax Exemptions Virginia offers some of the broadest sales and use tax exemptions in the U.S.

Property Tax Exemptions

Virginia does not tax intangible property, manufacturers' inventory and

manufacturers' furniture, fixtures and corporate aircraft

Enterprise ZonesState and local incentives to businesses that

invest and create jobs within Virginia's 56 enterprise zones

Foreign Trade ZonesVirginia and Hampton Roads offer foreign

trade zones and subzones which effectively eliminate or reduce customs duties

Source: Virginia Economic Development Partnership

Virginia offers a variety of performance-based incentives designed to target the needs of the company in conjunction with the development plans of localities and the state

Incentives Overview

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Local project specific incentives may also be available.

Examples Include:

• Economic Dev. Grants • and Loans• Utility Connections• Relocation Assistance• Machinery/Tool Tax • Rebates

Cost of Doing Business - Real Estate

Hampton Roads offers a variety of real estate options—including executive suites—at exceptional prices

Search latest listings at www.hreda.com

N/A = Data not available* Represents cost for mid-town NY

15Sources: NAI Harvey Lindsay Market Research 2009; RS Means Quick Cost Calculator

Hampton Roads, VA Atlanta, GA Baltimore, MD Orlando, FL New York, NY Washington, DC

Downtown Office Average Rental Rate per Sq.Ft.Class A $20.50 $25.25 $25.00 $29.00 $52.50 $48.00Class B $14.00 $22.52 $19.00 $22.00 $35.00 $41.00Suburban Office Class A $18.00 $23.50 $24.00 $24.00 $100.00* N/AClass B $13.50 $19.14 $21.00 $21.00 $52.00* N/AIndustrialBulk Warehouse $4.75 $3.19 $5.50 $5.70 N/A $12.00Manufacturing $6.00 $3.10 N/A $7.00 N/A N/AHigh Tech / R&D $8.50 $5.25 $10.00 $30.00 N/A $14.00Construction Median Cost (40,000 sq.ft. warehouse)Construction Costs $2,134,833 $2,222,500 $2,321,500 $2,252,000 $3,520,000 $2,489,000Contractor's Overhead & Profit

$533,833 $555,500 $580,500 $563,000 $880,000 $622,500

Architectural Fees $186,667 $194,500 $203,000 $197,000 $308,000 $218,000Total Building Cost $2,855,333 $2,972,500 $3,105,000 $3,012,000 $4,708,000 $3,329,500

Square Meters =Square Feet * 0.0929

Regional Economy - Technology Assets

The nation’s . . .

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The Commonwealth of Virginia ranks second in the

nation in total defense employment and Hampton

Roads has the largest share in Virginia with 52%

Sources: Old Dominion University; Jefferson Lab; Decision Data Resources

The world’s . . .• most advanced particle accelerator, the Continuous Electron Beam Accelerator, resides at the Thomas Jefferson National Accelerator Facility

• largest proton therapy institute will be operated by Hampton University starting in 2010• first in-vitro fertilizations and birth took place at the Jones Institute, Eastern Virginia Medical School• first doctorate in “Modeling and Simulation” was awarded by Old Dominion University• largest Seawater Research Laboratory is operated by the Virginia Institute of Marine Science (VIMS) at the College of William and Mary. VIMS is among the largest marine research and education centers in the nation• only manufacturer of nuclear-powered aircraft carriers is located in Hampton Roads

Business Incubators

17Sources: Franklin Business Incubator; Hampton Roads Technology Incubator System

40,000 sq. ft. located in downtown Franklin. Designed for existing small businesses as well as new business startups. Provides cost-effective space, administrative services and professional equipment.

Franklin Business Incubator http://www.franklinva.com

Hampton Roads Technology Incubator System (HRTIS) http://www.hrtis.org

The Hampton Roads Technology Incubator System is comprised of city-specific technology-based incubator facilities located within the Hampton Roads region of southeastern Virginia. The HRTIS currently has 15 clients and 11 graduates.

Hampton Technology Incubator (HTI)

The HTI is primarily supported by the City of Hampton and the Hampton Roads Technology Council. Hampton is dedicated to nurturing high-growth, high tech businesses into profitable industry leaders.

James City County Incubator (JCCTI)

The JCCTI is the newest addition to the system and is located in Williamsburg, VA. This facility offers full incubator services, including high speed internet, board room facility, copier & printer services, common area, individually locked offices, after-hours access and new office furniture.

NATO: Allied Command Transformation - Norfolk

Department of the Navy: U.S. Fleet Forces Command - Norfolk

DoD: United States Joint Forces Command - Norfolk

USMC: Marine Forces Atlantic - Norfolk

USCG: Maintenance and Logistics Command Atlantic - Norfolk

USCG: Atlantic Area Command - Portsmouth

USCG: Integrated Support Command - Portsmouth

U.S. Army: Surface Deployment and Distribution Command - Newport News

U.S. Army: Training and Doctrine Command – Hampton

USAF: Air Combat Command - Hampton

Headquartered Military Commands

18Source: 2009 Hampton Roads Statistical Digest

International Presence, Service and Support

180 international firms representing 27 countries in Hampton Roads means the region has internationally-oriented services and support in place

"Other" includes Australia, Belgium, Brazil, Chile, China, Finland, Greece, Hong Kong, India, Israel, Liechtenstein, Norway, South Korea, Spain, Taiwan & Turkey

19Source: HREDA Research

RomaniaFranceNorwayFinland

DenmarkCyprusBrazil

Belgium

Sweden

Moldova

IcelandItaly

GermanyConsuls in Hampton Roads

Germany20%

Japan16%

United Kingdom11%Sweden

7%Netherlands

5%

Switzerland3%

Canada4%

France7%

Italy4%

Denmark4%

Iceland2%

Austria2%

Other15%

Expansive Shoreline Varied Residential Options

Museums State and National Parks

Opera Historic Cities, Towns, Villages

Festivals Shopping Malls

Recreational and Professional Sports and

VenuesAmusement Parks

Hampton Roads Lifestyle

Hampton Roads Cost of Living

Offering the best of city, suburban and country living

Composite Index 112.1

Groceries 107.9

Housing 121.6

Transportation 94.4

Health Care 108.6*National Average = 100

20Sources: ACCRA, 2nd Quarter 2009; National Association of Realtors, 2nd Quarter 2009 Metropolitan Area Existing Home Prices; ODU, Center for Real Estate & Economic Development, 2009 Market Review

Median price of existing single–family homes

$216,000

Average apartment rent

$871 per month

Sampling Our Business Community

“We hire in excess of 500 college graduates every year…the workforce is very stable and very successful.”

Joe Witt Corporate Treasurer, Ferguson Enterprises

“Southeast Virginia is seen as a strategic location for NYK Logistics’ major East Coast presence. Centrally located with excellent port facilities and infrastructure, our expansion here further enables us to provide a full complement of logistics services for our clients. That, combined with a talented workforce and a business-friendly community, made this an easy choice.”Lane TurnerPresident, Warehouse Division, NYK Logistics Inc

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The Hampton Roads Economic Development Alliance

HREDA.COM

World Trade CenterBirkenstrasse 1528195 Bremen, GERMANYT: +49.421.174660

4 East Bank HouseTide Mill WayWoodbridge, Suffolk 1P12 1BY UK

T: +44.1394.610022

T: +1.757.627.2315 |F: +1.757.623.3081

U.S. Headquarters:

500 Main Street | Suite 1300, Norfolk, VA 23510 USA

11820 Fountain Way | Suite 301 Newport News, VA 23606 USA

T: +1.757.627.2315 | F: +1.757.826.6706