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Why CEDIA is Building New HQ in Fishers, IN: Crunching the Real-Estate Numbers

10-year lease on CEDIA’s Indianapolis headquarters is up: Why the home-technology trade association is building its own HQ in nearby Fishers, Ind., and why the economics work.

Why CEDIA is Building New HQ in Fishers, IN: Crunching the Real-Estate Numbers
Architect's rendering shows new CEDIA headquarters in Fishers, Ind., with CEDIA's Dave Pedigo arriving by bike, Cris Pyle skating on her lunch break, interim CEO Tabatha O'Connor pulling up in her Jeep, Olivia Sellke skipping to work in her flouncy skirt, and Walt Zerbe throwing a Tech-Council party on the deck.
Credit: American Structurepoint, Architects

Julie Jacobson · June 13, 2017

Next year CEDIA, the trade association for home-technology specialists, will move its headquarters from a rented space in Indianapolis to a new facility it’s building in nearby Fishers, Ind.

Ordinarily, this might not be a major story, but since cynics are bound to groan about this “priority” of their trade association, it bears discussing the rationale behind the move.

Over the past 10 years in Indy, CEDIA has spent some $4 million on rent, improvements and maintenance – this for a facility that doesn’t really meet its needs. Inherited from CEDIA’s previous association-management firm, the current space isn’t optimized for training dealers or courting trade partners such as interior designers and architects.

It’s also not amenable to collaboration, due to its chopped-up spaces, says CEDIA chairman Dennis Erskine.

Furthermore, the current arrangements leave no room for expansion.

To renovate the older building to meet CEDIA’s modern-day needs, “we would have to invest quite a bit of money,” says Erskine.

Furthermore, the landlords would be raising rent, and on top of that the lease is triple-net, meaning CEDIA foots the bill for property taxes, building insurance and maintenance. Yes, CEDIA would have to pay to replace anything from plumbing to carpets to HVAC systems. With numerous HVAC units nearing their end of life, that bill alone would be substantial.

“All those $20,000 air conditioners need to be replaced,” Erskine says. “We’d be spending all this money and at the end of it, all we have is an address.”

Examining Options

It was clear the current leasing arrangement was impractical, Erskine says, so CEDIA looked for other places to rent.

“We’re building an asset and at the same time creating a building that makes a statement.”
— Dennis Erskine, CEDIA

The organization requires not just office space but warehouse space as well, leaving very few options beyond industrial parks, which “isn’t really representative of who CEDIA is,” Erskine says.

“So we looked for buildings we could buy and redo to our requirements,” he explains. “I think we looked at every building for sale in Indianapolis. Many would be nice, but there was no warehouse or not enough parking.”

So a bunch of builders and architects and finance people looked into building a new facility, and at the end of the day determined it was the best option “economically to build a building that met our particular requirements but also would represent to the outside world the fact that we’re a tech organization,” according to Erskine.

The money-people determined that a 40,000-square-foot space would be the most advantageous to meet CEDIA’s needs: 30,000 square feet to utilize immediately, and 10,000 square feet available for future growth.

The extra space will be rented out for now, and CEDIA is optimistic it can find a good tenant within a year of opening.

With the addition of rental income, “the effect on cash flow will be minimal” compared to CEDIA's current lease and maintenance obligations, Erskine says.

Rather than dumping more than $400,000 a year into someone else’s inadequate property, it made more sense for CEDIA to have something to show for the investment, says Erskine: “We’re building an asset and at the same time creating a building that makes a statement.”

What the Heck is Fishers, Ind.?

Fishers is an up-and-coming suburb about 17 miles northeast of Indianapolis. CEDIA picked the location in part because it’s becoming something of a tech center in the area, which means the new corporate HQ is likely to appreciate nicely.

STANLEY Security is building a $15.9 million, 80,000-square-foot headquarters there. Braden Business Systems, provider of IT services and document automation, is also building there.

There’s a new 50,000 square-foot technology-business incubator called Launch Fishers that “received state approval as a certified tech park,” whatever that means.

Fishers aims to become hub of high-tech, entrepreneurial businesses,” the local Fox TV affiliate declared in 2016.

For its part, CEDIA will spend about $13.7 million dollars on its new facility, which is surrounded by hotels and restaurants for employees and visitors alike.

The town also has a Target Superstore, Walmart Supercenter, Costco and Nordstroms, so there’s no need to venture into the big city.

Fishers was named one of the Best Places to Live by Money (2016), Time (2016) and Niche (2017).

CEDIA expects to break ground by August, and move into the new HQ about one year later.

See press release below.

More receptions on the CEDIA deck. 

Press Release

CEDIA to Build a New Global Headquarters in Fishers, Ind.

INDIANAPOLIS (June 13, 2017) - CEDIA has announced plans to build a new global headquarters in Fishers Ind., a suburb just northeast of Indianapolis. After more than 18 months of research, financial analyses, and due diligence, the CEDIA Board determined that a new built-to-suit global headquarters would provide the best solution for the current and future needs of the association and its members.

The building will be 40,000 square feet total on three floors and is expected to cost $13.7 million dollars. CEDIA plans to occupy 30,000 square feet, which will include staff office space, as well as a world-class training facility, an experience center, and an auditorium, all of which will be available for member use. 10,000 square feet will be made available for tenants.

Since 2003, CEDIA has leased a space on the northwest side of Indianapolis; by the end of 2017, the organization will have spent over $4 million in rent and upkeep. The association’s lease is up in October 2017. Early building estimates project that the new CEDIA headquarters will be ready for occupancy in early fall 2018: Until that time, CEDIA has negotiated to stay in its current location with a month-to-month lease.

“Building a new headquarters in a desirable, high-growth area gives the CEDIA membership an asset with appreciating value, as well as opportunity for monthly revenue from tenants,” said Dennis Erskine, CEDIA Chairman. “We came to this decision only after 18 months of careful consideration of all options, including renovating the current space, finding new lease space, buying an existing structure and finally, building. We had three separate financial firms vet the build-to-suit alternative, and all concluded that real estate in this booming area was a sound investment, and a solid strategy to diversify CEDIA’s overall investment portfolio.”

CEDIA is working with Indianapolis-based architect American Structurepoint and Meyer Najem Construction to determine the design and space requirements for the future global headquarters. (A rendering is included with this release.)

“We are incredibly excited to create a space that reflects CEDIA – we represent the very best in technology and yet we have struggled to accurately represent that in our current headquarters. The new global headquarters will be a space that CEDIA members can not only be proud of, but can utilize for training, client tours, after-hours events, and much more.” Said Tabatha O’Connor, CEDIA COO.  

CEDIA has a signed a purchase agreement for a plot of land in Fishers, Ind. with closing scheduled in the coming weeks. Fishers has become a popular area for tech-focused companies to put down roots, and has been named as one of the Best Places to Live by both Time (2016) and Niche (2017) and was honored as Indiana’s 2016 Community of the Year.

CEDIA members interested in providing products and technical expertise to fully integrate the new global headquarters should contact [email protected]



  About the Author

Julie Jacobson, recipient of the 2014 CEA TechHome Leadership Award, is co-founder of EH Publishing, producer of CE Pro, Electronic House, Commercial Integrator, Security Sales and other leading technology publications. She currently spends most of her time writing for CE Pro in the areas of home automation, security, networked A/V and the business of home systems integration. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. She's a washed-up Ultimate Frisbee player currently residing in Carlsbad, Calif. Email Julie at [email protected]

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Comments

Posted by ritchut on June 18, 2017

Always better to own than rent for the long term. But, what is “the long term”. I used to be a member of NSCA. NSCA gave up their show and became a “pavilion” or maybe it was “NSCA Zone” at InfoComm. That lasted maybe 2 years and now what is NSCA?
I always thought CEDIA was the show and the show defined CEDIA.  With all of the positive things CEDIA has done in the past few years and the things yet to be accomplished, I hope CEDIA hasn’t sold its birthright

Posted by Tom Doherty on June 15, 2017

This is way worse than what is being reported Greg Pass….

CEDIA is building in a non-tax exempt property in Fishers…thus they will be paying nearly $140K every year just in Taxes!!!

When the Indianapolis Business Journal asked why CEDIA would choose to build in such an area…the answer they got was “no comment”....When Vin was approached he indicated that he would not build in that location after learning of the Tax Implication….  But Vin is gone and you have a Board that is ignoring their fiduciary responsibility and spending other peoples money….Dear Dennis, please resign immediately!!!

Posted by Greg Pass on June 13, 2017

I agree with Tom.  The current $4M spent on the lease was over 14 years not 10 so the annual cost is closer to $285,000.  Do you really expect any disclosure when they didn’t disclose the purchase price of Expo and hid behind the line that the purchaser was a private company when they are actually owned by a public corporation.

Here is the email I sent to Dennis in response to this poor financial decision.

“Dennis,

At $285K per year ($4M over 17 years) CEDIA could have leased and upgraded the current building for over 40 years for $13.7M.  This seems like an totally unnecessary use of our funds. CEDIA must have received a massive amount of as yet undisclosed money from the sale of the Expo to be able to afford such a huge capital investment.  Considering how many members are feeling about the Vin Bruno departure and lack of transparency, the sale of Expo and lack of transparency, and the growing lack of focus on our original core mission of installing and supporting luxury brands and high end consumers, I find it unlikely that CEDIA will even be in existence 40 years from now.

Additionally I would hope that no CEDIA members are the eventually tenants in the 10,000 square feet of available leasable space.

It is sad that an organization that helped shape our niche in the CE business and that I have been part of since almost the beginning (Amelia Island attendee and every Expo since) seems to have totally ran off the tracks.

Please feel free to share my comments with the board, staff and others.

Sincerely,
Greg Pass”

Posted by Tom Doherty on June 13, 2017

If I were to guess that the Mortgage is $10M, and thus they spend $3.7M as a downpayment, you are looking at just P&I of nearly $960K per year at an average commercial mortgage of 6%.  Then you have Insurance, Taxes and Maintenance. There is no way that the organizations cash out flow grow substantially. I have no idea on the details, nor if the $13.7 includes furniture, fixtures, new office equipment, etc., etc. Has said before, Executive BOD has a poor record of fiduciary responsibility.  Its not their personal money and they do spend it like it is others peoples money.  They are lavish spenders.

Posted by Julie Jacobson on June 13, 2017

Tom, They are looking for 15-20 year mortgage. As noted in the story, they don’t expect the new arrangement to affect cash flow (much) vs. the current arrangement. Why not build equity in a building? It’s exactly what integrators are doing today (if they’re smart). Few will be able to sell their businesses, but at least they can sell their property. I assume they’ll provide details to members who request it, right?

Posted by Tom Doherty on June 13, 2017

hmmm…Stanley spends 15.9 million for 80,000 square feet and media gets 40,000 for 13.7 million—- I think the membership deserves greater detail on the deal….this CEDIA board has a poor record for fiduciary responsibility.  Is there going to be a mortgage? What is the estimated annual overhead costs of owning the building, taxes, insurance, maintenance, etc. How does this benefit the membership?

Posted by Tom Doherty on June 13, 2017

hmmm…Stanley spends 15.9 million for 80,000 square feet and media gets 40,000 for 13.7 million—- I think the membership deserves greater detail on the deal….this CEDIA board has a poor record for fiduciary responsibility.  Is there going to be a mortgage? What is the estimated annual overhead costs of owning the building, taxes, insurance, maintenance, etc. How does this benefit the membership?

Posted by Julie Jacobson on June 13, 2017

Tom, They are looking for 15-20 year mortgage. As noted in the story, they don’t expect the new arrangement to affect cash flow (much) vs. the current arrangement. Why not build equity in a building? It’s exactly what integrators are doing today (if they’re smart). Few will be able to sell their businesses, but at least they can sell their property. I assume they’ll provide details to members who request it, right?

Posted by Tom Doherty on June 13, 2017

If I were to guess that the Mortgage is $10M, and thus they spend $3.7M as a downpayment, you are looking at just P&I of nearly $960K per year at an average commercial mortgage of 6%.  Then you have Insurance, Taxes and Maintenance. There is no way that the organizations cash out flow grow substantially. I have no idea on the details, nor if the $13.7 includes furniture, fixtures, new office equipment, etc., etc. Has said before, Executive BOD has a poor record of fiduciary responsibility.  Its not their personal money and they do spend it like it is others peoples money.  They are lavish spenders.

Posted by Greg Pass on June 13, 2017

I agree with Tom.  The current $4M spent on the lease was over 14 years not 10 so the annual cost is closer to $285,000.  Do you really expect any disclosure when they didn’t disclose the purchase price of Expo and hid behind the line that the purchaser was a private company when they are actually owned by a public corporation.

Here is the email I sent to Dennis in response to this poor financial decision.

“Dennis,

At $285K per year ($4M over 17 years) CEDIA could have leased and upgraded the current building for over 40 years for $13.7M.  This seems like an totally unnecessary use of our funds. CEDIA must have received a massive amount of as yet undisclosed money from the sale of the Expo to be able to afford such a huge capital investment.  Considering how many members are feeling about the Vin Bruno departure and lack of transparency, the sale of Expo and lack of transparency, and the growing lack of focus on our original core mission of installing and supporting luxury brands and high end consumers, I find it unlikely that CEDIA will even be in existence 40 years from now.

Additionally I would hope that no CEDIA members are the eventually tenants in the 10,000 square feet of available leasable space.

It is sad that an organization that helped shape our niche in the CE business and that I have been part of since almost the beginning (Amelia Island attendee and every Expo since) seems to have totally ran off the tracks.

Please feel free to share my comments with the board, staff and others.

Sincerely,
Greg Pass”

Posted by Tom Doherty on June 15, 2017

This is way worse than what is being reported Greg Pass….

CEDIA is building in a non-tax exempt property in Fishers…thus they will be paying nearly $140K every year just in Taxes!!!

When the Indianapolis Business Journal asked why CEDIA would choose to build in such an area…the answer they got was “no comment”....When Vin was approached he indicated that he would not build in that location after learning of the Tax Implication….  But Vin is gone and you have a Board that is ignoring their fiduciary responsibility and spending other peoples money….Dear Dennis, please resign immediately!!!

Posted by ritchut on June 18, 2017

Always better to own than rent for the long term. But, what is “the long term”. I used to be a member of NSCA. NSCA gave up their show and became a “pavilion” or maybe it was “NSCA Zone” at InfoComm. That lasted maybe 2 years and now what is NSCA?
I always thought CEDIA was the show and the show defined CEDIA.  With all of the positive things CEDIA has done in the past few years and the things yet to be accomplished, I hope CEDIA hasn’t sold its birthright