State of KansasLocation Elimination Discussion Kristian D. BjorsonManaging DirectorSupply Chain & Logistics Solutions

September 25, 2008

Location

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Comments from JLL Industrial Market Report - Fall 2008

• Downside risks remain rampant with expectations for the economy to “bump along the bottom” during the next 3-4 quarters

• Do not expect a housing market correction to end until mid-2009, with price recovery in 2010 at the earliest• Overall positive industrial net absorption in first half of 2008• Scarcity of large deals due to reluctance to commit with uncertain near-term business outlook• Challenging financing environment for new construction (especially speculative) and uncertain demand

will limit any overbuilding, expect significant constraints on debt availability

• With large amounts of short-term debt maturing in 2009-2010, expect acceleration in transaction – recapitalization activity from motivated sellers and institutional-foreign investors with excessive equity for real estate investments

• High transportation costs will continue for the near future due to fuel prices, environmental issues / new regulations on trucks and shortage / security requirements on drivers

• Continued but slowed import growth, significant railroad investments ($10B since 2000 with another $12B upgrades planned), improved railroad operating efficiencies and cost-effectiveness will drive the need rail over long-haul trucking

• Even in difficult economic times, users will focus on the optimal location strategies to maximize service at the lowest possible total fixed and variable operating costs

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My Recommendations (Future Expectations for KS)

• Take an integrated (state, regional and local) team approach – personalities, skill sets, etc.

• Deliver “no brainer” sites (>80 acres) - Shovel Ready – Fully entitled, platted, subdivided, annexed, approved development guidelines, preliminary

planning and engineering, utilities infrastructure analysis, topographic survey, soil boring exploration, storm water detention studies, wetland delineation report, environmental site assessment, archeological survey and

- REALogisticsSM Ready – logistics advantage index, distribution climate study, workforce profile, operating costs analysis, taxes-incentives information

• Understand the scale of the supply chain costs associated with inventory and transportation

• Focus on your ability to reduce costs related to workforce, real estate and taxation

• Deepen relationships with existing industrial employers to be workforce references

• Target specific industries and users with a strategic game plan and passion

• Be aggressive and prepared to make a play as there is often only one shot at opportunity

• Remember location selection is a systematic process of elimination where as real estate is an impulsive decision

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Integrated Approach

Supply chain strategy

Business and economic incentives

Real estate advisory Capital

markets

Project development services

Integrated facilities management

Integrated

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Optimize. Monitor. Improve. Network StrategyWe objectively evaluate cost and service related trade-offs of various supplychain networks. Our experts utilize sophisticated, leading-edge networkoptimizing tools. Alternative supply chain scenarios are identified and tested forsensitivity to changes in cost, service, capacity, and workforce constraints.We provide fact-based recommendations from our analysis on how best toservice your clients at the lowest landed cost.

Inventory OptimizationInventory management tools map the flow, positioning and true carrying costs ofinventory. Our team leverages technologies and works closely with our clients to develop process improvements, accurate lead time forecasting models and service level analyses. We serve as an objective advisor, providing information on the optimal balance between service and inventory levels to maximize efficiency without sacrificing service.

Transportation ManagementWe identify and drive savings to the largest cost component in the supply chainthrough both tactical cost reductions and strategic operating improvements.Our experts utilize strategic transportation planning software and proactiveimprovement techniques to identify areas of opportunity for savings by modalallocation, lane efficiency, available capacity, and alternative transportation.

Optimize.

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Simple Supply Chain Cost AllocationSimple Supply Chain Cost Allocation

Transportation

Inventory

Workforce

Real Estate / Taxation

Revenue – Customer Service

Simple

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FUNCTIONALORGANIZATION

OBJECTIVEFOCUS

CUSTOMERSERVICE INVENTORY COST

SALES &MARKETING

DISTRIBUTION

MANUFACTURING

FINANCE

High AvailabilityFast Response

Low CostMinimum Handling

Large Lot SizesLong-Lead Time

Low Investment

C O M P A N Y F O C U SC O M P A N Y F O C U S

Major Impacts

Know Your Audience – Functional ObjectivesKnow

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Location SelectionMinimize the impulsive nature of real estate decisions by first prioritizing the operating considerations across the supply chain. We employ a proven multi-tiered elimination process for location selection which provides a practical and analytical perspective on supply chain, workforce, business climate, and operating costs. To maximize the value of location selection, we make the right decision with thoughtful logistics analytics and make it better with integrated business and economic incentives negotiations.

Workforce AnalysisMitigate risks and maximize savings through the quantification of workforce sustainability, productivity and cost. We assist you in developing your key workforce evaluation criteria to benchmark against best-in-class locations. Prospective locations are tested through competitive labor interviews, predictive economic-psychographic analytics, future wage progressions, workforce availability, and historical organized labor activity .

Logistics OutsourcingOur experience with transportation and third-party logistics service providers brings unique market insight and sound decision making to your organization’s outsourcing process. We analyze supply chain operations and procedures along with your requirements to make objective evaluations and, if applicable, selections of outsourcing candidates. Through informed negotiation, we help you to maximize savings and implement successful partnerships.

Efficient. Smart. Effective. Smart.

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Location Selection – OverviewSimple Supply Chain Cost Allocation

Definition Integrated evaluation process comparing transportation, labor, operating expenses, taxes, incentives and real estate

Application Complex, multi-market location searches

Value Clearly identify and define operating environment advantages to accelerate elimination process.

Result• Reduced selection timeline and resource appliance• Increased project focus and definition• Detailed total operating cost comparison of primary and secondary locations

Process (Areas of Study): • Supply Chain (Logistics / Transportation)• Distribution / Operation• Workforce • Taxes and Incentives• Real Estate

Selection

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Location Elimination – Sample Regional ProjectsSimple Supply Chain Cost Allocation

PRESENT (Project ABC) – County Level

The target geography encompasses five (5) states focused on three (3) primary regions:

• Kansas City, KS to Salina, KS• Des Moines, IA to Lincoln, NE• Denver, CO to Cheyenne, W

PAST (Retail Distribution) – MSA Level

The target geography encompasses five (5) states and (11) Metropolitan Statistical Areas:

Kansas City, MO-KS (Centeroid) with a 250 Mile Radius

PAST (Project T) – City Level

The target geography encompasses thirteen (13) states:

• VA, NC, SC, GA, TN, AL, AR, MS, TX, OK, KS, NE, IA

Elimination

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High Level Screen – County LevelSimple Supply Chain Cost Allocation

Project ABC: Population 2007 50,000 to 10,000,000 Kept 20, Cut 40

Workforce 2007 25,000 to 1,000,000 employees Kept 22, Cut 38

Unemployment May 2008 2.7% to 12.0% Kept 55, Cut 5

Real Estate Availability 1 to 5 Kept 47, Cut 13

Wage (Forklift Median) $10.00 to $13.50 Kept 60, Cut 0

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High Level Screen

Screen Center Kansas City, MO-KS

Stretched Geography Under Consideration w/n 250 Mile Radius: Eleven (11) Metropolitan Statistical Areas (MSA)s across five (5) states

Threshold Criteria Population Center Proximity to Current - Future Sales Demand Major Transportation Lanes - Multiple Interstates

Short-listed Kansas City, MO-KS; Topeka, KS; Wichita, KS; Oklahoma City, OK and Tulsa, OK

Kept 5, Cut 6 MSAs

Eliminated Lincoln, NE; Omaha, NE; Des Moines, IA; Cedar Rapids, IA; St. Louis, MO and Springfield, MO

High Level Screen – MSA Level

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Location Selection Criteria and Weighting

Rounded

Averages

As %

of Total

Labor 31% 100%

Population 2007 8% 2%

Immigrant Population (foreign born) 5% 2%

Population Growth – 5 Year Growth 6% 2%

Population 20-34 Year Olds 7% 2%

Population Growth 20-34 Year Olds 5% 2%

Arts, Culture, and Leisure 1% 0%

Median Age 2% 1%

Unemployment November 2007 12% 4%

Point Change in Unemployment 2006-2007 5% 2%

Private Sector Unionization 18% 6%

Right to Work State 8% 2%

Employment at Will Exceptions 6% 2%

HS Diploma 6% 2%

Some College, AA Degree, or Bachelors 5% 2%

Occupation in Transportation 2% 1%

Full-time Undergraduate College Enrollment 4% 1%

Rounded

Averages

As %

of Total

Distribution Climate 28% 100%

Customer Service (AWD to Stores) 6% 2%

Air Cargo Airport Capacity 5% 1%

FedEx Freight/Ground/Shipping Centers 16% 4%

Foreign Trade Zones 7% 2%

Total Companies with 100+ Employees 2% 1%

Companies SIC 4200 with 20+ Employees 8% 2%

Employment in SIC 4200 2% 1%

Employment Growth in Transportation 2007-2012

4% 1%

White Collar Employment 6% 2%

Median Household Income 6% 2%

Growth in Median Household Income 4% 1%

Cost of Living Index 12% 3%

Crime Rate / 100,000 People 12% 3%

Median Home Price 2% 1%

Quality of Life Rating (100 is best) 8% 2%

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Rounded

Averages

As %

of Total

Operating Issues & Costs 41% 100%

Outbound Transportation Costs 7% 3%

Inbound Transportation Costs 5% 2%

Warehouse Supervisor Hourly Wage (8Yrs. Exp.) 7% 3%

Forklift Operator Hourly Wage (2 Yrs. Exp.) 11% 5%

Warehouse Laborer Hourly Wage 12% 5%

Worker’s Compensation Rates (per $100 payroll) 10% 4%

Land Availability (>50 acre sites with industrial zoning) 10% 4%

Existing building Availability (400K SF expandable to 900K SF) 5% 2%

Land Costs ($/Acre) 14% 6%

NNN Rental Rates ($/SF) 4% 2%

Real Estate Taxes ($/SF) 7% 3%

Utility Rates per ($/kWh) 8% 3%

Location Selection Criteria and Weighting

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Threshold Criteria: 4,525 Cities Across 13 States- Class I Rail Service (Cut if < 2 Class I Rail Lines)- Proximity to Major City Pop. (Cut if < 200,000 in 30 mile Radius or < 500,000 in 50 mile Radius) - Proximity to Interstate (Cut if > 15 miles away”)- Target Population of 25,000 (Cut if < 18,000)- Natural Disaster Ranking (Cut if countywide insurance claims > $100M) - Metal Fabrication to Manufacturing Workforce (Cut if < .50%)- Metal Fabrication Wage (Cut if > $33,500)

Kept 13, Cut 4,512

High Level Screen – City Level

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Workforce AnalysisProject T – Workforce Availability / Training:

ALABAMA

Education Interview:Number of Annual Welding Graduates: 370 StudentsNumber of Welding Programs: 7

Blind Ad Response:Number of Applicants: 2,865 ApplicantsSurvey (Responses & State Database)

OTHER STATE

Education Interview:Number of Annual Welding Graduates: 180 StudentsNumber of Welding Programs: 5

Blind Ad Response:Number of Applicants: 357 Applicants (Responses, Trade School Graduates, & Recently Displaced)

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Thank You…

Kristian D. Bjorson

Managing Director

Industrial / Supply Chain & Logistics Solutions

Jones Lang LaSalle Americas, Inc.

200 East Randolph Street, 47th Floor

Chicago, IL 60601

Kris.bjorson@am.jll.com

Direct +1 312 228 3611 mobile +1 312 282 0511

www.us.joneslanglasalle.com