Rexnord dives into Milwaukee’s water initiative

Cover Story

The Reed Street Yards site on which Rexnord will build its new Zurn Industries headquarters.

Milwaukee-based Rexnord Corp. spent the first 115 years of its history making process and motion control products.

Then in 2007, the $2 billion company with 8,000 worldwide employees entered water management, an industry that today makes up 40 percent of its sales.

The Reed Street Yards site on which Rexnord will build its new Zurn Industries headquarters.
The Reed Street Yards site on which Rexnord will build its new Zurn Industries headquarters.

“We started to invest in water businesses because we felt like long term, the growth in the water sector was going to be well above industrial growth, and we wanted to position ourselves to capture that growth,” said Todd Adams, president and chief executive officer.

Rexnord has become so committed to the water management industry over the past eight years that not only did it move its corporate offices into Milwaukee’s Global Water Center, but it also announced in June that it plans to establish the headquarters of its Zurn Industries LLC subsidiary in Milwaukee’s Reed Street Yards.

That will make Zurn, currently based in Erie, Pa., the first company to be located in the Reed Street Yards. A 17-acre property across from the Global Water Center in the Walker’s Point neighborhood, the Reed Street Yards is intended to become a global water technology business park.

“It’s exciting for our business, our employees and our customers to see us investing in our water business, and we’re optimistic that this is one of the many steps it’s going to take to grow our water business and make it even more successful than it is today,” Adams said.

The addition of the Zurn headquarters should also prove meaningful to the future of the Reed Street Yards.

“It’s a significant impact to be able to attract a global headquarters to the Reed Street Yards,” said Dean Amhaus, president and chief executive officer of the Milwaukee-based The Water Council, which operates the Global Water Center. “To get something of this size and magnitude is tremendous. It’s the first step of much more activity in the Reed Street Yards and the entire Water Technology District.”

Zurn’s move to Milwaukee

Once a rail yard, the first building development in the vacant Reed Street Yards began to take shape in September with the start of construction on Zurn’s three-story, 52,000-square-foot headquarters, which is scheduled to open in late summer or early fall of 2016.

Zurn is a global leader in such water products as commercial and residential plumbing fixtures, drains, tubing, valves and other water control devices. Acquired by Rexnord in 2007, Zurn operates in a number of locations across the country, including Erie, Pa., Cary, N.C., and Fresno, Calif., but lacks a definitive headquarters, according to Adams.

Todd Adams
Todd Adams

“That was really the catalyst for this,” said Adams, who did not disclose the investment in the new building. “We were a little too diluted in some of our efforts, and felt like we wanted to create a destination for customers, designers and architects…one location with access to all the right people.”

Other unspecified cities were considered to house Zurn’s headquarters, but Adams said Milwaukee was selected for a variety of reasons.

“It was obviously access to talent, the ability to leverage a lot of the existing infrastructure we already had, and finally, where did we feel like we wanted to be for a long time,” he said. “For us, we felt like Milwaukee and Wisconsin was that place based on the company’s history of being here for over 100 years.”

Established in 1892, Rexnord employs close to 1,800 employees throughout Wisconsin.

“We are committed to being here, and it’s a way to cement the water business as a permanent part of Rexnord in a water technology cluster,” Adams said. “We didn’t create it, but we certainly feel like we can be additive to the mix by being here, and it helps the overall cluster of technology companies that are here.”

Thirty-five full-time employees will work in Zurn’s headquarters by March 2017, and that number will grow to 120 by March 2021, according to City of Milwaukee documents. Contingent on the number of jobs, the city will award Rexnord $1.9 million for site costs, hiring and other costs of relocation.

Renderings of Zurn’s new headquarters, which is under construction in the Reed Street Yards.
Renderings of Zurn’s new headquarters, which is under construction in the Reed Street Yards.

The Wisconsin Economic Development Corp. also awarded Rexnord up to $2 million in state tax credits to support the move. This assistance from the city and the state contributed to Rexnord’s decision to locate Zurn’s headquarters in Milwaukee, Adams said.

The jobs will be in the areas of engineering, research and development, sales and marketing, finance, human resources and customer service, according to Adams. The employees, he predicts, will be a combination of homegrown and out-of-state talent.

He did not disclose the number of present Zurn employees who will be moving to Milwaukee, but he did say many new positions will be added in Milwaukee and no Zurn locations will be closing.

“For us, it’s about growth as opposed to moving from A to B,” Adams said. “It’s about creating new jobs and growing our business versus a simple relocation. Some things will be relocated over time, but fundamentally, the headquarters here is really just about growth.”

Rexnord’s dive into water management

Rexnord entered the water management industry in 2007, the year it made the acquisition of Zurn. Since then, it has gone on to acquire seven additional water-related businesses that Adams describes as leaders in water conservation, safety and flow control. (See sidebar for details on the other companies.)

Adams said Rexnord’s strategy has been to buy the companies and then supplement their offerings with new research and development and new product introductions.

Among the eight total acquisitions, Adams refers to Zurn as the “foundation” of its water management platform.

Today, that platform has $850 million in revenue, making up approximately 40 percent of the company’s sales, according to Adams.

Its process and motion control platform currently comprises the other 60 percent, but he expects the former to account for at least 50 percent of revenue in the next three to five years.

Renderings of Zurn’s new headquarters, which is under construction in the Reed Street Yards.
Renderings of Zurn’s new headquarters, which is under construction in the Reed Street Yards.

“We’re not cutting back on process and motion control,” Adams said. “It’s just the growth rates plus acquisitions we’ll likely do over time will create a scenario where water management will be at least 50 percent or more of our revenues.”

Rexnord’s latest quarterly report reflects the water management platform’s success, with a 4 percent increase in sales year-over-year. The increase was said to be a result of favorable shipment timing and solid growth in the Zurn business.

The process and motion control segment core sales, however, were down 7 percent due to a broadly weak economic environment in several of its process industry end markets.

Besides the acquisitions of water-related businesses, Rexnord has demonstrated its commitment to the industry by joining The Water Council in 2009 and by moving its corporate headquarters from West Milwaukee to the Global Water Center in 2014.

Opened in September 2013, the seven-story, 98,000-square-foot Global Water Center houses tenants such as Badger Meter Inc., A.O. Smith Corp. and three universities. (See sidebar for the latest update on the Global Water Center.)

Rexnord employees from departments including finance, legal and tax work in 21,779 square feet of leased space on portions of the second, third and sixth floors of the building, according to Adams and Amhaus.

Adams told BizTimes Milwaukee in July that approximately 45 Rexnord employees work in the Global Water Center. In mid-September, about 20 human resources staff moved into the sixth floor of the building, said Meghan Jensen, director of marketing and membership for The Water Council.

“We think as a public company, we have to create returns for our shareholders, and participating in a high-growth end market where we have the chance to become a leader is a great way to do that,” said Adams of Rexnord’s participation in the water management industry. “Not to mention the fact that from a socially responsible perspective, it’s a rewarding endeavor for us to participate in helping solve the world’s water challenges.”

He said it is clear that water is our most precious resource, and it will become increasingly scarce over time without developing ways to conserve and treat it and to reduce the reliance on old technology.

Addressing those issues is important in the United States and throughout the world, Adams said, and Milwaukee is well-positioned to do that.

Not only is the world’s largest concentration of water technology companies located in southeastern Wisconsin, but he describes the area as “an ecosystem” of businesses, universities, and city and state governments working together to advance, promote and develop solutions to the world’s water challenges.

“We got into the water business broadly in 2007, and over time it became obvious to us we wanted to be in the mix with what was happening here and what we could do to both learn from it and give back to building that ecosystem,” Adams said. “That’s why we got involved.”

Zurn’s mark on Milwaukee

The location of Zurn’s headquarters in Milwaukee could result in numerous positive impacts for the city.

For one, Wisconsin Lt. Gov. Rebecca Kleefisch said the company’s Milwaukee headquarters represents 120 new Wisconsin jobs that will pay an average of $36 an hour.

Zurn’s headquarters is the first development in the Reed Street Yards.
Zurn’s headquarters is the first development in the Reed Street Yards.

“They’re extraordinarily well-paying jobs for an extraordinarily future-looking industry. We are so excited for what this means for the City of Milwaukee and the future of freshwater technology as it grows right here at home,” Kleefisch said at a press conference held this summer.

“It’s an exciting time for us, and we want to continue to grow,” Adams said. “It’s an opportunity to create jobs and at the end of the day, to stay competitive, putting infrastructure in place, and to grow the business for the longer term.”

It is also a possibility Zurn may be the first of more Rexnord subsidiaries to come.

“We’re starting with Zurn,” Adams said. “Over time I think a lot of water businesses will be able to leverage this location…We’ve led with Zurn, but I would say that it’s pretty likely we will continue to build out aspects of our water business globally in Milwaukee.”

When asked if that means other Rexnord subsidiaries will relocate to the Reed Street Yards or elsewhere in Milwaukee, Adams shrugged.

Establishing Zurn’s headquarters in the Reed Street Yards is “a big statement,” according to Amhaus.

Given that The Water Council began its formation in 2007 and the Global Water Center opened in 2013, he said it is significant that the Reed Street Yards could attract a global headquarters in such a short amount of time.

“They could have gone anywhere,” Amhaus said. “They could have kept Zurn in Erie. But Todd (Adams) said, ‘No. It makes sense to be here.’”

One of Zurn’s impacts, Amhaus forecasts, will be the attraction of more companies to the area.

While no other companies are currently slated to move into the Reed Street Yards, Amhaus said The Water Council continues to receive interest from both domestic and international small businesses in relocating to Milwaukee.

“We’re talking to anyone and everybody, but for anyone to move a headquarters, that’s hard,” he said. “For someone to say, ‘I’m going to move from Denver to Milwaukee’ is rare, but if you’ve got a company that’s in Frankfurt and wants to expand to the U.S., that’s highly likely. Milwaukee is the best place for them because there’s no other place in the U.S. with that highest concentration of like-minded industry.”

Some have called Milwaukee the “Silicon Valley of Water,” and Amhaus wholeheartedly agrees.

Zurn manufactures this high-efficiency toilet and carrier system.
Zurn manufactures this high-efficiency toilet and carrier system.

“When it comes to water, we have not done any advertising or marketing,” he said. “That’s what the word of mouth is, and we’re hearing this across the globe. If you want to go to the U.S., you have to go to Milwaukee. It’s the Silicon Valley of Water, because that’s where the talent is and where the companies are…So to say can we (be the Silicon Valley of Water)? We already are.”

Beyond the attraction of new water technology businesses to Milwaukee, Amhaus asserts Zurn and the whole water technology district have and will continue to improve the Walker’s Point neighborhood.

For instance, he believes the addition of the Global Water Center to the neighborhood has played a role in the creation of new apartments, stores and restaurants; a higher level of safety; and an uptick in outdoor activity by residents.

“This building triggered a lot of things,” Amhaus said of the Global Water Center. “Zurn coming in will be triggering even more things, and it just becomes that ripple thing. Right now, Walker’s Point is the hottest place in the city.”

The future of the Reed Street Yards

The Reed Street Yards is capable of containing 1 million square feet of development, and Amhaus said he wants to see all million square feet built out.

While the Reed Street Yards will contain the high-profile headquarters of Zurn, he would also like to see companies like 3M, Ford or Intel set up 1,000-square-foot research offices where a few researchers could work on coming up with new product solutions.

“I would love to be able to walk into a building with Fortune 500 companies that are all working on solutions with water. That would be fantastic,” Amhaus said.

While 70 percent of the Reed Street Yards square footage must be leased to either water technology-related businesses or firms that would bring new jobs to Milwaukee, he envisions the remaining 30 percent could be comprised of restaurants and stores located on the first floor of the businesses.

“If you take the notion of that’s what we’ve got in the Third Ward, why can’t you do that there?” he said of the Reed Street Yards. “Part of the attraction of being in the Third Ward is all the other amenities…It’s changing the model from your business park in the suburbs. This is a business park, but why do you have to have every single floor offices?”

Amhaus does not know how long it may take for the Reed Street Yards to be fully developed, but he thinks the addition of Zurn can only help.

“The potential now with Zurn coming in will add to it,” he said. “Two years ago, I never thought (The Water Council) would be where we are. Three years ago, I never thought we could do (the Global Water Center). If I was to estimate, I think Zurn going in there is going to cause more of a reaction from others. It’s the statement that ‘We made the move, and it’s a good move for the company.’

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