May 12, 2008

Burlington Northern Santa Fe buys land at Dallas Logistics Hub

By Sheryl Jean and Brendan Case

A unit of Fort Worth-based Burlington Northern Santa Fe Corp. has purchased 198 acres of land at the Dallas Logistics Hub in Lancaster and Dallas, the developer Allen Group said Monday.

The rail company also has an option to buy additional 164 acres. The price and terms of the agreement were not disclosed.

Patrick Hiatte, a spokesman for BNSF, confirmed the transaction but declined to say what the railroad might do with the land.

“It is a property acquisition, and at this point, no more than that,” Mr. Hiatte said. “I wouldn’t want to speculate on any uses to which that property might or might not be put.”

Mr. Hiatte said it would be “inappropriate” to assume that the railroad would build an intermodal facility on the property.

But Vann Cunningham, BNSF’s vice president for economic development, said earlier this year that an intermodal facility in southern Dallas County would complement the railroad’s operations at AllianceTexas development. BNSF has the land under option with Allen Group since April 2007.

The BNSF property provides more than 9,000 feet of rail frontage and represents a portion of the 2.5 miles of BNSF track frontage within the Dallas Logistics Hub.

“The momentum is definitely happening in South Dallas,” said Jon Cross, a spokesman for  California-based Allen Group, which is development the 6,000-acre Dallas Logistics Hub in southern Dallas County. “I think this is important for folks in the supply chain and logistics world to improve the goods movement in and out of Dallas, which is becoming one of the nation’s leading trade centers. It will be an important step at the Dallas Logistics Hub creating further opportunity for development.”

The Union Pacific Railroad already operates an intermodal facility in southern Dallas County. A BNSF facility would offer shippers more rail options, which could draw more investment to the area.

Getting Around in the Heart of Texas

April 22, 2008

The Dallas/Fort Worth area is on the cutting edge of transportation. Its central location between the east and west coasts makes it a key transfer point for the movement of goods, and it has emerging logistics hubs as a result. As the fourth-largest metropolitan area in the country, bolstered by wealth from the aerospace, information technology, and oil industries, it is also on the cutting edge in terms of road building and transit, with a variety of freeways, tollways, and transit-oriented development.

Logistics

A fast-growing niche of the transportation and industrial markets is logistics hubs. These “inland ports” are the transfer point from rail to truck, and are typically in central locations in mid-America. With the rise of imported goods and the use of containers to move cargo, logistics hubs represent a major point of transfer. Dallas/Fort Worth is already the fourth-largest industrial market in the United States, and its location as a major highway and rail crossroads is conducive to the development of logistics hubs.

As cargo containers arrive by ship from Asia, primarily in Long Beach and Los Angeles, they are loaded onto rail and transferred to trucks at an intermodal facility. Because of limited land at ports like Long Beach and Los Angeles, inland ports are created in mid-continent locations to allow for transfer to trucks and distribution to population centers further east. Logistics hubs contain intermodal facilities for the train-to-truck transfer, and typically a substantial amount of distribution warehousing is developed nearby. The advantage for users is the efficiency and corresponding lower cost, due to proximity to the intermodal facility, of transferring goods from train to truck and then to a nearby distribution warehouse to await delivery to the final destination, be it a store or elsewhere.

Used somewhat loosely in the industry, the term logistics hub is defined by stricter parameters by a collection of industry experts including the Texas Transportation Institute (see sidebar, page 78). By the stricter definition, fewer than ten true logistics hubs exist in the United States, and they are located in Illinois, Kansas, and Texas, to name a few locations. Two such hubs are in the Dallas/Fort Worth area. One, AllianceTexas, is nearly 20 years old and the other, the Dallas Logistics Hub, is newly established. Alliance

During the late 1980s, the family of Ross Perot, Sr., the wealthy Texan and future presidential candidate, began to acquire land on speculation in the suburbs north of Fort Worth. To manage these landholdings, the Perot family formed a company, Hillwood, run by Ross Perot, Jr. The land was purchased in part for its proximity to transportation, including Dallas/Fort Worth International Airport (which had been open for just over ten years at the time), as well as Interstate 35. This instinctive move paid off, as the landholdings have been developed into AllianceTexas, one of the largest logistics hubs in the country.

“It is almost like running a city up here,” says David Pelletier, director of communications for Hillwood. To date, Hillwood’s 17,000 acres (6,882 ha) of holdings have resulted in 29 million square feet (2,694,188 sq m) of development, including the aforementioned airport, 7,000 homes, and industrial, office, and retail space. In addition to the logistics hub, major developments at AllianceTexas include a regional office for Fidelity Investments and a Cabela’s store, an outfitter of hunting, fishing, and outdoor gear. Currently under construction is a mixed-use town center (see Patricia Kirk’s mixed use article, page 86).

The AllianceTexas logistics hub comprises a Burlington Northern Santa Fe (BNSF) intermodal facility, which performs 600,000 lifts per year. A “lift” is one container being moved, or lifted, from a train to a truck or vice versa. According to Pelletier, the intermodal facility is the key component of AllianceTexas. Expansion and increased efficiency of the facility will allow for an increase to 1.2 million lifts by 2012.

In addition, the Alliance Airport was developed in partnership with the city of Fort Worth and the Federal Aviation Administration. This facility includes a major FedEx sorting hub and an American Airlines maintenance facility. The airport is in the early stages of lengthening its runways to allow the largest cargo aircraft, including 747s, to take off fully loaded with cargo and fuel in order to reach their Asian destinations, for example, nonstop.

The development generated has been substantial, including 26 million square feet (2,415,479 sq m) of distribution space and 28,000 full-time jobs. Major companies with distribution facilities at AllianceTexas include JCPenney, Kraft, Ford, Motorola, and Volkswagen. Of the 170 companies located there, 66 are in the Fortune 500, Global 500, or Forbes 500.

“One of the things that make AllianceTexas successful is [that] Dallas is the fourth-largest metro area,” Pelletier explains. He notes that even though AllianceTexas as a whole is only 40 percent built out, it has already created a $31 billion economic impact, including $6.5 billion in real estate investment.

Dallas Logistics Hub

Development of a second logistics hub is underway in the Dallas/Fort Worth area. Located on the opposite end of the metropolitan area, in southeast Dallas, the Dallas Logistics Hub (DLH) includes 6,000 acres (2,429 ha) and is expected to result in 60 million square feet (5,574,182 sq m) of space over time.

Jon Cross, director of marketing for the San Diego– based Allen Group, the developer of the DLH, is bullish about the project simply because of its location. “It’s hard to find available land near dual rail and four major highways in a major metro area,” he says. “It’s like having oceanfront property.” Like AllianceTexas, the DLH has an intermodal facility, developed by Union Pacific (UP), and is located near four highways, three of which are interstates, in addition to the Lancaster Airport, which may one day be expanded to allow for cargo flights.

The DLH is still in its infancy. The first two buildings under construction there are a 635,040- square-foot (58,997-sq-m) cross-dock distribution warehouse and a 192,850-square-foot (17,916-sq-m) office warehouse. They will be the first two industrial structures in Texas to receive Leadership in Energy and Environmental Design (LEED) certification. “I think it is a must to be competitive in the industry,” says Cross about building green.

Both AllianceTexas and the Dallas Logistics Hub are long-term investments, and are being built out over a period of decades. They are financed privately by “patient capital” that does not require quarterly earnings reports like publicly traded real estate investment trusts (REITs). However, both developers anticipate continued growth in logistics, as container ports are expected to double their volume by 2020.

Private/Public Toll Roads

Figures complied by the Texas Department of Transportation (TxDOT) indicate that between 1980 and 2003, the population of Texas increased by 57 percent, and miles driven by even more. Total road miles, however, increased by less than 8 percent. Though the Dallas/Fort Worth area is served by a web of freeways, interstates, and major arterials, toll roads are an increasing part of the transportation equation there.

The existing Dallas North Tollway and President George Bush Turnpike bisect each other and serve the north Dallas suburbs. A third, State Highway 121, is the latest addition to a growing network of toll roads in the Dallas/Fort Worth metropolitan area. The 121 is partially finished, and by 2012 it will connect from Dallas/Fort Worth International Airport to the northeast and fast-growing cities in Collin and Denton counties, located north of Dallas.

“The advantage of toll roads is they are not a drain on scarce gas tax funds out there,” says Kevin Feldt, director of project development and planning for the North Texas Tollway Authority (NTTA), a state agency that builds and manages tollways in the Dallas/Fort Worth area. Futhermore, he says, the cash flow from tolls enables system growth to be self-perpetuating.

In times when road construction cannot keep up with population growth, toll roads provide a popular alternative. Indeed, TxDOT officially supports tollways as a means of financing a road system that they acknowledge lacks sufficient funding. Without substantial tax increases at the state level to pay for major highway expansion, tollways will continue to be an option for new projects, because they can move forward in a shorter time frame and they free up scarce tax dollars to be used on other projects.

TOD

The Dallas Area Rapid Transit (DART) system has operated light-rail service since 1996, and has major expansion plans (see sidebar, page 82). Two major lines serve downtown Dallas, the southern side of the city, and northern suburbs such as Garland, Richardson, and Plano. A third commuter rail service, the Trinity Railway Express, connects to Fort Worth.

Under construction is the Green Line, which will serve southeast Dallas and run northwest from downtown Dallas to Carrollton. A fourth line is also planned to the northwest, serving Irving and terminating at Dallas/Fort Worth International Airport. Since Mockingbird Station opened in Dallas in 2001, the metropolitan area has become an unexpected poster child for transit-oriented development (TOD). A second phase is planned for Mockingbird Station, including 23,000 square feet (2,136 sq m) of additional retail space. Even the George W. Bush Presidential Library that is planned on the campus of nearby Southern Methodist University will be within walking distance of the station, something that not even the president himself may have considered.

Additional office and residential development is occurring at Galatyn Park. Blue Cross Blue Shield, in partnership with locally based Koll Development Company, broke ground on a 1.1 million-square-foot (102,193-sq-m) regional office complex last year. Upon completion in 2010, it will house 3,900 employees and be the largest single office complex near a DART station.

The Venue, a 279-unit apartment complex developed by California-based Legacy Partners, is also under construction. The Venue and the Blue Cross Blue Shield offices will complement development already in the station area, which includes a Renaissance Hotel and the Eisemann Center for the Performing Arts. The Beat, a ten- story, 75-unit condo development, will open this year near DART’s Cedars Station.

The Beat will complement the massive South Side Works mixed-use project in this evolving area just south of downtown. The Victory Park development is on a 75-acre (30.3-ha) brownfield site north of downtown Dallas.

Developed by Hillwood, it contains the American Airlines Arena (basketball and hockey), which opened in 2001. By the end of 2008, development will include 750 residential units, 665,000 square feet (61,780 sq m) of office space, over 60 shops and restaurants, and a W hotel. Although current rail service is limited to special events at the arena, Victory Station will become a permanent stop with the start of Green Line service in late 2009. The urban center at Las Colinas, a futuristic suburban downtown developed during the 1980s, is adding new residential development in anticipation of DART service planned in 2011. The Delano, a 258- unit luxury apartment complex developed by Legacy Partners, is just one of the new residential projects that complement the existing office, hotel, and residential development. Plans call for the original people-mover system, called Area Personal Transit, to be linked into the DART station and provide circulation throughout the Las Colinas urban center.

A 2007 study conducted by the Center for Economic Development and Research at the University of North Texas in Denton showed that the economic development generated by real estate located near transit stations is substantial. Their estimates show that since 1999, the total value of projects that are attributable to the presence of DART light-rail service is $4.26 billion. The expansion will certainly result in opportunities for billions of additional investment in the coming years.

Bridges

One of the planning goals for the city of Dallas is to create better connections to, and across, the Trinity River, which flows along the western edge of downtown and divides it from the west side of the city. The broad valley of the Trinity River dwarfs the waterway itself, which in most seasons is a trickle compared with most rivers. And although downtown Dallas abuts the Trinity, much of its banks are lined with low-intensity uses, many of which are industrial.

An effort is being made to open up the river and its environs to recreational and other public uses. Work is also underway to replace the first of three bridges across the Trinity, with spans designed by internationally renowned architect Santiago Calatrava.

Loren Montgomery, a fundraiser and champion for the bridge project and chairman of the Southern Dallas Development Corporation, a nonprofit organization that promotes growth in the southern sector of Dallas, is enthusiastic about the Calatrava spans. “To have such an internationally renowned designer create three of the most revolutionary and modern The W Hotel can be seen from the platform of the Victory Station, which will be served by the Green Line bridges in the world is a remarkable achievement for Dallas,” says Montgomery, who believes the bridges create economic development opportunities and improve the image of the area. Ground has been broken on the first bridge, due to be completed in 2009.

Trans-Texas Corridor

Sometimes referred to as the NAFTA Superhighway because of its connection to Mexico, the Trans- Texas Corridor (TTC) is an ambitious infrastructure project proposed by Governor Rick Perry in 2002. If fully realized, the TTC could have far-reaching effects on the movement of people and goods, and certainly on trade with and through Mexico.

The vision for the Trans-Texas Corridor is for separate truck and automobile lanes, as well as freight or passenger rail service and utility lines. All would fit in a corridor up to 1,200 feet (365.8 m) wide.

Two roadways are planned, I-69/TTC and TTC 35. Both would start at the Mexico border at Laredo and/ or McAllen/Brownsville. I-69/TTC would head northeast around Houston toward Arkansas, while TTC 35 would head north past San Antonio, Austin, and Dallas and into Oklahoma. Looking ahead, many believe that the Dallas/Fort Worth area is well poised to tackle various transportation challenges. Not only is a range of transportation options being tested, but investment in them is also being maximized by the private sector. UL

Sam Newberg is an urbanist, writer, consultant, and founder of Joe Urban, Inc., based in Minneapolis.

State Senate approves aid for intermodal hub

April 3, 2008

Topeka — A giant shipment and distribution hub planned for southwest Johnson County is getting financial help from the Kansas Legislature. The Senate on Wednesday endorsed a proposal to issue $49 million in bonds for the 1,000-acre facility that will be built by BNSF Railway and The Allen Group near Gardner.

Officials say the intermodal freight hub is projected to have a $1.7 billion economic benefit to the state, creating 13,000 direct and indirect jobs during the next 20 years.

Under the plan, trains coming from Pacific ports would be unloaded at the site, with the goods transferred to trucks to carry cargo elsewhere. It will become one of the major distribution centers in the Midwest with thousands of trucks traveling in and out every day, officials say.

The bond proceeds will be used to improve roads and other infrastructure.

The measure was adopted 34-4 and now goes to the House for consideration.

“This is a real bargain for the jobs, the tax base and economic activity this can create for the state of Kansas,” said state Sen. Jim Barone, D-Frontenac. But state Sen. Marci Francisco, D-Lawrence, was one of the four who voted against the measure. She said she was concerned the hub could have a negative effect on distribution centers in Lawrence and Ottawa. But state Sen. Karin Brownlee, Rolathe, said she believed the hub would enhance economic opportunities in the region.

The measure was supported in committee by Gardner City Council and various Johnson County governmental entities and economic development groups.

But it was opposed by a Gardner citizens group and the Gardner-Edgerton school district. School officials say population growth from the project will require new schools while tax abatements granted the project by the city of Gardner will cut district revenues.

Dropping a port into the heartland

By Stephanie Nall and William Hoffman

Retailers have one main concern in mind when they choose the location of a new distribution center, according to real estate logistics consultant Curtis Spencer.

The No. 1 thing when it comes to site selection is this: Where are my customers? Where are my stores? said Spencer, president of IMS Worldwide Inc. It has nothing to do with complex inbound logistics. If I m a retailer, I’m going to put my distribution center where I can reach my customers the fastest, the easiest and the cheapest way possible.

But if the determining factor is the domestic outbound reach, convenience and lower costs through economies of scale on the inbound importing side of the equation make inland ports and logistics hubs increasingly popular.

Fiesta Warehouse at inland Port San Antonio moved the first shipments by rail from East Kelly Railport earlier this month. The 3PL delivered to customers in and around San Antonio.

If the Port of Long Beach, with all its great infrastructure, could just be dropped off in the middle of Harrisburg, Pa., Columbus, Ohio, or Chicago or Dallas or Atlanta, you d have the best of both worlds, he said. You d have a distribution center in the middle of the population hub where your customers are and give them the best and least inexpensive inbound service as well.

That is really what an inland port does it ties together two pieces of the supply chain in one facility.

The flood of containerized imports hitting U.S. shores from Asia is redrawing the country’s logistics facilities map, driving a boom in intermodal centers and inland hubs that developers say will last beyond this year’s slowing economy.

The intermodal is the big paradigm shift, the realization that (global) trade is increasing, and with that, intermodal is increasing, and that s creating the development of these new logistics hubs, said Richard Allen, chief executive of industrial real estate developer The Allen Group.

As long as goods can be manufactured more cheaply overseas than in destination consumer countries such as the United States, real estate developers say demand for master-planned logistics hubs will balloon. As long as populations grow and world economic vitality continues to expand, that will continue, Allen said. A slowdown in the current container traffic and trading volumes is not going to stop the larger trends.

Many trace the move to inland ports to the Virginia Port Authority. In 1989, the agency opened the 161- acre Virginia Inland Port in Front Royal, Va., about 70 miles west of Washington. The Appalachian Regional Commission describes the intermodal transfer facility as something that effectively brings the ports of Norfolk, Newport News and Hampton Roads 220 miles inland.

More complex logistics hubs have been around for 15 years, but they ve only started to come into their own in recent years as container traffic from Asia boomed into West Coast ports. Approximately 11.7 million containers and trailers were carried on U.S. railroads in 2005, compared with 6.2 million in 1990, according to the 2007 study Integrated Logistics Centers by the Heitman real estate investment management firm.

The report suggests that the impact of the enormous logistics volume is doing more than pushing boxes onto railroads. The fat pipelines are attracting more demand for specialized handling that include the more sophisticated logistics services working in concert with intermodal transport.

The intermodal facility takes advantage of lower fuel, transport and labor costs available through rail providers and supply-chain savings made from minimizing the unloading and repacking of containers as they proceed from manufacturing source to retail destination.

More than a collection of warehouses or distribution centers, logistics hubs are master-planned communities providing multiple modes of incoming and outbound transportation as well as accessible infrastructure, continuing development and services. We re almost like city hall, said David Pelletier, director of communications for developer Hillwood. If (tenants) are having a problem with their streets, they come to us, and then we approach the municipal and other authorities.

We feel with our Alliance development we sort of developed the prototype of a logistics hub, Pelletier said. Alliance, north of Fort Worth, Texas, opened in 1994, boasting a cargo-focused airport with an adjacent BNSF intermodal facility.

It was the intermodal business, rather than the airport, that helped build Alliance s fortunes, and that developers say is the key to logistics hub success.

Let’s face it: If you are in a 1 million-square-foot (distribution) facility and getting 30,000 containers a year, the drayage from six, eight or 10 miles away . . . is probably greater than or equal to the rent, Allen said. The point is, you can’t afford not to be adjacent to an intermodal facility if you’re receiving a great amount of containers.

Most logistics hubs are near or have on-site intermodal facilities; with space at a premium at so many U.S. ocean ports, containerized cargo often goes direct from the container ship onto trains for processing elsewhere. Logistics consulting firm Tioga Group estimated that 42 percent of containers arriving at the ports of Los Angeles and Long Beach is distributed this way to the rest of the country.

However, 58 percent is processed through distribution centers in Southern California, such as those at Tejon Industrial Complex, a master-planned development 19 miles from the intermodal site. Barry Hibbard, vice president of commercial and industrial development at Tejon, said his hub’s proximity to West Coast consumer markets means it does not need as much intermodal service as inland ports.

I think it depends on who you re trying to serve and where you re located, Hibbard said. He said corporate emphasis on sustainable development will further propel enthusiasm for large, master-planned logistics hubs.

If you’re doing a one-off development, you could never afford the time to figure this out, or raise the money to do it, he said. This is why green initiatives will push toward master planning, because you have to have a meaningful scale to afford to do these broader sustainable developments.

For most users and developers, however, the key attraction to a logistics hub is a nearby intermodal facility, which Allen characterized as oceanfront property.

Large distributors of consumer goods want to be close to the intermodal, he said.

Another advantage to having an inland port located away from the port is that often you can choose routings through different ocean ports and different rail routes if needed.

Even if the Southern California ports of Los Angeles and Long Beach return to the congestion levels of 2004 or if fees there increase dramatically, cargo destined for Southern California consumers and even for those in surrounding western states will remain there, Spencer said.

But discretionary cargo the boxes headed for farflung distribution centers could be rerouted through new and expanding ports in Mexico, the Pacific Northwest or Prince Rupert. They could also reach the midsection of the country by going on all-water routes through the Suez or Panama canals to East Coast ports.

Kansas City Southern Railway, a north-south carrier in the Mexico-U.S.-Canada corridor, and BNSF Railway, an east-west carrier of Asian imports moving through West Coast ports, have chosen Kansas City as a location for rail logistics parks.

The development of intermodal rail logistics parks in recent years turned Chicago and Dallas-Fort Worth into vibrant inland ports for international freight. Retailers and large importers built distribution centers near Chicago and Dallas to process containerized imports for distribution in the Midwest and Southwest. Railroads are turning their attention to secondary hubs, and Kansas City is the current object of their attention.

KCS and CenterPoint Properties, an industrial real estate company, this month announced a partnership to develop a former Air Force base in south Kansas City into a 1,300-acre rail logistics hub. Late lastyear, BNSF and developer The Allen Group announced plans to build a 1,000-acre logistics park in Gardner, Kan., a short distance from Kansas City.

Several national retailers already have regional domestic distribution centers in the area, said Chris Gutierrez, president of Kansas City SmartPort Inc. The KCS and BNSF projects are significant because they will link Kansas City via rail to international gateways such as Los Angeles-Long Beach and Lazaro Cardenas, Mexico, giving Kansas City a tool for attracting import distribution facilities.

U.S. Customs and Border Protection has an operation in Kansas City, so cargo can move there in-bond from seaports and be cleared at the inland port. Designation of the area as a foreign trade zone further enhances Kansas City s potential for attracting international cargo.

While a trickle of cargo is being diverted from Southern California ports, a bigger flow is sure to come at least for the short-term, Spencer said.

He said that with the International Longshore and Warehouse Union contract talks under way, new and increased port and cargo fees and the whole truck fiasco unfolding in Los Angeles and Long Beach, shippers are looking at alternatives for the year.

Asked about Prince Rupert s future potential as a port that will funnel traffic to inland ports, Spencer said that within two years, no one would be asking the question because it will be solidly entrenched in the North American supply chain.

The current sticking point for moving a greater volume of containers from Asia to the U.S. Midwest through Prince Rupert is the ability of the Canadian National Railway to move it. CN is investing in new train equipment, facilities in British Columbia and track along the route. What is still missing, Spencer said, is an intermodal facility in Chicago to handle a large volume of containers. It s like Kansas City Southern talking about its service from Lazaro Cardenas (in Mexico), Spencer said. Where is the intermodal facility to hold the millions of TEUs it is talking about?

Bill Mongelluzzo contributed to this article.

Texas on a roll despite economic slowdown

By Ian Putzger

Seemingly unaffected by the slowdown in the US economy and the high cost of aviation fuel, Dallas/Fort Worth appears to be on a roll. The latest expansion at the Texan hub comes courtesy of Schenker, which is doubling its capacity at the airport.

Construction has commenced of a 19,000 sq m logistics centre for the forwarding giant. The new facility, which will handle Schenker’s air cargo as well as national supply and distribution business, is slated to open some time this autumn.

According to Schenker, Dallas/Forth Worth is a strategic hub for the company. Besides functioning as a gateway for traffic originating in Asia and Europe for distribution throughout the central US, the centre is used for consolidating freight from Texas and the US Southwest for pan-North American distribution or exports to the rest of the world.

Schenker is not the only forwarder that is boosting its footprint at Dallas/Fort Worth. US cargo agent Seko recently moved into a larger facility close to the airport to offer full-service logistics operations serving most of Texas and Louisiana. The new building gives Seko 40 percent more dock space and 35 percent more office space.

On the carrier side, the most recent boost for Dallas/Fort Worth came in October, when Lufthansa Cargo boosted its freighter flights to the airport to four a week and extended the route to Mexico City for two of these frequencies. A number of carriers and US forwarders have stepped up their business in Mexico in response to growing demand during the past year.

Dallas/Fort Worth currently has 39 weekly freighter links to Asia, including B747F service from Cathay Pacific, Air China, China Cargo Airlines and Singapore Airlines. More are on the horizon. Jade Cargo Airlines has designated Dallas/Forth Worth as the destination for its first US operation, and Air Bridge Cargo wants to route B747-400 freighters from its Siberian hub to Dallas/Fort Worth to link the US gateway with its China flights. No decisions have been announced so far from either carrier when the planned services will take off.

In another part of Dallas, the authorities are hoping for a bigger piece of the logistics pie too. The 6,000-acre Dallas Logistics Hub, which is located adjacent to the intermodal rail terminal of Union Pacific and close to four major highway connectors, has been included in the expansion plans for a foreign trade zone.

According to the local authority, the hub is “a key component of the NAFTA (North American Free Trade Agreement) infrastructure and will serve as a major ‘inland port'”, handling imports from Asia landing in California, Houston and the new deepwater ports in western Mexico for regional and national distribution.

March 13, 2008

Gardner OKs abatement for logistics hub

The Gardner City Council has endorsed an extraordinary property tax abatement for a proposed logistics hub that could be built next to an intermodal distribution center BNSF Railway Co. is building in the city.

Property taxes on the proposed hub’s development by The Allen Group would be cut by 85 percent for 10 years. The city’s usual abatement is 50 percent for 10 years.

The Allen Group projects building as much as 12 million square feet of warehouses. Also on Wednesday, the council requested state backing of the city’s draw from the state’s transportation revolving loan fund. Cities usually guarantee these loans, but Gardner’s budget is too small to support infrastructure whose cost could exceed $60 million, excluding a new Interstate 35 interchange.

March 12, 2008

Feds Clear 3,200 Acres for FTZ 39 Expansion

By Connie Gore

DALLAS-After two years of groundwork and federal hurdles, nearly 3,200 acres in South Dallas County have been cleared for Foreign Trade Zone status. Five commercial developers and Lancaster Municipal Airport will share in the tax-free windfall, which is the largest expansion of an FTZ zone in Texas and perhaps the US.

“It’s in place and ready to go as soon as they do a deal,” says Michael Pyles, the point man for Dallas/Fort Worth International Airport board’s drive to expand FTZ 39. The decision gives added negotiating leverage to developers for their distribution centers and warehouses in and around the Union Pacific intermodal yard in southern Dallas County. The zone is classified as a second site so it’s a wide open prairie instead of being structured as a subzone, which is tenant-specific.

Pyles tells GlobeSt.com that the six landowners in the expansion area paid a pro-rata share based on acreage to cover the $200,000 tab to expand FTZ 39 from 574 acres to nearly 3,200 acres. San Diegobased Allen Group is the largest stakeholder, having added 1,949 acres to its previously approved 1,303 acres of FTZ-designated land in the Dallas Logistics Hub. Sunridge Business Park’s owner, Wilmer-Pleasant Run LP of Dallas, got approval for 434 acres; Dalport Business Park, now owned by Chicago-based First Industrial, put in 356 acres; ProLogis 20/35 Park, owned by Denver-based ProLogis, paid for 175 acres; Crossroads Trade Center, a project of Fort Worth-based Hillwood, locked in 112 acres; Lancaster’s airport board secured 50 acres; and Indianapolis-based Duke Realty Corp. added 32 acres in Duke Intermodal Park. The land block straddles the cities of Hutchins, Wilmer, Lancaster and Dallas’ southernmost tip, where several million sf of spec product is rising or proposed, including the Allen Group’s first two buildings, totaling 827,850 sf, at 4800 and 4900 Langdon Rd.

“We do have others showing interest,” Pyles says. “We probably will do an expansion in the future if they go through the hoops these people did.”

CEO Richard S. Allen says Dallas Logistics Hub is the largest FTZ-designated block in the Allen Group’s portfolio with the expansion. The developer’s previously designated land was part of his 2,000-acre purchase of Southport. “It was still important that [expansion] application get processed because we need that designation on other sites,” he says about the 6,000-acre Dallas Logistics Hub. “We did have a user that did need it and we lost that user to another park.”

Dealmakers say there was more than one lost deal in recent years as the application was making its way through the process, which involved clearances from all school districts, municipalities and Dallas County before it moved to the feds’ desk. “Any amenity is valuable. With Triple Freeport and now the Foreign Trade Zone, it just adds to the marketability,” says Jeff Thornton, Duke’s senior vice president of operations in Dallas, who added. “if tenants need it in the future, it’s there.” Duke has added the 627,100-sf Duke Intermodal Park to the FTZ zone.

D/FW airport’s board is the gatekeeper for FTZ 39, having sought expansions via subzones in the past, but not a full-blown expansion. “This is the largest we’ve ever sponsored. I know it’s the largest in the state of Texas,” Pyles says, “and one of the largest in the US.” The board has 2,500 acres of on-airport designated land in its bank.

“Parks are sustainable without it. Certain customers use it and certain customers don’t,” Allen says. “Clearly we do not have any industrial parks without a Foreign Trade Zone opportunity. That’s an important part of the package.”

March 12, 2008

Logistics Real Estate: Dallas Logistics Hub Gets Foreign Trade Zone Designation

By Jeff Berman

DALLAS—Commercial real estate developer TheAllen Group announced this week that one of itsdevelopments—the Dallas Logistics Hub (DLH), its 6,000-acre multi-modal logistics- and manufacturing-focused industrial park—has been included in the expansion Foreign Trade Zone (FTZ) #39 in Dallas.

According to the Allen Group, the DLH is the largest new logistics park under development in North America. FTZ 39 is primarily located at the Dallas-Fort Worth Airport. It is comprised of 2,469 acres that are available for foreign trade zone use, according to DFW Airport officials (with the addition of the DLH, its footprint will expand to roughly 3,200 acres, according to the Allen Group). And it is a 621-acre business park north of Highway 114 along with two air cargo distribution centers that total more than 70 acres and provide sites with direct ramp access. FTZ 39 also includes a 160,000 squarefoot warehouse that is owned by DFW Airport. The warehouse offers multiple services for shippers, including: distribution handling; freight forwarding; export packing; and consolidations, among others.

The Allen Group said in a statement that the DLH officially received the FTZ 39 designation late last month, and it added that future DLH customers—or shippers—will be able to streamline domestic and international shipments by deferring and exempting goods from duty and making customs procedures more efficient.

The statement also noted that an FTZ provides U.S. importers, notably retail distribution operations, with supply chain cost savings through consolidated weekly entries to Customs, reduced duty rates through assembly or pick and pack operations, duty deferral, and local tax benefits. An FTZ designation also allows foreign items to enter the Zone and defers duty payments until those items exit the zone and enter the stream of U.S. Commerce.

While being part of FTZ 39 is likely to yield various benefits for shippers that do business at the DLH, it is likely the biggest advantage for them will come from the tax savings they will see, said Leslie Jutzi, Allen Group director of government affairs and community relations, in an interview.

Mike Pyles, FTZ 39 manager at DFW Airport, added that taxes on inventory items are exempt from being taxed and puts them in an “exempt” status, whether they are held for import or are imported into the FTZ.

“It is a big positive [for shippers], and it adds numerous jobs to the economy by having all this land as a trade zone,” said Pyles. “If the DLH has a future tenant come in that wants to buy 200 acres worth of DLH space that needs FTZ status, the Allen Group can offer them a site that is already in the zone without any waiting processes needed. All they need to do is an operating agreement with DFW Airport, and they are up and running.”

The Allen Group’s Jutzi also pointed out that when potential tenants look at potential sites, they typically have a list of items they want to see at a site. That list, she said, usually includes a certain amount of land, close proximity to highways and airports, and an FTZ designation.

Along with its 6,000-acre footprint, the DLH’s land is master-planned for the potential development for 60 million square feet of vertical logistics and manufacturing space, according to the Allen Group. The DLH is adjacent to Class I railroad carrier Union Pacific’s intermodal facility, the BNSF rail line, major highway connectors—I-20, I-35, I-45, and the proposed Loop 9—and Lancaster Airport, which is in the master plan stages to facilitate cargo distribution. DLH development is part of four different cities in Texas: Dallas, Lancaster, Wilmer, and Hitchins.

The Allen Group held a grand opening ceremony for the DLH in April 2007.