May 20, 2008

Railway Company Retains Right to Purchase Additional 164 Acres

By Stephen Basham

BNSF Railway Company has purchased 198 acres of land in the Dallas Logistics Hub.

The Allen Group, a San Diego-based developer, sold the property. As part of the transaction, the parties entered into an option agreement giving BNSF purchasing rights to an additional 164 acres. The subject property straddles the line between the cities of Lancaster and Dallas, and features over 9,000 feet of rail frontage. The price and terms of the sale were not disclosed. BNSF has not yet revealed the intended use of the land.

Dallas Logistics Hub is a 6,000-acre master-planned logistics park adjacent to four major highways, dual rail lines, intermodal facilities and a future air-cargo terminal.

Please refer to CoStar COMPS ID # 1528453 for more information on this sale.

May 20, 2008

Red-Hot Logistics Parks and Inland Ports Address Shippers’
Distribution Needs

By Karen E. Thuermer

The latest prospects for real estate appear dim. Yet for those in the shipping industry, distribution centers are red-hot. After all, even in a slowing economy shippers want their goods fast. Consequently, distribution center (DC) developers have become adept at providing projects designed for flexibility and agility.

Now with transportation costs raging sky high, land becoming increasing scarce and rents too expensive for sites close to ports of importation, a number of logistics parks and inland ports farther a field are popping up. These draw strength from the availability of ample, inland land, cheaper real estate and multi-modal access. After all, we’re all heard the adage “location, location, location.” When combining real estate with logistics, this expression is not far from the truth.

“Today development companies are trying to take land acquisition away from high cost and high congested areas,” observes Jon C. Cross, spokesman for The Allen Group, a private development company in San Diego. The company is developing significant inland ports and logistics parks.

INLAND PORT DEFINED

The Center for Transportation Research at the University of Texas in Austin defines an inland port as a “site located away from traditional land, air and coastal borders with the vision to facilitate and process international trade through strategic investment in multi-modal transportation assets and by promoting value-added services as goods move through the supply chain.”

Cross adds that a successful logistics park has additional characteristics: access to a major container seaport, an intermodal facility serviced by Class I railroad, a minimum of 1,000 acres of total land, US Customs clearance services, Foreign Trade Zone (FTZ) status, strong local market access (e.g., major metropolitan area), nearby access to north/south and/or east/west interstate highways, and access to a strong local labor pool.

Although inland ports have been around since the Virginia Port Authority (VPA) opened its 161-acre Virginia Inland Port (VIP) in1989 in Front Royal, VA some 70 miles west of Washington, DC, inland ports are now coming of age. Today inland ports are being developed to operate similarly to VIP’s: an intermodal container transfer facility that provides an interface between truck and rail for the transport of ocean-going containers to and from the ports of Norfolk, Newport News and Hampton Roads. The idea is to ship containers by the less expensive means of rail to locations where they can be trucked shorter distances.

Cross defines such projects as akin to “oceanfront property.” By locating close to an inland port, a company can reduce its drayage costs. The savings can be considerable — as high as $1 million to $3 million per year, he claims.

“Companies, especially in the Western United States, are looking at all components: transportation, drayage costs, labor, real estate costs,” Cross says.

“All together, these equations call for an inland location.”

INTERMODAL ORIENTED

California, especially, is seeing its share of logistics parks and inland ports. These offer an alternative to California’s congested and expensive locations near Los Angeles/Long Beach. Driving their development in California is that state’s overwhelming importation of Asian imports. Despite its 15,000+ miles of highways and freeways, 12 cargo airports, 11 cargo seaports, 18 foreign trade zones, 42 enterprise zones, and 11 cargo seaports, California’s infrastructure is bursting at the seems handling increasing international trade.

Consequently, The Allen Group has developed two logistics parks in California’s Central Valley: International Trade and Transportation Center (ITTC) and MidState 99 Distribution Center.

ITTC is a 700 acre industrial park with some 2 million square feet in Bakersfield in California’s southern San Joaquin Valley. Located four hours from 35 million consumers, the park is rail-served and on the main line of the Burlington Northern Santa Fe Railway (BNSF). It includes an intermodal facility with direct rail service to and from the Ports of Los Angeles and Long Beach that serves shippers and distributors in the western United States. Its MidState 99 Distribution Center is a 488-acre park located in Visalia in the center of California halfway between Bakersfield and Fresno. Current tenants include VF Corporation, International Paper Company, JoAnn Stores, Coast Distribution Systems, Workflow One, Worms Way, Bound Tree Medical, ORS NASCO and DATS Trucking. Over 99% of the California market can be served next day from MidState 99 by UPS.

Also a burgeoning market for international trade, Texas is seeing its share of mega logistics parks. The Dallas Logistics Hub, under development by The Allen Group, operates as a logistics park and inland port on 6,000 acres on the south side of Dallas, Texas. Part of the project was recently designated Foreign Trade Zone status (FTZ No. 39). This means it can provide tenants (US importers, especially retail distribution operations) cost saving advantages on merchandise processing fees and deferred duty payments.

“The Dallas Logistics Hub is one of the largest intermodal-served inland ports in the country,” Cross claims.

The logistics hub is adjacent to Union Pacific’s (UP) Southern Dallas Intermodal Terminal with access to four major highways (Interstates 20, 45 and 35 and Loop 9).

“We also have an option with BNSF to put an intermodal facility there,” he adds. “If this happens, the project will become be first logistics park in the world to have two railroads offering intermodal facilities.”

In addition, Lancaster Airport on the project’s southern side, offers air cargo options. Its runway is currently being expanded to accommodate freight and related facilities. Cross adds airports and air cargo facilities are not drivers for industrial development.

“Goods are meant for short shelf life,” he states.

“They are in and out.”

In direct competition with the Dallas Logistics Hub, and located north of Dallas and Fort Worth, Texas is the 17,000-acre AllianceTexas project developed by Hillwood, a Perot real estate development company. Its location 15 miles northwest of Dallas/Fort Worth (DFW) Airport and the $420-million American Airlines Center and Victory district near downtown Dallas give AllianceTexas the distinction of often a logistics hub prototype.

The one million square-foot distribution facility project opened in 1994. Besides its air cargo focus the project is adjacent to a 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.

Last August, Union Pacific announced plans to build a $90 million state-of-the-art 300-acre intermodal rail terminal. To be alongside Interstate 35 in San Antonio, the project will advance the city’s goal to establish itself as a NAFTA inland port. UP officials indicate the terminal will process more than 100,000 truck trailers annually when completed in 2008, and will have the capacity to grow to a potential of 250,000 trailers and containers per year. It provides shipper tenants rail and airport service and access to deep water seaports.

Its East Kelly Railport offers direct rail access to the seaports of Houston, Corpus Christi, Long Beach, Los Angeles, and the Mexican seaports of Lazaro Cardenas, Manzanillo, Veracruz, Tampico, and Altamira thanks to its access to two Class I railroads, Union Pacific and BNSF. The Railport is immediately adjacent to the Union Pacific’s South San Antonio Classification Yard, which is the destination for most of the local industry traffic. The project also offers direct access to: Dallas, Kansas City, Chicago, and Detroit.

Slated to open this fall, the project’s Kelly Field (SKF) will offer an 11,500 foot (3,505 meter) runway that will be able to handle all heavy lift aircraft. Immediately adjacent to the runway is 575 acres (232.7 hectares) of mixed use airport property. The airfield will provide sufficient space on the ramp areas and terminals for quick re-fueling and efficient turnarounds. It is operated under a joint use agreement with Lackland Air Force Base. Both entities are co-located on either side of the runway, which affords the airport exceptional security.

Port San Antonio’s entire 1,900 acre site falls under FTZ (No. 80-10) classification.

UP, UP AND AWAY

With the decommissioning of various Air Force bases due to Defense Base Closure and Realignment (BRAC), numerous airfields have come available that offer alternatives for air cargo and adjacent industrial part development. To meet distribution needs and accommodate air cargo, Southern California Logistics Airport (SCLA) in Victorville, CA, a development by Stirling Capital Investment, offers an 8,500-acre multimodal business complex on the former George Air Force Base. The project provides a dedicated international airport. Phase I includes the 407,000-square-foot Newell Rubbermaid Distribution Center. Another 296,000- square-foot distribution building is set for completion in the second quarter of 2008.

Recently the Victorville Planning Commission approved another 1 million-square-foot warehouse to be built at SCLA by Stirling Capital Investments. Plans call for a total 6.5 million square feet of industrial space over 350 acres. Likewise, Hillwood has anchored its AllianceCalifornia in San Bernardino, CA to San Bernardino International Airport (SBD), the former Norton Air Force Base with easy access to Interstates 10, 210 and 215. It is also two miles from BNSF Intermodal Container Facility. SBD has attracted numerous all-cargo aircraft operations that include the Antonov-24, Atlas Air, Custom Air Transport and Evergreen Aviation International. Anticipated total cargo tonnage projected by Southern California Associated Government for SBD is 500,000 tons. SBD is supported by a new 3,048 meter by 61 meter runway. It offers a new fuel farm, US Customs facilities and personnel, and room to construct or expand facilities. Over $90 million have been invested in major infrastructure improvements that include the runway, hangar and utility upgrades.

“SBD is well positioned as a consolidation/distribution point for both air cargo and truck shipments,” states Donald L. Rogers, SBD Executive Director.

ODW Logistics, a Columbus, OH -based provider of logistics and transportation services, recently announced plans to lease 339,980 square feet there. Current tenants include Kohl’s, Mattel, Stater Bros., Pactiv, Medline and Pep Boys. Over the past seven years, more than 7.8 million square feet have either been built or are under construction at AllianceCalifornia.

In Ohio, Rickenbacker International Airport in Columbus has received much attention, especially with its anticipated connections to the Port of Virginia via the Heartland Corridor. Recent big news there is the Columbus Regional Airport Authority’s partnership with Norfolk Southern (NS) to create an intermodal facility adjacent to Rickenbacker. The new Rickenbacker Intermodal Terminal is expected to be operational in early 2008. According to the Airport Authority, developing a new rail/truck intermodal facility at Rickenbacker is vital to Central Ohio remaining an advanced logistics center and a key player in global trade. The facility will be used for the interchange of shipping containers between trains and trucks.

MIDWEST ADVANTAGES

The Rickenbacker project will quickly demonstrate how important intermodal is to the Midwest. Freight rail has traditionally played a major role in transporting commodities long distances. Other important Midwest rail centers in Kansas City and Chicago are fostering growth in intermodal transport and the development of inland ports. Intermodal is key to The Allen Group’s Logistics Park project in Gardner, KS, outside of Kansas City. The Logistics Park, a 1,000-acre project in partnership with BNSF Railroad, will operate as an intermodal inland logistics park when it become operational in 2009-2010. At that time, containers will arrive the inland port from the Ports of Long Beach and Los Angeles on a double stack train to the inland port.

“BNSF will rail containers on its southern transcontinental route from Los Angeles to Chicago,” Cross says. “The first stop will be Kansas City.”

Meanwhile, Kansas City Southern Railway Company (KCSR) and CenterPoint Properties have partnered to develop a 370-acre intermodal logistics park in Kansas City, MO that will offer 6 to 7 million square feet of warehousing and distribution space. Key to the project is KCSR’s direct rail service from the Mexican Port of Lazaro Cardenas. Also on site is Richards Gebaur Airport, a former US Air Force base.

CenterPoint’s CenterPoint Intermodal Center in Elwood, IL features an ultra-modern, 1,200-acre industrial park adjacent to the 770-acre BNSF Logistics Park Chicago. With more than 7.5 million square feet developed in less than five years, the industrial park will eventually encompass more than 12 million square feet of distribution centers and container handling yards.

CenterPoint Intermodal Center’s primary advantage is the significant reductions in average drayage and demurrage costs per container, due to the industrial park’s proximity to the rail yard and its location in FTZ No. 22. Executives estimate that importers at the park can realize savings of $200 – $275 per container by locating at CenterPoint Intermodal Center versus locations as little as five miles away. In addition, an on-site container handling yard is being developed to provide approximately 1,500 container positions, offering further savings. Existing customers include Wal-Mart, Maersk Sealand, Georgia Pacific, DSC Logistics, Potlatch, Inc., Sanyo Logistics, Partners Warehouse and California Cartage.

In Rochelle, IL, CenterPoint has also developed its CenterPoint Intermodal Center, a 362-acre development that will ultimately contain more than 5 million square feet of industrial facilities. Just minutes from the intersection of I-88 and I-39 and approximately 70 miles west of downtown Chicago, the park offers single-day access to nearly every major Midwestern market. For customers with aircargo requirements, the Rockford Airport is less than 30 minutes away.

The industrial park is located in FTZ No. 176, granted to the Greater Rockford Airport Authority. Companies operating at the park will have the ability to consolidate a week’s worth of entries into a single Customs entry, saving time and money.

Other CenterPoint projects in the Chicago area include BNSF Logistics Park – Chicago, a 770-acre intermodal facility that opened on the site on the former Joliet Arsenal in October 2002. As the cornerstone of CenterPoint Intermodal Center, this freight logistics center integrates direct rail, truck, transload and intermodal services with distribution and warehousing, all in one location.

SOUTHWARD CONNECTIONS

Also in the company’s portfolio is CenterPoint Intermodal Center – Savannah, GA. Located four miles from the Georgia Port Authority, adjacent to Highway 307 and within minutes of I-95 and I-16, CenterPoint Intermodal Center offers access to world-class transportation amenities, including direct NS rail service and access to NS’s Dillard Intermodal Yard. The NS Dillard Yard, a domestic intermodal facility, is capable of handling 150,000+ containers annually. It is situated on 40 acres and is operational 24 hours a day. With 250 acres available for development, CIC-Savannah will ultimately contain more than 1.3 million square feet of industrial facilities and 30 acres of container and trailer storage management.

Hillwood recently purchased 69 acres in Jacksonville, FL to build a 601,500 square-foot speculative building. Construction will start immediately with a delivery date of early fourth quarter 2008. Located on the city’s Westside, West Point Trade Center is in close proximity to the Port of Jacksonville (JAXPORT) and within two miles of the CSX Intermodal rail facility and the Interstate 295/10 interchange.

“Hillwood believes Jacksonville’s demographic location within the Southeast, excellent highway and rail infrastructure, burgeoning seaport, pro-business civic leadership, and abundance of labor make Jacksonville the ideal place for companies to locate their Southeastern U.S regional distribution centers,” says T. Preston Herold, vice president of Hillwood Investment Properties.

Containerized freight at JAXPORT is expected to be on the increase given plans by two Asian shipping companies to open new terminals at the port. Japanbased Mitsui O.S.K. Lines (MOL) is scheduled to open a new 157-acre, $220 million terminal later this year. Hanjin Shipping Company plans to open a new 170-acre, $360 million terminal in 2011. These alone will bring an additional capacity for 1.8 million containers. This new activity will be a large part of the expected quadrupling of containers handled at the port over the next seven years.

In addition, a proposed dredging project will allow the port to handle the massive ships that will begin flowing through the Panama Canal in 2014, when the canal expansion project is scheduled to be completed.

Tim Feemster, senior vice president, director Global Logistics for Grubb & Ellis, identifies the extensive dredging going on by East Coast ports as key to the burst of logistics parks and inland ports being developed to service this market.

“It has to do with the widening of the Panama Canal and the fact a lot of companies are looking at risk factors,” he says. “It’s driven by West Coast by-pass diversion. A lot of companies cannot afford to have all of their eggs in the West Coast basket.”

May 14, 2008

BNSF Railway Takes 198 Acres at Dallas Logistic Hub, May Buy 164 More

By Amanda Marsh

The Allen Group has announced the sale of 198 acres of land in the Dallas Logistics Hub to BNSF Railway Co., with the additional option agreement giving BNSF the right to purchase an additional 164 acres.

The property is located in the cities of Lancaster and Dallas, and provides more than 9,000 feet of rail frontage, representing a portion of the 2.5 miles of BNSF track frontage within the project. No further details of the transaction were available.

“There is definitely a lot of momentum with this deal, and it will be one of many we hope to announce over the next two months,” an Allen Group spokesperson told CPN. One of these forthcoming deals will be The Hub’s first build-tosuit, which is expected to be announced in the beginning of June.

Although details about what BNSF plans to do with the land have not been discussed, analysts have ventured that it might be a possible intermodal terminal. If that is indeed true, it will be the first logistics park in the world to have two intermodal terminals, the other being a 360-acre Union Pacific terminal, the spokesperson said, noting, “It will be the first of its kind and unique in the supply chain and shipping world.”

The Hub is already positioned to receive 95 percent of its trade from the Port of Los Angeles, but wellpositioned to receive trade from the Ports of Houston and Mexico as well. This is important as manufacturers and retailers are looking to limit their transportation costs as fuel prices continue to rise, the spokesperson said.

The Hub, which spans across the communities of Dallas, Lancaster, Wilmer and Hutchins, is one of the newest logistic parks in North America, with 6,000 acres master-planned for approximately 60 million square feet of distribution, manufacturing, office and retail development. The project, a foreign trade zone, is located near four major highway connecters, including I-20, I-45, I-35 and Loop 9/Trans-Texas Corridor and a future air cargo facility at Lancaster airport. Overall, the project is expect to create 32,000 direct jobs and 33,000 indirect jobs in the southern sector of Dallas.

In October, the Allen Group started construction on the first two industrial buildings in The Hub, which total 827,000 square feet of space. The first, DLH Building 1, is a 635,000-square-foot cross-dock distribution facility, and the second, DLH Building 2, is a 192,800-square-goot warehouse facility. Both are scheduled to be completed by the end of this month. The development team includes GSO Architects, Kimley-Horn & Associates, MYCON and 3i Construction.

The Dallas-Fort Worth industrial market experienced activity slowdown in the first quarter, with 2.1 million square feet of positive net absorption, down from last quarter’s 3.8 million square feet, according to CB Richard Ellis Inc. Despite a decrease in tenants moving into new space, total and direct vacancy rates are still down at their respective 9.2 and 8.4 percent. The firm expects stable rental rates and healthy leasing activity for the remainder of the year.

May 14, 2008

We deserve intermodal benefits

By Kurt Kloeblen

Intermodal.

The word is still pretty foreign to most, although it is gaining recognition every day in Kansas City, and intermodals will be here before we know it.

The Centerpoint-KCS Intermodal Center at the former Richards-Gebaur Memorial Airport will be the first to open. In Gardner in southern Johnson County, another intermodal is planned by Burlington Northern-Santa Fe and The Allen Group.

An intermodal is a center where trains bring in containers. Those containers are then either offloaded directly onto semi-trucks or taken to distribution centers at or near the site. The distribution centers are usually occupied by retail companies that sort and distribute the product via trains and trucks.

Intermodals are generally huge developments. Both sites will be just short of 1,000 acres and will be home to millions of square feet of warehouse space.

Gardner has seen far more opposition than the Centerpoint development.

One reason is this area of Kansas City needs economic development. Intermodals generally

employ thousands of people and generally pay a fair wage. Often, ancillary retail development springs ups around intermodal facilities.

There are negative aspects of intermodals, including environmental impacts from diesel exhaust, and wear and tear on highways.

The main argument in Gardner has been that the intermodal would change the quiet suburb into something different, cause health problems and lower property values.

The worry at Centerpoint is not the same. Many people on this side of the state line see benefits in the project. If you couple Centerpoint with the Three Trails development, you have two significant economic engines that will supply jobs and tax revenue.

For too long, other parts of the metro area have seen economic engines rev up. Johnson County has seen Sprint and numerous other developments. Wyandotte County has watched with absolute joy at the success of Kansas Speedway and Village West. Downtown now has the Sprint Center and Power and Light District. The northland will get a huge bump if the Bombardier plant is built.

So while there are certainly ways to limit the harm that can come from an intermodal, the future for south Kansas City should be much brighter because of what intermodal could bring to the area.

In just a few years, the citizens here may finally see things picking up, and, frankly, they deserve it.

May 14, 2008

BNSF closes on parcel in Dallas; 2nd intermodal yard possible

By Andrea Jares

BNSF Railway Co. has closed on 198 acres at a logistics business park in south Dallas, bringing the possibility of a second intermodal yard there closer to reality.

If the Fort Worth-based railroad joined Union Pacific with an intermodal yard at the 6,000-acre Dallas Logistics Hub, it would be a rarity that would increase transportation options for companies distributing Asian cargo. BNSF, known for its sprawling intermodal facility at the Alliance complex in north Fort Worth, has an option on 164 acres in Dallas.

A second intermodal facility at the logistics park taking shape near Hutchins, Wilmer, Lancaster and south Dallas may or may not happen, said a representative from BNSF. It is up to BNSF to decide how the land will be used, said a spokesman for the park’s developer, The Allen Group.

What it means

Two intermodal yards would add tremendously to access available to trains and trucks moving goods across the country.

“Two intermodals do not exist anywhere at a logistics park,” said Jon Cross, Allen’s director of marketing. “This would be the first of its kind in North America.”

But the land will not necessarily become an intermodal yard, said Suann Lundsberg, BNSF spokeswoman. The rail company exercised its option to buy the land for an undisclosed price, she said.

“We do not have plans at this time,” Lundsberg said.

How the deal works

In April 2007, BNSF entered into an option agreement to buy 387 acres at the Dallas Logistics Hub. The land purchased is part of that option. The development of rail infrastructure at the park enhances the three major highways — Interstates 45, 35E and 20 — that are close or adjacent to the park. A proposed Loop 9 would increase access to the south, Cross said.

“If a company has access to strategic rail and highway infrastructure, it improves your supply chain and reduces transportation costs,” Cross said.

Closer to home

In north Fort Worth, BNSF completed a $32.4 million expansion at its intermodal terminal at Alliance in recent months. Additions including rail increase its capacity to 750,000 lifts a year. In 2007, BNSF handled 570,000 lifts.

“BNSF has made a significant commitment to the Alliance facility with the improvements they have made in the past year,” said David Pelletier, spokesman for Hillwood, the developer of Alliance.

The intermodal yard is a key factor in the 17,000- acre industrial park’s business growth, he said. Since the BNSF intermodal yard opened in 1994, business at Alliance has grown in tandem, Pelletier said.

Hillwood is working on expanding highway access around the intermodal yard to improve truck flow and open more land close by, Pelletier said.

May 13, 2008

BNSF buys 198 acres at Dallas Logistics Hub

A unit of Fort Worth-based Burlington Northern Santa Fe Corp. has purchased 198 acres at the Dallas Logistics Hub in a move that could jump-start investment in southern Dallas County, hub developer Allen Group said Monday.

BNSF Railway Co., the nation’s second-largest railroad, confirmed the deal but declined to discuss its plans for the land, which sprawls into Dallas and Lancaster.

The price and terms of the agreement were not disclosed.

Analysts speculate that BNSF will eventually build an intermodal terminal where freight containers could be moved on and off trains. Union Pacific Railroad, the nation’s largest railroad, already has such an operation near the Dallas Logistics Hub. The deal “sure sends a signal that South Dallas is for real,” said Terry Pohlen, director of the Center for Logistics Education and Research at the University of North Texas. “In the near future, we will hear that several other firms are locating there. I think a lot of people were waiting to see if Burlington Northern went in or not.”

Dan McAuliffe, president of Allen Group’s Texas operations, called it “the final seal of approval that this is the location to do business.”

But Patrick Hiatte, a BNSF spokesman, said it would be “inappropriate” to assume the company will build an intermodal facility on the property.

The railroad already has such an operation at AllianceTexas, a competing development in Fort Worth.

“Burlington Northern Santa Fe put tens of millions of dollars of improvements into the [Alliance] intermodal yard in the past year,” said David Pelletier, a spokesman for Hillwood, Alliance’s developer. “They’ve made a commitment to the Alliance facility.”

Still, Vann Cunningham, BNSF’s vice president for economic development, said earlier this year that adding an intermodal facility in southern Dallas County would complement the railroad’s operations at Alliance.

BNSF’s property at the Dallas Logistics Hub has more than 9,000 feet of rail frontage. The company has had the land under option for more than a year with the San Diego-based Allen Group and has an option to buy an additional 164 acres.

The 6,000-acre Logistics Hub also has easy access to three interstate highways: I-35, I-45 and I-20.

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.