Inland Ports and the Battle of the Midwest

Inland Ports and the Battle of the MidwestMidwest

Moderator:Moderator: Curtis Magleby, Cushman & Wakefield

Panelists:

© NAIOP. Do not distribute or reproduce without permission.

Michael Berry, Hillwood PropertiesStephen Crosby, CSX Real Property

Please silence all cell phones.This session is being recorded.

Curtis MaglebyCushman & Wakefield

Curt spent 20 years at leading Wall Street firms

Oversees all of the firm’s Investment Sales, Debt & Equity Finance and Investment Banking activities in theInvestment Banking activities in the Western United States. He also leads the National Industrial Investment Sales Team.

Managing Director at Wachovia Securities Real Estate Group and in charge of the firm’s Lodging & Gamingcharge of the firm s Lodging & Gaming Investment Banking practice. Executed over 100 transactions, which were valued at over $100 billion.

© NAIOP. Do not distribute or reproduce without permission. 2

Transportation systems connect resources to customers


Characteristics of an Inland Port

• Regional Multimodal Transportation Infrastructure

• Class I Railroad Intermodal Hub – Port Connectivity

• Foreign Trade Zoneg

• Diverse, Broadly Skilled Workforce

L d A il bilit E titl d D l t Sit• Land Availability – Entitled Development Sites

• Economic Incentives


Global containerized freight has outpaced GDP

• Global trade and container• Global trade and container throughput have experienced significant growth since 1970

• Increasing containerized freight supports intermodal growthgrowth

• Growth experienced even as the global populationthe global population stabilizes

© NAIOP. Do not distribute or reproduce without permission. 51 Source: The Waves of Containerization: Shifts in Global maritime Transportation

International Intermodal


Today, the Panama Canal is operating at capacity

Existing Locks New Locks

• Canal was built in and designed for the 20th century• Canal was built in, and designed for, the 20 century– Two sets of locks can handle 38 PANAMAX ships a day – A PANAMAX ship can hold up to 2,400 containers (FEUs)

• Panama is adding a third set of locks to open in 2015Panama is adding a third set of locks to open in 2015– Containerships of up to 6,000 FEU capacity will be able to pass

through– Expansion roughly doubles the container throughput capacity


– $5B construction project; approved by referendum vote

More vessels will be able to make a loaded transit


The Panama Canal is essential for U.S. Trade


2015 shipper mode choice: Canal or landbridge?

Chi t NYC 24 d

China to LA: 13 days

LA to NYC: 7 daysChina to NYC: 24 days


Containerships are the focus of canal expansion

5,000 containerships in the world— Move in scheduled vessel “Strings”— Schedules planned years in advance— 32% of containerships too large for

current canal locks— After expansion, 99% will fit through

new locks MSC D i l 7 000new locks MSC Daniela: 7,000 FEUs

Container moves account for over a third of CSX’s annual volume

— Includes imports, exports, and domestic movesmoves

— Containers can be double-stacked— Specific terminals designed to handle

containers— Specialized labor and equipment


Domestic Intermodal


Intermodal transports a wide range of goods

T t Th H D t

.

Offi M• Target

• Best Buy

• Bed Bath & Beyond

• The Home Depot

• Ikea

• Pier 1 Imports

• Office Max

• Office Depot

• Sears

• Costco

• Walmart

• JCPenney

• Big Lots

• Dollar General

• Kohl’s

• Gap

• Ford

• Nissan


y• The Limited, Inc.

13

Services to intermediaries

• 3PLs, IMCs & Brokers

O C i• Ocean Carriers

• Trucking CompaniesTrucking Companies

• Parcels (UPS) & LTL


Supply chain shifts depend on complex economics

Transportation Transportation CostsCosts

Truck or rail to origin port Port-to-Port ocean carrier costs Canal and port feesCostsCosts Canal and port fees Rail or truck to final destination

I tI t Warehousing costs before/after move

InventoryInventoryCostsCosts

In-transit pipeline costs Value decay due to shelf life consumed in transit Safety stock to cover reliability and demand fluctuations

Other CostsOther Costs Transloading, mixing and consolidation services Switching costs for IT and other structural elements

Shippers consider complete cost picture when deciding how to route containers to consumers


deciding how to route containers to consumers

Shippers striving for cost savings and sustainability

• Companies implementing strategies to achieve savings

2011 Logistics Cost Breakdowng g

– Supply chain simplification– Near-sourcing of manufacturing– Use of optimization software

63%Transportation

– Alternate transportation mode use

• Corporate sustainability initiatives i i i ibilit9%

23%

Warehousing

Carrying Costs

gaining visibility– Rail is the most fuel efficient form

of ground transportation4%

9%

Administration

Warehousing

• Intermodal well positioned to deliver both1%Other


Source: CSCMP 2012 State of Logistics Report

Commodity flows follow rational pricing trends

T i ShT i Sh Total logistics only 3% of product cost Transportation costs less than half of totalTennis ShoesTennis Shoes

$310K per FEU$310K per FEU

Transportation costs less than half of total logistics

Inventory and safety stock costs high West coast landing has 2% cost advantage

Patio Furniture

est coast a d g as % cost ad a tage

Total logistics almost a third of product cost Transportation costs 90% of totalPatio Furniture

$15K per FEU

Transportation costs 90% of total Inventory and safety stock costs low East coast landing has 5% cost advantage

Cost differences are usually small; price sensitive to small changes in canal toll, port fees, etc.


Regional intermodalism is on the rise

Declining truckload productivity— Regulation (e.g. HOS rules) and

Cost & Length of Haul Intermodal versus OTR g ( g )

highway congestion

Rising costsA t k fl t i i i

TruckingFuture Enhanced Rail Opportunity

Costs

— Average truck fleet age is increasing— Shrinking driver pool due to regulation

(e.g. CSA) and demographics

uc gCosts

Break Even

Rail Opportunity

Fuel costs will likely increase with the recovery and regulation

RailCosts

Current Rail Opportunity

Break Even Point

Opportunity

1,000+ miles550+ miles Distance

© NAIOP. Do not distribute or reproduce without permission.1818

,000 es550 miles Distance

Intermodal Routes to Major Inland Ports


Inland Port Case Study

Denton20 min.

DFW Airport 20 min.

© NAIOP. Do not distribute or reproduce without permission.20

FW CBD 20 min.




Genco ATC

Martin Brower

17 MILLION SQUARE FEET DEVELOPED - 10,622 JOBS

TD Ameritrade

LG Electronics

Bridgestone

FirestoneFirestone

Nestle

AT&T

Texas Instruments

Ford

General Mills

Ryder

Behr Paint

UPS

Lego

Grainger

And More…


And More…


Amazon

5 MILLION SQUARE FEET DEVELOPED - 1,833 JOBS

BNSF Railway

Hyundai

Kraft

Dickies

Michaels

JC Penney

SC Johnson

C C lCoca-Cola

Volkswagen Audi

Trans-Trade

Teleflex Medical

And More…



• BNSF Railway’s Alliance Intermodal Facility

• BNSF & UP Class I Rail Lines

• Interstate Highway 35W

Canada Mexico

• Texas Highways 114 and 170

• Fort Worth Alliance Airport

Canada Mexico• FedEx Regional Sort Hub

• U.S. Customs & Border Protection –clearance and security

• Centralized Examination Station


Economic Impact

DEVELOPMENT STATISTICS

• $7 71 billion invested• $7.71 billion invested

• $43.74 billion economic impact

• 32 7 million+ SF developed• 32.7 million+ SF developed

• 31,000+ employees

• 7 740+ homes built• 7,740+ homes built

• 338 corporate residents

• 63 companies listed on the Fortune 500 Global 500/Forbes’ Top List of Private• 63 companies listed on the Fortune 500, Global 500/Forbes Top List of Private

Firms

• Fastest growing area of the nation’s fastest growing metropolitan city (500,000+)



Consolidation19 000 TEU I

Deal Examples:

19,000 TEU Imports

Drayage Savings Analysis

Final Assembly – Fulfillment

Logistics Infrastructure


g

Q&A

This is your opportunity to make this session exactly what you need it to be Ask the question

Q&A

to be – Ask the question.

Please note that this session is being recorded, so before speaking, l d t t di i hplease proceed to a standing microphone.

Thank you!

27© NAIOP. Do not distribute or reproduce without permission. 27

Thank You!

Curtis MaglebySenior Managing Director Region Head

U.S. Capital Markets-WestCushman & Wakefield

[email protected]

Michael BerryPresident

Hillwood Propertiesood ope t [email protected]

Stephen CrosbyPresidentPresident

CSX Real [email protected]


Inland Ports and the Battle of the Midwest

Documents