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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.
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Transportation systems connect resources to customers
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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
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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
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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
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– $5B construction project; approved by referendum vote
More vessels will be able to make a loaded transit
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The Panama Canal is essential for U.S. Trade
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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
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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
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Domestic Intermodal
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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
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y• The Limited, Inc.
13
Services to intermediaries
• 3PLs, IMCs & Brokers
O C i• Ocean Carriers
• Trucking CompaniesTrucking Companies
• Parcels (UPS) & LTL
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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
© NAIOP. Do not distribute or reproduce without permission. 15
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
© NAIOP. Do not distribute or reproduce without permission. 16
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.
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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
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Inland Port Case Study
Denton20 min.
DFW Airport 20 min.
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FW CBD 20 min.
Inland Port Case Study
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Inland Port Case Study
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…
© NAIOP. Do not distribute or reproduce without permission.
And More…
Inland Port Case Study
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…
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Inland Port Case Study
• 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
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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+)
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Inland Port Case Study
Consolidation19 000 TEU I
Deal Examples:
19,000 TEU Imports
Drayage Savings Analysis
Final Assembly – Fulfillment
Logistics Infrastructure
© NAIOP. Do not distribute or reproduce without permission. 26
g
Q&A
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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
Michael BerryPresident
Hillwood Propertiesood ope t [email protected]
Stephen CrosbyPresidentPresident
CSX Real [email protected]
© NAIOP. Do not distribute or reproduce without permission. 28