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TEXAS
From Site Selection magazine, September 2010
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Connections2

Racing to meet a customer deadline? Just racing?
Either way, Texas completes the circuit.

by ADAM BRUNS
TEXAS
Caterpillar’s 336E hydraulic excavator will be among the products made at the company’s forthcoming new manufacturing plant in Victoria, Texas.
Photo courtesy of Caterpillar
I

It could be innovation in pipelines. It could be trucking, airport and shipping lines. It could be foreign trade zones and borderlines, and credit lines as well. Any way you slice it, Texas, whether despite or because of its vast distances, is a connection capital.

Apparently that goes for moving van lines too, as the U.S. Census Bureau just reported that four Texas cities were among the 10 fastest-growing in the U.S. in 2009.

A study of export growth in the nation's 100 largest metro areas, released in late July by the Brookings Institution, revealed Houston (20 percent annual growth, inflation adjusted), Austin (16 percent) and Dallas (13 percent) to be among the 21 strongest in percent of export growth between 2003 and 2008. The McAllen and San Antonio metro areas were in the next tier of 19 cities, at 13 percent and 12 percent, respectively.

That means one-eighth of the nation's strongest exporting cities were in Texas alone. And that means — all talk of secession aside — that logistics projects and assets are making the Lone Star state less alone every day.

Cat Lands on Its Feet in the Golden Crescent

Other numbers back up the state's never-ending claim to being No. 1 in … well, in everything. Texas leads the nation in corporate facility projects with a logistics component (see p. 668). Glance back a few years at the ongoing research by Prof. Michael E. Porter's cluster mapping project at Harvard, and there's Texas solidly at No. 2 behind California in sector employment. But average sector wages in Texas in 2007, at $39,454, were 19 percent lower than California's, and the compound annual growth rate of those wages between 1998 and 2007 was 0.3 percent.

That nearly tied for dead last with Missouri … which could mean first in some site seekers' eyes.

A recent report from R.S. Means citing June 2010 construction costs per sq. ft. for hotel space (similar to office) found Dallas to be the second-least expensive among 25 major U.S. cities, and Houston to be the third-least expensive.

Those costs aren't lost on Caterpillar, which in August announced it would build a new 600,000-sq.-ft. (55,740-sq.-m.) hydraulic excavator manufacturing facility in Victoria, halfway between Houston and Corpus Christi. Capital investment is estimated to fall between US$120 million and $150 million.

The news came 18 months after Cat announced a $170-million, 1,400-job engine manufacturing consolidation project in Seguin, Texas, near San Antonio — a plant that opened for business this summer. And the Victoria announcement came mere days after Cat had announced another major facility investment in Winston-Salem, N.C. — the least expensive of the 25 cities on R.S. Means' construction cost list.

Once fully operational, the new plant at Victoria's Lone Tree Business Center will triple the company's current U.S. manufacturing capacity for hydraulic excavators, and will double the number of Caterpillar employees in the U.S. making them. The state's Texas Enterprise Fund is offering $1.175 million, tied to the creation of 238 of the projected 500 jobs.

"Based on our comprehensive review of possible locations, Victoria's proximity to our supply base, access to ports and other transportation, as well as the positive business climate in Texas made this the ideal site for this project," said Gary Stampanato, Caterpillar vice president with responsibility for excavators. The supply base refers in part to that new plant in Seguin, whose engines will make their way over to Victoria to be installed in the new excavators.

The Victoria project will shift production from a plant in Aurora, Ill., that is focusing its own expansion plans on other products, and from a plant in Japan so that it can focus production on the Asian market. Cat originally announced in March 2010 the possibility of a new facility in the U.S., to serve as the primary North American source for excavators.

Conditions were ripe for Victoria. Cat's chosen site is a 320-acre (130-hectare) greenfield industrial park that the Victoria Economic Development Corp. (VEDC) is giving to Cat. VEDC acquired the property in 2002 and has faced mounting criticism as it sat empty year after year. VEDC is offering a $5.5-million incentive package, another $2 million to Cat for more infrastructure work and a 10-year tax abatement on property improvements that as of mid-August was still awaiting final approval.

The site has brand new, 16-inch (41-cm.) mainline water service, new 36-inch (91-cm.) sewer, a complete Phase 1 environmental study and Foreign Trade Zone status. It's served by AEP and CenterPoint Energy, and has dual rail service from Kansas City Southern and Union Pacific. The larger region boasts a coalition of ports, from the Port of Victoria to the Port of Port Lavaca-Point Comfort and the Port of Palacios, not to mention the strong port infrastructure resident in Corpus Christi and Houston.

Gleaming New Rail Serves Projects

As it happens, KCS just last year opened a reconstructed rail line from Victoria to Rosenberg, Texas — a town in the southwest portion of the Houston metro area that, when viewed on a map, appears to be the hot center of a star-shaped network of roads and rail.

Just southwest of Rosenberg, conveniently near a town called Happy Landings, sits Beasley, and in Beasley sits the new $300-million CenterPoint Intermodal Center-Houston Metro complex (CIC-HM). Served by KCS on its way to and from Rosenberg, and jointly owned by KCS and CenterPoint, the 800-acre property includes two 5,000-ft. (1,524-m.) intermodal tracks and can accommodate 160 cars of intermodal equipment. "The tracks are designed to be modified easily by extending the current tracks to the south in addition to constructing new tracks," said KCS last July, citing 650 existing paved parking spaces and the potential to expand to an additional 2,000 paved spaces. The phased build-out of the complex is expected to take place over 12-15 years, and include some $16 million invested in infrastructure.

Among the first facilities to find a home at CIC-HM was a new finished vehicle distribution center for Nissan, to be operated by Wallenius Wilhelmsen Logistics.

"This new facility will allow WWL to provide new vehicle distribution service to three states from a single site," said a KCS news release from summer 2009, referencing Texas, Oklahoma and Louisiana. "Located on the new Victoria to Rosenberg KCS main line, CIC-HM provides direct access to the Nissan manufacturing facility at Aguascalientes, Mexico, and the Port of Lazaro Cardenas."

"Wallenius Wilhelmsen Logistics is constantly searching for ways to improve the factory-to-dealer journey for automobile manufacturers," said Christopher Connor, president of Wallenius Wilhelmsen Logistics, Americas. "We are excited to work with Kansas City Southern on our mission to seamlessly connect automakers and dealerships in the U.S., Mexico and the rest of the region."

WWL also is launching in September a new equipment processing center in Galveston, focused primarily on large construction equipment coming in and out of the Port of Galveston. WWL in 1999 selected Galveston as its regional U.S. Gulf headquarters location.

The Texas Dept. of Transportation is currently collecting data and input for a new comprehensive rail plan for the state. Among other rail-focused projects it will be paying heed to, UP and CSX in October 2009 launched RailChem Connect, a coordinated rail service for expedited transport of chemicals between the Texas Gulf Coast region and the Southeast. The service allows shipments to bypass smaller railyards for expedited transit between major hubs. These changes, along with increased operations coordination between the railroads, increase reliability of east- and west-bound service between UP-served chemical markets such as Houston, southern Texas and Louisiana, and CSX-served consumption markets in the southeastern states.

The two railroads have reduced the transit time between major markets by 25 percent in the last three years while improving consistency by 23 percent. The improvements provide more reliable service, enabling chemicals customers to optimize their fleets of privately owned rail cars. Over the same three-year period, the railroads have made a significant combined investment in RailChem Connect lanes for new capacity and upgrading tracks and facilities.

Over in Levelland, west of Lubbock and nearly to the New Mexico state line, a $3.3-million federal EDA grant of Recovery Act funds is helping expand the Levelland Industrial Rail Park by extending a rail line, roadway, and water and sewer lines in the park. Ground was broken in late November 2009. Local funding totals $5.3 million. Among the companies that have expressed interest in the park are cottonseed processor Tex-Rail Commodities, electrical contractor Independent Electric, cotton insulation product maker Eco Blue and an unknown maker of commercial-grade passageway doors that travels under the name of "Project Gorilla" and wants to construct a $28-million, 600,000-sq.-ft. (55,740-sq.-m.) manufacturing facility. Upon completion, the industrial rail park will have 18 total lots of various sizes, all with direct access to the rail line.

Making Tracks

The quotation at the top of the home page for legendary Texan and businessman Red McCombs is "Expect to Win!" So he can't be too surprised that Austin did win something big: A new Formula 1 U.S. Grand Prix track and event to be located on a 900-acre (364-hectare) site in southeast Austin.

Austin native and former racecar driver Tavo Hellmund, managing partner of Full Throttle Productions LP, revealed McCombs as the primary investor for the project in late July. Hellmund and McCombs Partners have been working on potential site development as well as event and facility infrastructure. They say the end result will be the first ever purpose-built F1 facility in the United States.

Hellmund said he has been working on the project for the past three years.

"Knowing that our hard work is being rewarded and that my dream is becoming a reality is extremely gratifying," he said. "It is a great honor to have Red McCombs and McCombs Partners as our primary investor and partner. Red's success in business and the professional sports arena is legendary. Working together as a team and under Red's direction, we will ensure that this project will make all Texans very proud and will benefit our great state."

McCombs, a Texas business and sports icon, is the former owner of the NFL's Minnesota Vikings and the NBA's San Antonio Spurs and Denver Nuggets. In addition, he is the co-founder of Clear Channel Communications and has owned nearly 400 businesses in his career, including McCombs Automotive Group and McCombs Energy.

"Bringing Formula 1 back to the United States represents the opportunity of a lifetime and one that any city in the world would want," stated McCombs. "The size and scope of an F1 event is comparable to hosting a Super Bowl and will bring substantial economic benefit to Austin, San Antonio and the entire State of Texas."

The project's economic impact to the community is estimated to be approximately $300 million on an annual basis, according to the Office of the Texas Comptroller.

Racing on an entirely different scale is coming to North Texas too, in the form of a new corporate headquarters at the Craig Ranch development in McKinney for Traxxas, a leader in hobby-class radio-remote-controlled cars, trucks and boats. KDC, one of America's leading commercial real estate development and investment firms, has been selected as construction manager.

Traxxas is relocating its headquarters from Plano. The announcement marks the first corporate headquarters to move to Craig Ranch following the unveiling of its $575-million, 250-acre (101-hectare) employment district and joint venture with KDC earlier in the summer. KDC will build a $12-million to $15-million campus-style office complex on 12 acres (5 hectares). Construction of the 160,000-to-200,000-sq.-ft. (14,86--to-18580-sq.-m.) office complex will begin later this year with completion slated for the end of 2011. A retail component is planned as well as test tracks with public access.

Traxxas plans to relocate 100 employees from corporate headquarters, research, development and distribution from Plano to Craig Ranch. Another 50 employees will be added by 2013.       

Texas Roundup

Corporate and infrastructure project highlights in Southeast Texas include the following:

  • In August 2010 the Port of Brownsville and Port Manatee, Fla., received the Marine Highway Designation from the U.S. Department of Transportation. An initial $7 million will be available for the funding of projects, and the designation provides support for the two ports' current container on barge operation, as well as the Port of Brownsville's expanding container/break bulk cargo business. The port is also involved in a two-phase waterborne freight study being conducted by the Texas Dept. of Transportation.
  • Pearland, part of the Houston metro, has recently welcomed a $6-million investment from Louisiana-based heat transfer equipment manufacturer Brask Inc., Neela, in order to service petrochemical and chemical customers in the Texas City, Freeport and Baytown areas, among others. The company initially will employ 27, and aims to employ as many as 100 in coming years. Incentives were offered by Pearland Economic Development Corp., Brazoria County and the state. Last fall, Pearland welcomed a new manufacturing operation from Minnesota-based medical device firm Cardiovascular Systems, Inc., which signed a 10-year lease and may create up to 250 jobs over the next five years. The city and state have offered up to $7 million in cash as hiring targets are met.
  • In March 2010, Frontier Logistics leased 300,000 sq. ft. (27,870 sq. m.) of warehouse space in Pasadena for the distribution of plastic resin. Direct rail service and proximity to the Port of Houston were factors, said John Nicholson, senior vice president, SIOR, Industrial Group for Grubb & Ellis.
  • Among other attributes, the Port of Houston in 2009 was the largest U.S. port in container trade with the booming nation of Brazil, with a 19.5-percent market share, up 26 percent since 2006.
  • As a result of a new contract with Ford, Toshiba in June 2010 announced it would expand capacity at its Houston plant for the manufacture of motors for electric vehicles, adding 100 jobs. Like Caterpillar's project in Victoria, the expansion signals a move of production from a Japanese plant to the U.S., in this case Toshiba's first shift of production of this particular product.
  • At the 2,000-acre (809-hectare)Port San Antonio complex, $15 million in Recovery Act funds are supporting the $40-million expansion of 36th Street, opening new land for development of aerospace and logistics assets. The project extends the four-lane thoroughfare for approximately 1.7 miles (2.7 km.) from Highway 90 to Billy Mitchell Boulevard in the heart of Port San Antonio, formerly Kelly Air Force Base. A study released in June concluded that the complex's 70 employers and various real estate development projects have a regional economic impact of over $4 billion annually. Later in June, the organization earned the Base Redevelopment Community of the Year award from the Association of Defense Communities, which noted in particular the amended lease agreement that Port San Antonio negotiated with the U.S. Air Force.
  • Port Corpus Christi announced in January 2010 it would proceed with design work for a new multipurpose dock and terminal at a 1,000-acre (405-hectare) site at La Quinta. The announcement came subsequent to contract awards from the U.S. Army Corps of Engineers for the extension of the La Quinta Channel. 

Among projects in North Texas:

  • The AllianceTexas development in the Dallas-Fort Worth area has welcomed projects recently from Texas-based United Supermarkets (75 jobs at Exel Logistics, its operator); LG Electronics (65 jobs at a cell phone repair unit relocated from Alabama); and LEGO Group. Texas Instruments, Lockheed, Ryder and Tarrant County College renewed leases. Through the first six months of 2010, Hillwood leased 2.6 million sq. ft. (241,540 sq. m.) at AllianceTexas, the highest lease total for the first half of a year in its 21-year history.
  • In July, after negotiations with the Corporation for the Economic Development of Midlothian, QuikTrip announced a new $25-million, 40-job distribution center at RailPort in Midlothian. QuikTrip's current distribution centers are located in Missouri, Georgia and Arizona, employing over 400 people, and working with a fleet of 56 tractors and 90 trailers which travel around 3.3 million miles (5.3 million km.) annually. QuikTrip operates 76 stores in Dallas-Fort Worth, and plans to open eight to 10 stores a year for the next ten years in North Texas.
  • Airport expansions in the region include a $60-million renovation of Collin County Regional Airport in McKinney, with a completion target of 2013. The facility serves business aviation and general aviation. North Texas Regional Airport in Denison, near the Oklahoma state line, was awarded $6.8 million in federal stimulus money for its own improvement project. The facility features Foreign Trade Zone status and development-ready land.

Story in Pictures

A Kansas City Southern train pays a call on the CenterPoint Intermodal Center-Houston Metro, which opened about the same time that KCS celebrated the reopening of a reconstructed rail line from Victoria (site of the new Caterpillar project) to nearby Rosenberg.
Photo courtesy of Caterpillar
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