|GROUND CONTROL: Hillwood’s Mike Berry says AllianceTexas’ Global Logistics Hub can handle the competition.
portrait by Elizabeth Lavin
Looking like a sun-drenched golfer weary from a morning on the links, Richard Allen folds his tall frame into a conference room chair on the 41st floor of a building off Dallas’ Ross Avenue. Despite a ruddy complexion and wide shoulders, the CEO of the California-based Allen Group says he’s never been particularly athletic and, as if to prove it, promptly fumbles with the remote control for a promotional DVD.
|STAKING A CLAIM: Richard Allen of The Allen Group says the Dallas Logistics Hub could generate up to 63,000 direct and indirect jobs.
photography by Joshua Martin
To succeed, however, Allen first has to square off against AllianceTexas, the mammoth industrial park and inland port developed by Ross Perot Jr.’s Hillwood company. Located 50 miles away in Fort Worth, Alliance is more than a local powerhouse. It’s a national heavyweight with $4 billion in foreign trade—the single most valuable international business hub in the United States.
Experts say the budding rivalry between these two developments will be healthy for Dallas-Fort Worth, a major hub in the global supply-chain network boasting about $39 billion annually in trade and logistics spending. Around $57 billion in trade passed through U.S. Customs in North Texas in 2007, making DFW the largest U.S. port of entry not located on a border or a coast. Both Allen and Alliance “want to sell or lease facilities. Neither wishes to lose a facility to the other,” says Terry Pohlen, director of the Center for Logistics Education and Research at the University of North Texas. “In the short term, I believe the two hubs will be fierce competitors to attract development.”
The prospect of butting heads with Alliance, the reigning champ of North Texas logistics, doesn’t seem to deter Allen. He pulls out a map and traces “the golden box of infrastructure” which he says circumscribes the Dallas Logistics Hub. The tract is bordered by a Union Pacific “intermodal” rail yard—intermodal means more than one form of transportation is used to get cargo to market—as well as highways linking Dallas-Fort Worth to Los Angeles (I-20), Houston (I-45), and Mexico (I-35E).
Allen says prospects are bright for his multimillion-dollar project. Among the reasons: Besides the presence of UP, Burlington Northern Santa Fe Railway has purchased 198 acres for its own intermodal yard in the area. The Lancaster Municipal Airport is adding an additional 1,500 feet of runway and is slated for an expansion to handle cargo, and two highways are in the works nearby: Loop 9 and the Trans-Texas Corridor (whose parameters the Allen Group is working hard to influence). Roughly a third of the Dallas Logistics Hub is a foreign trade zone—that means products like autos, which can arrive from Asia or Europe free of import taxes, aren’t taxed at all until they pass through the zone—and high unemployment in the southern sector ensures an eager, plentiful work force. The hub ultimately could generate up to 33,000 direct and 30,000 indirect jobs, Allen contends. It’s already helped lure a satellite campus of the University of North Texas to the area. It plans to engage 25 percent or more minority and/or women-owned contractors. And it intends to become the most “environmentally friendly” industrial park in the nation.
To date, The Allen Group has completed two “spec” buildings toward the property’s northern end, both boasting environmentally friendly “LEED Core & Shell” certification from the U.S. Green Building Council. The company’s local staff is negotiating with potential tenants, and at least one of the buildings is expected to be fully leased by March. Other agreements are also trickling in. ADESA auto auctioneers have begun construction of a $57 million build-to-suit facility on 175 acres of the hub, and still more acreage is earmarked for container storage by a local logistics firm.
Even so, isn’t Allen concerned that today’s tough economy has cooled demand for a new logistics hub? High diesel prices pushed some truckers out of business last year, and the real estate industry is weak nationwide. Before Wall Street’s drop-off in 2008, North Texas commercial foreclosure postings had already leaped 35 percent, according to Foreclosure Listing Service Inc.; meantime, undeveloped tracts of commercial land in Dallas County saw foreclosure postings jump by 60 percent.
|TRAINS AND PLANES: About $57 billion in trade went through U.S. Customs in North Texas in 2007.
photography courtesy of Getty Images
“We’re running out of industrial land in this region,” Allen says. “Our business is still very active. … As they say in real estate: location, location, location.”
Big industrial clients want 400,000 square feet or more in optimal locations to save transportation and fuel costs, he says, and that’s where he can help. Some companies will be adversely affected during the economic slowdown, but others are pressed “to become more efficient or die, because of the current market dynamics.” Consolidating facilities at the Dallas Logistics Hub could allow companies to streamline operations and reduce hauling costs, he adds.
If the Californian has any frayed nerves these days, they’re due to infrastructure delays and shifting requirements. The Hutchins bridge, for example, was held up by bureaucratic red tape. That meant that, in 2007, one major prospect that wanted 100 acres with foreign trade zone access ultimately had to go elsewhere. More recently, Allen was riled by area officials calling for an 18-month study that would overlay his property with a game-changing new master plan. As this article went to press, he seemed to have persuaded officials in various cities that his hub’s original development plan–which cost the company millions of dollars to engineer, and received all the necessary approvals—should prevail over a new master plan.
Meantime, over in Fort Worth, they’re monitoring developments at the Dallas Logistics Hub closely.
|photography courtesy of iStock|
The Cowtown office of Hillwood Properties is a beehive of activity. Many of the company’s 85 employees are coming and going, intent on various projects. High above one hallway, a banner proclaims, “Deal City.” Amid this bustle, company president Mike Berry, the hands-on leader behind Alliance’s Global Logistics Hub, invites a visitor into his airy office. He’s a compact, buoyant man wearing a starched white shirt with his initials on the pocket. Hanging on the walls are photos of fighter plane teams, autographed by the pilots.
“Competition is a great thing,” Berry says, referring to the upstart project in South Dallas. “Anytime you have competition, you’re probably more acutely aware you’ve got to make your product better, although we’ve always tried to avoid complacency.”
In the battle against Allen, Alliance Global Logistics Hub, a key part of the multimillion-dollar AllianceTexas development, enjoys 20 years of momentum. When the project broke ground in 1988, Berry began working for Ross Perot Jr. as marketing director, and eventually worked his way up to the company helm in 2000. He’s quick to point out that Alliance’s own intermodal facility has won awards for excellence in large-scale business parks, and is cited in best-practice case studies.
“Many people come here to see what we’ve done and how we’ve done it,” Berry says. “We’ve built a model that others are trying to emulate—including The Allen Group.”
AllianceTexas is a 17,000-acre master-planned development spanning four cities: Fort Worth, Haslet, Roanoke, and Westlake. Originally conceptualized around the industrial airport, it has access to I-35W and a Burlington Northern Santa Fe Railway intermodal yard that can handle 600,000 containers each year.
According to David Pelletier, Hillwood’s communications director, Alliance has 200 companies across its industrial, corporate, and retail tracts. “We don’t want to break down the numbers for what’s just in the logistics hub,” Pelletier says. “We look at this as one master-planned development that includes the logistics hub.” Among the current tenants are American Airline’s maintenance operations with 1.6 million square feet, JC Penney with 1.2 million square feet, and Motorola with 800,000 square feet. Companies such as Kraft, SC Johnson, Volkswagen, Michaels, and Coca-Cola all have major distribution centers there as well.
The entire logistics hub has foreign trade zone status. Alliance helps industrial tenants with job fairs, and works closely with the University of North Texas to educate potential employees. Over the last four years, Hillwood has given approximately $60,000 to support scholarships, says Terry Pohlen of UNT’s logistics center.
In recent years, the Alliance team has been spending much of its energy developing residential properties and corporate campuses surrounding the core industrial areas. “Our program is much more mature than what they’re doing in Dallas,” Berry says, referring to the Allen project. “From a lifecycle standpoint, we’re in a completely different phase. We’re building a fully integrated city.” He counts 29,000 jobs created, and tens of millions of tax dollars flowing through the region annually as a result.
Industrial tenants are the backbone of Alliance, and the company does what it can to keep them happy. To battle traffic congestion, Berry’s team is part of a coalition of business leaders and landowners working on the North Tarrant Express, a project intended to increase capacity of I-35 north of I-820. East-to-west access also will be improved by the future build-out of State Highway 170.
A $210 million overhaul of the core infrastructure is in progress as well. As the first step, the BNSF intermodal rail yard recently completed $32 million in capital improvements, including more efficient entry and exit gates and new bridges. Changes to the intermodal rail yard will increase container capacity to 1 million annually by 2011. Pending city approvals, a new paved area for container storage will allow drivers to drop off containers close to where they’re picking up a new load. Five miles of F.M. 156 and parallel rail lines will be relocated, to open up the space needed to lengthen the airport runway to 11,000 feet. This runway in turn will make long distance, non-stop cargo flights feasible throughout the year. The ambitious transformation is scheduled for completion by about 2016, depending on funding from the Federal Aviation Administration and others.
In addition, Alliance recently added 2 million square feet of speculative footage, the latest being 500,000 square feet in its Westport section. Berry says none of the spec buildings carries LEED certification. As evidence of Hillwood’s greening, however, he points to its 100 percent renewable-energy contract, and to Perot Jr.’s participation on the advisory board for the “Masdar” sustainable energy initiative in Abu Dhabi. “What we learn there, we want to bring back to Alliance and do a prototype and satellite of Masdar here,” Berry says.
Alliance should be able to weather the volatile economy, Berry believes, thanks to its diverse customer base of automotive, aviation, logistics, electronics, pharmaceutical, and consumer goods industries. What most concerns the Hillwood executive are transportation issues and unplanned sprawl.
“If we’re going to continue to grow and thrive as a major economic center, we’re going to have to accelerate infrastructure, not just concrete and roads, but also rail and transit, in more innovative ways,” he says. “Transportation and air quality are directly related. If we don’t improve transportation, our air quality will continue to deteriorate, and it will impact funding. Eventually you start to choke yourself and reverse growth trends. Those are huge regional issues.”
But, what of the Allen facility in South Dallas? “North Texas is continuing to expand and evolve as a major logistics center,” Berry says. “They’re driven by the Union Pacific railroad; we’re driven by the BNSF railroad. They may have both.”
With that, Berry slaps his hands on the table in front of him, then balls them into fists. “But it’s $200 million later,” he says, “to get from the land to an operating facility.”
Those millions–and the brewing competition—can’t help benefiting North Texas. Down the road, UNT’s Pohlen says, “I contend the two facilities will actually complement each other, and attract more logistics activity to the area. … The potential exists for both of these developments to be very successful. ”