By Ray Glier
On August 30, 2017 the White House Office of Intergovernmental Affairs hosted an invitation-only conference of state budget directors and planners to draft their guiding principles of infrastructure under the Trump administration.
John Porter was not waiting to be handed guiding principles. While the policy makers in Washington were meeting, Porter was closing in on a deal for actual infrastructure, a $115 million transaction in Savannah, Ga.
The Savannah Port Logistics Center is a 2.3-million square foot industrial campus 12 miles from the Port of Savannah, which is not just a port, but the largest and fastest growing infrastructure project in the United States. Porter’s campus, which integrates industrial development, e-commerce, and infrastructure, will be announced fall, 2017 with private funding and in cooperation with local governments.
Porter is the CEO of Capital Development Partners, a national developer of industrial and infrastructure projects. The Savannah Port Logistics Center is a blueprint that White House to follow for e-commerce infrastructure:
- The campus adds to the scarce e-commerce warehouse inventory near a vital port.
- The facility is accessible by road, rail, and air providing options for e-commerce.
- Its campus will feature high-speed connectivity that is built out to meet needs 20 years in the future.
- The project successfully overcame the bureaucratic tangle of three municipalities. It met requirements set by environmental and local regulatory guidelines and accomplished permitting in just seven months.
Here are some fundamentals of the deal.
The Panama Canal’s expansion was complete and opened in 2016. The wider locks meant megaships capable of carrying 14,000 TEUs could steam around to the east coast from Asia. The smaller ships that fit through the docks maxed at 4,500 TEUs, so this was a significant upgrade in moving out-sourced goods.
Revenues at the Savannah port jumped 17.8 percent in FY 2017 to $373 million. There were record number of containers moved through the port (3.85 million).
The Georgia Port Authority was prepared for the wave of big ships and is still adding infrastructure to meet the need. In July, 2017, the GPA approved the $72.5 million purchase of six to Neopanamax ship-to-shore cranes, which will arrive in 2020.
GPA’s fleet of 36 cranes will allow the Garden City Terminal at the port to move 1,300 containers across one dock in just one hour. No other terminal in the U.S. or Canada will be able to match that capacity, which means the port in Savannah opens the southeast U.S. to the largest consumer markets in the world for importing and exporting.
With more ships and more product coming into the port there are bottlenecks getting product off the ships, and moved off the port. The goods have to be broken up quickly to meet the surge in e-commerce as the consumer replaces brick-and-mortar with point-and-click.
There is an extreme shortage of warehouse space in Savannah that have multiple options of getting the product to consumers. Some warehouses had quick access to I-95, but not quick access to I-16. All could transport by truck, but very few had access to rail and truck, as well as air, in such close proximity to the port. Users were desperate for a solution in a constrained market.
The Savannah Port Logistics Center solves crucial issues for its users because it is a transload warehouse right in the heart of the port’s transportation cone.
“This is the most significant industrial infrastructure project in the southeast due to the growth of the Savannah port and proximity,” Porter said. “E-commerce and global trade require additional infrastructure. Infrastructure is logistics, energy, cyber security, and support facilities, not just roads or bridges.”
The Savannah Port Logistics Center will serve the port’s import/export customers, which are crucial to the U.S. role in the global economy. The campus combines transportation options critical to infrastructure____trucks, trains, airport____ and will allow users to serve the entire east coast, or 72 percent of the U.S. population, within 24 hours.
Companies are exploring same-day service in e-commerce and the closer the customer is to product the better chance for fulfillment.
The project sits between major interstates (I-16, I-95) and is served by the Genesee & Wyoming Railroad, which operates as part of the Port of Savannah’s rail infrastructure. The rail line can carry freight straight west to the major hub in Atlanta, or it can link with Norfolk Southern and carry goods north and south.
The characteristics of the project are speed, efficiency, options, and cost effectiveness.
In several years, the expansion of the Jimmy Deloach Parkway close to the campus will provide even more flexibility to users.
The options are especially critical when you consider the severe weather that impacted the country in August and September. The price of gasoline jumped as Houston-area refineries shut down. When that happens again, users will have rail as an option over truck.
“The Savannah Port Logistics Center will be the closest rail-served industrial campus and transload facility to the port,” Porter said. “The real vacancy in Savannah for Core+ real estate is 1 percent or less. This is a constrained market with strong demand and strong fundamentals going forward.”
The White House made it clear in the August meeting that the federal government will no longer be the major funder of the $926 billion needed for infrastructure in the U.S. It wants state and local governments to pick up more of the share, which will require a strict process, and more efficiency and cooperation between local governments and the business community.
Porter’s Savannah project is a case study in how an experienced private sector leader can complete a major project in a timely, cost effective manner with participation from both private and public entities. This not only provides jobs, it builds the tax base. This project did not take years. It took months to come together with private financing to create a win-win.
Consider this number: China’s exports to the U.S. were $462 billion in 2016, and almost one-third of those goods came through Savannah. The Savannah Port Logistics Center is the only industrial facility that will allow for import/export transloading in and out of the Garden City Terminal at the Savanah port. For users, that lowers cost and speeds up the supply chain, which goes to the bottom line.
“When you are this close to the Savannah port with prime real estate and have 2.3 million square feet to develop, with dual rail service, and large amounts of trailer storage that’s what we call a home run in the industrial real estate business.” said Darren Butler, the top global producer for NAI, which is co-listing the project with Cliff Dales of Colliers, the top real estate brokerage firm in Savannah.
“E-commerce is driving our business,” Butler said. “Investors are reallocating money into Core + industrial real estate, which services e-commerce and our import/export economy. The e-commerce fundamentals are driving the demand, which is all about purchasing with a click rather than driving to a mall or the grocery store.”
On Cyber Monday, 2016___the Monday after Thanksgiving____U.S. businesses did $3.5 billion in internet sales. That was a 12 percent increase over 2015. From Thanksgiving to Cyber Monday, there were $12.8 billion in digital sales over a five-day period. That revenue stream is added to the tax base for reinvestment into more infrastructure.
The Savannah Port Logistics Center was created by a process that Porter has used many times for the largest companies and wealthiest investors in the world. The ‘Process’ includes building teams, strong relationships, hovering over every detail and making sure that each aspect of the project is aligned and productive. The end result is a high-value industrial infrastructure asset creating value for customers, jobs in the community, and tax revenues.
“The end-users, the financial resources, the cities, the sellers, John has worked with them all,” said Harvey Gilbert, the managing partner and broker-in-charge for Gilbert & Ezelle, a prominent Savannah real estate firm. “A lot of people are good at a couple of those components. He’s good at all of it having to do with large-scale projects. That’s what makes him successful.”