A Multi-Modal Distribution Solution Requiring Vision, Patience, Collaboration

[ By Robert Abberger ]

With a mix of port-related and non-port users, Port Ybor represents a success story of the conversion of an undeveloped site into a unique project with identity.

Lying at the Port of Tampa’s front door on a main shipping channel, Port Ybor is a diverse industrial warehousing complex created through a collaborative effort, from a marriage of opportunities. Key among these opportunities were the desire of the Tampa Port Authority (TPA) to diversify its historically bulk cargo base and Trammell Crow Companies’ (TCC) desire to leverage its industrial development strength in new market niches.

The resulting collaboration has spawned a diverse industrial complex tenant base that will anchor and sustain bulk warehousing at the Port of Tampa for years to come. It is the only true multi-modal complex in the region, with deep water wharf access served by a main rail line and state-of-the-art roadway infrastructure.

The Port of Tampa is Florida’s largest, with nearly 50 million tons of cargo crossing the docks in 2006. The Port recognized in the late 1990s that there was an opportunity to leverage its real estate holdings to facilitate growth in a changing economy. The Port had a strategic vision to diversify its business -- with a key focus on the development of cruise ship terminals to establish Tampa as a key port of debarkation -- and to pursue expansion of its then-minimal container operations as a major component for growth. TCC sought a foothold in the coming industrial cycle, but did not want to follow the herd in traditional pure distribution locations. Therein opportunity was found.

TCC began discussions with the Port Director about creating a public/private partnership to leverage the strengths of each partner’s resources and capabilities. TCC offered master planning, branding, marketing, horizontal and vertical product knowledge, a substantial market presence and private capital. The Port is an economic engine, with varied lines of cargo and cruise activity and a commitment to maritime growth and diversification.

The first step was to identify suitable sites for distribution facilities. TCC worked with Port staff to locate sites where warehousing could be viable, but there were many challenges to address. Suitable sites were scarce and 50 years of heavy industrial uses posed environmental concerns for new development (with private capital). In addition, existing roadways were unable to support new growth from the Port. The Port Authority recognized these challenges and saw in Trammell Crow capabilities that could help create solutions. From that a public/private partnership was born in 2000.

The Port had recently opened new administrative offices adjacent to new cruise ship terminals and the Florida Aquarium. The movement of the administrative offices from Hooker’s Point to the downtown area made available an existing 40-acre site in the heart of the Port’s old industrial section served by wharf and rail. However, roadway infrastructure was inadequate and the locale had some areas of environmental concern.

Working together, the Port Authority and TCC developed a strategic plan to address the myriad issues that could hamper success and proceeded with a shared vision to solve problems. TCC entered into an option agreement with the Port Authority to ground lease the site in phases and, in return, committed expertise and capital to leverage the Port’s resources.

Roadways Were the Easy Part
As an integral part of the existing growth plan, the Port Authority had already secured a significant commitment for access and roadway improvements from the Florida Department of Transportation. The result would be a new five-lane roadway to the front door of the port, with key connectivity to expressways and interstates, that would pass directly by the site of focus.

First the company sought a plan amendment to secure a four-way, lighted entrance to the site, one of many sound strategic decisions. Patience was key because the plan was three years from completion. The Port also began improvements to the wharf serving the site, including straightening and lengthening the berths to handle larger vessels, dredging the channel for deeper draft vessels, and adding roll-on/roll-off (RO-RO) capability. The TCC master plan played a role in highlighting job creation potential and subsequently helped secure grants to offset the costs of the improvements.

Next, the company identified and secured a package of key entitlements, including designation as an Enterprise Zone and Free Trade Zone. The Enterprise Zone meant tax incentives became available to companies that created jobs. In a Free Trade Zone, goods can move into and out of the Port duty free. To address the key environmental issues, the Port Authority secured brownfield designation for the site that was then expanded to encompass virtually the entire Port of Tampa. This provided for the reclamation and rehabilitation of key land for new industrial uses, creating jobs and tax revenues for a site that was previously unsuitable for development.

Branding the Project
The Port of Tampa lies adjacent to Tampa’s historical district, known as Ybor City, which was once the original hub of cigar-making in the U.S. and the cornerstone of Tampa’s Hispanic heritage. “Port Ybor” was chosen to honor the old and the new and to create a distinct identity both separate from and integral to the Port. The pieces slowly came together: unparalleled infrastructure with great access, a modern wharf, rail service in place, a key package of entitlements -- all on a site that could become a model for redevelopment.

Yet numerous delays along the way plagued the project. Roadway improvements lagged almost a year behind plan. The events of September 11, 2001, cast uncertainty on Port operations and security, delaying a planned launch of the first phase. These uncertainties also affected the broader market; further difficulty came when the industrial market continued to soften into a free fall in 2002 and into 2003, with vacancies in the high teens and questionable market momentum. But TCC had made a commitment to launch. The company believed in the potential of the site, in the niche of large tenants with no place to go, and in the Port’s commitment to containerized cargos.

Fall 2003 brought the launch of Phase I, a 280,000-square-foot bulk cross-dock distribution warehouse. Then in early 2004, TCC presented this opportunity to a new 50/50 joint venture with ING Clarion (ING), which had targeted $500 million of new industrial development in target markets across the country. Port Ybor became the first approved project in the venture, bringing the additional depth and strength of ING as a key institutional partner to further support the project.

The launch of Phase I was, at that time, the largest speculative warehouse venture in Tampa’s history. It also was on the front end of the largest spike in development costs that had been seen in 20 years. Phase I was able to secure a guaranteed maximum price before concrete, steel, asphalt and fill began a 24-month run of cost escalation.

Phase I was pre-leased to a single logistics user before completion, and so Phase II, a 160,000-square-foot cross-dock was launched in 2005. Phase II bore the full brunt of the cost spikes previously mentioned, with an all-in cost 25 percent higher per square foot than delivery of Phase I. Fortunately, a tight market with sub-five percent vacancy had resulted in net rents also rising 25 percent over Phase I rental rates.

Completed in October 2006, Phase II is 70 percent leased to a single tenant, with significant lease momentum for the remaining space. Phase III, a 130,000-square-foot terminal facility, and Phase IV, a 30,000-square-foot flex building on the front door, are in conceptual design. There is renewed tenant interest in moving goods over the wharf and for additional warehousing.

With a mix of port-related and non-port users, Port Ybor represents a success story of the conversion of an undeveloped site into a unique project with identity. Port Ybor has created jobs and a tax base in a key Enterprise Zone, and leverages the Port’s growth for the future. Port Ybor is an example of a successful public/private partnership characterized by the unique strengths of each and leveraged private capital to develop facilities that freed Port capital for more critical infrastructure.

Port Ybor is only 650,000 square feet, so TCC sought additional opportunities. With investment partner ING Clarion, the company secured Madison Industrial Park, served by rail and located less than a mile from the Port of Tampa’s Port Sutton facility. TCC has launched another 680,000 square feet at this site and believes this will also benefit from the synergies ignited at Port Ybor. Tampa has emerged as a significant distribution market for Florida’s West Coast. The Port of Tampa now serves as a key hub serving Mexico, the Western Caribbean and perhaps Cuba in the future. This bodes well for the future of these development programs. The passage of the Dominican Republic and Central America Free Trade Agreement in 2005 further positions Tampa as an emerging center for international trade. The Port has dramatically grown its container base of operations, with direct weekly ship traffic from China and the Far East. TCC is proud to have played a role in this market expansion.