(By Dale King) HOUSTON – Joel Michael of NAI Partners has a HUGE assignment. He’s selling development sites in the fifth largest industrial park in the WORLD – and the largest one in the United States – the TGS Cedar Port Industrial Park adjacent to Baytown, 35 minutes from downtown Houston.
In the aftermath of the oil price crash, some parts of the Houston economy – and the city’s commercial real estate markets – have suffered. But this massive 15,000-acre property is on the good side of town – the east side. On the east side of Houston, an area dependent on the “downstream” refining aspect of the petroleum market, the economy is still in good shape.
So the TGS Cedar Port Industrial Park, which is only about 35 percent sold, is a thriving place with some 11,000 acres available for sale and future development.
Trans-Global Solutions Inc., a railroad service/logistics provider with offices in Houston and Beaumont, became majority owner of the massive industrial development Dec. 1, 2014, acquiring it from Cedar Crossing L.P., a partnership of area investors managed by Charles Iupe. After the deal closed, NAI Partners joined forces with TGS in marketing the park.
TGS provides rail service to Cedar Port with Burlington Northern Santa Fe (BNSF) and the Union Pacific railroads. The property also has water frontage for barge traffic.
How do business and real estate personnel shop around a property that’s three-quarters the size of Manhattan Island? Realty News Report met with Michael, a partner with the Industrial Brokerage Services division of NAI Partners in Houston. The following comments came from that interview.
Realty News Report: Although there’s a lot of concern about the Houston economy, you seem to have had considerable success in making deals happen recently at the Cedar Port Industrial Park. What’s going on?
Michael: That’s easy. Dual-rail service and public barge docks. With petrochemical expansion all along the Gulf Coast, there is quite a bit of activity on the east side. The park is in an area where there are many petrochemical plants. There are some houses sitting east of the park, but it’s mainly industrial uses and petrochemical companies.
Realty News Report: Since the new owners acquired the property, what improvements have been made?
Michael: The partnership has spent more than $22 million on drainage, roads, rail line maintenance and expansion and other work, mainly utilities. An interchange railroad track has been added to improve customer service and increase capacity for future tenants and rail customers. An additional interchange track will be constructed by 2018.
Realty News Report: Why are the owners spending so much on rail lines in the park?
Michael: We built the interchange in the park in response to what the market has asked us to do. It’s the polyethylene and polypropylene expansions that are doing this. Much of their product is stored in rail cars. There’s a term called “storage in transit.” The material can be stored until it is ready to ship out.
Realty News Report: Are you looking for rail-dependent industries to locate in the park?
Michael: At the end of the day, most people are interested in the dual service rail. TGS wants to serve these customers. The more rail there is, the better off TGS is. During the first quarter of 2016, we announced we were adding 17 more miles of track. This will be installed in phases.
Realty News Reports: Cedar Port has docks for barges. Why is this important?
Michael: Barges are most important for container transport to and from the Port of Houston. When TGS develops industrial infrastructure, customers like options. Having the ability to transport by rail, truck or barge will attract some customers, even if they don’t necessarily need all those modes now. Barge access is valuable to have. If down the road, your business needs to change its transport system, you can utilize it.
Realty News Report: Are two barge docks enough?
Michael: For now, yes. We do have plans to expand the dock area. We have already thought about that.
Realty News Report: How, specifically, will TGS benefit from the expansion of the Panama Canal?
Michael: This should make the cost of bringing container freight to the Port of Houston cheaper. I don’t know if it will increase the volume of container freight. Overall, it will make it more economical. Walmart and Home Depot, two tenants now at the park, are major consumers of container freight. You could take container freight over by barge or truck. People are doing both right now.
Realty News Reports: What companies are currently located at Cedar Port?
Michael: Home Depot’s 755,000-square-foot distribution center, Walmart’s 4.2 million-square-foot import center, JSW Steel’s plate and pipe manufacturing facilities and Borusan Mannesmann’s $148 million steel pipe manufacturing facility. Other occupants include Exel, S&B Engineers, National Oilwell, GE Water, TMK-IPSCO, Century Asphalt, Samson Controls and LS Energy Fabrication.
Realty News Reports: Several more firms have also committed to build, is that correct?
Michael: PBP, a Venezuela-based provider of plastic resin packaging, bagging and storage services, purchased a 312,000-square-foot warehouse on 68 acres. An undisclosed transportation company acquired 33.4 acres where it plans to build a warehouse of at least 300,000 square feet. Sugar Land-based Oasis Travel Center acquired 6.12 acres for a full-service truck stop and fast-food restaurant. Houston-based Clay Development & Construction Co. bought 80 acres where it plans to build the Cedar Port Distribution Park, with three buildings totaling 1.5 million square feet. Clay Development also acquired 23.35 acres for single-tenant spec manufacturing buildings.
Realty News Report: Any others?
Michael: Yes, we have five deals on more than 200 acres. We can’t talk about them until they are under contract.
April 17, 2016
Dale King is a regular contributor to Realty News Report, a Texas-based publication.