Inland Ports and the Battle of the

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Stephen Crosby, CSX Real Property NAIOP.

1 Inland Ports and the Battle of the Midwest Moderator: Curtis Magleby, Cushman & Wakefield Panelists: Michael Berry, Hillwood Properties Stephen Crosby, CSX Real Property NAIOP. Do not distribute or reproduce without permission. Please silence all cell phones. This session is being recorded.

Oversees all of the firm s Investment Sales,

activities in the Western United States.

Real Estate Group and in charge of the firm

2 Curtis Magleby Cushman & Wakefield Curt spent 20 years at leading Wall Street firms Oversees all of the firm s Investment Sales, Debt & Equity Finance and Investment Banking activities in the Western United States. He also leads the National Industrial Investment Sales Team. Managing Director at Wachovia Securities Real Estate Group and in charge of the firm s Lodging & Gaming Investment Banking practice. Executed over 100 transactions, which were valued at over $100 billion. NAIOP. Do not distribute or reproduce without permission. 2

3 Transportation systems connect resources to customers NAIOP. Do not distribute or reproduce without permission. 3

4 Characteristics of an Inland Port Regional Multimodal Transportation Infrastructure Class I Railroad Intermodal Hub Port Connectivity Foreign Trade Zone Diverse, Broadly Skilled Workforce Land Availability Entitled Development Sites Economic Incentives NAIOP. Do not distribute or reproduce without permission. 4

Global containerized freight has outpaced GDP Global trade and

1970 Increasing containerized freight supports intermodal growth

Source: The Waves of Containerization: Shifts in Global maritime

5 Global containerized freight has outpaced GDP Global trade and container throughput have experienced significant growth since 1970 Increasing containerized freight supports intermodal growth Growth experienced even as the global population stabilizes 1 Source: The Waves of Containerization: Shifts in Global maritime Transportation NAIOP. Do not distribute or reproduce without permission. 5

6 International Intermodal NAIOP. Do not distribute or reproduce without permission. 6

PANAMAX ships a day A PANAMAX ship can hold

adding a third set of locks to open in 2015

capacity $5B construction project; approved

7 Today, the Panama Canal is operating at capacity Existing Locks New Locks Canal was built in, and designed for, the 20 th century Two sets of locks can handle 38 PANAMAX ships a day A PANAMAX ship can hold up to 2,400 containers (FEUs) Panama is adding a third set of locks to open in 2015 Containerships of up to 6,000 FEU capacity will be able to pass through Expansion roughly doubles the container throughput capacity $5B construction project; approved by referendum vote NAIOP. Do not distribute or reproduce without permission. 7

8 More vessels will be able to make a loaded transit NAIOP. Do not distribute or reproduce without permission. 8

9 The Panama Canal is essential for U.S. Trade NAIOP. Do not distribute or reproduce without permission. 9

10 2015 shipper mode choice: Canal or landbridge? LA to NYC: 7 days China to NYC: 24 days China to LA: 13 days NAIOP. Do not distribute or reproduce without permission. 10

Containerships are the focus of canal expansion 5,000

Strings Schedules planned years in advance 32% of

expansion, 99% will fit through new locks MSC Daniela:

CSX s annual volume Includes imports, exports, and

terminals designed to handle containers Specialized

11 Containerships are the focus of canal expansion 5,000 containerships in the world Move in scheduled vessel Strings Schedules planned years in advance 32% of containerships too large for current canal locks After expansion, 99% will fit through new locks MSC Daniela: 7,000 FEUs Container moves account for over a third of CSX s annual volume Includes imports, exports, and domestic moves Containers can be double-stacked Specific terminals designed to handle containers Specialized labor and equipment NAIOP. Do not distribute or reproduce without permission. 11

12 Domestic Intermodal NAIOP. Do not distribute or reproduce without permission. 12

13 Intermodal transports a wide range of goods. Target The Home Depot Best Buy Ikea Bed Bath & Beyond Pier 1 Imports Costco Big Lots Walmart Dollar General JCPenney Kohl s The Limited, Inc. Office Max Office Depot Sears Gap Ford Nissan 13 NAIOP. Do not distribute or reproduce without permission.

14 Services to intermediaries 3PLs, IMCs & Brokers Ocean Carriers Trucking Companies Parcels (UPS) & LTL NAIOP. Do not distribute or reproduce without permission. 1

15 Supply chain shifts depend on complex economics Truck or rail to origin port Port-to-Port ocean carrier costs Costs Canal and port fees Rail or truck to final destination Transportation Costs Inventory Costs Warehousing costs before/after move In-transit pipeline costs Value decay due to shelf life consumed in transit Safety stock to cover reliability and demand fluctuations Other Costs Transloading, mixing and consolidation services Switching costs for IT and other structural elements Shippers consider complete cost picture when deciding how to route containers to consumers NAIOP. Do not distribute or reproduce without permission. 15

Shippers striving for cost savings and sustainability 2011 Logistics Cost Breakdown Transportation Carrying Costs 23% 63% Companies implementing strategies to achieve savings Supply chain

16 Shippers striving for cost savings and sustainability 2011 Logistics Cost Breakdown Transportation Carrying Costs 23% 63% Companies implementing strategies to achieve savings Supply chain simplification Near-sourcing of manufacturing Use of optimization software Alternate transportation mode use Warehousing Administration Other 9% 4% 1% Corporate sustainability initiatives gaining i visibility ibilit Rail is the most fuel efficient form of ground transportation Intermodal well positioned to deliver both Source: CSCMP 2012 State of Logistics Report NAIOP. Do not distribute or reproduce without permission. 16

17 Commodity flows follow rational pricing trends Tennis Shoes $310K per FEU Patio Furniture $15K per FEU Total logistics only 3% of product cost Transportation costs less than half of total logistics Inventory and safety stock costs high West coast landing has 2% cost advantagea Total logistics almost a third of product cost Transportation costs 90% of total Inventory and safety stock costs low East coast landing has 5% cost advantage Cost differences are usually small; price sensitive to small changes in canal toll, port fees, etc. NAIOP. Do not distribute or reproduce without permission. 17

Regional intermodalism is on the rise Costs Cost & Length of Haul Intermodal versus OTR Future Enhanced Rail Opportunity Trucking Costs Declining truckload productivity Regulation (e.g. HOS rules) and highway congestion Rising costs Average truck fleet age is increasing i Shrinking driver pool due to regulation (e.

18 Regional intermodalism is on the rise Costs Cost & Length of Haul Intermodal versus OTR Future Enhanced Rail Opportunity Trucking Costs Declining truckload productivity Regulation (e.g. HOS rules) and highway congestion Rising costs Average truck fleet age is increasing i Shrinking driver pool due to regulation (e.g. CSA) and demographics Break Even Point Rail Costs Fuel costs will likely increase with the recovery and regulation Current Rail Opportunity 550+ miles 1,000+ miles Distance NAIOP. Do not distribute or reproduce without permission. 18

19 Intermodal Routes to Major Inland Ports NAIOP. Do not distribute or reproduce without permission. 19

20 Inland Port Case Study Denton 20 min. DFW Airport 20 min. FW CBD 20 min. NAIOP. Do not distribute or reproduce without permission. 20

21 Inland Port Case Study NAIOP. Do not distribute or reproduce without permission. 21

22 Inland Port Case Study Genco ATC Martin Brower TD Ameritrade LG Electronics Bridgestone Firestone Nestle AT&T Texas Instruments Ford General Mills Ryder Behr Paint UPS Lego Grainger And More 17 MILLION SQUARE FEET DEVELOPED - 10,622 JOBS NAIOP. Do not distribute or reproduce without permission.

23 Inland Port Case Study Amazon BNSF Railway Hyundai Kraft Dickies Michaels JC Penney SC Johnson Coca-ColaC Volkswagen Audi Trans-Trade Teleflex Medical And More 5 MILLION SQUARE FEET DEVELOPED - 1,833 JOBS NAIOP. Do not distribute or reproduce without permission.

Inland Port Case Study BNSF Railway s Alliance Intermodal Facility BNSF & UP Class I Rail Lines Interstate Highway 35W Texas Highways 114 and 170 Fort Worth Alliance Airport

24 Inland Port Case Study BNSF Railway s Alliance Intermodal Facility BNSF & UP Class I Rail Lines Interstate Highway 35W Texas Highways 114 and 170 Fort Worth Alliance Airport FedEx Regional Sort Hub U.S. Customs & Border Protection clearance and security Centralized Examination Station Canada Mexico NAIOP. Do not distribute or reproduce without permission.

25 Economic Impact DEVELOPMENT STATISTICS $ billion invested $43.74 billion economic impact 32.7 million+ SF developed 31,000+ employees 7, homes built 338 corporate residents 63 companies listed on the Fortune 500, Global 500/Forbes Top List of Private Firms Fastest growing area of the nation s fastest growing metropolitan city (500,000+) NAIOP. Do not distribute or reproduce without permission.

26 Inland Port Case Study Deal Examples: Consolidation 19,000 TEU Imports Drayage Savings Analysis Final Assembly Fulfillment Logistics Infrastructure NAIOP. Do not distribute or reproduce without permission. 26

27 Q&A This is your opportunity to make this session exactly what you need it to be Ask the question. Please note that this session is being recorded, so before speaking, please proceed to a standing microphone. Thank you! NAIOP. Do not distribute or reproduce without permission. 27

28 Thank You! Curtis Magleby Senior Managing Director Region Head U.S. Capital Markets-West Cushman & Wakefield Michael Berry President Hillwood Properties es Stephen Crosby President CSX Real Property NAIOP. Do not distribute or reproduce without permission. 28

Anticipation, Expectation and Performance of Emerging Markets

Anticipation, Expectation and Performance of Emerging Markets Moderator: Steve Schellenberg, IMS Worldwide, Inc. Panelists: Don Cunningham, Lehigh Valley Economic Development Corp. Russell Held, Virginia