The Virginia Commonwealth Transportation Board (CTB) recently approved a contract that will move Hampton Boulevard under the rail line that now crosses it.  The $20 million contract is small relative to some others in the state, but is one that the Port Authority has been pushing for for over 15 years.  

Once completed, the improved traffic pattern will allow the port to build longer trains carrying imported cargo containers without disrupting traffic on Hampton Blvd.  The port estimates that this could allow them to utilize rail for an additional 20% of the product that comes through the port.  Currently, that 20% leaves the port via truck and contributes to pollution, congestion and disgruntled neighbors.  The more product that can leave via rail, the better for Hampton Roads.

Now that Hampton Boulevard is being addressed, the State is considering an additional $17.8 million investment to double the on-dock rail capacity at Norfolk International Terminals.  These are all great projects for the port and will further enhance its competitive position over other East Coast ports.

Citing a reduction in container volume, and increased competition from APM Terminals, Fitch recently downgraded their rating on the Virginia Port Authority’s $217.4 million of outstanding revenue bonds to “A”.  Fitch maintained a Stable outlook for VPA.  

Despite the economic woes in the National economy, Virginia is still landing soem big deals.  From REBusinessOnline:

RAYTHEON CORP. SIGNS 600,000-SQUARE-FOOT LEASE 
DULLES, VA. — Waltham, Mass.-based Raytheon Corp. has signed a 10-year, 600,000-square-foot lease with AOL for space in the company’s Pacific Corporate Park. Raytheon will fully occupy three buildings and lease half of a fourth building in the park, located on Pacific Boulevard in Dulles. The transaction involves a capital investment of $37.5 million and will create 100 jobs. Cathy Delcoco, Vicki Salamon and Terry Reiley of CB Richard Ellis’ McLean, Va., office and Rob Faktorow of the firm’s Washington, D.C., office represented AOL. Jones Lang LaSalle represented the tenant. 
     Raytheon had been looking to consolidate some of its Northern Virginia offices and plans on housing the company’s technical services company and intelligence and information systems unit in the property. The company will move into the buildings in three phases starting in 2010. The majority of the move will be completed in early 2011, with full occupancy expected by the end of the first quarter of 2011. “For the size of the lease, it moved quickly,” Delcoco says. “Both parties were motivated to close the transaction. Raytheon had some leases expiring and were contemplating a consolidation of several locations, and AOL had excess space due to rightsizing their Virginia campus.”
     This transaction represents a substantial commitment to the area in a time when most companies are in a holding pattern. “The lease is significant as it keeps a large user in Northern Virginia and gives a breath of fresh air to the commercial real estate market,” Delcoco says. “In today’s environment, the constant news is the difficulty in the capital markets and the lack of activity in the commercial real estate market. This is a positive commitment to the region.”

HEWLETT PACKARD RENEWS 800,000-SQUARE-FOOT LEASE IN VIRGINIA
SANDSTON, VA. — Hewlett Packard Co. has signed a lease renewal for 800,000 square feet of warehouse space in White Oak I Technology Park. The property is located at 7001 Technology Blvd. in Sandston. HP uses the property as a distribution center. N. Dean Meyer of Thalhimer’s Richmond, Va., office brokered the transaction.  

150,000-SQUARE-FOOT LEASE SIGNED IN VIRGINIA
DOSWELL, VA. — Diamond Hill Plywood Co. has signed a 150,000-square-foot lease for space in a Doswell warehouse. Terms of the lease were not released. The property is located at 17320 Washington Highway. Stephanie Sanker and Clay Culbreth of GVA Advantis’ Norfolk, Va., office represented Diamond Hill.

In a down market it’s great to be able to announce any new business at all.  It is tremendous to be able to announce a lot of new business, some of which you stole from a competitor!  That’s exactly what the Port of Virginia did today when they announced that China Shipping and two new CKYH alliance services will begin calling on Norfolk International Terminals in the next few months.  

The most exciting news comes is that one of the CKYH services, the NATCO-4, will have Norfolk as its first stop from Asia.  This means that customers shipping goods via this services will be able to receive their containers via Virginia before other ports.  First Call services are a big deal for ports and Virginia hopes that they can leverage the NATCO-4 success into more First Call services.  The full port rotation for the NATCO-4 service is Shanghai, Chiwan, Yantian, Hong Kong, Virginia and New York and will utilize eight vessels each with a 3,850 TEU capacity.  With the change in the service, CKYH dropped Savannah from the NATCO-4 rotation.

Virginia is also being added to the NATCO-5 service.  The full port rotation for that service is Pusan, Shanghai, Ningbo, Yantian, Xiamen, Savannah, Virginia and New York and will utilize eight vessels each with a 3,300 TEU capacity.

Finally, after bypassing Virginia over one year ago, China Shipping is adding Virginia back into their weekly AAE-1 service.  The full port rotation for the AAE-1 service will be Shanghai, Hong Kong, Yantian, Miami, Savannah, Virginia and New York.  This service will use smaller vessels, each of which are approximately 3,000 TEUs.

All told, the new services represent about 150 new ship calls to the Port of Virginia.  That’s great news in any economic environment.

According to a recent Bloomberg article, the renowned investor George Soros feels that commercial real estate has an additional 30% decline left in its pricing.  If he is correct, that would mean an upcoming strain on the US banking system on an unbelievable scale.  Commercial prices have already fallen +/- 30% from their 2007 highs.  An additional 30% would be devastating.  Soros also commented on the current Administrations monetary policy, fearing that we are setting ourselves up for a period of significant inflation.

It all puts the real estate investor in a tough predicament.  The impending inflation would drive you towards buying now and locking in your capital costs.  However, with the specter of additional pricing declines on the horizon, investors are reluctant to buy now for fear of overpaying.  So, again, the real estate market remains locked in indecision. 

Here in Richmond, the situation is very similar.  Richmond BizSense ran an article this week talking about the lack of sales activity in this market.  In addition to quoting some fantastic market experts (including your truly), the article does a very good job of laying out the situation that faces both buyers and sellers in today’s market.  No doubt, it’s a tough one.  The companies that can be flexible and creative will do much better than those that can’t.

The dailypress.com website is reporting that an offer may be forthcoming this week from CenterPoint properties to privatize the Port of Virginia.  Their sources indicate that an offer may be delivered to Virginia Transportation Secretary Pierce Homer this Friday.  Although the Port was not actively soliciting bids, privatizing their operations is something they have been examining after Del. Harry “Bob” Purkey, R-Virginia Beach organized a special committee to vet the option.  It could mean a significant upfront payment from CenterPoint which could help to plug the budget gap and fund other necessary transportation improvements.  

However, privatization comes with several big question marks.  As it stand right now, Virginia International Terminals operates the Virginia terminals.  They are a state owned organization and are currently focused on increasing the amount of cargo that flows through Virginia.  If CenterPoint were to operate the terminals, that focus may change to protecting their financial bottom line.  However, the two are more closely aligned than you might expect.  Port rankings are typically done by TEU volume (VIT’s goal), and shippers follow activity (more customers for them to work with, choose from and steal) and that flows through to CenterPoint’s bottom line.  So, the higher Virginia ranks the more business it will do and (presumably) the more profit it generates for CenterPoint.  Everyone wins.  If Virginia does agree to do this, I would suggest they structure significant rent penalties for CenterPoint if TEU volume targets are not met.

CenterPoint is not new to the Virginia market as the Chicago based developer recently won approval last month for its $350 million industrial park in Suffolk.  Although they are majority owned by CalPERS, I am not familiar with their terminal operating capabilities.  They may be exceptionally qualified to operate a port terminal, I’ve just always known them as an industrial real estate developer.  

If the proposal does arrive as expected, I am sure it will spawn a lively debate.  It will be interesting to see both sides present their arguments in the coming months.  I’ll keep you posted…

Well it looks like Unicorp, the developer of West Broad Village, has reached an agreement with Henrico County on how their tap fees are to be calculated.  Under the agreement, Unicorp will pay Henrico County $983,000 for the three connections that are already in place.  They will then take the balance of the payment due (+/- $2.517 million) and amortize it out over 36 years at an interest rate of Prime + 1%.  Seems like this might be a win-win for everyone.  Henrico County gets the tap fees that they are rightfully due and Unicorp gets to spread out their payments.

This week defense supplier Sparta Composite Products announced that they will be building a $13.2 million plant in Suffolk, Virginia.  In association with this new facility, Sparta will be creating approximately 200 new jobs over the next 5 years.  The new plant will be 67,000 SF and will be located in the Northgate Commerce Park.  The Company also has plans to build an additional 87,000 facility in 5 years.  Prologis will construct the building for Sparta on the land it recently purchased in Northgate.  Prologis had intended to develop speculative product at Northgate, but with its recent financial issues had decided to halt all new development nationwide.  

West Broad Village, the west ends new mixed use project has hit another snag.  This time it is over a misunderstanding in how much the water and sewer tap fees will be.  An article, which appeared in the Henrico Citizen outlined the saga between Unicorp, the developer, and the Henrico County Board of Supervisors.  According to the article, Unicorp’s position is that the mixed-use buildings should fall under the County’s “other buildings” classification for fee calculations.  The County, however, looked at each individual use within each building to calculate the fees.  While the difference may seem semantic, the resulting fee difference is not.

Unicorp calculated their total obligation to be $589,000.  The County calculates that same obligation to be $3,500,000.  The difference is huge and Unicorp claims it is enough to shut the project down.  They just don’t have the money in their budget to pay the higher fees.  While the discrepancy is making news now, Henrico County officials notified Unicorp and their engineer, Timmons Group, about the fee via three letters between March 26 and July 3, 2007.  Unicorp claims that they never received the notification because Timmons never notified them and the letters that the County sent to Unicorp were addressed to a marketing person, not a project manager.  

I suspect that Unicorp will have an uphill battle in getting the County to reduce the fees.  Henrico’s position is consistent with how other projects have been treated and they followed the proper protocol to notify the developer.  While I am sure it is a shock to Unicporp, county fees are a part of every development project and are one of those things you need to understand upfront and early.  It’s just one fo those “boxes” you have to check.

This latest issue surrounding West Broad Village just adds to the projects difficulties.  Obviously, the retail market (and the market in general) has completely gone out from under them, with retailers more likely to file for bankruptcy than sign a new leases.  In addition, late last year nine mechanics liens, totalling approximately $3.7 million were filed against the property for failure to pay contractors and brokers.  At the time, Unicorp cited difficulties in lining up their financing as the reason for the delays.  There has also been at least one failed acquisition of the property as Unicorp tried to unload its position in the property.  There are rumors that another group has the project under contract and is doing their due diligence.  It may have been through those due diligence efforts that the tap fee discrepancy was discovered.

The Richmond Times-Dispatch reported today that Tyson Foods, Inc. will be adding 180 jobs for a new processing line at its Hanover County plant.  Almost a year ago, Tyson announced the layoff of 190 employees.  The Company said it is pleased to be able to hire back most of the affected workers.  50 of the 180 workers have already been hired and the balance will be added over the coming months.  The plant currently has approximately 625 employees.

While I don’t have any inside knowledge of the Tyson Foods operation, I think this story may portend to what we will see more of in the US.  It appears that, prior to the new hires, Tyson found a way to operate its plant with fewer employees.  Basically, they increased their productivity and became more efficient.  It was only when they added a new production line that their hiring needs increased.  I believe that in the lean times, many more companies will find ways to be more efficient with their workforce – whether through technology or other means.  When the recovery comes, we may not need as many workers to accomplish the same level of production.  That speaks well for our national productivity, but would mean a longer more protracted job recovery.