News Article | 5/7/2004

When Properly Managed And Marketed, Ftz Status Big Plus

Memphis Business Journal05/07/04


Jane AldingerIf Dallas-based development firm Hillwood gains a Foreign-Trade Zone designation at its 219-acre DeSoto Trade Center site in Southaven, the Memphis area industrial market could see a rippling effect of benefits.Hillwood filed for the FTZ status under the nonprofit corporation Northern Mississippi FTZ, Inc., and has remained low-key about its intentions.Hillwood’s site plan calls for the construction of six buildings ranging in size from 425,000-846,066 square feet. The largest building has been constructed and Emerson Electric Co. occupies 290,000 square feet of it.Emerson plans to take advantage of the FTZ status, says Preston Herold, marketing manager with Hillwood, which also operates an FTZ at its Alliance Texas project in the Dallas/Fort Worth area. Dan Wilkinson, president of Colliers Wilkinson and Snowden, says the FTZ status could have a huge impact on the area’s industrial market if companies realize its advantages.”Potentially, it’s going to have a big impact and be a really favorable thing for companies that really understand the benefits and companies that are doing a lot of business with big, national companies,” Wilkinson says. With Memphis’ prime logistics location, the FTZ status could simply add to what the area already has to offer.Hillwood’s application is being processed by the federal Foreign-Trade Zones Board. Herold expects to receive the designation between Oct. 1-Dec. 31. The FTZ status in Southaven is collectively seen as a positive move, but some local real estate developers are more skeptical as to what effect it will have on the area. Proving not all FTZs are put to profit and use was Dallas-based Champion Partners, Inc. Champion obtained FTZ status on the 630,000-square-foot Memphis Trade Center II, and that designation was never taken advantage of.”They can be very valuable for some people, but is it going to change the face of how our market works? No,” says Kurt Nelson, vice president of development and district manager for Industrial Developments International’s central region. “I think it’s a nice arrow to have in your quiver. I do think it’s a good thing they’re doing it, and I think it’s positive.”Memphis has three general purpose FTZ sites, Centrepot, Meritex Logistics and the river port. Southaven and Hillwood are also applying for a general purpose status, but once Hillwood achieves FTZ status, other Southaven developers can apply for subzone status, or special purpose zone status, and have the FTZ transferred to other properties in the city.Regulations adopted by the federal Foreign-Trade Zones Board provide a significant incentive for a company to locate in a general-purpose zone as opposed to a subzone, according to Miller & Co. PC, a law firm specializing in international trade, customs and FTZ law.Miller & Co. lists the subzone application process — the fees, the processing time, the limited approval, the burden of proving that the FTZ activity would result in a significant public benefit, the potential opposition, the possibility of denial and the greater accessibility of confidential business information — all as deterrents for opting on a subzone as opposed to a general purpose zone. Memphis has two special purpose subzone operators, Brother International and Sharp Electronic Corp.Whether Southaven emerges as a successful FTZ community will depend on how the area is marketed and how it is run. Bill Fisher, executive vice president of Centrepot, says he has seen communities that get FTZ status approved but don’t see large-scale benefits from it.”They have this high expectation that the Foreign-Trade Zone is going to breathe all this life into their community, and then it doesn’t happen,” Fisher says. “But then there’s also some from the day they’ve been approved and activated, they’ve been profitable from day one. It’s a matter of how you market it and how you run it.” Wilkinson says achieving FTZ status should allow the Southaven area to attract larger distribution operations.”It’s going to make a difference,” Wilkinson says.”For many users, it means nothing, but for three of 10 prospects, it means the world,” Herold says.