Thursday, March 12, 2009

Revamped Jafza plan focuses on Santee

By DAN McCUE, Special to The T&D Thursday, March 12, 2009

The ongoing economic uncertainties of the global economy have caused Jafza Americas to revamp plans in the United States, a move that will put full emphasis on plans for 1,324 acres in Orangeburg County.

Jafza, a subsidiary of Jafza International, a Dubai-based Economic Zones World company, will now focus on the physical development of the central South Carolina site, for the time being forgoing potential projects in Virginia, Ohio and Texas.

“This is not a retrenchment,” said Chuck Heath, managing director and senior vice president of Jafza International, who is visiting South Carolina this week to meet with government and economic development officials as well as representatives of the S.C. State Ports Authority.

“What we have done is take a decision that we want Santee (the community adjacent to Orangeburg, and the one who’s name Heath uses when speaking of the project) to keep moving,” he said. “We’ve got very good friends and supporters here and there’s no reason to stop the project in light of the current economic difficulties.”

Although Health conceded that the timing of when ground will be broken on the project is largely dependent of when the federal government finally gets banks to start lending again, he strongly asserted the economy’s current travails “don’t mean we can’t continue to move forward.”

“Obviously, Santee is still in the development stage. We’re fine-tuning our strategy, but we are not divesting anything. Those projects (in other locations) that we have not committed to have stopped; but if we’ve bought land and have committed, we’re committed. As far as North America goes, we’ve decided to settle all of our resources and assets on Santee.”

A sign of Jafza’s continued seriousness in regard to the project is selection of Nexsen Pruet, which has offices in Columbia, Charleston and Myrtle Beach, to serve as its attorneys here.

In addition, Heath said Jafza is in receipt of its wetlands jurisdictional letter from the U.S. Army Corps of Engineers, which it had to secure before formally applying for development permits for the first phase of the project. The letter deals with wetlands mitigation and other environmental issues.

“We are most definitely making progress,” Heath said. “But in this economy, things sometimes will go more slowly than you might like.”

Continued growth

Speaking directly to the economic global crisis, Heath said the biggest effect in Dubai has been in the property development sector. A major player like Nakheel, one of Jafza’s sister companies, has had to reschedule, postpone and even cancel some projects.

By contrast, Heath said, Dubai Ports, the sister entity most closely aligned with Jebel Ali, Jafza’s massive logistics and warehousing park and namesake, “has been doing extremely well in a difficult environment.”

“We will slow to single-digit growth this year, but we’ll still experience growth,” he said. “Of course, the problem is, we’ve grown accustomed to double-digit growth.”

Jafza itself, meanwhile, is moving forward with the development of phase II of its free zone project in Djibouti, after a phase 1 consisting of light industrial units, warehouses and office facilities sold out.

“It’s the most modern container shipping terminal in East Africa,” Heath said with evident pride.

Its parent company, Economic Zones World, is also moving ahead with business park developments in China and India.

Turning his comments back to the South Carolina project, Heath said in an economic climate where there are limited resources available, it’s important to commit to having your assets generating revenue.

“No matter what business you’re in, whether you are selling ballpoint pens or airplanes, you always need to generate revenue – and that’s another reason to really hunker down and focus on Santee. Right now, I’m sitting here with an asset that’s not generating revenue. And in this climate, I’d rather have only one such property for a short time than two and longer range hopes for development.”

The Santee plan

Clint Murphy, vice president of the Jafza International’s Americas operation, said in moving forward with actual construction, Jafza would likely emphasize building to suit for committed tenants rather than creating building on spec for prospective tenants.

“Obviously, some spec buildings will remain part of the mix as we move forward with the 135-acre first phase of the project, but given what’s going on in the economy right now, we have a little bit less of an appetite for that right now,” he said.

The plan is now to build the first buildings on the site in early 2010.

“Right now I’d say we’re in client/relationship mode, rather than aggressively marketing the site,” Heath said. “I mean, how can you market a site when I can’t tell them precisely where the access road will be or where the utilities are – all of which will become clear later this summer when we expect to reward the design contract?”

“Until then, we’ll continue to introduce potential clients to who we are and what we are doing,” he said. “And that will take place mostly outside of the Middle East, our local market, where Jafza is already a well-known entity.”

As an example of the kind of outreach Jafza is already doing, Heath pointed to a reception hosted in India last month by the S.C. State Ports Authority.

“I was invited to participate and make a presentation and was happy to do so,” Heath said. “It’s all about awareness-building.”

Heath was scheduled to meet for the first time with John Hassell, the ports authority’s interim president and CEO, on Wednesday, and with Gregg Robinson of the Orangeburg County Development Commission on Thursday to discuss continuing such efforts.

The revamping of its strategy was accompanied by the departure of Steven Eames, who has overseen the project since Jafza bought the property for $22-24 million in September 2007.

Eames, a former member of the Australian Special Forces and a veteran of infrastructure planning for three Olympic games, became known as something of a planning visionary through his work on the project.

Over the course of the project’s first year, Eames focused on improving the road and rail efficiencies for the site, believing that those efficiencies would be a value-added, not just for Jafza’s customers, but also for the state of South Carolina as a whole.

His leaving the project comes just days after the Orangeburg County Development Commission began to circulate a proposal to create a $700 million “global logistics corridor” linking the Port of Charleston to the Global Logistics Triangle in Orangeburg, and then to the Columbia Metropolitan Airport, where time-sensitive cargo could be flown out of the state.

“I’m a supporter of the corridor, and frankly, that concept was one of the reasons we made the decision to go with the South Carolina site, as opposed to the two or three others we were looking at back then. If you remember, after we talked to Congressman Jim Clyburn, Gregg and the folks at the OCDC, and heard their explanation of what the logistics triangle and corridor could be, we made a decision on Santee in 24 hours,” Heath said.

Moving forward

The first real day of acting on its new focus will come Thursday, when Jafza Americas will open the requests for qualifications it requested from professional civil engineering firms interesting in competing for the design, permitting and construction administration work for the first phase of what will ultimately be a $600 million project.

Murphy said the design work would include coming up with plans for the roads and utilities that will need to crisscross the Jafza property, and “perhaps the design of some building pads.”

The Request for Qualifications was sent to more than 50 civil engineering firms that have expressed interest in Jafza. Firms receiving the RFQ are mainly from South Carolina, though some are from Georgia.

Jafza will select no more than six firms through a private evaluation process, and only then will those firms be asked to submit requirements to a Request for Proposals.

As Heath indicated, finalization of the RFP is expected this summer.

“Sometimes, given the state of the economy, it seems like we’re working a little harder than we used to,” Heath said. “But in the end, the results will show that it was well worth the effort.”

Dan McCue is an independent business journalist and writer in Charleston.

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