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WACO, TX-After keeping analysts on watch in recent weeks about portfolio changes, Peoria, IL-based Caterpillar Inc. has unveiled plans for a 750,000-sf build-to-suit on a 77-acre tract in McLennan County, just off Interstate 35 and south of Fort Worth. The LEED core & shell project will deliver by year’s end.

Indianapolis-based Duke Realty Corp.’s construction arm in Dallas started prepping the site last month, pushing full steam on a project with finish-out that’s sure to top $30 million. Caterpillar first opened doors in 2005 in the city, beginning with a work tools and service operation. In 2007, it added a 975,000-sf logistics and distribution center to create a centralized catch-basin for multiple divisions inside and outside the US. Caterpillar’s land stake is situated between Bagby Road and Gateway Boulevard in an emerging, unnamed industrial park.

“We are moving faster than the design documents are going out,” Teddy Peinado, Duke’s regional vice president of construction, tells GlobeSt.com. He estimates the 520-foot by 1,350-foot cross-dock is running two months ahead of schedule. It originally was penciled for a February 2009 delivery.

Duke’s crew is expected to surpass 200 in the coming weeks and increase the head count when interior work begins, Peinado says. The 32-foot clear height building will have 15,725 sf of office space.

To win the BTS project, Duke bested Sacramento-based Panattoni Development Co., Kajima USA Group of Cleveland, OH, James N. Gray Construction Co. of Lexington, KY and St. Louis-headquartered Clayco Inc. GSR Andrade Architects of Dallas designed the Caterpillar building; Rodman Construction Co. of Frisco, TX, the design-build civil engineer.

“It’s safe to say it’s one of the largest industrial buildings with LEED certification in North and Central Texas,” says Duke’s senior vice president Jeff D. Thornton.

Two weeks ago, Caterpillar’s management team reported to analysts that a plan had been set into motion to juxtaposition its manufacturing and distribution center portfolio. It currently has 3,600 locations in 180 countries in addition to 1,600 rental outlets worldwide.

Duke’s confidentiality agreement prevents the team from discussing Caterpillar’s intended uses for the new building. However, Caterpillar president Doug Oberhelman told analysts that the real estate changes would result in “alternative locations for a US manufacturing facility” for motorgraders, now being produced in Decatur, IL. The existing plant will be used to expand off-highway truck production when the new one comes on line.

Also in Illinois, Caterpillar also is looking at expanding production in East Peoria and Aurora, which could end up being sourced to a US tube supplier. Manufacturing of on-highway and off-highway engines will be moved from the Mossville, IL factory and the two million sf of industrial space put to other uses, according to Oberhelman’s comments. The options include centralization of engineering and design plus a new machinery and engine product design center for large parts.

Oberhelman didn’t identify the new manufacturing location for the off-road heavy-duty engines. But, he did say Mossville’s capacity is “far greater than what will be needed in the future.”

Caterpillar’s management also has said the plan is to invest $2 billion, give or take, into repackaging the portfolio in the next “three or four” years, with $1 billion aimed at the Illinois operations. The big picture is bringing changes to its manufacturing, assembly and distribution network in the US while Caterpillar builds three factories in China and an assembly plant in Russia and expands its reach in India. In 2007, Caterpillar sales were $44.9 billion.

Caterpillar’s real estate moves include creating “focus facilities” for component manufacturing, Oberhelman explained. Talks are ongoing with the union workforce, but he said no write-offs are anticipated and no closings are planned. In fact, he pointed out Caterpillar will open two more facilities in the US. Obviously, Waco has a large role in the plan.

“We think we can be very competitive from a US manufacturing base,” Oberhelman told analysts and shareholders, adding the new US facilities will be smaller in size, but highly focused production sites. “There will be some items moving out sooner rather than later into focused facilities or into Mossville,” he said, “and we will gradually readjust our production in these essentially five assembly plants or four assembly plants and Joliet within the state of Illinois.”

Also in recent weeks, Caterpillar and Warrenville, IL-based Navistar International Corp. inked a strategic alliance aimed at the global on-highway truck business and technology development engine platforms. That initiative calls for production of a North American CAT-branded heavy-duty truck in 2010. The new model is designed for uses in road construction, large infrastructure projects and oil and petroleum development. CAT plans to produce a full line of medium- and heavy-duty trucks in both conventional and cab-over designs.

In the release, officials said the collaboration will develop, manufacture and distribute commercial trucks in select regions outside North America. Navistar’s real estate spans Canada, Mexico and Latin American in addition to US locations. Caterpillar’s export countries for on-highway trucks are Australia and New Zealand, Mexico and Latin America, the United Kingdom, Belgium, Russia, China and South Africa.

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