NY firm has eye on city for growth
The future of the logistics industry will be led by technology moving along America’s railways, according to Michael Cohen, CEO of FR8 Zone, a New York-based logistics firm considering a new Memphis location.
Cohen hopes his company’s innovation will be the heart of that technological renaissance for the industry.
The standard for logistics technology is radio frequency identification (RFID) sensors used to track the movement of products from manufacturers to consumers. FR8 Zone is developing technology that it hopes will do the same work as an RFID sensor only better, faster and cheaper, Cohen said. “It’s RFID on steroids,” Cohen said. While it’s possible that Cohen will expand his company in Memphis, bringing developers and other tech professionals here to work on the RFID replacement, it will be weeks before Cohen makes a decision.
Workforce, location and incentives
FR8 Zone already has a presence in New York, New Jersey, Florida and California, according to an application for incentives.
The company was founded in 2017 after several logistics and technology companies merged. It and its affiliates have 25 employees, Cohen said.
But before it can take aim at sitting at the helm of logistics technology, Cohen needs to decide if Memphis is the right city to keep growing his company.
That would be decided by three factors: workforce, location and incentives.
No matter where the company ends up, Cohen wants there to be a large enough pool of job candidates with the skills needed for high-paying positions as developers to bring his technology to life. In states like New York and California, he said, there is a concentration of workers but turnover can also be high because of the number of tech companies there to take his employees after they gain a few years’ experience. If Memphis is to be the next home for his company, Cohen said he’ll need to be assured the University of Memphis and other local colleges can prepare the workforce he needs.
Cohen had a brief, private meeting with representatives from the University of Memphis and the Greater Memphis Chamber last week but didn’t share specifics of what was discussed.
The question of location is easier but comes with challenges too.
“We believe there is a trend of change in logistic transportation and the concentration of what our company needs is in rail locations between Chicago and the Texas border,” Cohen said. “For us, what’s important is a rail system — a well-defined rail system —where traffic flows between the ports in the west and the ports in the east.” Memphis fits that bill. But so does St. Louis and so does Horn Lake, Mississippi, and so do several other cities that Cohen said are also contenders but did not name.
That indecision has the potential to pit Memphis against countless other cities to provide the final requirement: a lucrative incentive package.
Last week, the Economic Development Growth Engine (EDGE) of Memphis and Shelby County board approved a $2 million tax break to help make Memphis more desirable for the company. It could take up to six weeks for Cohen to announce if his company will take advantage of the tax break and open a Memphis office.
The ‘vanilla stuff’ and ‘the gravy’
If Cohen does choose Memphis, FR8 Zone will take over a warehouse at 4173 B.F. Goodrich Blvd. about seven miles east of Memphis International Airport.
It would cost the company $5.8 million to buy the building and nearly $5 million more to renovate it. FR8 Zone has aspirations for a high tech future and most of the conversation at last week’s EDGE board meeting focused on logistics technology. But based on the hiring promises the company made in its incentive application, it is mostly a third-party logistics company.
FR8 Zone promised to create 32 jobs in exchange for saving about 75% of its property tax obligation over 10 years.
One hire, a general manager, will make $125,000 annually. Two hires, controlled machine tool operators, will make $39,228. All other workers can expect to make less than $35,000 each year with 20 of the positions — laborers and freight, stock and material movers — making $27,500 per year.
FR8 Zone will have to hire and maintain those employees in annual jobs reports to EDGE in order to qualify for its tax break each year.
The technology positions that Cohen said he plans to create could pay around $75,000 annually, but even if Cohen does not create a single position at that pay rate he will still be complying with the terms of his tax incentive.
“The Fast Track PILOT program that they applied under only requires that you commit to $1 million of investment and 25 jobs,” EDGE President Reid Dulberger said. “So essentially what he did was say, ‘Look, I easily meet that based on the vanilla stuff we’ll do.’ They did not give us numbers on the tech side. That would be the upside, that would be the gravy.”
Cohen said those were the jobs he included because he felt sure he could deliver and didn’t want to over-promise.
Although the higher-paying positions were not included in the company’s commitment to EDGE, FR8 Zone would not be considering Memphis if Cohen didn’t think it was a city where his company could grow, Michael Mullis, Cohen’s attorney, told the EDGE board. “If you’re happy with this, the only chance you get to make this deal better is to start with this deal,” Mullis told the board. “He’s not going somewhere that doesn’t at least do this deal.”
Seconds later, the board approved the tax break.
Dulberger said despite there being no guarantee that the company will be able to create the high-paying jobs or the technology that it aspires to create, he believes the board still took the promise of that future into consideration when approving the incentive.
“At the end of the day, the EDGE board made a decision that was primarily based on you’ve committed to these number of jobs, this much investment and taking this 300,000-square-foot building off the market,” Dulberger said. “If all that happens, none of us will consider this to be a great project, but we will say we checked the box, it was a project worth having...”