Port infrastructure attracts buyers in 2014
APM Terminals, the world’s third-largest container terminal operator in terms of throughput, announced July 21 that it has agreed to sell its ultra-modern facility in Portsmouth, Va., to two investment funds.
Alinda Capital Partners is a U.S.-based infrastructure investment firm, and Universities Superannuation Scheme Ltd., which has a global infrastructure portfolio, is the largest private-sector pension fund in the United Kingdom.
APMT said the transaction is expected to close in the third quarter, subject to regulatory approval, and the facility will be renamed the Virginia International Gateway.
A week later, Ports America, a large independent terminal operator and stevedore, said it plans to soon acquire a 30 percent stake in “K” Line’s U.S. terminal subsidiary, which operates container facilities in Long Beach, Calif., and Tacoma, Wash. The companies said Ports America will use its expertise and technology to improve truck, cargo and vessel flow and improve safety at International Transportation Services facilities to support the handling of ultra-large containerships and the Japanese carrier’s transpacific service.
The deals underscore the continued interest by equity investors in U.S. port infrastructure. The number of transactions has cooled off since the recession, as have the super-heated prices to consummate long-term concession agreements with port authorities. But investors with long-term horizons, such as pension funds, are still very drawn to the steady returns of container terminals as trade continues to grow, albeit at a slower pace than before 2008. Last year, the state of Virginia rejected offers by APM Terminals and a consortium headed by JPMorgan Chase to privatize the entire Port of Virginia. Virginia officials opted to make structural reforms and continue operating the port themselves.
Deutsche Bank is also looking to sell part or all of Maher Terminals, the largest terminal operation in the Port of New York and New Jersey, as well as the container terminal in Prince Rupert, British Columbia.
Earlier this year, APM Terminals sold a half-interest in its Elizabeth, N.J., terminal to Brookfield Asset Management. The deal comes on the heels of Brookfield’s purchase of a 49 percent interest in MOL's TraPac terminals in Los Angeles and Oakland, Calif. Brookfield also has port investments in Europe, China and Australia.
In July, Holt Logistics, which runs the Philadelphia Regional Port Authority’s Packer Avenue Marine Terminal, announced it’s partnering with the South Jersey Marine Corp. to build a new terminal in Paulsboro, N.J., on the Delaware River.
The APM Terminal site in Portsmouth is unique in the United States because it is a privately owned facility, built from scratch by the company on private land for about $540 million. Container terminals in the United States are typically owned by port authorities which have increasingly sought multi-decade concessions under which companies are leased land and given exclusive operating rights in exchange for some combination of infrastructure investment, cash, revenue-sharing or other considerations.
Commissioned in 2007, the semi-automated APMT facility uses remote-controlled, rail-mounted gantry cranes to handle container yard operations. At the time, it was considered the most modern facility in the United States, and to date, only one or two other facilities have the same level of technology to improve efficiency.
In 2010, APMT leased the Portsmouth marine terminal to the Virginia Port Authority for 20 years in response to lower-than-expected container volumes due to the global recession and maneuvering by port officials to attract most other shipping lines to the rival Norfolk International Terminal at the Port of Virginia. The container terminals will continue to operate under one umbrella for the next 16 years.
Soon after taking office early this year, Gov. Terry McAuliffe publicly suggested the APMT lease negotiated under his predecessor, Republican Bob McDonnell, was a bad deal and should be renegotiated. Under the lease, the VPA pays APMT $40 million per year, although the amount increases through the remainder of the lease and can rise further depending on cargo volume.
APMT, a unit of Danish shipping conglomerate A.P. Moller-Maersk, was more interested in Virginia buying the facility outright and McAuliffe rejected its asking price of $600 million, according to The Virginian-Pilot.
Those decisions were the genesis for APMT’s sale announcement, which did not mention the price paid by Alinda and the British pension fund.
“We are proud of the facility we built and the relationship we established with the Commonwealth of Virginia and the Virginia Port Authority. However, ownership of this terminal does not fit with our global strategy and ambition to operate and develop ports. We have chosen to sell our Portsmouth terminal because we are a non-operating lessor of the facility to the Commonwealth of Virginia for the next 16 years. We are confident Alinda and USS are the right owners to maximize the business opportunities in the future and that they will be good partners for the port authority and Commonwealth,” APMT Chief Financial Officer Christian Moller Laursen said in a statement.
Being a passive landlord that collects rent is better suited for financial investors, spokesman Erik Eisenberg elaborated.
“USS and Alinda see this acquisition as an important addition to our infrastructure portfolios. We are attracted to the terminal’s modern design and high levels of automation, which ensure that the facility will be a key component of the port’s infrastructure now and in the future. We look forward to continuing the excellent relationship with the VPA and the Commonwealth of Virginia that APM Terminals has developed over the years and intend to collaborate with the Commonwealth to explore any future expansion of the terminal to support the Port of Virginia’s continued growth,” the companies said in a joint statement.
Under the terms of the sale, the partnership will purchase all of the issued and outstanding capital stock of APM Terminals Virginia, Inc., which owns the Portsmouth facility. The deal will not have any impact on customers or staff, the partners said.
This article was published in the September 2014 issue of American Shipper.