Alinda Capital, USS team up in port deal

The US fund manager and the UK private sector pension fund have agreed to buy a container terminal in Virginia from APM Terminals.

Alinda Capital Partners, a US infrastructure investment firm, and Universities Superannuation Scheme (USS) of the UK have agreed to purchase a container terminal in Portsmouth, Virginia from APM Terminals, the independent port operating division of the AP Moller Maersk Group, according to a recent statement. Financial terms of the transaction were not disclosed.

The facility, which is the largest privately-owned terminal in North America, cost APM Terminals about $500 million to build.

“Commissioned in 2007 with the most modern automation at that time, APM Terminals Virginia is a deep-water marine container terminal that employs remote-controlled, rail-mounted gantry cranes that handle container yard operations in a safer, smarter, more eco-friendly manner,” APM Terminals said in its statement.

Alinda is funding its part of the acquisition through its second infrastructure fund, Alinda Infrastructure Fund II, which closed on $4 billion in January 2010, a spokeswoman for the firm told Infrastructure Investor. However, terms of equity ownership in the joint venture between Alinda and USS remain confidential, she said.

Neither the facility’s customers nor its staff will be affected by the sale, which subject to standard regulatory approvals, is expected to close in the third quarter of 2014.

“We look forward to continuing the excellent relationship with the VPA [Virginia Port Authority] 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,” Alinda managing partner Chris Beale and Gavin Merchant, USS’ co-head of real assets are quoted as saying in the statement.

APM Terminals leased the Portsmouth terminal to the Virginia Port Authority in July 2010 for a 20 year-period. According to the terms of the lease agreement, APM Terminals continued to own the facility and its principal capital assets. The annual base rent for the terminal started at $37 million for 2011 then increased to $39 million and $41 million for 2012 and 2013, respectively. The base rent for 2014-2030 was set at $44 million a year.

Virginia’s Secretary of Transportation Aubrey Layne sees the change in ownership as an opportunity to renegotiate terms of the lease agreement that APM Terminals entered into when Governor Bob McDonnell and his administration were in office.

“The lease does not contain any reversion clause, so after paying around $50 million a year for the next 16 years the asset will not revert back to the Commonwealth of Virginia. It doesn’t make sense,” he told Infrastructure Investor.

While the base rent is set at $40 million a year, additional fees bring the total closer to $50 million. The Virginia Port Authority is responsible for making those payments but because it has been operating at a loss for some time, the revenues it collects and which are supposed to go towards investments are instead used to keep up with operating expenses.

“Being an operator of terminals, APM was also a competitor,” Layne said. “The new owners, Alinda and USS, are financial buyers, which means they’re interested in investing in the asset with a view to exiting their investment at some point. Their interests and ours may be better aligned,” he continued, adding that the Commonwealth has not yet had any discussions with the new buyers.

Under the terms of the sale, Alinda and USS will purchase all of the issued and outstanding capital stock of APM Terminals Virginia. Once the transaction is complete the facility will be renamed Virginia International Gateway.

Headquartered in Greenwich, Connecticut, Alinda Capital Partners has made more than $8 billion of equity investments in infrastructure during the last eight years in the US, Canada, the UK, Germany, the Netherlands, Austria, Belgium, and Luxembourg. The firm also has offices in Houston, London, and Düsseldorf.

Established in 1974 to administer the principal pension scheme for academic and comparable staff in UK universities and other higher education and research institutions, USS is the largest private sector pension fund in the UK. As of March 31, 2013 – the latest information available on its website- the fund had more than £38 billion (€48.1bn; $64.8bn) in assets under management.