Port of Portland inks lease with Philippine group

The $70m deal will see ICTSI, a Philippine container terminal operator, pay the port an $8m upfront fee and $4.5m annual rent fees for 25 years in exchange for a concession on its container cargo terminal.

The Port of Portland in Oregon has signed a $70 million concession deal with a Philippine container terminal operator, bringing to fruition a long-sought private partnership that had been upended when the financial crisis ruined the port’s plan for a similar deal in 2008.

US Ports: open for

The port will give Manila-based International Container Terminal Services, or ICTSI, the right to the revenues from the Port’s container cargo facility for a period of 25 years. In exchange, ICTSI will pay the port an $8 million up-front free and ongoing annual payments of $4.5 million a year. In today’s dollars, the deal is worth about $68 million, according to Port of Portland spokesperson Joshua Thomas.

“One of the things that makes a lease like this attractive to a Port like ours is . . . this will stabilize revenues,” Thomas added, pointing out that container trade can be highly volatile. In the wake of the 2008 financial crisis, for example, the Port of Portland found its containerized cargo volumes down 30 percent, Thomas said.

The volatility and uncertainty of the crisis put an end to a procurement process the port was carrying out in late 2008 to bring in a private operator for the same container terminal facility. “Things had deteriorated to the point were it became evident that reaching a deal within that process would not be feasible,” he said.

Subsequently, ICTSI, one of the bidders in the original process, approached the port to try and negotiate a bilateral deal to lease the container terminal after all, albeit for a shorter, more conventional lease length of 25 years. Recent port terminal transactions at ports in Oakland, California and Baltimore, Maryland, have featured longer lease lengths of 50 years and much larger upfront lease payments than in Portland.

It's an alternate model to the Baltimore model and Oakland model

Joseph Seliga

“It’s an alternate model to the Baltimore model and Oakland model,” said Joseph Seliga, a partner at law firm Mayer Brown, which acted at the port’s attorney on the deal. He added that more port authorities may wish to look at the Portland example as a way “for getting a motivated private party to come in and create a partnership related to [the] operations of an existing container terminal.”

ICTSI, which marks its first US transaction in the Portland deal, has a financial incentive in the deal to increase container traffic at the port. For each container box moved at the port above an annual 250,000 threshold, the company will receive a fee of $10 per container up to 350,000 and potentially more if the volumes go above that.

Historically, the port has seen the volumes at the container terminal fluctuate between the low 200,000s and the mid 300,000s, Thomas said. The terminal has been in business since 1974.
Thomas is confident ICTSI can deliver on increasing the port’s cargo volume. “We’re getting a solid partner,” he said of the firm.