The Port of Virginia has reached an agreement to lease a port terminal from APM Terminals, clearing a hurdle for the evaluation of its now year-old public-private partnership proposals from three competing bidders.
Port officials wrote on its blog that the Virginia Port Authority (VPA) and APM “had reached an agreement in principle leading toward a 20-year lease” of APM’s port terminal in Portsmouth, Virginia to the VPA.
APM Terminals said in a statement that under the agreement, APM Terminals will continue to own the terminal and its major assets, though all the operations will be taken over by the VPA’s operating arm, known as Virginia International Terminals.
Details, including a timeline for inking the lease, reported by a local newspaper to be worth $800 million, will be finalised “in the coming weeks”, APM said.
However, the indication of the agreement could accelerate the potential negotiation of another big deal at the port. In February, Jeff Keever, the Port’s Senior Deputy Executive for External Affairs, told InfrastructureInvestor.com that once the APM Terminal deal is agreed, Virginia would move ahead with the process for evaluating the proposals it received in 2009 for the operation and maintenance of its port facilities.
In March 2009, CalPERS-backed industrial real estate developer CenterPoint Properties submitted an unsolicited proposal to lease the Port of Virginia’s entire operations for 60 years in exchange for a total package of economic benefits it estimated to reach at least $8.9 billion.
Several months later, private equity firm The Carlyle Group and investment bank Goldman Sachs stepped in and offered competing proposals for the port’s consideration.
After all the bids were disclosed in August 2009, then-Secretary of Transportation Pierce Homer was to appoint, designate a chair and schedule meetings for a panel to evaluate the proposals.
However, because there was an upcoming gubernatorial election, Homer didn’t appoint a review panel and handed off the responsibility to the new administration. In November, Republican Bob McDonnell won the election.
McDonnel said in a statement last week announcing the APM deal that “the most significant event in the history of this port was unification of the state-owned terminals under a common operator”. The APM lease, he added, will increase the overall value of VPA’s assets, expand its capacity and make the port more economically competitive.
By doing so, though, the APM deal could force any potential long-term lessors of VPA’s facilities to pay more for the right to earn the revenues from its assets.
Last year, CenterPoint proposed to lease the port's facilities for 60 years in exchange for an upfront cash payment of $500 million.
Carlyle said it would be possible to pay the Port of Virginia between $500 million and $700 million up front for such a concession, with profit sharing ranging from 15 percent to 40 percent based on specified return hurdles.
Goldman, in partnership with Goldman Infrastructure Partners-owned terminal operator Carrix, proposed a 30-year operating agreement in which Carrix would provide $250 million upfront for the agreement and then be compensated through a share of the port’s operating cashflow.
McDonnel, whose administration will ultimately be in charge of selecting the panel to evaluate the three firm’s proposals, did not make any reference to the CanterPoint, Carlyle and Goldman proposals in his statement on the APM deal.
He did say, however, that the deal would give “VPA the time and flexibility to create the best development and financing plan possible” for the expansion of Craney Island, another terminal facility at the port.
Carlyle and CenterPoint included the Craney Island development as an element of their proposals.
Goldman disagreed, saying “it is not an advantage for the VPA to have another organization fund and have complete rights to Craney Island”.