Terminal container operators negotiating with a port authority for new facilities should expect talks to be lengthy, possibly contentious, and focused on financial feasibility, considering terminals cost as much as $1 billion, the Journal of Commerce reported.
The Port of Long Beach, which will spend $4.4 billion over the next decade on terminals and infrastructure, is a prime example of a port where the staggering cost of large facilities requires a meticulous approach to terminal leasing, Chris Lytle, deputy executive director and chief operating officer at the port. No matter how the lease is structured, though, it must be beneficial for the port as well as the operator, Lytle told a terminal operators’ seminar sponsored by the American Association of Port Authorities.
The Port of Long Beach, which will spend $4.4 billion over the next decade on terminals and infrastructure, is a prime example of a port where the staggering cost of large facilities requires a meticulous approach to terminal leasing, Chris Lytle, deputy executive director and chief operating officer at the port. No matter how the lease is structured, though, it must be beneficial for the port as well as the operator, Lytle told a terminal operators’ seminar sponsored by the American Association of Port Authorities.
Redevelopment of the port’s Middle Harbor terminal into an automated 345-acre facility will take 10 years and will cost the port $1.2 billion to construct. The terminal operator will spend about $500 million on cranes and equipment, Lytle said.
Since all terminals in Southern California must now include costly environmental upgrades, all green requirements must be clearly defined before the lease is signed, he said.
Terminal operators also seek creative leases that reward the company for increasing its cargo volume and improving efficiency. Bruce Cashon, senior vice president and chief operating officer of Ceres Terminals, said this may require a longer lease term that gives the company enough time to amortize its investment in modern, efficient equipment.
Some ports that seek extensive private sector investment are entering into concession arrangements in which the port authority sells a public asset to a company for 50 to 75 years, and the company funds the entire project. Sam Ruda, director of marine and industrial development at the Port of Portland, said concession arrangements allow the city or state that owns the port to direct its money to traditional obligations such as funding public schools.
Terminal operators face increasing pressure to increase throughput per acre while being environmentally sensitive, said Patrick Burgoyne, president and chief executive of Yusen Terminals International in Los Angeles. This requires a huge investment in cargo-handling automation and electrification and computerized terminal operating systems.
Since all terminals in Southern California must now include costly environmental upgrades, all green requirements must be clearly defined before the lease is signed, he said.
Terminal operators also seek creative leases that reward the company for increasing its cargo volume and improving efficiency. Bruce Cashon, senior vice president and chief operating officer of Ceres Terminals, said this may require a longer lease term that gives the company enough time to amortize its investment in modern, efficient equipment.
Some ports that seek extensive private sector investment are entering into concession arrangements in which the port authority sells a public asset to a company for 50 to 75 years, and the company funds the entire project. Sam Ruda, director of marine and industrial development at the Port of Portland, said concession arrangements allow the city or state that owns the port to direct its money to traditional obligations such as funding public schools.
Terminal operators face increasing pressure to increase throughput per acre while being environmentally sensitive, said Patrick Burgoyne, president and chief executive of Yusen Terminals International in Los Angeles. This requires a huge investment in cargo-handling automation and electrification and computerized terminal operating systems.
Structuring leases with breakpoints where the terminal retains an increasing level of revenue as volume thresholds are met encourages these efficiencies, Burgoyne said.