$130M in Wings on Port Pilot Program

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$130M in Wings on Port Pilot Program
Rendering: Potential site of container storage.

There’s $130 million in funding committed to a public-private partnership to build a container staging facility at the Port of Los Angeles, a project that has yet to receive state regulatory approval and to go through a pilot program to test how well it reduces container congestion at the terminals.

The public-private partnership, called the Harbor Performance Enhancement Center, tapped in Macquarie Principal Finance, a subsidiary of Australia-based financial services firm, Macquarie, to finance the project.

HPEC is backed by the Port of Los Angeles and a consortium led by Jonathan Rosenthal, chief executive of HPEC and chief executive of Sawtelle-based investment firm Saybrook Corporate Opportunity Funds.

Rosenthal also serves as chairman of the board of directors of Total Transportation Services, a trucking company that filed for chapter 11 bankruptcy protection in 2016, shortly after it lost legal claims filed by truckers working as independent contractors who wanted employee status.

Rosenthal said his latest venture has drawn support from various groups with interests in the ports’ operations, including some that have found themselves at odds in the past.

“We have broad support from environmental organizations like the Natural Resources Defense Council, Coalition for Clean Air as well as the SCAQMD (South Coast Air Quality Management District), and supply chain partners like retailers, truckers and more,” said Rosenthal.

The financial commitment from Macquarie is for a minimum of 10 years, he said, which seems likely to be long enough to accomodate the regulatory procedures and the testing period of the pilot program.

The search for a financier for the project took about a year.

“We hired JLL [commercial real estate brokerage firm Jones Lang LaSalle Inc.] and they pulled together interested parties and with their global reach and got us Macquarie,” said Dan Pimentel, chief financial officer of Saybrook.

The goal of HPEC is to increase efficiency in cargo movement by utilizing a parcel of land on Terminal Island, which sits in the middle of the San Pedro twin-port complexes and has been utilized for various port operations over the years by the Port of L.A. and the Port of Long Beach.

HPEC envisions a 110-acre facility that would be available for container storage for an estimated daily fee of $30 to $40 a day, Pimentel said. The facility plans to take about 3,500 truckloads a day and be open for container pickups 24 hours at full capacity.

Neither port has facilities that provide 24-hour service on container pickup (see related item in Manufacturing & Trade column, page 12).

HPEC will start with a pilot program, with the larger vision of the overall project required to go through the California Environmental Quality Act approval process. The state-mandated review requires public agencies such as the Port of Los Angeles, which may lease the site to HPEC, to disclose environmental effects of the proposed project to the public.

The L.A. Harbor Commission has approved a year-long HPEC pilot project that will commence sometime in May or June, said Phillip Sanfield, spokesman for the Port of Los Angeles.

The Harbor Department released a request for proposals “to develop, operate and maintain a container support facility on Terminal Island” in June of 2015, according to documents on the Port of L.A.’s website.

Saybrook CFO Pimentel confirmed that Macquarie understands that the long-term project plan is contingent on the pilot project and environmental results. “We will get access to the full $130 million after the pilot project and CEQA process, which Macquarie is funding, is granted,” he said.

The proposed project site is owned by the Port of Los Angeles, with oversees leasing of the property.

Rosenthal said he hopes the HPEC can get a 50-year lease on the full site, part of which has been vacant.

“They had 100 acres of land just sitting there on Terminal Island,” said Nick Vyas, executive director at the Center for Global Supply Chain Management at USC.

The request for proposals got five responses including HPEC’s, which was selected in October, 2015.

“HPEC’s value is in creating more capacity to absolve volume and congestion issues in container movement without the port having to invest into building a new terminal,” Vyas said.

The entire HPEC facility, pending state regulations, could be up and running in 18 to 24 months, Pimentel said.

The pilot project, meanwhile, is planned on 10 acres and intended to handle 400 container stalls, Pimentel said. Part of the pilot project will entail discerning the needs and terms of container storage as well as construction plans.

“For construction of the full 110-acres, we’ll look at graving, paving, lighting, rail lines, including building a bridge over a rail line that crosses a part of the site right now,” Pimentel said.

Containers unloaded at the ports typically sit at a terminal, often stacked five high. Terminal operators have to shuffle containers in order to get them on a truck designated for delivering them from the port to their next destination.

HPEC aims to avoid stacked storage and keep containers on the chassis trailers used by trucks to haul them. USC’s Vyas estimates truckers would be in and out of a facility with such a setup in as little as 30 minutes.

“If I had to describe the function, I’d call it a valet kind of service,” he said.

The project has gotten a lot of interest from freight owners, including retailers, as well trucking companies and other participants in the supply chain, said Pimentel.

He said HPEC hopes to begin signing up customers once the pilot program is signed off.

“We need to first get through the state’s environmental clearance and can only begin with contracts after the project has passed that process.”

The HPEC facility is one of the many port projects that address congestion caused by port activity. More than a decade ago, terminal operators at the San Pedro ports created a not-for-profit entity called PierPass Inc. to reduce cargo-related congestion on the streets and freeways near the ports.

Ships have gotten larger over the past 10 years and both ports have broken cargo movement records as recently as last year. As such, options to ease congestion are always on the table.

“We’re always putting ideas in our toolbox of efficiency,” the Port of L.A.’s Sanfield said. “How do we improve trucking which affects everything else is something we’re constantly asking. Other cargo movement efficiency-focused right now includes the expansion of our on-dock rails.”

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