Most U.S. ports have leverage to do so because they have the final stamp of approval on these deals as the property owners.
Infrastructure and private equity funds have increasingly taken interests in port terminals, taking the reins from family-held businesses and global shipping enterprises in recent years. Analysts say part of the draw for investors is the size and stability of the terminal operations.
California Public Employees Retirement System, the nation’s largest public pension fund, holds several port assets among its investments, according to its 2017-18 annual investment report. Blackstone Group, a multinational investment firm, said in March that its infrastructure fund was investing in Carrix Inc., among the largest U.S. seaport operator with 16 container terminals in the Americas, including one in Long Beach. Terms of the investment weren’t disclosed.
Brookfield Asset Management Inc. holds a 49% stake in International Transportation Inc., a holding company that owns TraPac Inc., which operates the San Pedro Bay’s other automated terminal at the Port of Los Angeles.
Industry analysts trace the shift in port operations ownership back more than a decade to when financial firms began creating large infrastructure funds attractive to institutional investors and pension funds looking for stable investments.
One of the earliest sales came 12 years ago when Dubai’s port operator DP World sold several container ports to a subsidiary of insurer American International Group Inc. AIG renamed the terminal assets Ports America Inc., and they were later spun off and acquired in 2014 by downtown-based Oaktree Capital.
Ports America is now one of the largest independent marine terminal operators in the United States and is in more than 42 ports, including those on San Pedro Bay.
“This is indicative of the valuable assets investors are finding in port authorities, in port operations,” Port of Long Beach Executive Director Mario Cordero said. “Investing in capital improvement projects is not only good for the ports, but it’s good for investors.”
Automating to move cargo
The Long Beach port authority has sunk $1.5 billion into the Long Beach Container Terminal, known as Middle Harbor. When complete, the terminal will be able to handle an annual capacity of 3.3 million 20-foot equivalent units, a standard measure for container cargo.
“The automation makes this a preferred terminal because they can operate at a lower cost than any terminal in the gateway,” said Jeffrey Holt, managing director of power, utilities and infrastructure at the Bank of Montreal.
Holt said a terminal in the Southern California gateway — the nation’s top hub for trade with Asia — would likely have a targeted 13% to 15% return. “That’s the beauty of this, and that’s why they paid so much.”
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