Port of Galveston seeks investors

Port of Galveston seeks investors    The Port of Galveston is seeking private investors to help develop its marine terminals.
   On Monday, the Galveston Wharves' board of trustees hired BMO Capital Markets, an affiliate of BMO Bank of Montreal, to advise it on efforts to seek a concessionaire to operate and invest in port facilities.
   'This is a highly capital intensive business and we are seeking to bring value to the community as an economic engine, and at the same time we recognize the need to have a partner to help us redevelop those facilities,' said Steven M. Cernak, port director in Galveston, noting the port, must 'earn its own keep.'
   'We think it is a very attractive value proposition for investors that are seeking cash flowing assets while at the same time trying to capture the future growth potential of a port strategically located on the Gulf of Mexico,' said Eric Zampol, a vice president at BMO's public finance group. 'We think the timing is optimal, given the expansion of the Panama Canal.'
   Cernak said forecasts have projected 3 million TEUs of containerized cargo moving through the West Coast could be redistributed to Gulf ports when the wider Panama Canal opens.
   He said the port is a viable competitor to the Port of Houston for containerized cargo, noting it is immediately adjacent to the Houston/Galveston Ship Channel and only 30 to 40 minutes from the sea buoy. The port's channel is being deepened from 40 to 45 feet by 2011.
   On land, the port is served by the Union Pacific and Burlington Northern Santa Fe railroads and linked by a four-lane highway that leads to Interstate 45.
   'There are other ports doing what they have to do to capture their share, but there is plenty to go around for everybody. We are just trying to position ourselves to capture our share,” Cernak said.
   'The structure that is contemplated is a master lease framework in which the cash flowing assets of the port, excluding the cruise operations will, be bundled together with greenfield development opportunities,' Zampol said.
   The deal with Galveston follows work BMO did as co-senior manager on a debt offering of industrial revenue bonds by the State of Maryland as part of the Port of Baltimore's deal to award a five-year operating concession on its Seagirt Terminal to Highstar Capital and its stevedoring arm Ports America. Zampol and some of his colleagues also acted as advisors to Highstar for both the Baltimore deal and a lease of several terminals in Oakland last year when they were working for Goldman Sachs.
   That those two deals were done during the midst of the recession downturn shows investors' high interest in port assets, Zampol said.
   Galveston encompasses about 850 acres, with about half to two-thirds of the land on the largely undeveloped Pelican Island just north of the city.
   Other than the port's plan to retain the cruise business, Cernak said 'we don't know what this will entail yet — its an open idea, we have an idea of where we want to go, but the market is going to drive this.'
   The port is targeting the container business, even though it handles few boxes outside those moved by Del Monte as part of its fruit business.
   Cernak said Galveston’s move would be complementary to an agreement his port and Port of Houston reached for development of Pelican Island as a future container-handling facility.
   “I view this as beneficial to the ultimate plan on Pelican Island,” he said. “If successful, this will raise value to the existing port assets and allow other infrastructure improvement to occur with time and Pelican Island is 10-15 years in the future.” ' Chris Dupin