It’s a multibillion-dollar deal that will stretch over roughly a half-century.
Moments after signing the papers, Gov. Terry McAuliffe on Wednesday announced a new, long-term lease that ensures the Port of Virginia’s control of its second-largest container terminal – Virginia International Gateway – for decades and, possibly, for good.
“It really is a great day,” McAuliffe told dozens of state, local and port officials at the complex in Portsmouth. “What we have done is solidified our port for generations to come.”
The new lease, which replaces a 20-year agreement signed six years ago, is expected to take effect on Nov. 1 and end on Dec. 31, 2065.
While the previous lease was projected to cost a total of more than $1 billion, nominal rent payments for the new deal are expected to total about $4.2 billion, excluding yearly adjustments for inflation.
Port officials said that any consideration of that figure should be balanced by the recognition that revenues will grow commensurately over the years as well and resources will be in place to deal with such issues as shifts in global trade.
“I think the confidence level is quite high that we have the tools to protect ourselves in the event of an economic slowdown,” said John Milliken, the chairman of the Virginia Port Authority’s board.
The do-over of the “old” lease didn’t come overnight. Within his first few months in office, McAuliffe called it one of the worst he’d ever seen and asked Secretary of Transportation Aubrey Layne “to see if we can’t do some renegotiating.”
While it included a provision for buildout of the facility, the terminal would have reverted to its owners – not the port – once the lease expired in 2030. Making a big investment on expansion, however, didn’t make a lot of sense without knowing who would control the improved facility for the long term.
That question apparently has been settled now.
“At the end of that lease term agreement,” McAuliffe said of the new deal, “we have the right to buy all the assets back, at a fair-market value.”
The new agreement is between the port authority and Virginia International Gateway Inc., which is owned by Connecticut-based Alinda Capital Partners and Universities Superannuation Scheme, a United Kingdom-based pension manager.
Formerly known as APM Terminals Virginia and built by a unit of A.P. Moeller-Maersk Group, the Danish shipping conglomerate, the facility opened for business in 2007. At the time, it was widely regarded as the most technologically advanced and environmentally sensitive container terminal in the Americas.
In 2014, four years after signing a lease deal with the port, APM sold the facility to Alinda and the U.K. company.
McAuliffe’s announcement sets in motion plans for a $320 million expansion of the facility, enabling it to nearly double its container-handling ability. As had been expected, the owners will fund the buildout, expected to take about three years. They will be reimbursed through the higher rent.
It’s a big deal that follows another big deal McAuliffe put together earlier this year – a $350 million expansion of Norfolk International Terminals, funded by a state-backed bond package included in the governor’s budget, approved by the General Assembly.
The combined $670 million investment comes at a time of historic growth for the port, when its capacity is close to being maxed out by record cargo volumes that are projected to grow.
Robert McCabe, 757-446-2327, robert.mccabe@pilotonline.com
