Executive Summary of the Cali-Baja Sublease & The Coyote Wells Intermodal Project

Transcription

1 Executive Summary of the Cali-Baja Sublease & The Coyote Wells Intermodal Project

2 2 Cali-Baja Joint Venture Sublease and Operating Agreement The Cali-Baja Sublease grants BJRR: 96-year term Exclusive operating rights on BJRR Segment Non-exclusive operating rights on Intermodal Segment The Cali-Baja Sublease requires BJRR to: Semiannual rent payments $425,000 to PIR Upon commencement of commercial operations, 10% of gross freight revenues are paid to PIR Remain in compliance with the Desert Line Lease, including milestone requirements The map above shows the Desert Line and how the distinctions of the Intermodal Segment and the BJRR Segment in the Cali-Baja Sublease correspond to the Phase I and Phase II reconstruction requirements in PIR s Desert Line Lease.

3 3 PIR s Exclusive Intermodal Rights Rights & Obligations of PIR per the Cali-Baja Sublease: Exclusive rights to develop and operate an intermodal facility on the Intermodal Segment Intermodal rights include switching, blocking, sorting, storage and logistics services BJRR s Exclusive Right of Way Beginning of Union Pacific s Right of Way Non-exclusive operating rights on the Intermodal Segment Required to rehabilitate the Intermodal Segment to an FRA Class III Standard Intermodal Segment

4 4 Coyote Wells Intermodal- Strategic Site Location The Coyote Wells Intermodal facility: 45 miles from the Mexicali commercial port of entry 95 miles from the Otay Mesa Port of Entry The only American intermodal facility in a 125 mile radius which encompasses both the maquiladoras and Mexicali markets Provides direct link with Union Pacific and all eastern, midwest, and southern U.S. markets Locations allows PIR to build the required 100 car-length trains Located adjacent to both Federal Interstate 8 and State Highway 98

5 Los Angeles City of Commerce San Bernardino Cali-Baja Surface Freight Transportation Corridors Pacific Imperial Railroad Baja California Railroad Trucking Routes to Pacific Imperial Railroad s intermodal terminal SD&AE/BNSF Union Pacific Trucking Routes to intermodal terminals in L.A. County FerroMex Railroad Trucking Port of Entry El Centro San Diego San Ysidro Otay Mesa Tijuana Calexico Mexicali 5

6 Capturing the Market Potential Below is a map showing annual volumes of inbound freight to the U.S. from various ports of entry in the Cali-Baja region. One of the first allocations of capital would be used to produce a feasibility study to accurately ascertain how much of this enormous market can be captured by PIR Cali Baja Regional Inbound Freight Volumes San Diego PIR s Intermodal According to the U.S. Department of Transportation, in 2014 there were a total of 815,257 incoming loaded truck container crossings on the California-Mexico border. PIR would need to capture at least 95,000, or 12%, of those containers in the first year of operations and 144,000, or 18%, in the following years to meet the initial projections and performance initiatives. El Centro Port of San Diego: 48,000 TEUs (Dole bananas) (About 24,000 Containers) 425,253 Vehicles Imported Tijuana Tijuana Commercial Port of Entry: 641,512 Inbound Loaded Truck Containers Tecate Tecate Port of Entry: 31,736 Inbound Loaded Truck Containers Cali Baja Unified Railroad: Unknown Volumes/ Pending Reconstruction Calexico Mexicali Calexico Port of Entry: 192,747 Inbound Loaded Truck Containers *Data Source: U.S. Department of Transportation, Bureau of Transportation Statistics 6

7 Coyote Wells Intermodal Facility: Conceptual Site Plan Facility Features: Approximately acres Annual lift capacity of 876,000 lifts Six intermodal tracks 8,000+ feet in length Will support a six-train per day operation Locomotive Engine Tie Tracks and Repair Facility Adequate space for truck parking, container stacking, and facility operations Four lane check point with a long queuing capacity for inbound and outbound trucks Five 8,000+ feet in length storage tracks that can be used for train storage A lead track 8,000+ feet in length for staging trains and switching Coyote Wells Conceptual Site Plan Picture of Coyote Wells site as it currently looks A truck pulling under a gantry crane at Santa Teresa Intermodal Facility, in San Antonio. An example of what the Coyote Wells Intermodal Facility could look like. 7

8 Comparative Case Study: Houston Intermodal Facility ( HIF )* NOTE: This comparison is for illustrative purposes only and is not a representation of PIR s projected performance. Furthermore, the HIF numbers presented herein were prepared by Rainmaker Marketing, Inc., and are in no way associated with the intermodal terminal pictured above, which is a facility owned and operated by BNSF. However, PIR has been in contact with Rainmaker Marketing, Inc. to verify the methods used to develop the projections within the context of Houston s competitive freight logistics circumstances, and as such, PIR feels that this combination makes for a compelling comparison as the BNSF sire is approximately similar in scale to the site described in Rainmaker Marketing s materials. 8

9 Overview of the HIF Proposed Project Overview: Sought to develop and operate an intermodal facility located in Houston, Texas that provides: Ocean container transfer services, (rail-to-truck and vise-versa) Temporary onsite storage Warehousing services Local/regional market deliveries and related ancillary services Facilities: 40,000 square foot maintenance facility for the servicing of trucks, ocean containers and railway equipment 160,000 square foot warehousing facility that includes the administrative offices 10,000 feet of railway tracks, switching areas and associate equipment Approximately 60 acres of parking for staging of ocean containers Intermodal hub facility operations: Receiving freight trains from the Port of Houston into the hub and transferring the containers to the temporary staging area pending additional services Receiving freight trains into the hub and loading them with export cargo containers for shipment to the Port of Houston for loading onto steamships Unloading cargo from the containera and temporarily warehousing the cargo for the purposes of providing customers with supply chain fulfillment Repacking containers for shipment into the loacal and regional marketing area Temporary onsite container storage Delivery of containers into the local and regional marketing area Repair and maintenance of ocean containers Bonded warehouse operations Will be able to sustain up to 20,000 containers throughput capacity per month on an ongoing basis. 9

10 10 Houston Logistics Incoming Freight Flow Map Notes Houston Intermodal Facility (Case Study), is circled in red Yellow arrows indicate incoming freight movement flows Black lines indicate rail routes and spurs Area shaded in blue is the Port of Houston 2 Union Pacific intermodal terminals, indicating fierce competition Houston Port of Houston, st ranked US port in foreign tonnage 7 th ranked US container port by total TEUs Export container volume was 920,895 TEUs Import container volume was 842,361 21,564,236 tons of containers Barbours Cut Intermodal Union Pacific and BNSF have equal access

11 HIF Terminal Size Relative to Coyote Wells Site Selecting the appropriate location and terminal size and shape is of paramount importance. Below depicts the scale of the HIF relative to Coyote Wells. The image on the right is the Houston Intermodal Facility and the image on the left is a to-scale plat overlay of the HIF at PIR s selected build out site of Coyote Wells, California. Expandability is another important element when choosing an appropriate site to develop an intermodal terminal. The Coyote Wells site provides room to expand capacity to 876,000 lifts annually. Main Line Primary Source of Business: Connectivity to surrounding freight infrastructure: BNSF- Houston Intermodal Facility Port of Houston: PoH is 7 th in the DOT s rankings of top U.S. container ports, handling 1,572,000 TEU s 95,000 containers (after first year of operations) represents about 190,000 TEUs, or about 12% of the Port of Houston s container traffic. 144,000 container (after year three of operations) represents about 288,000 TEUs, or about 18% of the Port of Houston s container traffic Adjacent to Houston Hobby Airport About 4 miles from I-610 About 3 miles from I-45 About 8 miles from the Port of Houston About 35 miles from the Port of Galveston and 50 miles from Freeport Adjacent to William P. Hobby Airport Competition: Two Union Pacific intermodal terminals within 13 mile range, servicing same ports Primary Source of Business: Connectivity to surrounding freight infrastructure: Coyote Wells- PIRIntermodal Facility Trans-border freight traffic to/from Mexico s maquiladora manufacturing, primarily located in Tijuana. 815,257 loaded truck container crossings on the U.S.-Mexican border in California Assuming the PIR terminal were identical to the HIF terminal, PIR would need to capture 12% of that traffic in the first year of operations and 18% thereafter, which is nearly identical to HIF traffic capture Directly adjacent to I-8 Approximately 95 miles from Tijuana s port of entry Approximately 40 miles form Tecate s port of entry Approximately 40 miles from Mexicali s port of entry 25 miles from Imperial County Airport Competition: Trucking miles to Los Angeles or San Bernardino to reach rail Limited rail service out of Tijuana, no intermodal within 125 mile radius 11

12 HIF Market Capture Relative to Coyote Wells Site Even with three other intermodal terminals servicing the region, HIF projections indicate a capture rate of 18% of the market by the second year of operations. 144,000 in the the 2 nd year of HIF operations is approximately 18% of the market Measure of incoming containers processed at the Port of Houston If the Coyote Wells were to capture the same amount of containers as the HIF projections indicated, it would represent a 17% capture rate- and that s absent of regional competition. Tijuana Tecate 144,000 containers per year is about 17% of 815, Loaded Incoming Truck Container Crossings on California s U.S.-Mexico Border Mexicali 12

13 13 HIF Logistics and Manufacturing Hub Intermodal facilities tend to attract freight logistics companies and manufacturers due to the synergies of industry goals and the efficiencies associated with moving freight by rail. The image at the right demonstrates the array of various shippers and manufacturers clustered around the HIF. Proximity to the airport is an added advantage for the HIF. Companies include: Fed Ex Freight Southeastern Frieght Lines Old Dominion Freight Lines Texas Hobby Auto Sales and Manheim Remote Auto Storage Lot Schoenmann Produce Powell Industries Shasta Beverages Handy Hardware Univar USA

14 BNSF Alliance Intermodal- Fort Worth, Texas + Another great example of the logistics park concept is in Fort Worth, Texas. This global logistic hub was developed by Alliance Texas, a Perot Investments Company, and features: BNSF Railway s Alliance Intermodal Facility Two Class I rail lines (BNSF & UP) Fort Worth Alliance Airport I-35 access, which spans from Mexico to Canada, and Texas State Highways 114 and 170 Companies & Distribution Centers: Fed Ex Freight Kraft Delivery JC Penny Logistics Center Amazon Fulfillment Center Volkswagen PDC Warehouse Michael s Standby GE Manufacturing American Auto Works Car Ramp 14

15 15 Automobile Ramp Concept Approximately 1 of 10 automobiles in the U.S. come through San Diego Current import operation at the PoSD is run by Pasha Automotive Services Pasha imported 425,254 in 2015, up from 381,964 in 2014 PoSD gets roughly $30 for each vehicle that comes in In April of 2016, San Diego Union Tribune reported that four cargo ships carrying more than 7,000 vehicles were stalled in the bay because Pasha needed to clear room to unload the ships Coyote Wells provides opportunity to offer less expensive car storage and direct rail access Approximately 200- acre car ramp at the Port of San Diego 104-acre car ramp near HIF with an additional 50-acre car storage lot 54-acre car ramp near BNSF Alliance Intermodal

16 16 Coyote Wells Logistics Park Concept Truck Stop and Fueling Station 104-acre car ramp near with an additional 50-acre storage lot Manufacturing directly on the main line Shipping Distribution and Sorting Center PIR s Intermodal Facility, handling 144,000 containers Corporate Distribution Center

17 Coyote Wells Intermodal Project Statement of Operating Income Worst-Case Scenario Period Ending: % of Gross End Year 1 % of Gross End Year 2 % of Gross End Year 3 % of Gross End Year 4 % of Gross End Year 5 Project Income/Revenues: Routine Revenues - Container Handling % 61,638, % 111,758, % 115,670, Assessorial Charges & Other Ancillary Revenues % 3,920, % 7,104, % 7,353, Total Project Income (Gross): $ - $ - $ 65,558,520 $ 143,455,495 $ 205,467,945 Gross Revenues Per Container (TEU or FEU): - - $ $ $ Number of Containers: , , , Number of Trains (100 cars): Average 100-car Trains Per Day: Less Project Operating Expenses: General & Administrative Expense % 3,153, % 6,168, % 8,794,028 Marketing Department Expense % 2,707, % 5,279, % 7,520,127 IT Department Expense % 1,016, % 1,592, % 2,239,601 Fixed Operating Expense % 1,258, % 1,922, % 2,671,083 Maintenance & Grounds Department Expense % 12,967, % 20,657, % 29,155,901 Terminal Depot Operations Department Expense % 3,867, % 7,502, % 10,581,599 Terminal Railway Operations Department Expense % 9,814, % 20,729, % 29,279,182 Terminal Trucking Operations Expense % 6,372, % 11,376, % 15,882,672 Safety Operations Department Expense % 1,422, % 2,295, % 3,246,394 Warehouse Operations Department Expense % 1,796, % 3,026, % 4,273,733 Other Operating Expense % 2,215, % 4,031, % 5,670,915 Total Project Operating Expense: $ - $ % $ 46,592, % $ 84,581, % $ 119,315,236 Operating Income/EBITDA: $ - $ - $ 18,966,080 $ 58,874,135 $ 86,152,710 Operating Expense Per Container: $ - $ - $ $ $ Operating Income (EBITDA)/ Container: $ - $ - $ $ $ Less Non Operating Expenses: Rent % 2,124, % 3,242, % 4,479,201 Interest Expense % 1,953, % 2,783, % 3,534,049 Depreciation Expense % 2,124, % 3,227, % 4,479,201 Amortization Expense % 2,400, % 2,400, % 2,400,000 Total Project Non-Operating Expense $ - $ % $ 8,601, % $ 11,652, % $ 14,892,451 Project Pre-Tax Profit $ - $ % $ 10,364, % $ 47,221, % $ 71,260,258 Allowance for FIT/State Taxes $ - $ % $ 2,146, % $ 4,696, % $ 4,977,999 Revenue Assumption Notes: Container revenue is based on competitive going rate of $950/container to truck from Tijuana to Los Angeles. To be conservative, an additional 20% was subtracted to account for trucking costs. In first year of operations, PIR offers a 15% discounted rate to incentivize shippers to shift transportation modes and in the second year the discount is reduced to 7% By third year of operations, PIR will be charging full price to the upper edge of what the market will bear Market Assumption Notes: Assumes a market of 815,257 containers with market capture rates of 12.5% in first year of operation, 25% in second year of operation, and 33.3% in third year Amortization: Amortization is based on maturity payment totaling $60,000,000 over 25 years. Project Net Income/(Loss) $ - $ % $ 8,217, % $ 42,524, % $ 66,282,259 Net Income (Loss)/Per Container $ - $ - $ $ $ NOTE: This model is based on a model prepared by Rainmaker Marketing, Inc., which had produced a model for an intermodal development project in Houston. PIR has been in contact with Rainmaker Marketing, Inc. to gain an understanding of the methods used to generate the model and confirm the accuracy of the projections within the context of Houston s competitive freight logistics circumstances. PIR has used best efforts to modify the assumptions to accurately reflect circumstances in the Cali-Baja region. 17