Second time lucky
And so the merry-go-round continues: Deutsche Bank is offloading its container terminal at the Port of New York and New Jersey to another infrastructure-focused business, namely Macquarie.
But there’s a stark difference in the deals. Deutsche Bank’s RREEF – the real estate investment management business of Deutsche Bank's Asset Management division - paid top dollar for Maher Terminals USA when it bought from the Maher family back in 2007.
In those heady days, China was the engine of global growth and ports were enjoying the many fruits of booming world trade. Deutsche Bank was content to pay $2.3bn for the asset, an eye-wateringly high EBITDA multiple.
But trade stalled shortly after and Deutsche Bank has been paying for its hedonistic purchase ever since.
That the purchase has cost it dearly is common knowledge and it’s been public in its desire to get shot of the terminal since 2012. The New Jersey terminal was included in Deutsche Bank’s Non-Core Operations Unit, formed in 2012 in an effort to free up capital and reduce risk.
That’s it’s taken this long to find a willing buyer speaks not only of the state of the market but also of the price that it must have had to sink to for Macquarie to bite. To save face, both parties have agreed to keep the purchase price confidential.
Retrospectively, RREEF's bought Maher Terminals has been described as the single-most spectacular example of "implosion" in the port finance market with a tabled bid reported in the low 30s, in terms of EBITDA multiples. The bank’s total loss on the investment has been reported at $1.5bn.
While a fellow infrastructure fund, Macquarie Infrastructure and Real Assets has had more success in the container terminal operating business, holding shares in several successful container terminals in the US and Canada.
Macquarie Infrastructure and Real Assets manages infrastructure funds globally, some of which include ports, such as: Poland’s DCT Gdansk, China’s Tianjin Port Huisheng Terminal, and South Korea’s Busan New Port Phase 2-3, among other port assets.
The likes of Deutsche Bank, and others, that paid frankly crazy money in the ‘glory days’ made a rod for their own backs. At the time, commentators were honest in their shock at the EBITDA multiples being paid to secure terminals, multiples that required world trade to continue growing at unsustainable rates to allow the fund’s to recover its investment.
This latest deal encapsulates the fact that a healthy dose of realism, when it comes to port purchases, has finally set in. It also goes to show that some infrastructure funds have found a happy home in the ports’ sector, while others should have stayed well clear.
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