http://www.bloomberg.com/news/articles/2016-10-13/fortress-said-to-explore-sale-of-florida-east-coast-railway
What will this mean for AAF passenger rail service? I understand they have agreements for access to the FECR railway ROW and tracks between Miami and Jacksonville. With CSX downgrading routes lately and NS cutting back as well, will a new freight railway owner be as committed to maintaining operations needed for the new AAF service? Who would the possible new owners be?
Interesting. As the article points out Fortress separated the real estate from the railroad proper. It is the future presence of the passenger train driving the value of the properties they are developing in downtown Miami, Fort Lauderdale and West Palm Beach. Brightline Florida is its own separate entity from FEC with access agreements. Does Fortress have to own the railroad where their passenger trains will run? No but it does make things easier.
As always, in business, everything's for sale. If someone offers them a ridiculous amout of money for the railroad of course they should take it. That's why businesses are in business, to make money.
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D.Carleton Interesting. As the article points out Fortress separated the real estate from the railroad proper. It is the future presence of the passenger train driving the value of the properties they are developing in downtown Miami, Fort Lauderdale and West Palm Beach. Brightline Florida is its own separate entity from FEC with access agreements. Does Fortress have to own the railroad where their passenger trains will run? No but it does make things easier. As always, in business, everything's for sale. If someone offers them a ridiculous amout of money for the railroad of course they should take it. That's why businesses are in business, to make money.
Should not impact business strategy anymore than Bershire Hathaway's buy of BNSF. They increased the sale value of FEC with AAF in my view and now they want to take advantage of it.
DragomanIs this somehow reminiscent of Santa Fe taking all of the Southern Pacific real estate holdings, after having to unwind the half-done but disallowed SP/SFe merger? Seems like SP was never the same after that. If the realty play was the major motivator behind AAF/Brightline, then spinning off the RR may not be a good sign ... Oh, but what do I know.
I think two seperate items are being confused here. AAF has title to the properties it is developing and continues to own them. The FEC railroad has real estate in addition in a real estate arm for property along it's rail line that is either surplus or not developed yet. The fate of the railroads former real estate arm has zero to do with AAF, in my view. In fact if you look back at the start of AAF it had to buy additional real estate at some of these station sites to suppliment. FEC did not have enough local property in some cases for the station buildout. So why can't it continue to buy the land parcels from the real estate arm that it needs?
Also this is not the case of a railroad buying another railroad. It is an investment firm "exploring" the sale of just the FEC freight railroad while retaining the Holding Company which means retaining the real estate arm and probably AAF as well. Exploring does not mean a sale, it is an exploration of what price it will return if they did sell it or an exploration of what interest there is in buying the railroad.
AAF and FEC Railroad are entirely seperate in business setup. Only adverse item I could see happening is the new owner of FEC Railroad saying No way to AAF expansion but I am pretty confident at this point of development that would not happen or they would add a covenant to the sale that AAF had tenant rights on the entire FEC line.
Selling the frieght line does make sense in that it can be done now probably at a higher price than later in the future, it would also raise money for the AAF endevor. When AAF is large enough it can buy the line back probably for less than it sold it.........if the new railroad owner is not able to significantly increase the frieght haulage on the line.
CMStPnP
FECI is a holding company comprised of several entities: Flagler (original real estate development company), Parallel Infrastructure (think cell tower sites and leases and fiber cables along rail ROW's), Flagler global logistics (warehouses and just in time delivery), and AAF. FECI I believe was separate from FECR before Fortress bought FECI. FECR has been independent from FECI, but owned by the same owner.
AAF obtained separate agreements to access the entire FECR route between Miami and Jacksonville. The last was signed last year for the Cocoa to Jacksonville section, which got alot of people in Jacksonville excited about AAF expanding there before Tampa. As I have said elsewhere (Amtrak Unlimited and Metro Jacksonville forums), I believe the economics make a tampa expansion more likely before jacksonville. I believe the Jacksonville access agreement was done at this early date in order to clear the path for Fortress to sell FECR without limiting AAF expansion. That type of access agreement is much easier done when both properties are under a single owner. Not possible if another freight oriented owner controlled the FECR route.
I haven't read the original phase 1 agreement lately covering FECR south of Cocoa, but I believe it required FECR and any future owner to allow AAF rights to the ROW for a certain number of trains per day and it had clauses in it for the maintenance of Class 6 track allowing for 110 mph operation. Of course, AAF and the owner of FECR would split the costs of maintaining the tracks to that level.
So to me, little will change for Brightline or for its future expansion plans. I kind of agree that Fortress is looking to raise cash. Maybe not for AAF but because Fortress has been under some stress lately. AAF will either stand on its own merits or fail. AAF is lucky in that it has alot of real estate to support it. Brightline is but one subsidiary under AAF. Check out their many other shell companies that control their individual real estate developments around the AAF stations. AAF is a real estate project with passenger trains the common link holding it all together.
As far as the railroad part of it goes, one possible scenario is to have one third of FECR owned by CSX, one third owned by NS, and the remainder owned by the state of Florida. It can still operate independently the way the Richmond, Fredericksburg and Potomac did for much of the past century. The other option is have the aforementioned entities each own a fourth and AAF own the remaining fourth.
[quote user="A McIntosh"]As far as the railroad part of it goes, one possible scenario is to have one third of FECR owned by CSX, one third owned by NS, and the remainder owned by the state of Florida. It can still operate independently the way the Richmond, Fredericksburg and Potomac did for much of the past century. The other option is have the aforementioned entities each own a fourth and AAF own the remaining fourth.[/quote]
Potomac Yard was jointly owned by the B&O, C&O, PRR & SOU. It was operated under agreement by the RF&P. The RF&P was owned by the State of Virginia. CSX was able to purchase it in the late 1990's after several years of negotiations.
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As a shareholder of Fortress I know what is going on is that FEC is going to be a complety seperate independent entity as opposed to as of right now it is a Public Transportation Hedge Fund that is lightly traded. In plain english it could be a manegement buy-out.
Thans, Cando, for your input. Makes sense.
Now Fortress Investments is being bought by the Japanese
https://www.yahoo.com/news/japans-softbank-buy-fortress-investment-033201190.html?ref=gs
Wonder where the FEC will shake out of this deal?
Another article. This may actually speed up Bright line to Orlando if this company has enough funds to internally loan the money for track completion ? No worry about junk bond market ?
https://finance.yahoo.com/news/softbank-buy-fortress-investment-3-000453567.html
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