CHICAGO -- The Illinois International Port District, which owns the Port of Chicago, has struck an agreement with a private group to lease most of the district’s facilities and invest up to $500 million in infrastructure to rejuvenate the long-struggling port’s business, city and state officials announced.
Mayor Rahm Emanuel also touted the proposed deal with private operators for the estimated 1,000 jobs it’s expected to create, a key goal for the city when it launched early this year a competitive selection process for private operators/ investors.
Colorado-based international investment and management company Broe Group would take over operations and redevelopment efforts for the district under the proposed long-term lease deal announced Sunday. The port’s facilities serve Lake Michigan and Lake Calumet.
The master operating lease would run 62 years to match the current term on existing leases with various tenants. As part of the lease, the Broe Group and “other parties” would target an investment of $500 million in port facilities over the next decade. The district will retain ownership of its facilities and receive an annual payment of $1 million and a portion of annual revenues.
“Through smarter and efficient management of Chicago’s port, we will reinvigorate a critical asset for our city in the area of transportation and trade,” Emanuel said. “We are taking what was an underutilized, run down port and turning it into an engine of opportunity through infrastructure investment and job creation that will benefit Chicago and its neighborhoods on the southeast side.”
Emanuel installed Mayer Brown LLP partner Michael Forde to lead the district’s board in 2011 and he worked to return its operations to the black in 2012 achieving a $1.2 million profit on an $8 million budget following a decade of losses.
The profit was achieved even as it continued to subsidize its controversial golf course center which lost $463,000. The district has since signed a private management deal for the course in which it is guaranteed some profit.
The district then moved on toward developing a long-term strategy, and turned to privatization, viewing it as the best means to raise the capital for needed infrastructure investments. The port was formed in 1951 by the General Assembly to promote and manage the shipment of cargoes and commerce through Chicago ports and to promote the development of facilities to support port use.
BMO Capital Markets, Acacia Financial Group, and Cabrera Capital Markets were hired to advise the district. BMO completed a strategic and capital needs study last year that suggested the port was greatly underutilized but it lacked the access on its own to the needed capital. The port district is governed by a nine-member board that includes five members appointed by Emanuel and four by Gov. Pat Quinn.
The district in 2003 issued $15 million of variable rate revenue refunding bonds to refinance other loans that financed a clubhouse at the golf course. The bonds mature in 2033. In 2001, the district issued $8.5 million of port revenue bonds so that a private-sector entity could acquire and construct a bulk storage facility on land leased by the district.
In 2008, the Civic Federation of Chicago called for the district to be dissolved and its operations handed over to Chicago because it has failed to promote maritime commerce and shipping activities.