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Feb. 3, 2023

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Port pursues tenant for Terminal 5

Officials hopeful about filling empty Terminal 5; bulk facility would be ideal

By , Columbian business reporter
Published:
6 Photos
The rail loop on Terminal 5 allows "unit trains" -- freight trains with more than 100 cars -- to traverse the port without being broken up and turned around.
The rail loop on Terminal 5 allows "unit trains" -- freight trains with more than 100 cars -- to traverse the port without being broken up and turned around. (Photos by Nathan Howard/The Columbian) Photo Gallery

The old structures have been demolished. The rail lines are completed. The soil is stabilized. The Port of Vancouver’s Terminal 5 is a build-ready space, capable of supporting any of dozens of different uses.

All it needs is a tenant.

It’s been about 18 months since the completion of the $250 million West Vancouver Freight Access project, which created a new port entrance for freight trains, laid down nearly a dozen new tracks through the length of the port and added a one-and-a-half-mile turnaround loop at the west end on an undeveloped section of port property called Terminal 5.

It’s also been about two years since the port commissioners officially voted to end the lease for the proposed Vancouver Energy oil terminal project, which would have been the first big tenant to set up shop along the Terminal 5 rail loop. The oil terminal created a tremendous amount of local conflict before eventually having its permit application rejected by Gov. Jay Inslee.

Nearly every train that passes through the port uses the rail loop, but the rest of the space in Terminal 5 — about 80 acres inside the loop and a bit more along the outer perimeter — is currently only used as what port officials refer to as a “lay down area.” In essence, it’s extra storage space.

That doesn’t mean it’s gone unused, port Chief Commercial Officer Alex Strogen said. Space is always at a premium in the port, and the empty Terminal 5 acreage allows for the storage of some extremely large cargo, such a record-breaking shipment of wind turbine blades last year — most of which had to sit at the port for weeks while trucks move them out blade by blade.

Still, in an ideal world, Terminal 5 would be occupied by a business tenant that could take full advantage of the port’s rail capacity, moving large quantities of product from the trains onto cargo ships at a new dock to be built next to the rail loop.

Strogen and his team have spent years trying to find the right match, and they expect to keep searching for several more years before the terminal is full. The tenants are out there, but setting up shop at the port would represent an investment of hundreds of millions of dollars, so it’s going to be a slow and deliberate process for any prospective business.

“You’re talking about a long-term commitment,” port CEO Julianna Marler said. “You could be talking about 50, 80 years.”

The ideal tenant

There are a lot of possible tenants, but Strogen and Marler pointed to a few features that are likely to be consistent among any interested business — features that are shared by most of the port’s other users.

“Our ideal tenant for Terminal 5 would be some kind of bulk facility,” Marler said. That probably means something like a grain, liquid or mineral shipper.

All of the port’s existing facilities are used to move bulk cargo — “things that don’t fit easily in a box,” as Marler puts it — and Terminal 5 was designed with the same category in mind. In particular, she said, the ideal tenant will be able to take advantage of the rail loop to handle full-length freight trains without having to unhitch the cars.

Any future Terminal 5 tenant is also very likely to focus on exports. About 85 percent of the goods that flow through the port are exports, Marler said, with the notable exception of imported Subaru automobiles.

In the end, there will probably be multiple tenants filling out the 80 acres inside the loop. Typical bulk commodity operations lease about 25 acres, according to Strogen, although there’s a lot of variety depending on the product.

“Some bulk commodities do really well with vertical storage, like grain,” he said. “But peas and lentils get crushed.”

Ideally there will be two or three tenants, he said, and hopefully a little bit of space left over for storage. The configuration of the land in the loop will be primarily driven by the needs of the tenants, he said, and the port can adjust as needed to come up with extra storage space.

The oil terminal would have been located outside of the rail loop at the north end of Terminal 5, with pipes to carry the oil across the terminal and onto tanker ships. But that design is actually a bit of an exception, according to Strogen and Marler — most tenants would likely be located inside the rail loop, minimizing the distance that bulk cargo would need to travel between trains and ships.

Aside from an oil terminal, just about any tenant could be considered. There are no restrictions for issues like noise pollution; Terminal 5 has the same set of rules as the rest of the port. Tenants would be considered on a case-by-case basis, according to port communications director Heather Stebbings, and reviewed through multiple lenses including the port’s renewable energy policy, which was passed after the oil terminal was proposed.

Conducting the search

Marketing an area as big as Terminal 5 requires constant research and frequent trips for direct talks with potential tenants, Strogen said.

The basic pitch is fairly straightforward: Terminal 5 sits at what is effectively the western end of a BNSF Railway mainline that travels through the Columbia River Gorge and continues all the way east to Chicago.

“It kind of sits at the dead end of this massive rail corridor,” Strogen said.

And on the ocean side of things, the port’s Pacific Northwest location makes it closer to Asian ports than most of the U.S.A cargo ship traveling from Houston to Tokyo takes about 40 days, Strogen said — but from Vancouver, it only takes 17.

“We’re so much closer to those main Asian megacities — Tokyo, Seoul, Shanghai,” he said.

But every tenant is going to have their own set of needs, and trips to meet with potential clients will involve a lot of time spent learning the finer details of their businesses, Strogen said, in order make sure the port can support them.

The port staff try to pay attention to long-term trends when imagining future uses, Strogen said. Electric vehicle sales, for example, are expected to see a dramatic rise in the coming decades, likely leading to more shipments of copper and other minerals used in their manufacturing. Food trends in Asia can also provide a window into where the bulk agricultural sector is headed.

“We look at what people are eating in all these different places around the world because it’s going to impact us here,” Strogen said.

Overcoming challenges

The port can afford to take its time on the search, Marler said.

The primary purpose of the freight access project was to allow full-length trains to move through the port without having to be broken into segments, and the Terminal 5 rail loop is already serving that purpose. Existing port tenants, such as United Grain and Subaru, have grown their operations in the past decade to take advantage of the new rail capacity.

The undeveloped Terminal 5 land costs relatively little to maintain, and it’s almost always in use as a storage site while the port conducts its tenant search.

In the meantime, the port has been doing its best to obtain as much advance permitting as possible for the site.

Any tenant is going to necessarily have a large amount of due diligence to work through, likely taking at least two years, Marler said, and the port hopes to give them as much of a head start as possible. But there’s a limit to how much of that work can be done in advance, especially in light of the wide range of possible tenants.

“The question is, what can we do to be as prepared as possible?” she said. “The challenge is without knowing the design or the size: how do you prepare for that?”

The trade war with China is a complicating factor in the short term, Marler said, because it impacts nearly all port traffic and all potential Terminal 5 tenants to some degree. The uncertainty might make some businesses more hesitant to make big investments.

“It’s hard to avoid China,” Strogen said. “We need some good trade deals and we need them soon.”

Still, Marler said she doesn’t view a resolution to the trade war as an essential prerequisite to landing a Terminal 5 tenant — it’s just one of many considerations that to work through in any negotiation.

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Columbian business reporter