Brightline Trains Florida discussion

[cirdan]

Branson's early ventures were all succesful. When taking on the Virgin Trains franchise (especially Cross-Country), I think he / they seriously understimated the complexity, constraints and conflicts that came with a franchise that, to be honest, was already performing poorly prior to Virgin becoming involved.  

 

[jis]

Branson's early ventures were all succesful. When taking on the Virgin Trains franchise (especially Cross-Country), I think he / they seriously understimated the complexity, constraints and conflicts that came with a franchise that, to be honest, was already performing poorly prior to Virgin becoming involved.  

Also, even though the Virgin brand was used in VTEC, financially, Virgin had only a 10% stake in the thing, and it sank mostly because of over-promising and failing to meet that, rather than because there was no way to make it work at some level of service. The Rail Regulators were at least as responsible for the failure as the franchisee, though the bureaucrats love to cover their exposed rear ends by dumping on everyone else when their cockamamie schemes fail.

 

[DSS&A]

Virgin Trains (Brightline) is investigating a possible new station site in Fort Peirce.   Fort Pierce owns the downtown property and has goals for the type of development they want built on it.

https://www.tcpalm.com/story/news/local/shaping-our-future/growth/2019/02/05/virgin-trains-usa-interested-h-d-king-site-fort-pierce/2775858002/

 

[GBNorman]

That Brightline (Virgin, whatever) is apparently now planning a stop in Ft. Pierce (St. Lucie County) is a "concession" that they should have been prepared to make from the outset. Who knows, Gannett's Treasure Coast Newspapers will suddenly be in support of Brightline.

Also of note; the lawyers retained by the various anti-train factions won't exact like it. "Sob, sob" for them.

Now, as the immediately linked article notes, Ft. Pierce is where land to build the station can be had on the cheap.  All well and good and Jishnu may concur, but I would think there would be greater passenger potential "up the line" in more affluent Vero Beach (Indian River County). But wherever this intermediate stop is located, there is now potential to handle passengers to and from flights at MCO - especially if the transfer is "seamless". There seemed little potential for airport traffic at the Gold Coast stops - all have major "International" airports.

Finally, for what it be worth, when my Father and his (second) wife, resided in Vero, they did their flying from PBI.  That of course was a "drive in the wrong direction".

 

[jis]

They (Brightline) had said all along that they would add stations once they had the core Orlando service up and running. We in Brevard County negotiated a station with them based on that while the Treasure Coast threw a hissy fit about trains in general. It is gross ignorance or at least lack of understanding of the local politics to now claim that it was all just because of the lack of a station, and trying to excuse the general anti-rail obfuscation by the likes of CARE-FL, who led such opposition and who are still around but are being ignored more and more. Their position always has been “no train no station, no one needs that”. Indian River County, where Vero is located, is still firmly opposed to passenger service on FEC and is still fighting on. They will eventually lose and give up and then flow rivers of tears for a station, like the juvenile brats that they are. [emoji41] Meanwhile Stuart has not quite made up its mind yet about whether to support or oppose, but at least they are now divided, and a part of Stuart is in favor of getting a station. But they will lose out to Ft. Pierce.

 

[Anderson]

I cannot speak to the viability, but under the agreement with the Expressway folks in theory both Stuart and Fort Pierce could get stations (the rule in that agreement is, roughly, one station per county north of Palm Beach).  I'd note that Fort Pierce, by happy accident, probably limits the need to actually do anything at Vero in the near term due to its catchment area.

As to why they didn't move this earlier, I'd note that this has pretty clearly been in the works for a few years.  The problem is that once they got to a certain point, adding these stations earlier ran the risk of messing up the various environmental documents...for example, Indian River (or CARE) would probably have sued using this as grounds.  The morass of bond documents and the like would also have had to be redone at that point as well, I'm guessing, adding to the complications.  Adding them after-the-fact seems to be a safer move even if they're working on it now (since it basically lands as an extra project rather than part of the original project).

 

[GBNorman]

It's time to prepare and accept that there will be one stop in each of the "aggrieved" Treasure Coast counties.

Just a guess:

Martin; Stuart

St Lucie; Ft. Pierce

Indian River; Vero "Zero" Beach 

Brevard; defer to Jishnu

Not all trains, but enough; do the Regionals in the Corridor make all stops?

 

[cpotisch]

Not all trains, but enough; do the Regionals in the Corridor make all stops?

Some don't. Stations like Newark Airport, Metropark, BWI, and even Trenton are only served by certain trains.

 

[jis]

It's time to prepare and accept that there will be one stop in each of the "aggrieved" Treasure Coast counties.

Just a guess:

Martin; Stuart

St Lucie; Ft. Pierce

Indian River; Vero "Zero" Beach 

Brevard; defer to Jishnu

Not all trains, but enough; do the Regionals in the Corridor make all stops?

Suffice it to say that Brevard is not considered by anyone to be Treasure Coast. The total length of coastline of Brevard is longer than that of Martin, St. Lucie and Indian River, combined, and it is known as Space Coast. The Brevard station will be at Coca/Rockledge. Ideally, there should be second station in the South Melbourne/Palm Bay area, but that is unlikely at present. For the same reason it is highly unlikely that each of the Treasure Counties will get a station.

 

[keelhauled]

According to Bloomberg, the IPO has been delayed.

 

[Anderson]

Some don't. Stations like Newark Airport, Metropark, BWI, and even Trenton are only served by certain trains.

And there are a few stations (Princeton Junction, Aberdeen, and North Philadelphia) that get some limited additional coverage.

According to Bloomberg, the IPO has been delayed.

Well, if this isn't a red letter day for us...sigh...

 

[John Bredin]

According to Bloomberg, the IPO has been delayed.

They seriously started out with the "money-losing" trope?! It's a startup, of sorts. Not making money for investors *at the beginning* (as the article quotes an analyst) is par for the course. I bet no news story about the tech giants when they were money-losing *started off* with that fact.

Also, they seem to have missed that this is as much a real-estate "play" as a transportation one, which you'd think a business news source would pick up on. They had the perfect place to mention it in the paragraph on Flagler.

Not a hatchet job, but not fair reportage either, IMHO.

 

[jis]

Besides, all that happened is they found private funding to cover the expenses for now, so they do not need to go through the significant additional paperwork needed to be a publicly traded company.

 

[cirdan]

They seriously started out with the "money-losing" trope?! It's a startup, of sorts. Not making money for investors *at the beginning* (as the article quotes an analyst) is par for the course. I bet no news story about the tech giants when they were money-losing *started off* with that fact.

In the early days of Amazon, you couldn't find any coverage of them that didn't ram the fact down your throat that they were losing money hand over fist.

 

[neroden]

Besides, all that happened is they found private funding to cover the expenses for now, so they do not need to go through the significant additional paperwork needed to be a publicly traded company.

This is an ongoing thing.  There's so much money in the hands of a few billionaires and slightly more multimillionaires, who needs to go public?  Staying private is the "in thing" on Wall Street.

Honestly I'll probably have to get into private equity soon because the public stock markets are actually disappearing.

 

[Anderson]

This is an ongoing thing.  There's so much money in the hands of a few billionaires and slightly more multimillionaires, who needs to go public?  Staying private is the "in thing" on Wall Street.

Honestly I'll probably have to get into private equity soon because the public stock markets are actually disappearing.

Another reason for going/staying private is that can limit exposure to hedge fund mismanagement (coughHunterHarrisoncough).  Sadly, no companies seem to be inclined to turn to "activist" investors and suggest that, if they are displeased with the running of the company, they find somewhere else to invest it.  I think staying private also saves a lot of regulatory filings and issues.

 

[GBNorman]

I offer this ominous report in the spirit of "they sure have tried":

https://www.palmbeachpost.com/news/20190218/after-failed-ipo-brightlines-finances-troubled-experts-say    

Fair Use:

Quote
Financial experts say it’s unclear how long Virgin Trains USA can continue to operate after putting the brakes on a stock offering that would have raised nearly $500 million in much-needed capital.

With a cash flow of negative $6.8 million per month, the money-losing parent of the Brightline train service must look outside passenger revenue for a financial lifeline, said Ozgur Ince, a finance professor at the University of South Carolina.

“Their cash position looks very precarious,” Ince said. “With only $273,000 in cash and cash equivalents, they really needed the $500 million or so cash infusion from the IPO.”

Richard Rampell, a Palm Beach CPA and former board member of the RailAmerica freight line, also sees financial trouble down the track.

“At this rate, they could last maybe a year,” Rampell said. “Then they’re going to be in big trouble unless they can get some more capital.”

Best advice; "get on down" and "on the pronto" for a taste of what rail travel can be.

[/QUOTE]

 

[chrsjrcj]

I wonder if the XpressWest acquisition was an attempt to make Virgin look more viable and attract investors? 

It will be interesting to see if there is further delay in the start of construction for the Cocoa to Orlando segment. 

 

[Brian_tampa]

Maybe I am the eternal optimist on this... case in point, Brightline has always said they expected 3 years of ramp up before they would meet their ridership projections. I take this to mean that they have planned ahead to ensure they don't get starved of cash during the ramp up period. The last ridership/revenue report by Louis Berger that came out last fall even said they could break even with just 55-60% of predicted ridership. 

Another thing to consider is what is the financial relationship between the real estate development and the train operations? The current organizational structure shows Virgin Trains USA owned by AAF Holdings LLC and Corvina (Richard Branson's company). VTUS controls Brightline Trains LLC and Brightline Property Holdings LLC (among other subsidiaries), which would seem to be the old AAF Operations and AAF Stations LLCs. How much revenue will their real estate produce? I suspect that once they get their Miami Central complex fully opened, it alone will become a good source of revenue. It is my understanding that not much has opened in Miami. Central Fare is yet to open and the apartment and office towers are not ready yet. Future expansion to Tampa and potential real estate development there will add to their S Florida real estate revenue over time. I did read that one of the reasons they want to come to Tampa is that they need a second big station development to add revenue. That is one of the issues with the MCO airport station - no other revenue sources there. Perhaps they will find enough land at an I-Drive area station site near the theme parks?

I would think that within the Fortress organization there are ways to ensure that VTUS has enough cash on hand to maintain and grow their business during the initial ramp up period. Also, since this is Wes Edens' pet project, I am quite sure he would not allow it to fail before it ever got going.

Edit: Brightline announced back in late 2018 that the NTP would be given to the construction contractors working on phase 2 (WPB - Orlando) around first of March 2019. If they miss this date then I will suspect that the "alternate financing options" are not quite there.

 

[neroden]

It's pretty clear that they got a direct infusion of private equity money.  They don't have to report how much it was or when it was or even who put the money in, so we probably won't find out unless there's another bond prospectus or something.

Dunno whether it's enough to get to Orlando or whether they'll need more.

 

[jis]

https://www.palmbeachpost.com/news/20190221/brightline-seeks-additional-950-million-in-bonds

 

[GBNorman]

From Hilton Glades Road Boca Raton--

OK, Jishnu has reported their "alternative financing".

Now, unless they have some party; hey Softbank, prepared to guarantee these issues, then I see "no hope".

If Fortress accepts that Brightline is a lost hope as a passenger transportation company, but will bring benefit to their real estate development activities in the three Gold Coast cities, then great. But they must step forward and include guarantees within the indentures, or otherwise bonds secured only by Brightline's EBIDTA, or what's there to seevice and eventually pay off the debt, or otherwise, it's "TILT; Game over".

Thanks for the memories.

 

[neroden]

The bonds will sell.  It's clear there's also a silent equity investor involved.  (They're proposing $950 million in bonds, but when dropping the IPO, said that they were trying to raise $2 billion; this says they've got a billion in equity coming down the pike.)  This is probably enough to get to Orlando.

It appears that the response they got to the IPO was a few private equity investors who said "We'll invest but only if you stay private" -- I've seen this before, recently.  It's a thing now, for whatever reason.

They aren't out of the woods even after getting to Orlando, of course.  That's just barely large enough to have a chance of breaking even.  But at this point I'm guessing they will make it to Orlando.

 

[Brian_tampa]

A year ago when they sold the initial $600M tranche of PABs they were over subscribed. They received $2.2B in offers. 

The $950M along with the $1.15B previously allocated will fully fund phase 2 to Orlando. Brightline has previously said phase 2 will require $2.1B to construct. As far as I know, Fortress did not make any promises to financially back those who bought the 2017 bonds. In fact those bonds have increased in value over the past year if you actually care to check the bond trades that are public record.

The past couple of years has been rough on bonds and IPOs in general. This is due to our current administration and it's reckless actions with trade and associated impacts on the economy. There are consequences to not having a stable environment for investors. A tax cut alone will not guarantee prosperity.

But I agree that buyers of bonds will be more interested in long term results versus those investors who buy into IPOs.

 

[Anderson]

My guess is that the increase in the bonds' value has more to do with the resolution of the legal challenges than it does the operating situation.  Indian River County getting its previous suit rejected is not a bad thing for Brightline.  As long as they get to Orlando I think they're good (and Tampa, should it come to pass, only helps that situation).

I will say that it is quite possible to envision a situation where the line goes bankrupt and ends up owned by the bondholders...and that they're able to make good in the longer term regardless.  I suspect they can still avoid that fate, but regardless of whether they do or not it seems like there's a lot to be milked out of station properties, track/station access fees, commuter contracts, etc.  I don't know for sure what's involved here.

BTW, it did just occur to me that putting the Jacksonville extention into a separate company might have been a defensive move: If the "main" project were to go bust, without that there it wouldn't be hard to see someone swooping in and attempting to "force" Jacksonville onto them, and an operation in receivership would plausibly look to offer access to Amtrak and/or any sort of Jacksonville-based commuter operations for a relative song to generate any additional revenue.