Brightline Trains

[jliv]

Wow! 

https://www.virgin.com/richard-branson/introducing-virgin-trains-usa

Everything I’ve read indicates this is a “rent-a-tycoon” deal. The undisclosed minority stake the Virgin Group is taking is the Branson/Trump model of licensing a brand attached to a highly-visible entrepreneur. I doubt Branson and his company will be heavily involved. Probably done to help with selling to the derivative markets to generate the massive capital needed to fund all of the projects they have on their plate.


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[dcluley98]

It's pretty obvious it's mostly the name they are after. It is going to give them more credibility and grease the wheels of the capital market and development of stations and the land deals around the stations. It is more about TOD than the system itself. I would say the train system would likely not make money, but they are trying to make money on the development around it. 

[aent]

5 hours ago, dcluley98 said:

It's pretty obvious it's mostly the name they are after. It is going to give them more credibility and grease the wheels of the capital market and development of stations and the land deals around the stations. It is more about TOD than the system itself. I would say the train system would likely not make money, but they are trying to make money on the development around it. 

There cost basis for the train should be pretty low. Considering most of the tracks were there and also used for freight, and there is a huge amount of commercial within the stations, the costs are really just operational and the biggest capital is the trains themselves. I've heard the WPB-Miami route running now already has the ridership to be profitable in the long term for that segment.

[dcluley98]

I think the train system could "eventually" pay for itself over time, but will be loss leader at the start, as you are mentioning. They will not be making money on operating at the beginning, but will use the development and as you said commercial and retail at the stations in order to recoup the initial construction cost and the initial operating loss of the trains hoping to increase ridership long term and cross over to operational profitability eventually. I did not know the south segment is already on track to cross over. That is great!  

Our high speed segment will cost considerably more to build out because the tracks do not exist. 

Edited November 17, 2018 by dcluley98

[codypet]

On 11/17/2018 at 8:23 AM, jliv said:

 

Everything I’ve read indicates this is a “rent-a-tycoon” deal. The undisclosed minority stake the Virgin Group is taking is the Branson/Trump model of licensing a brand attached to a highly-visible entrepreneur. I doubt Branson and his company will be heavily involved. Probably done to help with selling to the derivative markets to generate the massive capital needed to fund all of the projects they have on their plate.


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On 11/17/2018 at 9:09 AM, dcluley98 said:

It's pretty obvious it's mostly the name they are after. It is going to give them more credibility and grease the wheels of the capital market and development of stations and the land deals around the stations. It is more about TOD than the system itself. I would say the train system would likely not make money, but they are trying to make money on the development around it. 

Accurate on both points.

[aent]

Virgin Trains USA has filed for an IPO apparently, so the name is likely to generate interest on selling the stock as part of that IPO to raise capital to build the Orlando segment.

[codypet]

Bingo

[spenser1058]

Here's the story on the IPO from the Palm Beach Post which also mentions the theoretical WDW station:

https://www.palmbeachpost.com/news/20181123/virgin-trains-plans-stock-ipo-disney-world-station?template=ampart

The story also notes significant losses on the ummmm, train part of this. Also, it notes it will be at least three years before the Orlando leg is operational and has no firm date.

It appears the money makers in this are land development, ancillary activities and the IPO, anything but the train itself. Even if all were to go according to plan, at some point some CFO or hedge fund whizkid is going to ditch the money loser (aka the train.) 

Watch for this to end up like Eddie Lampert's treatment of Sears or Donald Trump's various bankruptcies where they end up doing just fine while the core entities are doomed.

 

 

[dcluley98]

See my post above. This is obvious to anybody who is in the development/construction industry. The trains are a loss leader.   It is not like this is different from any other large-scale transportation project, however. The state may end up running it in the end if private equity abandons it. This would be after the system is built, however, so would be limited to operational and maintenance costs. The losers would be bondholders and sucker shareholders if they write down parts as a loss. 

I would not be surprised to see multiple separate ventures established for construction entities and development or land lease companies surrounding the whole thing so they can siphon off as much money as possible from it while still letting the system itself get abandoned or written down and leave others who are not as sophisticated "investors" holding the bag on the "planned-to-fail" portions of the deal. The dealmakers would keep the good portions to themselves so they can make money and let the public suckers buy the rest thinking that they are part of the whole successful universe backed by Virgin. 

I hope the whole thing is on the up-and-up and a great success over time, though. 

Edited November 25, 2018 by dcluley98

[aent]

2 hours ago, dcluley98 said:

I would not be surprised to see multiple separate ventures established for construction entities and development or land lease companies surrounding the whole thing so they can siphon off as much money as possible from it while still letting the system itself get abandoned or written down and leave others who are not as sophisticated "investors" holding the bag on the "planned-to-fail" portions of the deal.

It sounds like thats already been done from that article:

“We do not have any ability to control the decisions made by our Parent with respect to the facilities it owns at and around our stations, which may create actual or perceived conflicts of interest,” Virgin Trains said. “Our Parent may decide that it is in its or its equityholders’ best interests to pursue such opportunities in a manner that is not consistent with the best interests of us or our stockholders.”

Brightline is paying $1.6 million in rent to FEC for rental of its facilities in Palm Beach County alone. This Brightline entity/Virgin Trains USA sounds like it pays everything it can and owns little to nothing.

I guess the Bright side of things is when it fails, FEC can likely screw the investors as you said, and still retain all of the infrastructure and capital to launch it again with a much lower cost basis. The only question is who in the world would fall for this IPO to pad FEC's bottom Line? (pun intended)

[dcluley98]

"There's a sucker born every minute"  -  P. T. Barnum

They can even disclose it in the filings and somebody will still buy it, most likely.  I will not be one, directly. Let's hope we all are not one among us, indirectly, through government subsidy of the failing system for the benefit of private developers. 

Subsidizing mass transit for the benefit of us all is good, subsidizing it so some private profiteers can package off profit centers and capture the money of passengers while we all pay for the traffic is not ideal. 

We wil see what happens. 

Edited November 25, 2018 by dcluley98

[PuppiesandKittens]

7 hours ago, dcluley98 said:

"There's a sucker born every minute"  -  P. T. Barnum

They can even disclose it in the filings and somebody will still buy it, most likely.  I will not be one, directly. Let's hope we all are not one among us, indirectly, through government subsidy of the failing system for the benefit of private developers. 

Subsidizing mass transit for the benefit of us all is good, subsidizing it so some private profiteers can package off profit centers and capture the money of passengers while we all pay for the traffic is not ideal. 

We wil see what happens. 

Your post is illogical.

Anyone can ride Brightline trains, so we all benefit, whether or not we use the real estate.

Often government (with our tax dollars) builds rail lines with the goal of promoting dense real estate development, which real estate is built by and for the financial benefit of private investors.  See, e.g., Charlotte’s light rail line.

In this case, private enterprise stepped in and did something that government failed to do: build an effective solution to excessive car traffic and deficient roads.  

So the private sector will benefit from real estate development no matter who builds mass transit.  Mass transit in the US is generally a government responsibility, but government has failed to build effective mass transit.  In this case, private investors are willing to take losses of their own funds by doing something that government should have done a long time ago.  

 

 

 

 

[dcluley98]

Let's see how that works out. 

(O Geez, I'm gonna get accused of being a republican now, lol)

Edited November 25, 2018 by dcluley98

[Dale]

Governmentistas acknowledge that government has failed to deliver cost-effective rail transit. Worried sick that private sector may succeed.

[aent]

13 hours ago, dcluley98 said:

"There's a sucker born every minute"  -  P. T. Barnum

They can even disclose it in the filings and somebody will still buy it, most likely.  I will not be one, directly. Let's hope we all are not one among us, indirectly, through government subsidy of the failing system for the benefit of private developers. 

Subsidizing mass transit for the benefit of us all is good, subsidizing it so some private profiteers can package off profit centers and capture the money of passengers while we all pay for the traffic is not ideal. 

We wil see what happens. 

I guess we'll see what happens. If it gets done, if the alternatives were to sped several billion tax dollars take by force to build it from scratch, or let them default on a few million of loans screwing over some willing investor to do the same at a lower cost, I'll stick pick the private way, even if thats what appears to be happened. When the government builds it, often private landowners with lobbyists push for certain routes to maximize the value of their holdings, and it typically works, so the same thing happens no matter what, its just whether everyone gets screwed, a willing few investors gets screwed, or we're both wrong and everyone wins.  There is no doubt its setup to fail without affecting FEC's other profitable ventures, including freight, real estate, etc... and move the money back into FEC even if it does well.

As the article said, last quarter got approximately 150,000 between WPB to Miami, where there's the same line on Tri-Rail at a lower cost (although lengthier trip, but more stops). There seems to be at least some demand for it from what we see.

[dcluley98]

I would pick the Private way, too, Aent. Fools are fools. The rail will most likely not be profitable. I dislike them arranging profit centers around the main thing and then trying to force us to pay for it in the end if we take up the slack for the failing operational and maintenance costs, however.   It could happen that way. 

We can all say this out loud, predict it, see it happening, and still see fools lose money and the state have to take up the slack. Even when we all know what is going to happen. It is straight economics and corporate profiteering. It's not rocket science. Bookmark this post and see what happened 10 years from now. 

Edited November 25, 2018 by dcluley98

[dcluley98]

 The money is what matters and it will be done as the profit goes. It's like lightning. . . the environment adapts to form the path of least resistance.  

Edited November 26, 2018 by dcluley98

[aent]

4 hours ago, dcluley98 said:

I would pick the Private way, too, Aent. Fools are fools. The rail will most likely not be profitable. I dislike them arranging profit centers around the main thing and then trying to force us to pay for it in the end if we take up the slack for the failing operational and maintenance costs, however.   It could happen that way. 

We can all say this out loud, predict it, see it happening, and still see fools lose money and the state have to take up the slack. Even when we all know what is going to happen. It is straight economics and corporate profiteering. It's not rocket science. Bookmark this post and see what happened 10 years from now. 

I imagine if it is, they'll be able to buy back the stock at a discount since the potential profits are being siphoned off back into FEC anyways, at FEC's discretion apparently. If FEC doesn't want this to lose money any more and doesn't want it to go bankrupt at some point, its very apparent they can snap their fingers and make that happen as well just by adjusting a few terms.

[jrs2]

On 11/24/2018 at 8:03 AM, spenser1058 said:

Here's the story on the IPO from the Palm Beach Post which also mentions the theoretical WDW station:

https://www.palmbeachpost.com/news/20181123/virgin-trains-plans-stock-ipo-disney-world-station?template=ampart

The story also notes significant losses on the ummmm, train part of this. Also, it notes it will be at least three years before the Orlando leg is operational and has no firm date.

It appears the money makers in this are land development, ancillary activities and the IPO, anything but the train itself. Even if all were to go according to plan, at some point some CFO or hedge fund whizkid is going to ditch the money loser (aka the train.) 

Watch for this to end up like Eddie Lampert's treatment of Sears or Donald Trump's various bankruptcies where they end up doing just fine while the core entities are doomed.

 

 

They mention a WDW stop, but not in reference to the proposed Tampa segment.  Did they take this info out of the context of that proposed Tampa route, or is a second Orlando station in play for this phase?

[codypet]

Its the Tampa route.

[HankStrong]

If you have a stop at Disney and they get rid of the Magical Express, this could be epic in ridership numbers.

[spenser1058]

1 hour ago, jrs2 said:

They mention a WDW stop, but not in reference to the proposed Tampa segment.  Did they take this info out of the context of that proposed Tampa route, or is a second Orlando station in play for this phase?

If. I had to guess, this probably goes back to the earliest HSR proposals and they just threw it in to juice interest for the IPO. I haven't heard a peep out of Disney, RCID or even any of the unofficial sites about it since the earliest days of HSR. 

The funny thing to me is how many folks are going gaga over this which will have no connection to downtown Orlando instead of beefing up the Amtrak service that does. 

As far as demand for tourists to the middle of downtown Tampa, I have to laugh.Tourists heading over there are likely to want to head for the Pinellas beaches, not Tampa. If they plan to use bus connections like Amtrak does, those folks frankly might as well rent a car to use at the beach (PSTA service is hardly world-class and the retirees in the county and the infinite number of small towns over there are not transit-friendly.) Then again, as we have surmised, the backers of this could really care less about the train service.

[aent]

10 hours ago, spenser1058 said:

If. I had to guess, this probably goes back to the earliest HSR proposals and they just threw it in to juice interest for the IPO. I haven't heard a peep out of Disney, RCID or even any of the unofficial sites about it since the earliest days of HSR. 

The funny thing to me is how many folks are going gaga over this which will have no connection to downtown Orlando instead of beefing up the Amtrak service that does. 

As far as demand for tourists to the middle of downtown Tampa, I have to laugh.Tourists heading over there are likely to want to head for the Pinellas beaches, not Tampa. If they plan to use bus connections like Amtrak does, those folks frankly might as well rent a car to use at the beach (PSTA service is hardly world-class and the retirees in the county and the infinite number of small towns over there are not transit-friendly.) Then again, as we have surmised, the backers of this could really care less about the train service.

Disney won't say anything until there is  a done deal. And your Tampa comment is part of the reason I'm happy this is being built rather then the HSR. For me, I far prefer the possibility to take it to south florida then tampa, many more conections (tri-rail, metrorail, etc) and more in general to do.

I imagine the Tampa section will get built in multiple phases just like everything that has opened thus far. The train started out only between WPB and Ft Lauderdale at launch, then Miami was added when it was ready. Extending service to Disney first, then Tampa later is probably much easier to finance and get done, so I expect them to go that route.

[jrs2]

19 hours ago, aent said:

Disney won't say anything until there is  a done deal. And your Tampa comment is part of the reason I'm happy this is being built rather then the HSR. For me, I far prefer the possibility to take it to south florida then tampa, many more conections (tri-rail, metrorail, etc) and more in general to do.

I imagine the Tampa section will get built in multiple phases just like everything that has opened thus far. The train started out only between WPB and Ft Lauderdale at launch, then Miami was added when it was ready. Extending service to Disney first, then Tampa later is probably much easier to finance and get done, so I expect them to go that route.

I wonder if BL will face the same financial issues from GOAA that Maglev faced, ala replacing lost gate fees and/or car rental fees because of the direct connection.

[aent]

39 minutes ago, jrs2 said:

I wonder if BL will face the same financial issues from GOAA that Maglev faced, ala replacing lost gate fees and/or car rental fees because of the direct connection.

There agreement with Brightline is already negotiated and signed for the rent, so they are beyond that point already. Since when it was negotiated, I don't think the transport to Disney was considered (they had no ROW to get there at the time), they likely lucked out or tricked GOAA into allowing some local transit.