Jeff Smith wrote:Interesting analysis. Assuming you mean negative cash flow of $23m (you mentioned net loss) after debt service (before or after tax, depreciation, and amortization?) an IPO may still net them a profit based on Enterprise Value. Not sure if there's an estimate for that out there if they are privately held. Although RE, particularly in FL, has been hard hit, I imagine it's still pretty valuable. Remember Alexander's, a department store in New York? Caldors? The RE was more valuable than the operation. Potential shareholders in an IPO should view it the same way; i.e. what's the return on investment (ROI), yield, etc.
I doubt the government would buy the line. We're not talking about a lightly used excess line here like Sunrail for CSX. This is a pretty major line. Is FEC angling for infrastructure support? Maybe. Keeping Amtrak off? Maybe, but they wouldn't relinquish dispatch over their line anyway. And Amtrak isn't talking a lot of frequency anyway; one or two of the Silvers or splitting them, and we dont' even know that at this point.
Buying a line this huge I think is beyond the reach of Florida for the level of passenger traffic envisioned.
But I do think it's about positioning at this point.
Agreed in every way. The FEC is a profitable line, if not yet showing a positive return because of the buyout. Governments are averse to purchasing and running
profitable enterprises, which is why we complain so much about Amtrak losing money as a government ward
I think this is a real estate deal, as posited by Gaius Paulus Magnus and others - the FEC buys or leverages the land, and makes the profit when their new transportation mode comes into play.
Secondarily, this is an instance where for a relatively small outlay the passenger line can be profitable. After all, we've noted that the proposed line will pass by, or through, Disney World, Sea World, Busch Gardens, Universal Studios Orlando, and several other tourist destinations, as well as the Orlando International Airport and the city of Orlando (and others.) The existing line also passes by KMLB, very close to KPBI, next to KFLL and not far from KMIA, within spitting distance of at least half-a-dozen universities and colleges, and of course through several beachfront towns that would be major traffic producers. Frankly though, if The Mouse is on board with the FEC's plans, they can't fail at making money.
I doubt that Amtrak itself is a major consideration, since I don't think the FEC has reason to regard the NRPC as such a canker sore as do the Big Four plus Two. However, it definitely sends a strong message to Florida's government that the Florida East Coast will do just fine without their interference, thank you very much.