Moody Upgrades Port of Palm Beach
The Port of Palm Beach District announced that Moody’s Investors Service, Inc. upgraded the Port of Palm Beach District senior rating to Baa3 from Ba1, and reported the outlook to be stable. The report, released October 2, 2015, documented the port’s strengths, challenges and recent developments as the agency’s rationale for the ratings upgrade.
According to the report:
The upgrade to Baa3 recognizes the port’s sustained financial improvement due to successful contract renewals with its largest customers. The improved margins experienced over the last four fiscal years are expected to continue in the midterm, supported by tenant minimum annual revenue guarantee that improve the port’s cash flow predictability.
“Just as the majority of our neighbors were hit by the 2008 crash, the Port of Palm Beach felt the same blows. In the aftermath of the economic downturn, tenant operations decreased which resulted in subsequent revenue declines,” explains Port of Palm Beach Chairman Blair J Ciklin.
“With that said, I am proud to have watched the port use that economic tide as a catalyst to adopt management practices that minimize expenditures while maximizing efficiency, productivity, and revenue possibilities. As a landlord port, which relies on tenant rents and fees for its income, the district was determined to rebuild profits for its tenant base.
Through physical infrastructure and technology improvements, our largest revenue generators are now on the verge of surpassing their highest years.”
Since 2008, operating revenues have steadily increased. The five-year compounded annual growth rate in 2014 was 8.3% in FY 2014. Revenue forecasts for FY 2016 predict continued growth due to minimum annual revenue guarantees in tenant leases combined with forecasts for higher passenger and parking revenues related to cruise operations.
As the port is enjoying a stable outlook, based on the Moody’s view that it will “sustain its financial performance in the medium-term given revenue guarantees under long-term customer contracts, despite exposure to economically sensitive business partners and trade routes within a highly competitive market,” it maintains awareness of its challenges.
The port maintains efforts to diversify its tenant base, improve liquidity and source alternative funding options for incoming capital improvement projects. For the full report, please visit www.moodys.com.