BHI Ltd. signs ferry purchase agreement with private equity firm
Bald Head Island Ltd. entered into a purchase agreement with a Raleigh-based private equity firm to sell the island’s ferry transportation infrastructure and other remaining assets of George Mitchell’s estate.
The $67.7 million deal with SharpVue Capital announced Tuesday is partly dependent on approval of the transaction by the NC Utilities Commission, which regulates Ltd’s ferry and streetcar services. Unregulated assets in the transaction are unrelated to state approvals, according to the CEO of Ltd. Chad Paul, and may be closed earlier, potentially in a few months.
The transmission assets were provisionally sold for $56 million. Also included in the agreement are the Chandler administration building, golf cart parking adjacent to the marina, marina, and shipping and receiving operations. “We were able to put together something where it was really a complete transaction and a complete solution for the Mitchells operationally,” Paul said.
Not included in the transaction are the ongoing plans of Ltd. for Project Indigo, a proposed nearly 400-acre, over half a billion dollar residential and commercial development in Southport; East West Partners is in the process of recovering the real estate assets of Ltd. under this arrangement, which is subject to local approvals.
With deals pending for the ferry assets, Project Indigo and the historic Captain Charlie’s Station up for sale, Paul said he was close to settling the estate – a quest he had been given since his death. in 2013 from the Mitchell family patriarch.
Plans to sell the transportation assets to a state-created entity, the Bald Head Island Transportation Authority (BHITA), were quickly derailed beginning in late 2020 after the Village of Bald Head Island began intervening in the pending transaction, raising concerns about the valuation of the system and a lack of transparency surrounding the proposed acquisition.
North Carolina State Treasurer Dale Folwell and State Auditor Beth Wood, who both serve on the Local Government Commission responsible for authorizing the issuance of BHITA debt or the village, expressed these concerns. Wood particularly condemned BHITA’s two separate valuations for resulting in valuations that she said deviated too much from tax value.
Folwell said Wednesday he still considers the Southport-Bald Head Island shipping route a “public road.” “Our sole objective is to generate as much transparency [and] jurisdiction of government in what we could,” he said.
BHITA chair Susan Rabon said the authority was waiting to hear from LGC staff on how to move forward with its pending request – although that may be a moot point now. “We tried to be on the agenda of the Local Government Commission,” she said.
The lack of guidance on how the authority, which was tasked by a law passed in 2017 with buying the ferry’s assets, should move forward has been frustrating, Rabon said. “What is more frustrating is that the authority followed the intent of the law from day one. And we’re putting all the pieces together and we’re ready to go to the Local Government Commission, and we weren’t allowed to go. It’s frustrating. That was 15 months ago, we were ready.”
A sale to BHITA was Ltd.’s first choice, Paul said. With that out of reach, Paul said private sale is the next best option. “I am disappointed with the political process and the political outcome here,” he said. “A lot of people talked about transparency, sunlight and facts. And what happened was that people didn’t like the facts. They didn’t like transparency, they didn’t like sunlight because that wasn’t what they wanted, so they created their own narrative.
BHITA includes representation of three village leaders on the 11-member council; a seat dedicated to Southport, County of Brunswick, the Governor; two NC General Assembly seats; and three spots for the North Carolina Department of Transportation.
Village leaders aspired to full representation and control, submitted a competing bid to buy the system, and held a referendum on the $52 million general obligation bonds in the November 2021 ballot, which was adopted. If the private agreement is entered into, the village and other local governments with an interest in the system will have no official representation in the operation of the company.
Reached on Wednesday, the village mayor, Peter Quinn, said he personally had no intention of opposing the acquisition, but it was still too early to say whether his views reflected the consensus of all of its council.
“The position of the village has always been that there will be a deal done somewhere. And ideally it would be with the village,” Quinn said. “The village has always developed strategies to deal with any outcome.”
Village management had previously threatened legal action to enforce a 23-year-old’s disputed right of first refusal with Ltd. (which Ltd. says is invalid). Quinn said that at this point, given the increase in the sale price, the cost of buying became “a little out of our reach.” Unlike the sometimes confrontational tone negotiations have taken in the past, Quinn said he intends to work closely with the new owners to represent the interests of the village. Roberts seems willing to understand the interests of the village, Quinn said.
“I am disappointed that [Bald Head Island Ltd.] could never come to the table and deal directly with the village,” he said. “I think the Mitchells have always struggled with village government and maybe rightly so… Right now I see the different sides are ready to talk, and that’s great.”
In a statement, a village spokesperson said it has and will continue to “protect users and hold the system and its owners and operators accountable to them.”
A lawsuit filed by the village earlier this year against Ltd. is still pending with the NC Utilities Commission. Wary of a possible piecemeal sale to private parties, the Village asked the state to step in and regulate Ltd.’s unregulated barge and yard services, a request that Ltd. asked the commission to ignore. That complaint is still pending and the commission could at any time either issue an order to resolve the matter on its own initiative or schedule a hearing, according to commission spokesman Sam Watson.
Furthermore, Ltd. intends to file a joint application with SharpVue Capital seeking commission approval for the transaction, which Paul says will be submitted approximately next month.
Asked generally about how long the commission takes to review utility acquisitions, Watson cited several examples of unopposed deals that each took between one and three months to approve. The hotly contested Duke Energy-Progress Energy merger in 2012 lasted nearly 14 months, he pointed out.
Paul said the buyer was unimpressed with the deal’s previously messy landscape.
Founded in 2019, SharpVue Capital is an early-stage investment firm that targets middle-market companies that may be overlooked by large real estate funds, according to its website. Founded by former state budget director Lee Roberts and Triangle Capital Corporation alum Doug Vaughn, the company has invested in Durham-based Counter Culture Coffee and California-based Pondera Solutions, according to Triangle Business. Log.
“We recognize the responsibility to operate critical infrastructure in a safe, reliable and cost-effective manner,” Roberts, managing partner of SharpVue, said in a press release. “We plan to continue the legacy of high-quality stewardship and service that the Mitchells have established, and we are delighted that the excellent employees and long-serving management team will remain in place to ensure seamless continuity of operations. daily. ”
All of Ltd.’s 113 employees, including 70 transportation staff, will transfer to SharpVue as part of the deal, according to Paul.
SharpVue Capital has experience with other infrastructure-related entities, according to Paul, who said he has a working relationship of more than 15 years with Roberts. “I trust Lee. I trust his judgment, I trust his intentions, and he’s going to be a great partner for these assets and a great steward for the island.
Paul said SharpVue Capital stands out from other private equity funds that require short-term returns, and therefore a shorter holding period. He described the company ready to own the assets of Ltd. as an “evergreen entity” looking for “long-term real estate play”.
“There is no sale date requirement. There is no end date for the entity – so that’s the main difference. We don’t have that pressure here,” Paul said.
Securing a buyer who has a working knowledge of the state, infrastructure operations and the complicated saga of the proposed sale is a positive outcome for the island and the Mitchell family, Paul said. “They come out with grace,” he said. “It’s the best private deal you can put together.”