U.S.: doubling Chiquita's rent 'not punitive', says Gulfport
Mississippi's Port of Gulfport has said the decision to double Chiquita Brands International's (NYSE: CQB) rent for the second half of the year was made purely for business reasons, and was in no way an act of retaliation for the banana producer's sudden departure.
Chiquita has been an important tenant at Gulfport for 40 years, but in May announced it would be moving its shipping operations to Louisiana's Port of New Orleans.
Gulfport has recently agreed to a six-month extension of the company's lease, which expires on July 15, but will charge it double the rent for use of land and facilities over that time.
Gulfport executive director and CEO Jonathan Daniels told www.freshfruitportal.com the increased rent was necessary in order to recuperate some costs.
"Certainly there’s a need [to charge more rent] because of the timing under which we were notified, but we do need to protect our financial interests as we were going into the budget process. This was in no way meant to be a punitive situation," Daniels said.
"We very well could have taken a very punitive and very offensive position in this – we chose not to do that.
"We worked under our statutory guidelines with the state of Mississippi and understood what our abilities were, and we stayed within those statutory limits. The most that we could go was a doubling."
Daniels explained a more aggressive response Gulfport could have taken included going outside of its tariff structure and applying additional fees.
It could also have forced Chiquita to remove every bit of equipment by the termination of their lease in mid-July.
He went on to say Gulfport would ideally like to have been given more advanced notice by Chiquita of its departure, especially given the two parties were working together on port expansions that were largely tailored to the tenant's requirements.
"They participated to a heavy extent in the redesign of the terminal and because of that we did put some components in the terminal that were very specific to their utilization, and so we kept on going on," Daniels said.
Upon hearing rumors of Chiquita's imminent departure, Daniels said his efforts to negotiate a longer lease were rejected.
"It was incumbent upon us to be able to work through the planning process and actually begin to make some changes in the design of the terminal that would allow us the opportunity to go into another direction, because the writing was on the wall for us," he said.
Last Thursday (June 26) Gulfport approved a land use alteration of the expansion and is currently working with Crowley Liner Services, who will be filling Chiquita's shoes in the port.
Daniels also said increased activity from current and future tenants was likely to compensate for any lost revenue from Chiquita.
"We're working with Crowley, we've had meetings with them, and their activities are increasing significantly, their vessel utilization is increasing - as well as our primary bulk shipper which is Dupont, their tonnage is up dramatically over the past year," he said.
"So we feel comfortable that we’re going to be able to make up any potential losses on the revenue side by the increased shipping that is actually being accommodated because Chiquita's leaving."
He added that he was confident the two companies would be able to work side by side smoothly over the rest of the year despite the higher rent.
"It was a business decision that was made, so ultimately, on a personal basis, I understand the decision that they made. It was made based on what they felt was best economically for their operation," Daniels said.
"Our commitment now - and the reason as to why the commission was so animate about working out some type of agreement with Chiquita to keep them here as long as possible - is to not impact our development efforts. But at the same time keeping the longshoremen working as long as possible, so that they wouldn't see as much of a downturn in their operations."
Chiquita told www.freshfruitportal.com in a statement it was always planning on extending its lease and that was very much the normal course of business.
"We notified Gulfport as soon as we had completed our end-to-end analysis of our shipping needs in the Gulf and had worked through the process to be able to announce a return to the Port of New Orleans," said communications director Ed Loyd.
"We knew that would lead to a short term extension of our lease at Gulfport, which allows us time to ensure we have our operations ready to go in New Orleans."
Chiquita's lease further north
Chiquita has reportedly signed a five-year agreement to extend its lease at the Port of Wilmington, according to Delawareonline.com.
The story reported the move had allegedly been expected after Dole contemplated moving to New Jersey's Port of Paulsboro, but instead opted for the Delaware port last year.