The observant reader will notice it has been a fucking minute. I've been busy with other ventures and trying to stay happy and healthy. It hasn't worked very well.
I also tried to buy a wharf, and in failing to do so interviewed more than 50 people working on or thinking about the Ocean. Across every conversation there was a common thread of maintaining cultural continuity in iconic trades, offset with earnest hope that the future is more collaborative.
It was a year of migrations, shake-ups, business failures and successes. It is difficult to draw any sort of conclusion on how to prepare for that. But things will be different moving forward, and there is money back on the table. If we have learned anything, it is that you need infrastructure in place before shit hits the fan. Every technology we need for prosperous and accountable blue economy already exists. “All we need to do” is connect the dots.
That's where you come in. The future is distributed, and the benefits available to large firms are possible for small and cooperative ventures through the use of technology. We live risk, and can use all the help we can get. We need investment in people, processes, and technology. That intentionally echos agile principles, because even though frameworks make me feel a little 🤮, language is like, important or something.
I've said before that I want to align with one metric from the Maine State Strategic Plan: raise median wages. Also, increase economic production, but mostly the wages thing. You can do that the old extraction way, through ancient innovations like communication and stewardship. As long as we optimize extraction, things will trend toward overcapacity and consolidation.
I was lucky to reminded of this yesterday by someone else in the industry who was frustrated by the ethical amalgam that is the “blue economy”. The health of the ocean never improves because we exploit it better. We are very lucky to still have some of our natural resources, but it's not anything the rush for a few billion dollars couldn't undo.
We don't need 🌕 shots, we need new models of participation. If the answers were obvious and could be accomplished with time and money alone, they would be solved. Money helps of course. Some of my open questions from the pondering over past year include:
- Does trust matter if we have observability?
- If renewing and amending property rights were easier could terms be shorter?
- Can coordinated, incremental, organic growth be incentivized?
I wanted to buy Union Wharf because it could serve as a platform to accomplish the wages goal by empowering other people who needed quality marine facilities and services, and a way to build an accountable community.
That's how it's been run so far (more later), but I figured you could sprinkle some technology on that Poole magic. I was disappointed to find out that the “SeaWork” trademark was taken.
The property consists of warehouses, storage, docking and berthing, office, retail, restaurant, and parking income. It's truly amazing, and I'm interested to see what the Gulf of Maine Research Institute does with it.
The main part is zoned Waterfront Central (WCZ), and abuts the Downtown Entertainment Overlay (DEOZ). The Portland zoning rules protect marine use, in a very useful way. There is a 180 day waiting period on leasing to non-marine uses, which can lead to low tenancy at times. The Proprietors of Union Wharf counteracted this by offering good deals to well behaved, anchor tenants. This is at the heart of why the property is so cherished, with greater that 90% occupancy. That means 10% could be available at any given time for short-term (startup) use.
Across about 4 acres and 12 structures there are:
- 1,500+ linear feet of vessel berthing ($150)
- 250+ linear feet street frontage
- 60K+ square feet indoors ($17)
- 55K+ square feet yard and pier ($8)
- 19,230 square feet submerged leases through 2034
- 3K+ square feet wet and cold storage ($18)
- 30K+ square feet parking ($8)
Lease agreements bundle services and charge variable rates, which hides opportunity costs. Considered as a business, the property is worth $6M based on discounted cash flow for 10 years with modest growth. According to a marine construction expert, one should have $2.5M to deal with repairs and improvements over 5 years. So, the capitalization rate is 9-17%.
The additional costs come in part from plans to dredge the harbor to make CAD cells for storing hazardous sediments. This will loosen pilings, maybe requiring simultaneous repair of the whole 1600+ linear feet of the wharf.
Additional liability comes from possible dereliction of vessels. This has happened three times in Portland since 2000. In one notorious case the owner “sold” the boat to someone in the Old Port, only to drink the proceedings and go on to “sell” it again to someone else.
Filling berthing with working vessels prevents this, but fishing berthing is not a long term money maker. There is a strong lobster industry presence, and it is likely that from my conversations that they were one of the bids on the property. Close ties with the family and all that. Okay for steady month to month income, but maybe not a sustainable in the long term. Unfortunately, the deepest draft is about twenty feet, which prevent larger vessels for offshore wind support. You can put a decent research vessel there though, or a crew vessel.
The previous owners are a waterfront fixture, and provided many fishermen their first berth. The job of a Wharfinger, like a bouncer, is to keep out bad tenants, even at loss of income. This dedication is evident in the common refrain I heard that Union Wharf is the ONLY property on commercial street worth investing in.
So let's engage in a little make believe. You can see our $5K 3D architectural rendering below. Grey is hardscape and road, green is landscape, orange is existing structures to remain, yellow is new structure, and light blue is dedicated pier and marine berthing.
(1) Mixed office, restaurant, and retail on Commercial Street. Currently, this is profitable, but holds mostly non-marine use and is a distraction from improving the utility of the property for marine industry. Sell it! But only after doubling the effective storefront space, and bringing safe pedestrian access 300 further southeast. A new connection to shared access road improves traffic flow. The profit can fund maintenance of the southwest side of the wharf, see (4).
(2) Warehouse, offices, shared facilities. This is currently and oil spill response company, which I really hope will stay given the amount of large ships that come into the harbor. If they were to leave, it would be an excellent option for shipping and receiving and waste management.
(3) Marine campus, consisting of park, concourse, and private boat ramp. Design for runoff remediation and catchment, as well as periodic flooding with sea water. The is some consensus that most business on the water will be done with boats that fit on towed trailers, and having that capacity adjacent to storage and repair facilities would be a game changer for some operators.
(4) Industrial condos and berthing. Marine use on flexible lower levels, with offices on upper level. That 180 day waiting period doesn't sound so bad when you have turn key facilities that new ventures can use short-term. I imagine something like this will happen with new owners. Includes 900-1000 feet of berth space for commercial vessels. Existing uses will consolidate over time into these facilities, which have dedicated water access and loading dock. All systems electrified to allow energy co-generation on south-facing roofs. The overall berthing capacity is high, and does not appear to pay for itself. You would need eliminate 500' feet of dedicated berthing, leaving 1000' contiguous. The lost 500' feet could still be available for transient vessels. Loss of working yard and parking spaces are resolved by adding “underground” parking and storage. This means building up. The waterfront code is good in this regard allowing 20-foot lower level, two 15-foot levels, and an additional 15 feet for HVAC. One can imagine a flexible industry condo, like this:
(5) Port facility and maritime center. Elevation raised to accommodate underground parking and storage for tenants. Current maintenance yard will converted to a truck turn and loading dock with shared gantry cranes and electric fork trucks. Tie-ups for deep draft vessels is possible along the south and north-east edges.
I'm going to be over here with my 🍿, seeing what happens. I'm a little disappointed not to be invited to the party. But you know, these folks have been working on their new ventures division for ten years, and brought together 30-35 parties in the deal. Maybe I'll be a tenant some day, or the Wharfinger. We do agree on one thing, that state action is insufficient to protect access to rights and equity. I just worry that venture capital and institution building can get in the way of doing real work. If all the money flows to organizations that do business development and market strategy rather than project execution, how do we get better terms for the human beings at the production end of that supply chain?