PACKING IN AT PORT OF L.A. : Growth in Pacific Basin Trade Keeps Leasing Close to 100% and Sends Earnings Soaring

The departure of a major tenant could create problems at some ports. When executives at Overseas Shipping Co. announced plans to abandon a large operation at the Port of Los Angeles, however, a difficult situation was actually resolved.

The predicament arose when port officials decided to ask one tenant to vacate its site to make room for Overseas. The tenant, which was to be moved when its lease expired this summer, challenged the plan. The dispute over space was settled only when Overseas decided to discontinue its operations at the port.

The lack of available space, however, is still a matter of concern at the port. In all, about 99% of the space at the Port of Los Angeles is leased. Of the 3,800 acres of land at the port’s locations in Wilmington, San Pedro and Terminal Island, only one berth--a 25-acre site--is unleased.

Al Fierstine, assistant marketing director for the port, said demand for space has been heavy the past two years. Port officials are developing port facilities at a 198-acre landfill site on Terminal Island, but the project, in the design stage, is not scheduled for completion until 1993.

“That will take away some of the space pressure we have now,” he said.

The amount of cargo handled at the port--exports and imports--has been increasing dramatically. About 60.6 million tons passed through the port’s harbors in 1988, an increase of 10% compared to 1987. In contrast, only 38.4 million tons moved in and out of the port in 1983.

The port collects tariffs on that traffic. As levels of activity have increased, so have port revenues and profits. Revenue totaled $146 million in 1988, 12% more than the total recorded in 1987. Net income reached $84 million last year, a big increase over the net income of $67.2 million in 1987 and more than twice as much as the $41.7 million in earnings in 1984.

The American Assn. of Port Authorities says there is greater demand for leases at

the Port of Los Angeles, a conduit for international commerce, partly because trade with Pacific Basin nations is booming.

The increasingly active port has been an economic boon to Southern California, providing about 20,000 harbor jobs. In all, about 113,000 jobs in Southern California stem directly or indirectly from port activity.

While the level of activity at the port has risen rapidly, relatively little new space has been added. The last expansion, the conversion of a landfill on Terminal Island in 1983, provided 30 acres of space for storage facilities.

In the meantime, port officials have sometimes shifted companies to different harbor locations to cope with the growing demands of some of its tenants.

“Tenants are being moved around like . . . game pieces,” said Raymond Cunan, general manager of Hanjin Shipping Co.’s operations at the port. “They (port authorities) are moving tenants around and trying to keep everyone happy, but the business and demand for space is greater than the port’s capacity.”

The recent controversy over tenant shifting began when port officials asked Overseas to move from one port location to another to accommodate Evergreen International, one the harbor’s biggest moneymakers. The shift was proposed after Evergreen, a shipping firm with two separate yards at the port, asked port officials for one undivided terminal.

Overseas, which loads and unloads containerized cargo at the port, agreed to give up its 75-acre Terminal Island site for Evergreen. Port officials offered Overseas a site occupied by Stevedoring Services of America, another firm that handles containerized cargo. Port managers planed to move Overseas this summer when Stevedoring’s lease expired Aug. 1.

Port officials proposed moving Stevedoring to other berths. However, Stevedoring executives objected, calling the proposed site unsuitable. The Seattle company challenged the port’s decision in a complaint with the Federal Maritime Commission, the government agency that regulates shipping.

The dispute ended recently when Overseas, which had five years remaining on its lease, decided to close its container yard operations to concentrate on its other line of business--chartering ships for brokered cargo. Overseas, based in Mill Valley, will close the container yard May 31, according to Carl Blom, the company’s president. Other port operators plan to hire the 30 Overseas employees affected by the shutdown, Blom said.

Meanwhile, Stevedoring Services, which agreed to buy Overseas’ cranes and other cargo-handling equipment, is expected to remain at its current facility.

“Given all the problems,” Blom said, “we decided to see if we could make a business decision and work something out for the benefit of all parties.”

Blom would not comment on the financial health of the container yard operation. However, he noted that more and more independent container yard operators are failing, partly because more exporters are setting up their own cargo-handling operations.

Concerned about the space situation, the Seoul-based Hanjin Shipping Co. plans to leave its berths in the Wilmington section of the Port of Los Angeles. Hanjin, which has 45 acres in Wilmington, plans to move to the Port of Long Beach when its contract expires next year because Long Beach is offering 55 acres initially and even more space at a later date, company executives say. The firm’s managers said they could not get adequate space in Los Angeles.

If Hanjin moves, port managers won’t have any difficulty finding a new tenant, according to Richard Eastes, general manager of a fruit importing firm that leased space at the Port of Los Angeles last year. The company, David Oppenheimer California, moved its operation to the Port of Long Beach.

The Visalia-based Oppenheimer, which imports Chilean fruit, may have to shift its receiving site from Southern California to Florida for space-related reasons, according to Eastes. The company’s fruit is sold in 30 states. Eastes said the company is considering a move partly because large amounts of land once reserved for transit sheds--fruit is sorted and sometimes fumigated in the buildings--have been converted for other uses at the Port of Los Angeles. Representatives of Oppenheimer California and other members of the Chilean Winter Fruit Assn. expressed concern about the lack of local dock space at a recent press conference.

“I think the Port of Los Angeles and the Port of Long Beach would like us to stay, but they don’t have the space,” Eastes said. “Their long-term planning doesn’t include transit sheds.”

The Port of Los Angeles eliminated 175,000 square feet of shed space but still maintains about 1.3 million square feet of transit space on the docks, according to port managers.

“We’ve been cognizant of the fact that they need space, and we’ve worked to keep warehouses intact,” said Fierstine.

While port officials scramble to meet the growing needs of its customers, managers of some of the nation’s other ports look on with envy, according to Erik Stromberg, president of the American Assn. of Port Authorities, a trade group representing port managers in the Caribbean and North and South America.

“The space problem (at the Port of Los Angeles) is pronounced and among the most serious in the country,” Stromberg said. “It’s the sort of problem most port directors would like to have.”