BHI Ltd. Inks Ferry Purchase Agreement With Private Equity Firm

By Johanna F. Still, posted Jun 1, 2022
SharpVue Capital has executed a $67.7-million purchase agreement with Bald Head Island Ltd. to acquire several operational and real estate assets, including its ferry infrastructure. (Photo courtesy of Bald Head Island Ltd.)

Bald Head Island Ltd. has cemented a purchase agreement with a Raleigh-based private equity firm to sell the island’s ferry transportation infrastructure and other lingering assets of the George Mitchell estate. 

The $67.7-million deal with SharpVue Capital announced Tuesday is partially contingent upon the approval of the transaction by the N.C. Utilities Commission, which governs Ltd.’s ferry and tram services. Nonregulated assets in the transaction are not tied to state approvals, according to Ltd. CEO Chad Paul, and can close sooner, potentially in a few months’ time. 

Transportation-related assets were tentatively sold for $56 million. Also included in the deal are the Chandler administrative building, marina-adjacent golf cart parking lot and the 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 is Ltd.’s ongoing plans for Project Indigo, a nearly 400-acre, more than half-billion-dollar residential and commercial development project proposed in Southport; East West Partners is poised to pick up Ltd.’s real estate assets in that arrangement, which hinges on local approvals.  

With deals queued for the ferry assets, Project Indigo and the historic Captain Charlie’s Station listed for sale, Paul said he is close to settling the estate – a quest he’s been tasked with since the 2013 death of the Mitchell family patriarch. 

A sale to a private buyer was not the Ltd.'s initial objective. 

Plans to sell the transportation assets to a state-created entity, the Bald Head Island Transportation Authority (BHITA), quickly derailed beginning in late 2020 after the Village of Bald Head Island began to intervene in the teed-up transaction, raising concerns about the system’s valuation and a lack of transparency surrounding the proposed acquisition.

N.C. State Treasurer Dale Folwell and State Auditor Beth Wood – who both sit on the Local Government Commission responsible for authorizing BHITA’s or the village’s debt issuance – have been vocal about these concerns. Wood has especially condemned BHITA’s two separate appraisals for arriving at assessments that she said strayed too far from the tax value.  

Folwell said Wednesday he still sees the Southport-Bald Head Island waterborne route as a “public highway.” “Our only goal is to drive as much transparency [and] competency in government into this as we could,” he said.  

BHITA Chair Susan Rabon said the authority has been waiting to hear from LGC staff on how to move forward with its pending application – though that may be a moot point now. “We have been trying to get on the agenda at the Local Government Commission,” she said.

A lack of guidance on how the authority, which was tasked by legislation passed in 2017 to purchase the ferry assets, should move forward has been frustrating, Rabon said. “What's more frustrating is that the authority has followed the intent of the statute from day one. And we put all the pieces together and we're ready to go before the Local Government Commission, and we have not been allowed to go. That is 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 the private sale is the next-best option. “I'm disappointed in the political process and the political outcome here,” he said. “A lot of people talked about transparency and sunlight and facts. And what happened was, is people didn't like the facts. They didn't like the transparency; they didn't like the sunlight because it wasn't what they wanted so they created their own narrative.” 

BHITA includes representation for three village officials on the 11-member board; one seat dedicated to Southport, Brunswick County, and the governor; two seats for the N.C. General Assembly; and three spots for the N.C. Department of Transportation.

Village leadership yearned for total representation and control, submitted a competing bid to purchase the system and put a $52-million general obligation bond referendum on the November 2021 ballot, which passed. Should the private agreement go through, the village and other local governments with an interest in the system will have no formal representation in the operation of the business.  

Reached Wednesday, village Mayor Peter Quinn said he personally has no plans to object to the acquisition, but it’s still too soon to say whether his views reflect the consensus of his entire council.  

“The village’s position always has been that there's gonna be a deal made somewhere. And ideally, it was gonna be with the village,” Quinn said. “The village has been all along developing strategies to deal with any outcome.” 

Village leadership had previously threatened legal action to uphold a 23-year-old contested right-of-first-refusal with Ltd. (which Ltd. contends is invalid). Quinn said at this point, considering the growing sale price, the purchase cost has gotten “a little out of our reach.” In contrast to the sometimes adversarial tone negotiations have taken in the past, Quinn said he intends to work closely and collaboratively with the new owners to represent the village’s interests. Roberts seems amenable to understanding the village’s interests, Quinn said.  

“I'm disappointed that [Bald Head Island Ltd.] could never come to the table and deal with the village directly,” he said. “I think the Mitchells have always had a hard time with the village government and maybe rightfully so … Right now I do see the different parties are willing to talk, and that’s great.”  

In a statement, a village spokesperson said it has and will continue to “protect the users and hold the system, and its owners and operators, accountable to them.” 

A complaint filed by the village earlier this year against Ltd. is still pending with the N.C. Utilities Commission. Wary of a potential piecemeal sale to private parties, the village asked the state to intervene and govern Ltd.’s unregulated barge and parking services, a request Ltd. has asked the commission to disregard. That complaint is still pending, and the commission could at any point either issue an order to resolve the matter on its own accord or schedule a hearing, according to commission spokesperson Sam Watson.  

Separately, Ltd. intends to file a joint application with SharpVue Capital seeking the commission’s approval of the transaction, which Paul said will be submitted in the next month or so.  

Asked generally 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 2012 Duke Energy-Progress Energy merger took nearly 14 months, he pointed out.  

Paul said the buyer is unfazed by the deal’s previously messy landscape. 

Formed in 2019, SharpVue Captial is a startup investment firm that eyes mid-market enterprises that can be overlooked by major real estate funds, according to its website. Founded by former state budget director Lee Roberts and Triangle Capital Corporation alum Doug Vaughn, the firm has invested in Durham-based Counter Culture Coffee and the California-based Pondera Solutions, according to the Triangle Business Journal

“We recognize the responsibility of operating critical infrastructure in a safe, reliable, and cost-effective manner,” SharpVue managing partner Roberts said in a press release. “We plan to continue the legacy of stewardship and high-quality service the Mitchells have established, and we’re pleased that the excellent employees and long-standing management team will remain in place to ensure seamless continuity of day-to-day operations.” 

All 113 Ltd. employees, which include 70 transportation staff members, 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 15-plus-year working relationship with Roberts. “I trust Lee. I trust his judgment, I trust his intents, and he's going to be a great partner for these assets and a great steward for the island.”  

Paul said SharpVue Capital is distinct from other private equity funds that require short-term returns, and therefore a tighter ownership duration. He described the firm set to own Ltd.’s assets as an “evergreen entity” seeking a “long-term real estate play.”  

“There's no sell date requirement. There’s no end date to the entity – so that’s the key difference. We don't have any of that pressure here,” Paul said. 

Securing a buyer that has a working familiarity with the state, infrastructure operations and the proposed sale’s complicated saga is a positive outcome for the island and Mitchell family, Paul said. “They’re exiting with grace,” he said. “It’s the best private deal you can put together.”  

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