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Johns Hopkins UniversityArts and Sciences Magazine

Joint Ventures

Combining investment smarts with political savvy, Christopher H. Lee ’74 is giving new life to the seaports, roads, pipelines, and airports that keep the world running.

It was a sunny day in early March when a diverse group gathered amid the patchwork of colorful steel containers crowding the Seagirt Marine Terminal on Baltimore's southeastern waterfront. There were government officials and businessmen, politicians and longshoremen, hardhats and suits. Among the guests were Helen Delich Bentley, former Baltimore congresswoman and chair of the Federal Maritime Commission, for whom the Port of Baltimore is named; recently inaugurated Baltimore Mayor Stephanie Rawlings-Blake; and Richard P. "Richie" Hughes, president of the International Longshoremen's Association.

In the shadow of seven expansive container cranes, they assembled at the water's edge to witness the groundbreaking for construction of a 50-foot-deep berth at Seagirt and the beginning of a landmark public-private partnership between the state of Maryland and Ports America Group, which will operate Seagirt for the next 50 years and finance an ambitious expansion of the Port of Baltimore's leading container terminal. Arriving by tugboat, Gov. Martin O'Malley and Christopher H. Lee ’74, chairman of Ports America, signaled a new relationship that O'Malley said would "change the face of the maritime shipping business."

A groundbreaking partnership: James J. White, executive director of the Maryland Port Administration, Christopher Lee ’74, Martin O’Malley, Helen Delich Bentley, Stephanie Rawlings-Blake, and Richard P. “Richie” Hughes celebrate the start of an ambitious expansion of the Port of Baltimore financed by Lee’s Ports America Group.

 

"When we announced our agreement with Ports America last November, we said it was all about jobs," O'Malley said. "Today, those jobs become reality. We are wasting no time putting people to work and getting this $105 million project under way."

Lee, whose New York-based Highstar Capital controls Ports America, added: "We made this a win-win for everybody, especially through the creation of nearly 5,700 jobs at a time of near-record unemployment in Maryland. I'm especially proud that we created twice the number of jobs for Maryland that the Obama administration did in its economic stimulus program."

The agreement between the state and Ports America will add a critical 50-foot berth and four cranes to the terminal's existing three berths and seven cranes, keeping the state-owned container terminal competitive and allowing it to attract new business from supersized ships that will begin arriving after the Panama Canal is widened in 2014.

Ports America is now supervising daily operations at the Seagirt terminal, and in addition to building the 50-foot berth, it will provide funding for other transportation-related infrastructure improvements in the state. Ports America also will make an annual payment to the state and provide ongoing revenues to the Maryland Port Administration during the 50-year concession investment. The partnership is expected to generate some $1.5 billion in economic benefits for the state over the next 50 years, according to Highstar officials.

Lee is no stranger to such arrangements, having founded Highstar Capital in 1998 to undertake infrastructure investments like the one at Seagirt. Lee has spent three decades traveling the globe in pursuit of public-private partnerships, which have included investments in natural gas pipelines and storage facilities, power plants, airports, seaports, toll roads, and water and waste-water systems.

With state and local governments facing record deficits at a time of deteriorating infrastructure, such public-private deals are becoming more and more popular in the U.S. The American Society of Civil Engineers has estimated that it will cost a staggering $2.2 trillion to restore the nation's aging infrastructure to acceptable levels.

To Lee and his investors, that's a big, untapped market.

In January, Lee visited Hopkins' Homewood campus to explain the field of infrastructure investing to students enrolled in an Intersession seminar on Financial Literacy. "We live in a country with crumbling infrastructure, and that puts us at a huge economic and competitive disadvantage," he told the class. "Just go to Shanghai for a day and compare it with Baltimore, New York, or Los Angeles if you don't believe me."

Infrastructure upgrades are essential, he told them, because "if the infrastructure goes to hell, so does the economy."

Lee has been increasingly viewed as a leader in the field, appearing three times on CNBC as an authority on the subject. His Highstar Capital was first thrust into the media spotlight in 2007 when it bought Ports America from Dubai's marine terminal operator DP World. Now the Seagirt deal, and a similar one in California's Port of Oakland, has put Highstar Capital and its infrastructure investment focus back in the limelight.

 

While his firm manages close to $5 billion in assets, Lee comes across as a regular guy. Arriving for his Intersession lecture in January, Lee was not wearing an expensive suit, nor were his hands tethered to a cell phone. Instead he came garbed in a yellow button-down, wrinkled khaki pants, and a sport coat, a crumpled green tie in one hand and a Starbucks cup in the other.

Political science professor emeritus Matthew Crenson '63 was surprised when he first met Lee. That meeting came after Lee and his wife, Susan Ginkel, made a $1.1 million donation to Hopkins' Baltimore Scholars program, which provides full scholarships to qualified graduates of Baltimore City public schools. "I expected to find this guy wearing a $1,200 suit with a $100 haircut," says Crenson, who is the faculty administrator of the Baltimore Scholars program. "But there he was in shirtsleeves, no tie, very easy to talk to. He's very engaging."

As an expert in state and local politics, Crenson knows how those charms can help, like when it comes to building consensus.The Seagirt deal has won broad support from the state Legislatureand the unions, and was approved unanimously by the MarylandBoard of Public Works.

 

Born in the port town of Bremen, Germany, where his father was stationed with the U.S. Foreign Service, Lee had a peripatetic childhood, often in harbor cities like Baltimore.

His family moved to Yokohama, Japan; Washington, D.C.; Ankara, Turkey; and back to Germany before his father went to Vietnam as a top official in the U.S. embassy in Saigon. With his father overseas, Lee attended Western Reserve Academy in Hudson, Ohio. His early academic success in history in high school led a teacher to recommend Hopkins. Of his time at Hopkins, Lee says, "While I didn't appreciate it at the time, Hopkins provided me with an extraordinary opportunity and grounding, particularly by including the late David Donald [the two-time Pulitzer winner and preeminent Lincoln scholar] as my advisor."

Lee adds, "Where else but at Hopkins could an 18-year-old kid get the leader in his academic field as a mentor/advisor? To his credit, Dr. Donald told me early on that I had neither the patience nor the temperament for academics. Instead, in his patrician Southern voice, he suggested that 'Mr. Lee, perhaps a career in commerce would suit you better.' At the time he didn't mean it as a compliment, but he was right. Plus, his advice worked out well for me!"

After graduation in 1974, the Hopkins history major first tried the London School of Economics, but Lee found the other side of the English Channel more interesting. "I majored in French railway schedules to the south of France, not the grim formulas of political economy," he says. "So I never buckled down and finished at the LSE."

Instead, Lee returned to Washington as a speechwriter and staffer for two Ohio lawmakers, Robert Taft Jr. and Ralph Regula. But he dreamed of living abroad like the well-heeled, expatriate Chase and Citibank bankers he had met in the West End of London. Landing a job at Chase Manhattan, he graduated from the bank's two-year training program--in those days an MBA equivalent--and was stationed first in Hong Kong, then back in Manila, before going to Seoul, Korea, in 1980.

Back then, Cambodia was still rife with violence. Lee's assignment from Chase Hong Kong: Secure the assets of a Chase joint venture truck-finance company run by a rogue partner. "He hid the trucks we financed in Cambodia, thinking we wouldn't have the guts to retrieve them from a war zone," Lee says. "So I figured out a way to get our trucks back into Thailand where we could take control." Lee, then in his early 20s, drove into Cambodia with hired guards, secured the trucks, and drove them out.

A decade later Lee would return to Thailand for a multibillion dollar public-private partnership to build a major toll road in traffic-challenged Bangkok, for which he would win the 1989 International Project Finance Deal of the Year award.

Lee first delved into infrastructure investing while in Korea, where emerging industrial giants like Hyundai were being hired to build "whole cities, harbors, and airports" throughout the Middle East. In the mid-1980s he moved to Lehman Brothers' Hong Kong office and spent the next several years working on major infrastructure projects throughout Southeast Asia.

Back in New York in the early '90s, Lee financed a number of toll road privatization deals for a major Mexican construction company. The company--Grupo Tribasa--hired Lee as its chief financial officer in 1993 when it went public on the New York Stock Exchange.

But the peso crisis in 1995 had a significant negative financial impact on the company. After a major restructuring of the company's capital structure, Lee left and moved to an 86-acre dairy farm in northwest Connecticut with his wife and year-old son.

After a year or two in the Berkshire foothills, he grew bored of semi-retirement and was ready to jump back into infrastructure investing. In 1998, he launched Highstar Capital with his close friend, consummate Washington insider Wayne Berman.

The first fund he raised attracted $407 million from investors in late 2000. At the time, says Lee, "virtually nobody was doing infrastructure investing. Now it's a major asset class."

By late 2007, his third fund raised $3.5 billion from more than 80 institutional investors in the U.S. and around the world, demonstrating mounting confidence in the rapidly growing infrastructure market and in Lee's Highstar Capital portfolio management team.

Lee's Highstar Funds have achieved a number of firsts, including first financial owner of an interstate natural gas pipeline in the U.S.; first financial owner of a major water and waste water utility in the U.S.; and first owner of a tri-coastal, independent port operator in the U.S.

Good Business for Baltimore

The landmark public/private partnership between Maryland and Ports
America at Seagirt will boost jobs and pump new revenue into the region.

Before deal
Cranes: 7
Berths: 3 with 45-foot depth
Port jobs: 16,500
Containers: 500,000
After deal
Cranes: 11
Berths: 4, one with 50-foot depth
Port jobs: 19,200 (projected)
Containers: 1.8 million
(projected by 2020)

 

 

While infrastructure investing may be coming back into vogue, it's hardly a new idea. "Public-private partnerships have been in existence since long before the Revolutionary War," says Richard Norment, executive director of the National Council for Public- Private Partnerships.

The Port of Baltimore has its own history with public-private partnerships. Private firms built the port and owned it for many decades. But such ownership eventually proved problematic.

"In the 1950s, Baltimore's port was in big trouble," says Crenson, an expert in state and local politics who is currently writing a nine-part encyclopedia entry on Baltimore's history. "It was owned by railroads, and the railroads didn't have any interest in accommodating the trucking industry." The railroad companies were forcing container ships that needed trucks to transport their wares to travel to other ports.

The other ports were surpassing Baltimore's for another reason: They had port authorities with quasi-governmental powers to "provide public funds for modernization," according to The Great Port of Baltimore.

Baltimore's private sector, eager to reignite the port business, helped the state form a port authority in 1956. The authority focused on accommodating container ships and truck traffic. Three years later the authority began building the Dundalk Marine Terminal and dredging a 50-foot-deep channel leading to the port. In 1990, the state built the more modern Seagirt Marine Terminal to handle bigger ships.

Ports America will modernize Seagirt yet again to prepare forthe Panama Canal's expansion. Says Crenson, "Christopher Lee isa continuation of this modernization trend that was essential forthe port's survival."

As rail shipments from the West Coast continue to rise in cost for Asian container companies, the all-water route through the canal to the East Coast has become less expensive, according to an analysis by Martin Associates. State figures show that Seagirt handled more than 300,000 containers in fiscal year 2008, but that it has the capacity to move significantly more. The new berth, scheduled to be finished two years ahead of the Panama Canal expansion, should help Baltimore attract higher traffic over the coming decades and better compete with Norfolk and New York in handling the supersized container ships.

Building a new berth will give Baltimore an advantage over New York, where most of the container terminals are above the Bayonne Bridge, which is too low for passage of the larger ships. Seagirt is also 150 miles farther inland than any other mid-Atlantic port--putting it within a single day's drive of half the U.S. population.

Without a partner putting up the money to expand Seagirt, the Port of Baltimore could have fallen far behind and, potentially, become a backwater operation. "Given the state's financial structure, we could not enhance the terminal to deliver the cranes or the berths," says Maryland's secretary of transportation, Beverley K. Swaim-Staley. She added that Ports America was best situated to do so, given that its predecessor companies have been operating in Baltimore for 89 years and at Seagirt for its entire 19-year history.

It also didn't hurt that Lee had strong ties to Maryland. He moved his family to Baltimore from Sharon, Conn., three years ago so his two sons could attend Gilman School in North Baltimore.

Lee has a second home on Maryland's Eastern Shore, on scenic Trippe Creek in Oxford. He constantly reminds MPA director Jim White that Baltimore is just a "junior port" to Oxford, Maryland's oldest port, founded in 1694, 12 years before the Port of Baltimore. Ever the Hopkins history major, Lee points out that Oxford produced Robert Morris Jr., the "financier of the American Revolution."

"Mr. Lee is a Marylander," Swaim-Staley says. "With his hometown roots, I think he is very pleased that this is a partnership that he can have in Baltimore."

Lee chose Gilman for his two teenage sons, McHenry and Fitzhugh, based on the school's academic and athletic reputations. He also has a particular fondness for one of Gilman's most famous graduates, Walter Lord. The Baltimore author wrote A Night to Remember, the seminal account of the Titanic's sinking (Lee and his wife have endowed a scholarship at Gilman named after Walter Lord). An ocean liner aficionado and serious collector, Lee owns pristine originals of the Titanic's first-class passenger list and deck plans.

He also commissioned a detailed model of the ship for Highstar's panoramic offices on the 45th floor of a Park Avenue skyscraper in New York City (a duplicate resides in the Walter Lord Library at Gilman). "The Titanic was an extraordinarily well-proportioned, very beautiful ship, so a model of her is very pleasing to have, regardless of what happened," Lee says. "Understanding what did happen to the Titanic, her owners, the White Star Line, had no plan B, let alone a Plan C, in case of trouble. In the private equity business you always need a plan B and a plan C. The fate of the Titanic is a good reminder to us at Highstar."

 


Christopher Lee '74

Related Links

Ports America Group

Highstar Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The new berth should
help Baltimore attract
higher traffic over the
coming decades and
better compete with
Norfolk and New York
in handling supersized
container ships.