◼ FINANCE September 30, 2019
25THEBOTTOMLINE A planbackedbyFortressfundswouldwhisk
CaliforniatouriststoLasVegasat 150 mph.Butfirsttheywould
havetogettoa trainstation 90 milesfromdowntownL.A.Orlando, which it expects to open in 2022.
There’s also no word on when additional sta-
tions may open in Tampa and at Walt Disney World.
Tapping Disney tourists was an ultimate goal
pitched to buyers of the high-yield municipal debt
the company sold in April and June for the Orlando
expansion. The sales occurred several months after
Virgin Trains put its initial public offering on hold.
Sincethen,yieldsontheunratedbondssuggestthe
marketis skepticalthattheFloridatrainlinewill
workoutaswellashoped.
“IfI getinvolvedina projectlikethat,having
seenwhatwentoninFlorida,I wouldhavetobe
somewhatsuspectoftheperfectendingandper-
fectoutcome,”saysJimColby,seniormunici-
palstrategistatVanEckAssociatesCorp.,which
holdssomeoftheFloridasecurities.VirginTrains
executivessaytheirmodelofservingareasthatare
“toolongtodrive,tooshorttofly”works.“Faster
andcheaperintransportationalwayswin,”says
spokesmanBenPorritt.Thecompanywasknown
asBrightlinebeforea marketingdeallastyear
withRichardBranson’sVirginGroup,whichalso
boughta smallpieceofit.SoftBankGroupCorp.
ownsFortress.
TheprospectivestationinCaliforniais ina part
ofSanBernardinoCountythatwashithardbythe
housingbust.Porrittcallsit a “strategiclocation”
fordriversfromLosAngelesdecidingwhetherto
pressontoVegas.Oncetheymaketheirwayto
theAppleValleystation,passengerscoulddrop
offtheirbags.They’dseethemagainintheirhotel
roomsaftera tripincludingfoodandbeverageser-
vicesandfreeWi-Fi.“Youwouldbeabletoessen-
tiallystartyoureveninginLasVegasfromthe
secondyoujumpontoourtrain,”Porrittsays.
AneconomicanalysiscommissionedbyVirgin
Trainspredictstheprojectwillemploythousands
ofconstructionworkersandmorethan 500 people
aftercompletion,aswellasreducecarbonemis-
sionsbytaking4.5million cars off the freeway. But
the train ticket has to compete with direct ways to
get to Vegas. Over a mid-October weekend, peo-
ple can fly there from Los Angeles International
Airport for about $200 or rent a midsize car for
about $70 a day, according to an online search.
John Miller, co-head of fixed income at Nuveen
LLC, which holds a lot of the bonds sold in April for
the Florida rail, isn’t yet sold on the California proj-
ect. The location outside of Los Angeles is a “con-
cern,” and he wants to see cost details.
The Florida line began running in January
- Passengers from Miami sitting in the most
expensive cars (about $40) can order compli-
mentary bloody marys until the train pulls into the
WestPalmBeachstationanhourand 15 minutes
later.Thetaxpayer-fundedstationat Orlando
InternationalAirportis slatedfor2022,andstations
inAventura,BocaRaton,andthePortofMiamiwill
openin2020.
Thatwouldboostridership.Overthefirsteight
monthsofthisyear,639,373passengersrodethe
railline,makingit unlikelytheyearwillendwith
morethan 2 milliontotalcustomers,whichwastheexpectationina studydistributedtoinvestors.
Thereare 390 million trips taken annually between
southeast Florida and Orlando; the company says
it needs to provide service to just 2% of that total
to succeed.
It’s “incredibly optimistic” for the company to
seek additional financing with its key Orlando expan-
sion under way, says Nicholos Venditti, a portfolio
manager at Thornburg Investment Management. But
it’s also smart, he says, given today’s low interest
rates and a bullish environment for bonds. “They’re
in a world where investors broadly are yield-
starved,” he says. “They will be able to get it done
at kind of unprecedented levels for a project of this
size and with this kind of risk.” �Romy Varghese
and Nathan Crooks, with Jonathan Levin◀ Virgin Group’s
Branson (second from
right) at the Florida line’s
Miami hubLas Vegas by Rail
A proposednewlineshortensthedrivebutdoesn’treachL.A.Los Angeles
Union StationSanta
Barbara PalmdaleBakersfieldOtherrail PlannedVirginTrainsUSAlineVictor Valley15105Las
Vegas50 mi.