A Study of Rent Fee Assessment on the Port Railway Station: The Litigation Case Study of a Korean Container Terminal

Abstract

This study provides a systematic method for determining the proper rent fee of a port railway station with a litigation case study of Busan port container terminal. The Port Rail Station Operating Company (PRSOC) leases and operates the port railway station of the port authority (PA). The PA wants to receive a rent fee with the goal of recovering the investment cost, and the PRSOC wants to pay rent to the extent that it can generate an appropriate profit. In order to reasonably estimate the rent fee, this study attempted using a method of estimating the capacity-based demand of the rail station. A recent discussion of terminal rentals concerns what to rent. That is, will only the infrastructure be leased, or will the substructure and the superstructure be leased? Will the infrastructure, superstructure, and equipment be leased? Rail station capacity encounters a bottleneck when measuring railroad track capacity, i.e. RMGC capacity. In other words, arbitrary demand estimation leads to operating losses for PRSOC and may also cause losses to investors because investment costs cannot be recovered. In this study, data such as investment cost, operating cost, and sales required for the construction of the rail station were collected from the Ministry of Ocean and Fishery, PA, and PRSOC. Based on these data, a proper rent fee is proposed by analyzing the cash flow on the premise of operation for the next 30 years. This study adopts the discounted cashflow (DCF) method because DCF allows an objective and consistent comparison of rent fee levels from the PA and PRSOC perspectives. Using DCF, this study finds that the proper rent fee from the perspective of the PA is USD 397,045, while the PRSOC’s proper rent fee is USD 355,801. Thus, it is reasonable to set the standard for determining the proper rent fee by calculating and comparing the rent fee level from the perspective of PA’s investment cost recovery and PRSOC’s operating balance maintenance perspective. This study suggests that the DCF method should be applied to standardize the rent fee calculation system for the port railway station.