Talking Back

PortSL CEO responds to critics, shares vision for Avondale

BY RICH COLLINS AND KIM SINGLETARY

Paul Matthews, CEO of the Port of South Louisiana, sat down with Biz New Orleans recently to provide an update on the port’s plan to purchase the Avondale Global Gateway for $445 million from Virginia-based maritime company T. Parker Host.

PortSL’s proposal, which was announced in January, has its critics. Some say the price is too high, the property needs too much work and PortSL shouldn’t be doing deals in the jurisdiction of the Port of New Orleans. But, despite the pushback, the plan has been blessed by the Jefferson Parish Council, the Jefferson Business Council and others who view it as an economic development win for the parish.

This is the second half of the interview. The first half is available on bizneworleans.com.

One of the big critiques of the potential Avondale deal is the $445 price tag. Where did that number come from?

It came from an appraisal provided by Cook, Moore, Davenport and Associates. As a public entity, when we try to acquire property, we have to get an appraisal. And we can only buy at market value. It’s based on operations there, the revenue that’s being generated. This is a fully functioning operating terminal that’s moving cargo and has lease agreements on it.

The appraisal said that if we were to build what’s there already from scratch [it would cost somewhere in the range of] a billion dollars.

In December of 2021, the Bond Commission approved $300 million in Plaquemines for docks and wharves on a piece of property that had nothing on it. [And that was just] to build the numbers. We have no interest in rushing a process of this magnitude. We are aggressive with the timeline because we like to be aggressive, but we have to pull back at the right time. So if the revenue bond report comes in at $375 or $400 million, do you either find the other $45-plus million to buy it or negotiate a new price? just the docks and floors, not warehousing, rail, cranes, etc. We’re going for a 254-acre facility with four docks, warehousing, rail components and cranes in the sky, and with revenue already generating on the property,

DID YOU KNOW? Avondale Shipyard had been closed for exactly four years when T. Parker Host took over the 254-acre site in October 2018. The site was purchased for $60 million and has since received $150 million in repairs and upgrades.

Exactly, that’s what happens. It’s no different than buying a house.

But only a few tenants. That’s another criticism: that Host was hoping for more revenue by this point.

Right, and they’ve done an incredible job when you look at what they had to deal with: purchasing it, getting it ready to go, dealing with the high river, the low river and the pandemic. And for us, we’re seeing that the revenue is going to pay for the note. That’s the plan. And that’s why I say if the math doesn’t work, we walk away. But if the math works, and we get all the financing done, we’re gonna move forward.

What were Avondale’s gross and net revenues last year?

I would defer to Host on their revenues.* [“Host reported that in 2022 it grossed $46 million in total revenue at Avondale Global Gateway from the property and from stevedoring. It says its net revenue at Avondale for the last three quarters of 2022 exceeded $20 million from the same sources.”]

But you have to put more money into it as well, right?

We’re going to look at trying to attract federal dollars to potentially expand the rail and then also add additional docks, but that’s a long-term play. Do you provide the appraisal to the Bond Commission?

Yes. Our bond counsel [Foley & Judell LLP] works with the staff there, and they go through

Where are you in the process?

The execution of the purchase and sale agreement in January triggered the beginning of a due diligence process that includes a financial feasibility study and an environmental assessment, and is meant to determine several things, including whether the financials can support that purchase price. We are currently in that process.

PortSL is conducting further financial analyses with the assistance of bond counsel, a financial advisor, our underwriters and our other consultants to ensure the cash flow projections, which were largely the basis for the appraisal, are reliable and sufficient to support the debt service of the bonds.

Those reviews will be available prior to the Bond Commission meeting where we will seek approval. Until the due diligence period is complete, it is premature to articulate a clear picture of how the financing of the project will ultimately be structured. As I’ve stated, this is a process that will not be rushed.

Some observers say the lower Mississippi River would benefit from one coordinated port system instead of five different authorities. What are your thoughts about that?

We can’t compare ourselves to Alabama or Mississippi, because they have different dynamics. And [a structure like ours] works in other states. Florida has a port in Fort Lauderdale and PortMiami 45 minutes away, and those are two of the top cruise ports in the world. There’s Los Angeles and Long Beach. And look at Texas: nobody’s complaining about Port Houston and the Port of Galveston. So it can work with having multiple ports in one state. And I think we do that very well. T