The Port of South Louisiana's agreement to buy the former Avondale shipyard for nearly $450 million was inked without discussions with other area port officials, civic leaders or Gov. John Bel Edwards, who said on Wednesday that he was withholding support for the deal until a number of questions were resolved.
Edwards, long a cheerleader for redevelopment at the 254-acre site, wasn't told of the acquisition until after the port's board of commissioners had already voted to approve the deal on Jan. 9.
Neither were officials from the Port of New Orleans, which is a separate state entity from the Port of South Louisiana but a critical partner in developing infrastructure for global trade along the Mississippi River.
The deal is contingent on approval of hundreds of millions of dollars in state-backed bonds, and would represent a major expansion of the port, extending its reach beyond St. Charles, St. James and St. John the Baptist parishes into Jefferson Parish, which is within the Port of New Orleans' jurisdiction.
But port officials have released little information publicly to justify the $445 million purchase from private port operator T. Parker Host, which bought the site four years ago for $60 million. So far, the port has declined to provide any independent assessments of the site or how it determined what operating the port would be worth.
'A number of questions'
Without Edwards' support, getting the financing approved by the state Bond Commission could prove difficult. On Wednesday, Edwards spokesperson Eric Holl said in a prepared statement that "there's a lot of due diligence" and "a number of questions" that are still outstanding about whether the deal is a good one for taxpayers, who would be on the hook to cover borrowing costs should the site be unable to do so.
"At this time, he (Edwards) has instructed both DOTD and LED to look into this project to determine whether it's worthy of the administration's support," said Holl, referring to the state departments of transportation and economic development.
The Avondale shipyard was once one of the state's largest employers, building vessels for the U.S. Navy and other organizations for nearly 100 years. But business dwindled and the last ship rolled off its docks more than a decade ago.
In 2018, Huntington Ingalls sold the site to T. Parker Host. The company said it invested $150 million as part of its plans to turn the area into a multi-modal logistics and manufacturing hub.
The pandemic, Hurricane Ida and other issues slowed the company's progress in upgrading the site, removing toxic debris and attracting new tenants. So far, the site employs about 300 people, but the company has yet to find any "anchor tenants" that would help it reach an employment target of 2,000 workers in coming years.
'A very, very high number'
Without an independent assessment of the site, civic leaders and former port officials questioned why the site's value would have risen so much, so quickly, to justify the price the Port of South Louisiana is paying.
“That appears to be a very, very high number,” said Greg Rusovich, CEO of Transoceanic Development and chairman of the Louisiana Board of International Commerce, a state-run body tasked with coordinating Louisiana’s port strategy. “I don’t know how they arrived at that figure, what due diligence has been done and how it is going to make an acceptable rate of return for that investment.”
Port of South Louisiana executive director Paul Matthews said Thursday after announcing the deal that the rationale to buy the site, which was renamed the Avondale Global Gateway last October, was to enable the port to make the longer-term, job-creating investments that would be more difficult for a private owner to make.
Also, he said, having a state body owning the site would be better for attracting government grants for infrastructure improvements.
Matthews has so far declined to discuss the details of the price and has cited a non-disclosure agreement for the delay in disclosing the appraisal.
But publicly available information indicates that the port is offering roughly ten times the site's 2022 revenues of $46 million, a figure that was shared by T. Parker Host.
Host spokesman Jeff Keaver noted that Avondale’s profits have been rising sharply in recent months. The company broke even in the first three months last year and made a net profit of $20 million for the rest of the year, he said.
“In December 2022 alone, T. Parker Host net was more than $3 million at the site,” he said.
It’s not clear if those are the net earnings figures that factored into any port valuation or appraisal, but last year’s net profit would mean the Port of South Louisiana would be paying more than 22 times annual earnings.
Former state Sen. Conrad Appel, a former chairman of the Port of New Orleans board, questioned whether the deal adds up.
“The bottom line is it makes no sense to me,” he said. “You’ve got a private operator doing what they say is a very successful operation there. Why would the state commit to guaranteeing half-a-billion dollars in loans to take the private operator out of it, so the state assumes the risk of failure? It just makes no sense.”
To be sure, there are a number of supporters of the deal. The port's board of commissioners, six of whom were appointed by Edwards, approved the acquisition. Jefferson Parish President Cynthia Lee Sheng also voiced her support after the announcement. And state Rep. Kyle Green, a Democrat whose district includes the Avondale site, also welcomed the deal.
“T Parker Host has done a marvelous job from the point they acquired the property until now,” he said. “Have we achieved the goals of job creation and tenants? No. But if there’s an opportunity to grow it and further revitalize the region, I think we ought to take that opportunity.”
Port of New Orleans
Still, a broader concern for Rusovich and others is that the deal is emblematic of Louisiana’s long struggle to develop a coordinated port strategy.
“It is absolutely critical for the state to have a cohesive and coordinated strategy on trade and port activities otherwise you get too much parochialism and end up looking disorganized to the world,” he said. “What we end up doing is cannibalizing one another.”
Appel echoed that worry, saying the Port of South Louisiana would simply undercut other ports, shuffling around the same limited amount of commerce on the river.
The Port of New Orleans, within whose jurisdiction the Avondale site is located, was not consulted on the acquisition, according to spokesperson Kimberly Curth.
“Port NOLA was not made aware of the Port of South Louisiana’s intent to enter into a purchase agreement for Avondale Marine until the public announcement was made last week,” she said, adding that the port “is interested in learning the details of this agreement and how the proposed acquisition plans to align with a regional and statewide trade strategy for the success of Jefferson Parish and Avondale.”
Matthews has said in interviews over the last week that he sees the deal being mutually beneficial for the five southern Louisiana ports, including the Port of New Orleans, which he said would benefit from increased traffic at Avondale's docks.
The Port of New Orleans confirmed that it earned just $20,000 from Avondale last year even as revenue from the site reached $46 million.
Adam Anderson, CEO of Host, said that one reason it makes sense for the state-owned port to buy it is that it would help attract government money.
“They can supercharge it with access to federal funding and we can help them maintain it as a world-class terminal operator,” he said.
But Rusovich worries that a larger Port of South Louisiana would just end up competing with Port of New Orleans and the other smaller state ports for federal infrastructure dollars.
He notes that Avondale’s master plan, produced before the deal was announced, calls for about $880 million of additional infrastructure spending over the next few years to make it competitive.
“It’s like going into a football game without a playbook,” he said. “Alabama, Georgia, Florida, Texas – they’re all going out with one face to raise infrastructure money and to sell to the world. We’re not.”