N.Y.-N.J. ports seek $37 million for transfer of Howland Hook lease

N.Y.-N.J. ports seek $37 million for transfer of Howland Hook lease The Port Authority of New York and New Jersey is asking for $37 million before it will approve Orient Overseas International Ltd.’s transfer of the lease of the New York Container Terminal (NYCT) at Howland Hook on Staten Island to the Ontario Teachers Pension Plan Board. It also wants a commitment from the new owners to invest $17 million in the facility.
   In a letter to C.C. Tung, chief executive officer of the Hong Kong based shipping company, Richard Larrabee, director of authority’s port department notes, that the agency has invested more than $111 million in extending the berth and rehabilitating the terminal, enhancing its value.
   “Once OOIL decided to move away from operating the terminal and use the Howland Hook lease as a financial instrument, it became our responsibility, as a prudent public landlord, to ensure that the terminal would continue to have adequate stewardship and capital investment under the next tenant,” Larrabee wrote.
   OOIL, parent company of the container shipping line Orient Overseas Container Line, agreed in November to sell the Howland Hook terminal, the Global Terminal on privately owned land in New Jersey, and two terminals in Vancouver, British Columbia to the Ontario teachers for $2.4 billion.
   Larrabee said the port authority is asking for about one-third of what it spent on rehabilitation of the terminal, which is “absolutely consistent with the terms and conditions” required when it allowed Dubai Ports World, the United Arab Emirates-based port company, to transfer its lease on Port Newark Container Terminal to the AIG insurance company earlier this year.
   “Applying the same math here, we arrive at our $37 million figure.' He notes that the new owners of the Newark terminal “committed to invest approximately $10,000 per year per acre for each year left on the lease.    When we apply the same standard in this case, it translates into a $17 million commitment for NYCT.”
   Larrabee notes that at New York Container Terminal, unlike other terminals, the port authority “is responsible for pavement maintenance, and we believe that your profit from the sale of the lease reflects, in part, the ongoing value of the port authority’s pavement maintenance responsibility. Finally, the port authority requires a security deposit equal to one year’s rent; this is also consistent with the terms of the PNCT lease.”
   Larrabee notes that the need for port authority consent to terminal transfers “is intended to ensure both the suitability of any new terminal operator and to protect the public’s capacity to continue investing in the port.”
   He adds that “any capital expenditures recovered by the port authority will be reinvested in port facilities, and will benefit present and future port operators, and ultimately the citizens of New York and New Jersey whom we serve.”
   He concludes by saying that the agency’s staff is prepared to make a recommendation to Anthony Shorris, the agency’s director, in favor of granting the transfer if the conditions outlined in the letter are met.
   Jim Devine, president of New York Container Terminal, said the company did not have any comment on the letter.
   The port authority is expected to make a request for reimbursement for capital investments from Maher Terminals in its planned sale to Deutsche Bank, announced last month.