Page 446 - WhyAsInY

Why (as in yaverbaum)
could be shaped so as to make it economically viable. (Bankers Trust was still the owner of the money-losing site and was looking for any way out.) To accommodate the transaction, the City, acting through its Pub- lic Development Corporation (the “PDC”), and the State, acting through its Urban Development Corporation (the “UDC”), cooperated with Portman to shape a venture the structure of which was both novel and complex: The UDC would own both the Broadway blockfront land and, among other things, the land underlying the Piccadilly Hotel (no more need for the Straddle Agreement!). Notably, it would also own the land under the buildings that housed the Helen Hayes and Morosco Theatres. Because those theaters would have to be demolished to make way for the hotel, Portman would be obligated to build a large, state-of-the-art theater within the new hotel. Portman would first acquire all of the land, using the threat of UDC’s statutory power to condemn the property (with compensation) as leverage, then deed it to the UDC, and then lease it back pursuant to a ninety-nine-year “ground lease” that would permit the construction and, because of its specially structured rent
provisions, the successful operation of the project.
The PDC would also have an interest in the land. Chemical Bank
would lead a consortium of lenders to provide construction financing, originally estimated to be more than a hefty $350 million (far more than $1 billion, today), and three major institutional lenders would commit to provide the long-term “permanent” financing, receiving a mortgage on Portman’s leasehold interest as their security. In addition, the federal government, through President Jimmy Carter’s Department of Housing and Urban Development, would commit to provide an additional $20 million, pursuant to a “UDAG loan” (a loan made in the form of an Urban Development Action Grant). The UDAG loan would also be secured by the leasehold and the hotel, but it would be subordinate to the institutional permanent financing. The new theater would enter into a management agreement with either the Schubert organization or, as it ultimately turned out, the Nederlander organization. And, Marriott would form a partnership with Portman to own the ground lease and the hotel, and enter into an agreement to manage the hotel operations.
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