NEW ORLEANS, LA - Amidst a recession that has frozen New Orleans' once-emerging condo boom, apartment projects are proving their resilience as they move forward with the help of subsidies unavailable to their purchase-only peers. "Condos are cyclical and unfortunately for New Orleans, we are in a tough part of the cycle. Apartments have certain built-in immunities," said Brian Gibbs, a downtown developer best known for the Civic Theater apartments on Baronne Street in the Warehouse District.
Gibbs is one of the few downtown New Orleans developers who can speak about the rough condo cycle without raising too many bad memories. The Tulane University graduate chose to steer clear of the condo craze after Hurricane Katrina, and instead build another apartment building. His 930 Poydras St. skyscraper, a 37-story Eskew+Dumez+Ripple design now under construction, is one of only six major downtown residential projects that appear to have averted the credit crisis.
Of the six, only one, KFK Group's luxury condo conversion of the Krauss Department Store at 1201 Canal St., contains ownership units. The other four are also apartment buildings, including the former National American Bank building at 200 Carondelet St. and three market-rate conversions of nearby historic buildings by architect-developer Marcel Wisznia
None of the projects would likely have gotten off the ground without federal and state historic renovation tax credits, or in the case of Gibbs' project, bonus depreciation benefits passed on under the Gulf Opportunity Zone legislation of 2005.
One of the developments, the $26.5 million mixed-income rental conversion of the former National American Bank building by Ellis Diversified and Reliance Housing Foundation, also used low-income housing tax credits.
As the gloomy economy grinds lending and building to a halt, it becomes increasingly apparent that downtown New Orleans will end the decade with far fewer condos than anticipated in the days after Katrina. Of 14 major downtown residential condo projects announced after the storm, the credit market has indefinitely delayed six.
Projects on indeterminate hold include the World Trade Center's redevelopment into a hotel, condo, retail and museum complex and the Trump International Hotel and Tower of New Orleans. On the edge of the Warehouse District on Annunciation Street, weeds sprout on the space reserved for Traçage, a chic, 24-story Warehouse District condo project that was grounded by a lawsuit.
Three other projects, Felicity Crossing, Vantage Tower Condominiums and condos planned for the Royal Cosmopolitan hotel on Royal Street, have been scrapped completely. In the Central Business District, the only sign of life anywhere near the solid granite façade of empty 210 Baronne St. is a glossy banner advertising the imminent arrival of luxury condos. "We, along with pretty much everyone else downtown, are at the market's mercy," said Denise Gaines, chief operating officer for Kailas Cos., which lacks the financing necessary to move forward with the long awaited 201 Baronne redevelopment.
But even as the condo market sinks along with 401(k) accounts nationwide, the appetite for apartments appears stable. In the Central Business District, apartment construction appears to be weathering the economic downturn with developers using rental-friendly subsidies as armor against the economy. Around the corner from Kailas' stagnated condo building, cable installers paid a visit recently to the ornate, high-ceilinged lobby of 200 Carondelet St. The landmark project's relative recession-proof status could make it a model for future development in the CBD, where there are many buildings saddled with high redevelopment costs and a lack of investors.
In other cities, mixed-income housing is a common feature of downtown areas. But in New Orleans, such development is restricted to a few new apartment buildings now under construction on Tulane Avenue. "It's a trend we have seen since in other parts of the country and elsewhere in the city since Katrina and certainly, it makes the numbers easier," said Henry Charlot, economic development director for the Downtown Development District.
While low-income housing tax credits are one way developers can cut costs, Charlot and others say they believe the primary subsidy being used downtown is likely to remain historic renovation tax credits because of developers' desire to maintain the downtown address as a luxury brand. "The downtown has impaired certain projects from moving forward but downtown is still a great urban center where people want to live," Wisznia said. "The only difference is the amount of time it will take to bring them all here."
Source: New Orleans City Business