Lured by congressionally authorized tax credits and other financial incentives after Hurricane Katrina, a procession of developers announced plans to build high-rises.
But 20 months after the storm, most have fallen by the wayside. The slow pace of the recovery gets much of the blame. New Orleans still has no comprehensive rebuilding blueprint, and funding is falling far short of planners’ expectations.
Adding to the tension for commercial investors: Construction and insurance costs have soared.
“There have been a lot of announcements, but you don’t see a lot of cranes, do you?” said Michael Siegel, executive vice president of Corporate Realty Inc., a New Orleans-based brokerage. “I think we all underestimated how long this (the recovery) was going to take.”
At least one big plan — a $400 million proposal by Donald Trump to construct the city’s tallest building — is going ahead, although the only visible sign at the planned site of the Trump International Hotel & Tower is the tycoon’s name painted on a brick-wall mural. Every weekday morning, cars fill the parking lot where the 70-story building is to be built.
Not to worry, said Trump’s son, Donald Jr. The city’s slow recovery, he said, hasn’t derailed the plan to build more than 700 units of condos and hotel rooms in the city’s central business district. A sales office is expected to open near the site in less than three months, he said.
But while the Trump proposal is making its way through the city approval process, most other projects have seen more hype than hard hats. Many have stalled or fallen apart.
David da Cunha, president of the commercial investment division for the New Orleans Metropolitan Association of Realtors, said many developers are waiting for government leaders to devise a clear rebuilding plan before they invest. “I think that’s what is slowing things down,” he said.
Redevelopment proposals are making their way through the city approval process, and the city’s recovery director, Ed Blakely, hopes the pace of reconstruction will pick up by fall. Blakely envisions a $1 billion program of mixed-use redevelopment, but his funding source — the federal government — has only $117 million available for the task.
Doubts about the strength of the city’s flood protection system also are weighing on developers’ minds, said city planning administrator Arlen Brunson. When Katrina struck on Aug. 29, 2005, levees broke and flooded about 80 percent of New Orleans. The water extended well into the business district, and hurricane-force winds blew out windows in many high-rises.
The Army Corps of Engineers is pumping billions of dollars into flood protection improvements. But the Corps itself acknowledges some levees are not up to federally mandated standards set before Katrina.
The Trumps, at least, have not been deterred. “This is going to be a big statement for the city and its recovery,” Donald Trump Jr. said recently. “It’s not charity, but we do think it’s one of America’s great cities and we want to be there to support it any way we can.”
The Trump project is one of eight new luxury condo complexes, totaling more than 8,000 units, approved by the city planning commission since Katrina. At least one of those projects, Vantage Tower, has fallen apart.
In January 2006, Trey Cefalu announced plans to build the 25-story condo complex in the central business district. Prospective buyers reserved 105 of 219 units at Vantage Tower, but about half of them backed out after the developers raised prices to offset a 30 percent increase in construction costs.
Cefalu said he decided to shelve Vantage Tower in February.
“We’re taking a wait-and-see attitude to see where construction costs go,” he said.
Other developers say they aren’t giving up on the market. The first high-rise project to break ground could be Tracage (the French word for “loft”), a 24-story condo complex planned for the Warehouse District.
Jason Voyles, the Jackson, Miss.-based developer of the $60 million project, said he acquired rights to the property before Katrina, but didn’t close the deal until after the storm.
“We were committed to New Orleans and wanted to make it happen,” Voyles said.
Voyles said he has pre-sold 65 percent of 126 units, which range in price from $266,000 to $2.5 million. Construction will begin sometime this fall, he added.
“We believe in the project. We believe in the city. We are not scared to take calculated risks,” he said.
The city hasn’t seen many commercially driven projects that match the scale of the residential high-rises proposed by Trump and other developers. A notable exception is a $715 million redevelopment announced last May by Strategic Hotels and Resorts, Chicago-based owners of the Hyatt Regency Hotel in New Orleans.
The company’s blueprint called for opening a park, a National Jazz Center and government offices along with repairing and renovating the hotel, which is next to the Louisiana Superdome. The high-rise hotel was heavily damaged by Katrina, and is expected to reopen next year. Strategic hasn’t set a timetable for construction on the rest of the project.
Company chief executive Laurence Geller, said plans for the jazz center have been adjusted to reflect “all of the real estate hurdles we encountered.” He described New Orleans as “a challenging city in which to get things done.”
The city’s overall rebuilding hasn’t moved at the anticipated pace, but there has been progress, he wrote in an e-mail to The Associated Press.
“We remain optimistic that the local, state and federal governments will act in concert and build momentum,” Geller wrote.
Next to the Hyatt and across from the Superdome — the refurbished stadium that’s perhaps the most positive symbol of the city’s recovery — is a pockmarked office building that sends a very different message about progress in New Orleans.
The storm-shattered windows on Dominion Tower seem out of place at the heart of the city’s bustling business district, where top-of-the-line high-rises have more tenants than before the hurricane. Market watchers say that’s because many smaller or older office buildings have not been repaired.
The 26-story Dominion Tower, which includes the New Orleans Shopping Centre, is one of several office buildings owned by Judah Hertz. The Santa Monica, Calif.-based real estate investor said he will begin repairing broken windows soon, but doesn’t have any firm plans to reopen either the office building or the shopping center. Macy’s, the shopping mall’s major tenant, has said it will not reopen its downtown store or another in suburban Kenner.
“We’re just going over our different options,” Hertz said.
