Posted on: August 21 2013 | Posted in: Latest NewsThe City of New Orleans received three proposals from groups interested in redeveloping the former World Trade Center building at the foot of Canal Street.
Former World Trade Center building to remain; Dallas firm recommended as developer
Bruce Eggler, NOLA.com | The Times-Picayune By Bruce Eggler, NOLA.com | The Times-Picayune
August 20, 2013
The former World Trade Center building at the foot of Canal Street -- a vacant 1960s office tower beloved by some New Orleanians and ridiculed by others -- will not be coming down, at least not anytime soon.
A five-member city selection committee voted Tuesday to recommend to the New Orleans Building Corp. that Gatehouse Capital Corp. of Dallas be awarded a contract to redevelop the 33-story structure as a hotel and residential building. The NOBC, a public-benefit corporation, acts as landlord for the city-owned site and building.
In response to a city request for proposals on what to do with the old building, Gatehouse proposed converting the bottom 12 floors into a 245-room upscale W Hotel and floors 13-30 into 280 luxury apartments, with a John Besh-branded restaurant on the first floor and a revolving lounge and restaurant on the top floor. On the Poydras Street side of the building, Gatehouse wants to add a five-story structure to include parking, a ballroom and a rooftop pool for the hotel.
Gatehouse earned an overall score of 405 points out of a possible 500 from the five members of the committee, all high officials of the Landrieu administration. James H. Burch LLC of Clifton, Va., which also wanted to convert the building for hotel and residential use, came in second with 342 points. The Tricentennial Consortium, a coalition of leaders of New Orleans' major tourism organizations who wanted to demolish the building, came in last with a score of 308.
Gatehouse's victory, however, does not guarantee it will end up getting the right to redevelop the building.
The selection committee members indicated dissatisfaction chiefly with two aspects of the Gatehouse proposal. It has offered the city only a $10 million upfront payment, which the city considers far below the value of the property, and it has offered no specifics on how it will meet the city's demand for 35 percent participation in the project by disadvantaged businesses, meaning those owned by minorities or women.
Those issues are expected to be addressed during negotiations between the Building Corp. and Gatehouse.
Deputy Mayor Cedric Grant, chairman of the selection committee and acting chief executive of the NOBC, said he hopes the agency's board of directors can meet within a couple of weeks to begin the negotiations process. He said he hopes a final contract can be agreed on by this fall.
The biggest stumbling block in those talks could be financial issues. Scott Whittaker, a legal adviser to the NOBC and the selection committee, said Gatehouse's offer of an upfront payment of $10 million for a 99-year lease amounted to just $391,000 a year in terms of present value. He said experts consider that amount to be well below the fair market value of a site that has sometimes been called the most valuable piece of real estate in New Orleans.
The Burch proposal, by contrast, offered the city $1.25 million a year during construction and then $1.5 million a year, adjusted for inflation, for the rest of a 99-year lease. Whittaker noted, however, that the city's experts questioned whether those numbers were attainable, suggesting that the Burch proposal underestimated expenses and overestimated likely rental rates for its apartments.
In an Aug. 1 letter to Whittaker, Gatehouse CEO Marty Collins indicated a willingness to revise his company's original $10 million offer, saying it would be willing to pay the city 105 percent of whatever an independent appraisal determines to be the fair market value of the WTC building and land. As an alternative, he offered unspecified "periodic ground lease payments and/or potential revenue sharing with the city, rather than a single lump sum prepaid 99-year lease, if preferred."
Gatehouse estimates the cost of renovating and converting the old building at $190 million and has emphasized the economic value to the city of that spending, plus the property taxes the building would pay and the value of the 2,500 permanent jobs it says the project would create.
The Tricentennial Consortium proposal -- to tear down the old building and in its place create some yet-to-be-determined new attraction that could become an "iconic symbol" of New Orleans and help attract millions of new tourists to the city -- was backed by a virtual Who's Who of leaders of the city's tourist and hospitality organizations, including the Superdome and the Morial Convention Center.
Its proposal seemed to jibe with Mayor Mitch Landrieu's personal preferences, and Chief Administrative Officer Andy Kopplin, a member of the selection committee, confessed Tuesday what had long seemed clear: that he also was drawn to what he called tourism leaders' big vision. "My heart is with the big vision," he said, even though his brain said the city needs a more assured revenue stream than the Tricentennial proposal offered.
The Tricentennial proposal came up short in at least two key areas: the vagueness of its backers' plans about what sort of new "demand generator" might be created at the site, and a lack of identifiable financing, especially after Gov. Bobby Jindal vetoed a bill that would have let the Convention Center put up $25 million to pay for initial work, such as demolishing the old building.
Besides questions about the reliability of its financial projections, the Burch proposal also suffered from doubts about its leading figures, original "visionary" James Burch and the man who later seemed to replace him as leader of the project, Steve Peer. Whittaker told the committee that neither man could point to successfully completed projects on which he had been the lead developer and chief decision-maker.
Despite rejecting the Tricentennial proposal, several committee members said they hope the city-owned public areas around the WTC can be redeveloped in a way to make them more attractive to both tourists and residents, even if there will not be room for a major new structure.
The consortium issued a statement late Tuesday afternoon saying that its members "will continue to take a leadership role in the development of those public spaces" around the WTC building. "Our goal of drawing locals and visitors to a reconnection with the riverfront, stimulating the economy and providing a compelling commemoration of the city's tricentennial, is steadfast," the group said.
In its original proposal, Gatehouse suggested building a "Tricentennial Sky Wheel" -- a smaller version of the London Eye, a giant Ferris wheel on the banks of the Thames River -- at Spanish Plaza near the WTC building, but it has since dropped that idea.
The Tricentennial proposal to tear down the WTC building inspired a flood of protests from preservationists, many of them backed by Gatehouse and its local partners. The preservationists emphasized the importance of the building, designed by well-known modernist architect Edward Durell Stone, and the Louisiana Landmarks Society placed the WTC at the top of its 2013 list of New Orleans' nine most endangered historical and architectural landmarks.
Besides Grant and Kopplin, the other members of the selection committee were William Gilchrist, director of place-based planning for the administration; Jeff Hebert, executive director of the New Orleans Redevelopment Authority; and Cynthia Connick, executive director of the Canal Street Development Corp.
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