A local developer has acquired a former hotel in the Central Business District with plans to put the property back into commerce.
The New Orleans Redevelopment Fund closed on a deal to purchase the former Warwick Hotel at 1315 Gravier St. via its recently formed NORF 3 Opportunity Zone Fund. The structure sits across the street from Duncan Plaza and near the former Charity Hospital, which is in negotiations to be redeveloped.
The purchase price of the former hotel was not disclosed. The sale occurred on June 4.
The 12-story building has been shuttered since Hurricane Katrina and consists of 130,000 square feet of developable space. A spokeswoman for Hernandez Consulting & Construction, the general contractor on the project, said they are looking at turning it into another hotel or housing development and are receiving “considerable interest” from numerous groups.
She said developers are considering a roughly 140-unit redevelopment, depending on the operator. The total construction cost has not been determined, but work could begin by the end of 2019.
“We are excited to lead this transformative project that will breathe new life into the Charity District,” NORF’s development director Cullan Maumus said in a news release. “It will be a catalyst for the redevelopment of Duncan Plaza, the surrounding neighborhood and this part of the CBD.”
The design team for the project will be a joint venture between local design firms SCNZ Architects and Albert Architecture.
Developers plan to use Historic Tax Credits and possibly New Markets Tax Credits to help finance the rehabilitation. NORF also plans to take advantage of new federal legislation called the Opportunity Zone program, created to revitalize economically distressed communities by using private investments rather than taxpayer dollars.
The program allows developers to invest in real estate or small businesses and defer federal taxes on any recent capital gains until Dec. 31, 2026 while reducing that tax payment by up to 15 percent. Investors may pay as little as zero taxes on potential profits from an Opportunity Fund if the investment is held for 10 years.
Investors have six months to reinvest unrealized capital gains into projects. The gain can be from the sale of any capital asset, including stocks and bonds, real property or a privately held business, providing for a broad investment base. Qualified projects include traditional real property developments and rehabilitations, as well as investments in existing businesses in a zone that may need capital for expansion or retooling.
In Louisiana, Gov. John Bel Edwards has designated 150 Opportunity Zones, 44 of which are in New Orleans and surrounding parishes. The former hotel sits in an Opportunity Zone.
The IRS released an initial round of guidelines in October 2018 that addressed some concerns, mainly in the area of real estate investment to help provide clarity for potential investors. The most recent round of guidelines, released in April, focuses on operating businesses.
According to a news release, NORF 3 has received increased investor interest with a June 28 deadline for investors with capital gains from 2018 taxable partnerships to realize the full potential of the capital gain tax deferral and benefits from qualified Opportunity Zone investment.
NORF also has two private equity real estate investment funds that have helped redevelop over 250,000 square feet of blighted property valued at nearly $40 million. Another 191 residential units were put back in business, and 40 Historic Tax Credit projects have been completed.