Bringing Back the Hibernia Bank Building
19 January 2011
Plans are in place to bring back a downtown icon in the City of New Orleans. The Hibernia Bank Building at 313 Carondelet Street will be renovated into apartments and office space. The team of Woodward Interests and HRI Properties, Inc. will lead the project.
Nearly vacant Hibernia Bank building may be converted into apartments, office space
19 January 2011
The nearly vacant Hibernia Bank building, which for many years was the tallest building in New Orleans and home to the state’s largest bank, may soon have a new life as mixed-income apartments helping to transform downtown New Orleans into a residential neighborhood.
Developers are planning to convert the nearly vacant Hibernia Bank building into mixed-income apartments.
Historic Restoration Inc. and Woodward Interest LLC, a division of Carl E. Woodward LLC, seek to turn the 1921 beaux arts building into 176 mixed-income apartments and two floors of Class A office space with an adjacent parking garage.
Capital One Financial Corp, which bought out Hibernia Corp. in March 2006, would continue to operate its flagship bank location in the lobby of the building.
The 335-foot tall, 23-story Hibernia building was the tallest in Louisiana until it was surpassed by the Louisiana State Capitol in Baton Rouge in 1932, and remained the tallest building in New Orleans until the World Trade Center was built in 1967. The cupola on top of the building, which the bank lights in different colors for holidays throughout the year, once served as a navigational beacon for ships along the Mississippi River, and has been a landmark for generations of New Orleanians.
Hibernia began vacating the building in 2006 as the deal with Capital One was set to close, and slowly moved all of its offices to the Place St. Charles building, where 630 people work on seven floors of the tower. The only part of the Hibernia building that remains in use is the retail bank in the lobby.
If HRI and Woodward are successful with their joint venture, 313 Carondelet Complex LLC, the Hibernia bank building would be the latest effort to transform downtown into a residential neighborhood. According to the Downtown Development District, more than 5,000 people live downtown in 2,821 residences. Another 330 housing units are under construction, and 170 units are poised to begin construction. Still others are on the drawing board.
Capital One declined to talk about plan, saying that it won’t discuss pending real estate deals. HRI said it was unable to talk about the deal because of agreements with Capital One. But the plan was discussed publicly at Tuesday’s meeting of the Industrial Development Board, which by a 12-1 vote, allowed 313 Carondelet Complex to proceed with a $128,464 payment in lieu of taxes, or PILOT, for ten years, to assist with getting the project off the ground.
Pres Kabacoff, chief executive and co-chairman of HRI, said Tuesday that the development team has been trying to pull the project together for nearly five years, but it’s been “very difficult” to make the numbers work because of the tough economic environment and a changing mix of financing tools available to developers.
“We’re putting every effort into making this happen,” Kabacoff said. “If we get an iconic building up and running, I think it does the city and awful lot of good.”
The latest cost challenge, Kabacoff said, is that the state historic tax credit program is set to expire next year, putting $8 million of funding for the project in jeopardy. Another $4 million in state community development block grant funding is also at risk if the project doesn’t get off the ground soon. Contractors will have to work double time — an expensive proposition — to complete the building by the end of the year to obtain a temporary certificate of occupancy. “Every day is a race to the finish,” Kabacoff said.
The 313 Carondelet venture has an agreement to purchase the Hibernia bank building for $6.15 million, but Kabacoff said his team is trying to negotiate the purchase price down a bit further to keep the project feasible because other costs have arisen.
Rebuilding and modernizing the Hibernia bank building is expected to cost about $58 million. HRI and Woodward plan to finance it with a mix of equity from $13.3 million in federal new market tax credits and $16.5 million in federal and state historic tax credits, as well as a loan from Capital One, the community development block grant money and the PILOT.
The PILOT that the Industrial Development Board approved Tuesday was based on the $6.15 million purchase agreement sum, not the value of the building once it is renovated or the reduced price that HRI and Woodward are seeking to pay. Board member John L. Koch voted against the PILOT after raising questions about how the value was set.
The developers agreed to “clawback provisions” that if the financing isn’t as tight on the project as they expect, that they will reduce the level of the PILOT to put more money back in city coffers. The Industrial Development Board is working out details.
They hope to close the deal in March and get started on construction immediately. New Orleans-based Woodward Design+Build is the general contractor, and the developers promised the Industrial Development Board they would make every effort to use local subcontractors and buy materials locally.
If the project gets off the ground, 51 percent of the units will be designated as affordable. That means that about 85 units will be market rate, about 55 units will be available to people who earn at or below 80 percent of New Orleans’ area median income, and the remaining 36 will be for people earning less than 60 percent of area median income.
To help get the project off the ground, Kabacoff said that HRI plans to move its headquarters into the office portion of the building, and rent out the remaining space.
The Central Business District building became largely vacant when businesses moved to gleaming new office towers on Poydras Street in the 1970s and 1980s. In the 1990s and early 2000s, many vacant buildings in the Central Business District were transformed into hotels, but Larry Schedler, who runs an apartment brokerage business and publishes a quarterly newsletter on the New Orleans area apartment market, said that that type of re-use is no longer feasible.
Financing for hotel projects is really difficult, especially with a cash-strapped American public pulling back on vacation spending and corporate America turning to video-conferencing for many meetings, Schedler said. But apartment projects have more financing options, and fit with trends of people desiring to move downtown where they can be closer to entertainment options without having to drive.
The architecture of many attractive buildings like the Hibernia building is also a big sell to many people thinking about becoming downtown dwellers.
While the apartment market elsewhere in the metro area has been a little soft in recent years, downtown has remained strong, even with the addition of new supply, Schedler said. And downtowns have different economics than apartments in other areas; while others might loathe new competition, downtown apartment developers tend to welcome others because it helps build a critical mass, and mutual success helps make the whole area more attractive.
“It starts feeding off of itself,” Schedler said.
Rebecca Mowbray can be reached at email@example.com or 504.826.3417.