New Orleans Building Corp. Approves Leasing WTC Building for Four Seasons Project
1 April 2015
The Four Seasons New Orleans took another step forward as the New Orleans Building Corp. approved leasing the World Trade Center building for the development project spearheaded by Carpenter & Co. and Woodward.
New Orleans Board Approves Leasing World Trade Center Building for Four Seasons Project
1 April 2015
By Jaquetta White
Pushing aside the objection of one of the teams on the losing end of last week’s decision approving development of a Four Seasons hotel and condominiums inside the former World Trade Center building, the New Orleans Building Corp. on Tuesday gave its executive director permission to sign a lease agreement for the site with the development team of Carpenter & Co. and Woodward Design + Build.
The NOBC is a public benefit corporation that acts as landlord for the city-owned site.
With most of the details hammered out before the Carpenter team was picked, it took just a week for the city and the developers to come to terms on the lease.
The agreement approved Tuesday includes two changes to the deal that won the favor of a five-member selection committee last week.
It removes a cap on rent payments so as to provide more money to the city over the life of the lease, though that portion of the agreement is contingent on the project receiving historic tax credits. The agreement also calls for Carpenter to rent a larger swath of riverfront land than the city originally offered up for development.
The Carpenter team beat out four other groups on March 24 for the right to negotiate a lease agreement with the city for the vacant 33-story office building, built in the 1960s. The team has proposed a $364 million redevelopment of the tower into a 350-room Four Seasons hotel, with 76 hotel-serviced condominiums.
The lease must still be approved by the City Council. It likely will go before the council in early May.
Accommodating the Four Seasons proposal will require the city to work out deals with the Howard Hughes Corp. and the state Department of Transportation and Development, both of which control land in the footprint of the proposed Four Seasons project. The developers’ proposal calls for two new low-rise buildings on either side of the existing structure. The Hughes Corp., which owns the Outlet Collection at Riverwalk, leases land from the city on the Poydras Street side of the building. DOTD controls the ferry terminal on the other side.
Deputy Mayor Cedric Grant, who serves as acting executive director of the NOBC, said the city has talked with both agencies and they are “favorably disposed” toward an arrangement that would involve their giving up some control of those areas.
Under the lease agreement, the developers will pay the city $3.25 million per year in rent for the first 10 years of the lease, $3.75 million annually for years 11 through 20 and, after that, an amount equal to the base rent of $3.75 million times the percentage increase in the consumer price index in the preceding five years.
In their original proposal, the developers capped the rent figure at the base rent times 50 percent of the percentage increase in hotel room revenue. The agreement approved Tuesday would remove that cap if the project receives historic tax credits. The change would mean about $10 million more for the city over the life of the lease, Grant said. The developers have said their proposal can be realized with or without the historic tax credits.
The team also is offering the city a share of the gross revenue from a planned cultural attraction on the site and a share of the proceeds from the sale of any component of the project.
It has asked for a credit on its rent if its property taxes exceed certain established amounts.
Although the agreement cleared the Building Corp.’s board unanimously, it was opposed by an attorney representing Two Canal Street Investors Inc., which placed last in the selection committee’s ranking of the five proposals to redevelop the riverfront property.
Charline Gipson said a consultant’s report summarizing the financial offers made by each team contained a “fatal flaw.”
The report estimated the property taxes each group would pay by assuming that the assessor would value the building at half of the construction cost. The Carpenter proposal came out on top in that measure because its construction budget was nearly $100 million greater than that of its nearest competitor.
Gipson said her clients, after talking with Orleans Parish Assessor Errol Williams, were under the impression that a formula based on net operating income and not construction cost would form the basis for the site’s assessment — a calculation that presumably would have worked in that team’s favor.
Cindy Connick, who was a member of the selection committee, said the Assessor’s Office was consulted during the evaluation process but it declined to provide specific assessments of the site under the various proposals. Instead, she said, consultants for the selection committee used a formula arrived at with the help of the Assessor’s Office and applied evenly to all the proposals to project how much they would pay in property taxes.
Gipson said the committee also did not properly account for the $65 million the Two Canal team offered to pay the city up-front.
“We found a lot of divergent, erroneous information about our proposal,” Gipson said after asking the committee not to adopt the lease, which she said would violate the public lease law.
After the vote, Gipson would not say whether the Two Canal team will continue to pursue its challenge. The developers are “definitely considering all of their options,” she said.
Grant dismissed the complaint, saying that the Carpenter team had the best shot of putting together the financing for its proposal.
The $364 million project is expected to be financed with $238 million in debt, $86 million in equity and $40 million in private capital. The team also will pursue the historic tax credits.
Cascade Investment Group, a holding and investment firm controlled by billionaire Microsoft founder Bill Gates, is an investor in the project.
“What the ultimate evaluation was based on was people putting up real money that we could spend or that could be dedicated to this project and create benefits (to the community),” Grant said. “Some of the proposals didn’t include anything close to a guarantee of the money. You can promise me anything, but show me the money.”