In The News › Developer, city reach agreement on N.O. mall

May 9, 2009

Source: Times Picayune

Filed under: Orleans Parish, Taxation & Assessments

Developer, city reach agreement on N.O. mall

Saturday, May 09, 2009
By Kate Moran
Business writer

The owner of Lake Forest Plaza agreed Friday to repay a delinquent loan he and his former business partners owe the city, while persuading Mayor Ray Nagin to pour additional public money into redeveloping the former shopping center.

The loan has been in court since 2004, when the city sued owners Gowri Kailas and Ashton Ryan Jr. to recover the arrears. Ryan bought Kailas out of the project this year and said he has assembled a new group of investors who can repay the city and build a new shopping mall.

The city, in return for getting its money back, has agreed to support the formation of a tax-increment financing district at Lake Forest Plaza. A portion of the sales tax collected in such districts helps support the sale of bonds and ultimately allows the developer to offer retailers more affordable rents.

A board that includes the mayor, two City Council members and a state senator and representative must still approve the tax-increment financing district, but Ryan said he fully expected the support of its members. The nonpartisan Bureau of Governmental Research has previously opposed the TIF because of the debt the Lake Forest Plaza owners owed the city.

Ryan and Mayor Ray Nagin signed a four-page agreement Friday that they said should spur the rebuilding of the troubled shopping center, which had deteriorated even before Hurricane Katrina, and help restore retail to devastated eastern New Orleans.

“We think this is a great opportunity to bring a lot of jobs and a lot of economic development to an area that deserves it,” said Ryan, who is also the president of First NBC Bank. “We hope to convince a lot of people to come back to their homes.”

Ryan has 30 days to rally his group of investors and deposit nearly $1.6 million in escrow to cover the balance of the city loan plus attorneys fees. The city has agreed to forgive $1.2 million in interest and $165,000 in penalties owed by Ryan’s company, Lake Forest Plaza LLC, provided that it meets certain benchmarks for redeveloping the mall. Those benchmarks were not described in the agreement.

Nagin also pledged $1 million to relocate utility and sewer lines and to make other infrastructure improvements at the site. The mayor also agreed to support Ryan’s application for tax-exempt Gulf Opportunity Zone bonds, an incentive Congress created to spur private investment in the region after Katrina.

“We are ready to move forward with a first-class development. This will benefit the citizens of New Orleans East and throughout our city and region,” Nagin said in a prepared statement.

At the same time Ryan bought Kailas out of the Lake Forest Plaza, he recruited local attorney Cesar Burgos to serve as lead developer of the new shopping center. Burgos is a longtime supporter of Ray Nagin whom the mayor appointed as chairman of the Regional Transit Authority board in 2006.

Ryan said he met Burgos after the storm when he applied for a loan through First NBC to buy some investment property. He said he was impressed by his work on the Bring New Orleans Back Commission and by his energy and enthusiasm. He also thought Burgos would have a better feel for the local market than a developer brought in from outside the area.

In a phone interview Friday evening, Burgos said he hoped to bring outlet stores to Lake Forest Plaza to lure shoppers not only from eastern New Orleans, but from all across the city and its surrounding parishes. Ryan and Burgos also expressed an interest in helping to restore the Grand Theater, a 12-screen movie house next to Lake Forest Plaza whose owners also owe an economic development debt to the city.

By coincidence, a Civil District Court judge in New Orleans ruled Friday that Grand of the East, the development partnership that owns the movie theater, had to pay the city some of the insurance proceeds it collected after Katrina to help satisfy the past-due debt.

That partnership received two checks totaling $3.19 million from Travelers Indemnity Co. to cover the losses it sustained on the theater during the storm. Grand of the East used a portion of the proceeds to pay down other debts, and Judge Herbert Cade ruled Friday that the partnership had to forward the balance of $2.3 million to the city of New Orleans.

The city had loaned the partnership $5 million in 2002 to finance construction of the movie theater. The group, run by Liberty Bank chief executive Alden McDonald Jr., fell behind on payments starting in 2003. The insurance proceeds Grand of the East will pay to the city will not fully satisfy the debt, and a city spokeswoman said Friday that a deal has not yet been worked out for how the rest would be repaid.

May 9, 2009

Source: Times Picayune

Filed under: Orleans Parish, Taxation & Assessments

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