In The News › Opinion: City needs to sell 2 Canal St.

Sep 2, 2014

Source: CityBusiness

Filed under: City Government, Orleans Parish, World Trade Center

Opinion: City needs to sell 2 Canal St.

By CityBusiness Editorial

September 2, 2014

There’s no reason for Mayor Mitch Landrieu to take too many lumps when it comes to the 33-story tower on the Mississippi Riverfront that was once home to the World Trade Center. His administration is only the latest to fail to put the city-owned property back into commerce.

For more than 15 years, the building at 2 Canal St. has faded on the city skyline to the point that it has become a hazard, with pieces of soffit falling some 400 feet to the ground in 2011. While not structural in nature, the damage served as a reminder of the inability to find a workable redevelopment plan for the building.

This month, the city will issue another request for proposals — the second under Landrieu’s watch and the fourth since 1998 — seeking new ideas for the site.

It’s high time for the city to remove this burdensome building from its real estate portfolio and end its fruitless quest for a long-term lessee who will foot the bill for major upgrades to a property it doesn’t own. The Landrieu administration should follow the suggestion of the Bureau of Government Research, which this week repeated a call it first made in 2009: Sell 2 Canal St.

“The city should set a minimum price that approximates fair market value,” BGR’s latest report states, “and sell to the highest bidder willing to accept a redevelopment timeline with penalties, including a recapture provision, for nonperformance.”

The city has long resisted selling the building, arguing that its greater value and revenue potential would come from leasing it. Officials against a sale maintain the continuous stream of rent payments from a long-term lease would provide the city with more money than selling the building.

That stance is essentially pointless as long as the tower remains empty, and BGR feels the city could create a comparable source of steady income by investing the proceeds of a sale. Using the example of a developer offering $25 million in present value to lease the building, the bureau calculates that the city would receive $1.1 million annually over a 99-year lease, factoring in adjustments for inflation every five years.

Investing $25 million from a sale would also generate a return of about $1 million each year, based on BGR’s conservative interest rate projections for long-term bonds and U.S. Treasury debt.

BGR also notes that selling the building through a bid process would be more transparent than using an RFP for leasing and redevelopment, with the subjectivity of a bid amount being preferable to the objectivity and negotiation of a development proposal. Plus, a sale removes the need for city incentives, which sullied the original redevelopment proposal back in 1998.

The city has already declared that the value of 2 Canal St. based on its most recent appraisal is $23.5 million. BGR believes this is a good opening bid amount, which sets a clear starting point for investors. It also notes selling the building would put the property on city property tax rolls.

Rather than continuing to beat a dead horse by insisting on a lease, the Landrieu administration could give new life to the building by selling it outright. Private development is a driving force in downtown New Orleans at the moment, and 2 Canal St. is an example where government needs to get out of the way.

Sep 2, 2014

Source: CityBusiness

Filed under: City Government, Orleans Parish, World Trade Center

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