In The News › World Trade Center building should be sold off to highest bidder, watchdog group says

World Trade Center building should be sold off to highest bidder, watchdog group says

By Katherine Sayre

NOLA.com | The Times-Picayune

August 26, 2014

New Orleans should sell the former World Trade Center building to the highest bidder, rather than keep the property to lease to a private developer, a government watchdog group said Tuesday. Negotiations over long-term leases for the 33-story tower have failed three times already.

The Bureau of Governmental Research urged City Hall and the New Orleans Building Corp., the landlord over city-owned property, to take a new approach to redeveloping the vacant tower. It’s on prime real estate at the foot of Canal Street.

“The city should set a minimum price that approximates fair market value and sell to the highest bidder willing to accept a redevelopment timeline with penalties, including a recapture provision for non-performance,” BGR said. The city, which is preparing to launch a new selection process for a developer, has appraised the building at $23.5 million.

In May, the latest effort to revive the building ground to a halt. The city announced that it broke off lease negotiations with Gatehouse Capital Corp. over a disagreement on the financial terms.

Garnesha Crawford, spokeswoman for Mayor Mitch Landrieu’s administration, said a new request for proposals will be issued in September.

“Based on past experiences and the greatly improved national and local economy, the New Orleans Building Corp. is preparing an improved RFP process to maximize the potential this property represents,” Crawford said in an email message. “This property is located in a critical area, at the heart of the riverfront, and we are committed to getting the best deal for the taxpayers.”

Gatehouse had planned to spend $190 million to renovate the tower into apartments and a W Hotel. It won out over two other groups:

James H. Burch LLC of Clifton, Va. proposed turning it into a mixed-used building with apartments and a Valencia Group hotel.

Tricentennial Consortium, a coalition of leaders of New Orleans’ major tourism organizations, wanted to demolish the 1960s building and create a public space with an “iconic tower” of some kind, similar to the Gateway Arch in St. Louis.

That marked the third failed attempt to redevelop the building since the late 1990s, BRG’s report said. In the first two rounds, city government partnered with the master lease tenant at the time. The city ultimately bought out the leaseholder and started the third round on its own.

In each case, BGR said, the city and the New Orleans Building Corp. hoped to negotiate a 99-year lease with a selected developer.

The watchdog group argued that selling the building outright would have five primary benefits:

More transparency through a public bid process using objective factors, rather than a request-for-proposal process that allows room for subjectivity in picking a winner

Open competition that allows for the city to get fair market value, while competing bids could push the selling price higher

An end to long-term city government involvement in the property

A payment for the building’s full value up-front, rather than over the course of years through rent

Putting the building back on the city’s tax rolls once it is privately owned. As it stands now, the building is publicly owned and tax exempt.

BGR said there is a risk that a government entity or nonprofit could buy the building, taking it off the rolls indefinitely. “The risk seems small given the strategic location of the building in the downtown residential and hotel market,” the report says.

According to the city, a lease would require the tenant developer to pay taxes on improvements to the building, and any loss in property tax revenue would be offset by rental income over the 99-year term of a lease.

BGR also pointed to the potential downside of selling: City government would relinquish control over an important piece of riverfront property and give up a steady source of rent revenue.

“But after more than 15 years of failed development efforts, adhering to the same course of action appears to be a greater risk,” the report says.

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