AFL-CIO Funds Pumping $1B Into Gulf Coast

NEW ORLEANS-In a marriage of capital investment and compassion, the AFL-CIO is deploying $1 billion from two open-end funds to further fuel the rebuilding campaign for the hurricane-ravaged Gulf Coast. Discussions already are under way with development partners.

The Gulf Coast Workforce Development Project was unveiled yesterday in New Orleans. The initiative's cost is comparable to one rolled out after 9-11 in New York City. Four years into a five-year plan in NYC, the AFL-CIO funds had invested $840 million for a $2.2-billion economic impact and then made plans for a second phase.

"The conditions in New Orleans are challenging for investment, but at the end of the day we believe in the recovery of the city and that we can earn a competitive market-rate return, which is our primary mandate," David Keto, COO for the AFL-CIO Investment Trust Corp. tells GlobeSt.com. "This will be the most ambitious one that we've done."

The AFL-CIO Building Investment and Housing Investment trusts are funding a seven-year plan to develop multifamily, single-family, hospitality and healthcare projects. The stipulation is all jobs will carry union wages and benefits, which isn't commonplace in much of the South. "We think that's really the path to recovery beyond real estate," Keto explains, citing New Orleans' previous reputation for low wages. "This catastrophe is an opportunity to take the city in a new direction." Plus, he adds, "it's not that big of a stretch" between the union rates and current wages. "The key issue here is availability of labor due to the housing shortage," he assesses.

The AFL-CIO is creating a $250-million direct pool and leveraging another $150 million to develop 5,000 to 10,000 multifamily units, focusing on affordable housing product. Another $250-million pool has been earmarked for single-family mortgages. And, $100 million is ticketed for healthcare and hospital facilities.

The commercial pool, totaling $100 million, will be leveraged with another $150 million. The till primarily will fund hotel development. Keto says the Building Investment Trust has never funded a casino, but it's not being ruled out as a Gulf Coast option.

The trusts most often joint ventures developers, but it's assuming a co-developer's role with several non-profit organizations in New Orleans to bring 196 abandoned adjudicated single- and multifamily properties back on line with a 40% affordable component in the Treme and Tulane/Gravier neighborhoods.

Keto says his group, which has leased office space at 1100 Poydras St. in the New Orleans CBD, also is talking with a developer who's been assembling land tracts in the recently announced Hyatt Jazz District and another in Jackson, MS.

The trusts invest Taft-Hartley and public employee pension funds in housing and economic development projects, mostly as long-term holds. The Building Investment Trust's sweet spot is $25-million to $75-million projects while the housing trust tickets slightly smaller investments. The Mercantile Safe Deposit & Trust Co. of Baltimore underwrites and reviews the projects across the board.

"We are here to do our part to rebuild and reunite this great city," AFL-CIO president John Sweeney said at yesterday's conference to announce the initiative. "We hope business and financial institutions will follow our lead as they did when we stepped forward after 9-11 in New York City." Sweeney was joined by New Orleans Mayor Ray Nagin and a battery of top union officials, including Steve Coyle, CEO for the housing trust fund.

The union groups invested 1,500 staff hours in the Gulf Coast region to game out the program. Aside from the obvious challenges, Keto says it's hard not to get discouraged by the overwhelming reconstruction need. "We are going to be here awhile. That's the responsible way to do it," he says. "It's really been kind of a privilege to do something like this. There's the potential to make a difference. It will take a lot more money from many other sources, but if we can play a trailblazing role--so be it."