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NEW ORLEANS-Though some institutional investors are still wary, a just-released study by Real Estate Research Corp. shows the economic outlook for New Orleans clearly is hardier than it was before Hurricane Katrina.

“The economic pre-Katrina outlook was not favorable,” Ken Riggs, president and CEO of the Chicago-based RERC, says to GlobeSt.com. “Fifty percent believe the economy will come back stronger. From a debt lending standpoint, there’s going to be huge opportunity there and that’s different from the equity investment objective.” The survey results came from responses by 30 institutions and regional real estate investors.

To no one’s surprise, the apartment market’s investment ratings outlook is the strongest of the commercial real estate sectors. On a scale of one to 10, the multifamily marked came up with a 7.2 investment conditions rating. The industrial market scored 6.4; hotels, 5.6; and CBD office and retail, 4.6 each. The respondents ranked the city’s economy at 4.2 and the nation’s at 6.9.

Riggs says New Orleans is a classic “tale of two cities” because it’s still uncertain what can be rebuilt and where–and if the replacement development can be sustainable. The uncertainty has some investors cautiously waiting “to see what happens,” he says. “It wasn’t attractive before Katrina and they’re not so sure it’ll be attractive today. People think there are a lot of big bargains down there and people say there aren’t.”

According to RERC research, the going-in capitalization rate for the national apartment market was 6.4% in the first quarter whereas it was 7.6% in New Orleans. The required pre-tax yield rate is 8.6% nationally and 10.7% in the Big Easy. The South overall bears a 9% pre-tax yield rate. In the coming year, New Orleans’ effective rent change is projected to be 8.5% for multifamily units; 6% for industrial warehouse; 4.3% for suburban office and 0.8% for CBD office. Retail was not included in the rent findings. On the investment risk barometer, multifamily properties is ranked 6.3; hotels, 5.9; industrial, 5.8; retail, 5; and office, 4.6.

In general, the expectation is the rebuilding will bring higher paying jobs than pre-Katrina New Orleans–a strong likelihood since the AFL-CIO is funding $1 billion of Gulf Coast investments. Likewise, the capital infusions from the federal sector also carry promises of higher-paying jobs and a stronger economic base at the end of the rebuilding, which is being estimated to take five to 10 years. “This rebuilding of New Orleans will be one of the most unique we’ll see in our lifetime,” Riggs says. “At the end of the day, it will be a better city.”

The US Small Business Administration also just released data on processed applications. Of the 99.5% of processed requests, $10 billion in disaster loans have been approved for commercial rebuilding. According to the report, more than 21,750 businesses in the Gulf Coast disaster zone were cleared for $2.3 billion of loans, representing 51% of the applications for disaster recovery funds. For homeowners and renters, 130,436 loans valued at $7.7 billion were approved. In addition, the SBA’s regular business loan program funded more than $790 million for 4,260 loans to commercial operations in hurricane-ravaged areas.

Louisiana led the SBA pack with $6.3 billion for 89,622 loans. Mississippi businesses will get $2.5 billion for 34,619 borrowers; Texas, $351 million for 8,487 requests; Florida, $767 million for 16,622 approved applications; and Alabama, $131 million for 2,838 loans.

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