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Sule Aygoren Carranza is managing editor of Real Estate Forum.

[IMGCAP(1)] NEW ORLEANS-In the aftermath of the devastating hurricanes of 2005, several real estate firms have traveled down to the Big Easy to help with the reconstruction effort. Among them is Domain Cos., a New York City-based development company that is currently working on three large-scale, mixed-use projects along Tulane Avenue, as well as several smaller ones in the vicinity.

The company’s principals, Matt Schwartz and Chris Papamichael, are not new to the city–both are alumni of Tulane University. The pair had been looking at a potential deal in the area, but Katrina blew those plans off course. Yet after the hurricane, says Schwartz, “we had an opportunity to assist the city in its recovery by focusing on the core strength of our company, which is large-scale community development projects.”

While a lot of major community development players around the country have chosen to focus on New Orleans’ four massive, severely dilapidated public housing projects–the C.J. Peete, B.W. Cooper, St. Bernard, and Lafitte developments–Schwartz says Domain is the most active builder of mixed-use, mixed-income housing, with the largest pipeline on Tulane Avenue.

[IMGCAP(2)] So far, the firm has invested some $125 million into its projects, which total 500 or so units. They are the 228-unit Crescent Club, which also has 5,000 sf of retail; the 183-unit Preserve; and the Meridian, with 72 units of work force housing, where rents for the one- and two-bedroom units are $550 to $650 per month. At the Crescent Club and Meridian, 60% of the units are market rate, while the remaining 40% are subsidized. Domain is also developing another 70,000 sf of retail in commercial properties it purchased around the sites.

The residential units are mixed income to benefit a variety of households, says Schwartz. “We’re delivering is a true class A, renter-by-choice product that has more affordable levels to it, which helps us put the financing package together to make the project feasible,” he says. For the most part, 60% of the units are market rate, while the balance is classified as moderate income. The latter component is available to households making about $36,000 a year, which Schwartz says could accommodate young firefighters, police officers, teachers and the like. “We’re actually developing right in the heart of the city’s Civic Complex, near the criminal courthouse, the district attorney’s office, police and fire headquarters, civil and criminal sheriff’s office and Xavier University. All of those entities have a very high number of employees, the majority of which would qualify for the moderate-income or work force housing units.”

[IMGCAP(3)] In addition, Domain has several projects in the area surrounding these developments worth some $30 million to $40 million. In the area around the Preserve, for example, 25 single-family homes are under way. And most recently, the company bought the 30,000-sf Gold Seal Creamery, a historic building it’s converting into artist galleries and workspace. Also in the works are several neighborhood commercial developments and public infrastructure improvements, being done in tandem with the city, as well as the redevelopment of a public park.

Support from the community, of course, is vital to these developments. “There was a unified planning process that created kind of the final master plan for redevelopment that reflected the community’s goals, and what we’re doing is consistent with that and was one of the priorities outlined in that effort,” explains Schwartz.

Domain’s three main projects are also receiving financial assistance from the Go Zone recovery package. “We’ve accessed a combination of incentives that were put in place to help the region recover after the storm, including tax credits, community development block grant funds and other tax incentives,” says Schwartz. Traditional construction financing is coming from Bank of America, and Centerline is providing equity as a syndicator for the tax benefits, and is also serving as seller-servicer for Freddie Mac, which is providing permanent financing.

Putting those financing and incentive programs in place was the hardest part of the process, says Schwartz. “Getting that recovery package passed, and then taking that recovery package and working with the agencies to put those programs in a format to address the recovery needs of the region–that took us some time to do. There was also a large-scale planning and recovery effort that had to take place in order for the developments to get under way,” he says. “We’ve crossed that hurdle at this point, and that’s the reason the recovery has picked up so much momentum. There’s just so much going on right now in New Orleans, and that’s really a result of finally having been able to overcome those initial planning hurdles that we had in order to be able to get under way.”

Still, problems persist. The insurance premiums, for one, are substantially higher than before the hurricanes, and higher than most other markets, says the executive, “but that was another factor that needed to be taken into consideration when putting together the incentive package that we would need to make the numbers work.”

Domain has also taken steps to guard against flood protection, even though the projects are in New Orleans’ Downtown core, which wasn’t hit as hard as some of the outlying locations and is one of the areas that have benefited the most from the levy reconstruction work that’s been done thus far. “We have designed the projects with the potential for another event in mind,” Schwartz relates. All of the structures are built to new building codes and are thus able to withstand hurricane-force winds. Further, all of the housing begins on the second level, with concrete parking taking up the ground floor.

The next phase in the firm’s efforts on Tulane Avenue is building more mixed-use complexes with an emphasis on commercial and retail components in addition to housing, he says. The firm sees a very bright future for the Big Easy. “We’re very excited to be in the area of New Orleans we’re in. Along Tulane Avenue, this 25-block strip of the city, there’s $3.5 billion of development under way,” Schwartz says. “The city and the state are developing a number of new economic development initiatives that we found very promising and attractive. Of those, the most significant to us is the development of a large medical and biotechnology corridor including a new cancer center and biotech company incubator, new LSU hospital and VA hospital. There are also new courthouses, new district attorney’s offices, police, fire and EMS headquarters. On top of that, there’s a total overhaul of the area’s infrastructure, from the roads and main thoroughfares to side streets to street lighting and sidewalks.

“I think the resiliency of New Orleans is clear. Not many cities would be able to bounce back as successfully as this one has. The convention and tourism business is creeping back to the level it was at before the storm, and the ports and the manufacturing and energy industry are also doing well. Those core segments of the city’s economy have bounced back and we feel they’ll continue to thrive,” he adds. “Given the damage of the housing stock after Katrina and the return of these industries, there’s a substantial imbalance between supply and demand for the type of housing we’re developing. We saw an opportunity to develop housing given that imbalance, and also an opportunity and a comfort level given the long-term economic prospects for the city, which we think are very positive.”

If recent reports are any indication, developers like Domain may have no problem attracting residents to their projects. In an independent survey conducted by the University of Texas at Arlington and commissioned by the Housing Authority of New Orleans, 71.6% of 2,100 current and former New Orleans public housing residents polled said they want to return to the city, but only 35% preferred to return to public housing. Only 20.3% stated they’d like to return to the public housing unit they lived in prior to Katrina. Meanwhile, nearly 37% want to come back to New Orleans, but want a Section 8 Housing Choice Voucher to rent a home rather than live in public housing. And when narrowed down to households that lived in the city’s main four public housing projects, a mere 13.7% preferred to return to their former units.

“The vast majority of HANO’s families want better housing in safer communities,” says C. Donald Babers, chairman of the HANO board who was appointed by the Department of Housing and Urban Development. “We are creating a vibrant, safe environment where children and families can thrive.” Currently, the housing authority and others are redeveloping the more than 3,200 public housing units and another 1,765 affordable housing residences for households at or below 80% of the area median income, as well as 1,800 market-rate and affordable single-family homes that would be market rate and affordable.

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