City Issues New Request for Qualifications for World Trade Center Building in New Orleans
Earlier this month the City of New Orleans issued a request for qualifications (“RFQ”) in furtherance of the city’s efforts to redevelop the World Trade Center (“WTC”). The RFQ is the first step of the two-part process involved in selecting a new developer for the prime riverfront property. The vacant 33-story building sits atop one of the most coveted locations in the entire city, at the intersection of Canal and Poydras, and is claimed to be one of the city skyline’s most distinctive buildings.
The need for a new RFQ came about after the city rejected its previously accepted request for proposal (“RFP”) from Gatehouse Capital Corporation in April of this year. Gatehouse, the self-proclaimed largest developer of Starwood Hotel and Resort’s W Hotels, proposed to spend nearly $200 million transforming the unoccupied building into a 245-room W Hotel which would be accompanied by 280 luxury apartments. Their plans also called for construction of a Tricentennial Sky Wheel, which would be a small-scale replication of the notorious London Eye, at Spanish plaza. The overall aim of their redevelopment plan was capturing the coveted, underrepresented younger, upscale leisure visitors and gaining new nationwide exposure/demand for the city. Some of the economic benefits that would result from such proposal coming to fruition included bringing in additional visitors, creating more jobs, and generating higher tax revenue to the city.
So, with all of the bells and whistles involved, why did the city’s negotiations with Gatehouse come to a halt? The city claimed that it halted negotiations because Gatehouse’s offer significantly undervalued the building and that it wanted to avoid being pushed into a corner and making a bad deal just for the sake of making a deal. The city further explained that its goal was to ensure the city receives favorable return for the citizens of New Orleans, especially considering the fact that the WTC is one of the most coveted properties in the city.
In a nutshell, Gatehouse offered to pay, solely through private financing as required by the city, 105 percent of the building’s fair market value. In addition, they also agreed to pay $1 million in annual rent, subject to a 10% rent escalation clause every five years, over a 99-year lease term. This was said to equate to approximately $268 million over the 99-year term and equal to a present-day value of $25.6 million, which is the equivalent of more than 105 percent of the city’s valuation of the building.
To most, these terms do not correlate to a “bad deal,” considering the building has underperformed for decades and has remained vacant since 2010. However, the city, in continuance of its almost 25-year effort to redevelop the building, seems to be holding out to welcome other proposals that will be more favorable. With a final deadline of November 14th for submissions of RFQs, residents of the city will see what developers have offered up to outdo the previous submission and efforts by Gatehouse. Hopefully, the city finds a plan that is, in their opinion, satisfactory so that this underperforming city asset can be transformed into a project that matches the site and building’s true potential.
Earlier this month the City of New Orleans issued a request for qualifications (“RFQ”) in furtherance of the city’s efforts to redevelop the World Trade Center (“WTC”). The RFQ is the first step of the two-part process involved in selecting a new developer for the prime riverfront property. The vacant 33-story building sits atop one of the most coveted locations in the entire city, at the intersection of Canal and Poydras, and is claimed to be one of the city skyline’s most distinctive buildings.
The need for a new RFQ came about after the city rejected its previously accepted request for proposal (“RFP”) from Gatehouse Capital Corporation in April of this year. Gatehouse, the self-proclaimed largest developer of Starwood Hotel and Resort’s W Hotels, proposed to spend nearly $200 million transforming the unoccupied building into a 245-room W Hotel which would be accompanied by 280 luxury apartments. Their plans also called for construction of a Tricentennial Sky Wheel, which would be a small-scale replication of the notorious London Eye, at Spanish plaza. The overall aim of their redevelopment plan was capturing the coveted, underrepresented younger, upscale leisure visitors and gaining new nationwide exposure/demand for the city. Some of the economic benefits that would result from such proposal coming to fruition included bringing in additional visitors, creating more jobs, and generating higher tax revenue to the city.
So, with all of the bells and whistles involved, why did the city’s negotiations with Gatehouse come to a halt? The city claimed that it halted negotiations because Gatehouse’s offer significantly undervalued the building and that it wanted to avoid being pushed into a corner and making a bad deal just for the sake of making a deal. The city further explained that its goal was to ensure the city receives favorable return for the citizens of New Orleans, especially considering the fact that the WTC is one of the most coveted properties in the city.
In a nutshell, Gatehouse offered to pay, solely through private financing as required by the city, 105 percent of the building’s fair market value. In addition, they also agreed to pay $1 million in annual rent, subject to a 10% rent escalation clause every five years, over a 99-year lease term. This was said to equate to approximately $268 million over the 99-year term and equal to a present-day value of $25.6 million, which is the equivalent of more than 105 percent of the city’s valuation of the building.
To most, these terms do not correlate to a “bad deal,” considering the building has underperformed for decades and has remained vacant since 2010. However, the city, in continuance of its almost 25-year effort to redevelop the building, seems to be holding out to welcome other proposals that will be more favorable. With a final deadline of November 14th for submissions of RFQs, residents of the city will see what developers have offered up to outdo the previous submission and efforts by Gatehouse. Hopefully, the city finds a plan that is, in their opinion, satisfactory so that this underperforming city asset can be transformed into a project that matches the site and building’s true potential.
