While New Orleans factions wrangle over public monies and plans necessary to revitalize their ravaged city, one hotel REIT is pushing forth its own private plan to help recast the downtown area.
Chicago-based Strategic Hotels & Resorts, owners of the Hyatt Regency New Orleans, says it's committing $430 million of its own funds to a $715 million project that would transform the Hyatt area into a national jazz center, park and office hub, much the way Millennium Park refaced Chicago and Inner Harbor restyled Baltimore. Strategic's commitment includes $130 million in insurance money for storm damage on the $210 million Hyatt property.
Under the plan, the city's run-down City Hall and Civil District Court complexes and the defunct New Orleans Shopping Centre would give way to a 20-acre complex with a working name of Hyatt National Jazz Center and Park. It would feature a 25,000 sq. ft., multi-use National Jazz Center flanked by new offices and a new civic headquarters nestled in a park setting. Beneath the park would be 280,000 sq. ft. of shops and restaurants with a multi-screen theater and two parking levels.
“It brings a major cultural and recreational area to a previously declining area,” says Laurence Geller, president and CEO of Strategic Hotels. The first phase will consist of a $210 million renovation and repositioning of the 1,184-room Hyatt, which gains a new main entrance and restaurant but will lose some meeting space and a few dozen rooms in the process. While groundbreaking is expected by summer 2007, construction is projected to take about three years.
The project is expected to create 6,500 permanent jobs and generate $6 billion in economic impact in New Orleans over 20 years. “We're focusing on a micro area and want to do it through a private process,” says Geller. The Hyatt segment can't access federal money from the Gulf Opportunity Zone Act, which offers tax incentives to small businesses rebuilding in Katrina-affected areas, because public companies are not eligible.
“The riskiest money to put in is seed money — but it's a risk we are willingly taking,” adds Geller. “Clearly local, state and federal governments must be behind this, too.” To find the balance of needed funds, developers are exploring tax-credit projects, foundations and public agencies, and additional private investors. At a press conference announcing the project, Mayor Ray Nagin gave the project his vote. “We will push to make this thing a reality,” he said.
Geller says the development will be “a project that returns 10 to 1 — this is an absolute win-win.” He also adds that several peripheral opportunities have already been identified. Project consultant Michael Siegel, executive vice president of New Orleans-based Corporate Realty, says investors “see a fantastic city that's been hit and is coming back with an unprecedented amount of money devoted to it.” In fact, on June 15, President Bush signed a $10.4 billion emergency relief bill for federal housing aid.
“[The Hyatt plan] would be a good symbol of rebirth for the city,” according to Richard Stone, vice president and director of commercial sales and leasing for New Orleans-based NAI Latter & Blum.
Most of the investment interest in New Orleans has been in hospitality or multifamily redevelopment spurred by federal incentives and the city's housing shortage.
“Prior to Katrina, New Orleans was considered a mature market and there weren't a lot of quality commercial opportunities,” says Stone. “Post-storm, we have more investors looking for more product than we have available.”