Multi-Housing News - February 2009 - (Page 12)

market forecast New Orleans/Gulf Coast Stalls Developments hampered by credit crunch, a vanished public underwriting infrastructure By Christopher Hosford, Contributing Editor More than three years after New Orleans and much of the Gulf Coast were destroyed by Hurricane Katrina, the area’s apartment industry is in a state of flux. Continuing high demand for rentals, the paucity of tax credits and public funds—combined with a constricted credit market—have brought multifamily development to a standstill. This is particularly so for new mixed-income construction, which relies on tax credit allotments from state housing financing agencies. These tax credit allocations, and the syndicators who strive to round up investors to buy them, have also vanished. “It’s tough times right now [in New Orleans],” says Robert Greer, president of Michaels Development Company, an affordable housing developer based in Marlton, NJ. “The big money is out of the tax credit program, and a lot of the investors who used to be in the marketplace don’t need tax shelters because they aren’t making any money.” Michaels Development has avoided some of the difficulty by forming its own syndication company to find investors willing to buy the tax credits it obtains. As a result, the company remains active in the New Orleans market, but for longer than it would have wished. Michaels Development is closing in on the revi- talization of New Desire Village in New Orleans, an existing 97-acre public housing development involving the creation of 425 new rental singlefamily homes and duplexes. The project was almost complete in 2005 when it was destroyed by the hurricane. Today, 107 units are complete, with financing for 318 units in phase two being finalized. Projects put on hold But it is precisely financing that continues to dog the area’s multifamily market, even when some gov- New Orleans Market Rents & Occupancy Location Avg. rent Avg. Rent/ Occupancy Sq. Ft. Sq. Ft. rate 837 828 975 898 $1.58 $0.99 $1.04 $0.85 84% 93% 95% 84% Recent New Orleans Area and Gulf Coast Property Sales Project/Location The Saulet Apts. New Orleans Josephine Apts. New Orleans Haydel Heights Apts. New Orleans Units 703 52 65 Date Sold Price/Unit Oct. 2008 Sept. 2008 Sept. 2008 Sept. 2008 Sept. 2008 Oct. 2008 $138,691 $8,654 $3,846 $62,147 $7,083 $83,807 New Orleans $1,322 Historic District Jefferson Parish St. Tammany Parish Orleans— Algiers & East New Orleans Overall $819 $1,011 $763 Regency Woods Apts. 184 Pascagoula, MS Waverly Apts. Bay St. Louis, MS 120 352 $863 858 $1.01 92% Source: The MultiFamily Advisory Group LLC; Madderra & Cazalot; and Larry G. Schedler & Associates, Inc. Pinnacle Homes at Coursey Place Baton Rouge, LA ernment support is available. One of the highest profile developments in New Orleans, the $400 million Trump International hotel and condo tower, is on hold and awaiting financing, despite the availability of about $100 million in Gulf Opportunity Zone (GO Zone) bonds, federally supported lowinterest, tax-exempt financing. “Conventional lending basically is not available for the construction of apartment projects,” says Mark Humphreys, CEO of Humphreys & Partners Architects. “Banks are asking for 30 or 40 percent equity, and nobody wants to put in that much.” Still, Humphreys also is active in the market, with three projects in the heart of New Orleans, each of which has benefited from GO Zone bonds and from financing that was in place before the markets essentially shut down in mid-2008. They include The Preserve, a mixed-income development with 183 units in the mid-city area; The Meridien, consisting of 72 affordable-housing units; and Crescent Club, with 228 units. Each project is being developed by The Domain Companies, and they are close to opening for occupancy, although much pre-lease activity has been going on, Humphreys says. “If anybody has been to New Orleans, you know you can’t put the city down,” Humphreys says. “It’s the heart and soul of Americana, a fabulous place. I see New Orleans as the new Chicago, after the fire that destroyed that city in 1871. There’s now the 12 February 2009 | Multi-Housing News | Official Publication of Multi-Housing World

Table of Contents for the Digital Edition of Multi-Housing News - February 2009

Multi-Housing News - February 2009
Contents
From the Editor
Executive Insight
Perspective
NMHC Washington Outlook
Market Forecast: Gulf Coast
Renovating in a Recession: New Rules
Development & Design: Make Way for Modular
Products: Security
Finance: Structured Financing
Directory: Multi-Housing Finance Providers
Technology: Utility Management

Multi-Housing News - February 2009