Four months after New Orleans officials agreed to a deal that would turn the former World Trade Center building at the foot of Canal Street into a Four Seasons hotel and condominiums, the hotel’s financial backers formally committed to the project on Tuesday, removing the last hurdle before construction begins next year.
The $364 million project now will move on to the final stages before groundbreaking, with a roughly two-year construction period scheduled to begin in the first quarter of 2016 and an opening date sometime in 2018.
The development team of Carpenter & Co., based in Massachusetts, and the local firm Woodward Design + Build intends to convert the 33-story 1960s office building into a 350-room Four Seasons hotel, with 76 hotel-serviced condominiums.
The project is being financed with $238 million in debt, $86 million in equity and $40 million in private capital. The team also plans to apply for historic tax credits.
Cascade Investment Group, a holding and investment firm controlled by billionaire Microsoft founder Bill Gates, is an investor in the project.
Local investors include Henry Coaxum, whose firm Coaxum Enterprises owns several local McDonald’s franchises; Woodward Design + Build President and CEO Paul Flower; Lee Jackson, president of Jackson Offshore Operations; lawyer Sherry Marcus Leventhal; Latter & Blum Chairman and CEO Bob Merrick; and Earl Robinson, president of PowerMovesNOLA and a partner in the private equity firm RLMcCall Capital.
The group of investors “epitomizes how far this city has come and how far we actually can go,” said Mayor Mitch Landrieu, who joined the investors Tuesday for a signing ceremony in the lobby of the long-vacant building.
“The city of New Orleans has never in our history, not ever, seen a group of investors like this that represent the breadth of the best investors in the world that have come to our city because they think we are valuable,” Landrieu said. “That means that not only are we back but that we can compete on the highest levels as we go forward.”
The fact that Tuesday’s signing — usually a private event — was something of a public show, drawing elected officials and business leaders who were greeted with valet parking, a violin soloist and hors d’oeuvres, speaks to how closely watched the development will be.
“There’s many people who have been skeptical for years about this long-vacant building,” said Dick Friedman, president of Carpenter & Co., the project’s master developer. “We really want to show that this project is going forward at long last. The real purpose of this is to demonstrate to the people that we have a financial commitment from the wealthiest people in the world. We have the money. The papers are signed, and we’re ready to go.”
The riverfront property at 2 Canal St. is widely considered to be one of the most valuable sites in New Orleans, but the city has struggled for years to find someone to redevelop the empty X-shaped building. Repeated efforts to convert it have come to naught, including another hotel and condominium proposal last year. In that case, the city and the developer could not agree on the terms of a lease.
The lease deal posed no such problems this time around.
Under the 99-year agreement signed by Landrieu in May, the developers will pay the city $3.25 million per year in rent for the first 10 years of the lease, $3.75 million annually for years 11 through 20 and, after that, an amount equal to the base rent of $3.75 million times the percentage increase in the consumer price index in the preceding five years.
The development team also is offering the city a share of the gross revenue from a planned cultural attraction on the site and a share of the proceeds from the sale of any component of the project.
It has asked for a credit on its rent if its property taxes exceed certain established amounts.
The project is proceeding even as one of the losing applicants to develop the building is suing the city in Civil District Court. Attorneys for Two Canal Street Investors have said the lease agreement should be voided because the selection process violated public bid law requirements, lacked transparency and allowed for undue political influence and favoritism. The case is still pending.