One of the teams on the losing end of city officials’ decision to approve the development of a Four Seasons Hotel and condominiums in the former World Trade Center building has filed a suit against the city, claiming that the decision violated public lease law requirements, lacked transparency and allowed for undue political influence and favoritism.
In the Civil District Court suit, Two Canal Street Investors is asking that it be awarded the lease for the site or that any agreement for the property to which it is not a party be tossed out.
The suit names the city of New Orleans, Chief Procurement Officer Mary Kay Kleinpeter-Zamora and the New Orleans Building Corp. as defendants. The NOBC is a public benefit corporation that acts as landlord for the city-owned site.
A spokesman for the city did not immediately respond to a request for comment Thursday.
A selection committee in March picked the development team of Carpenter & Co. and Woodward Design + Build to convert the long-vacant former WTC building at the foot of Canal Street into a Four Seasons Hotel and condominiums. That plan beat out proposals from four other teams, including Two Canal Street, which proposed to open a Hotel Alessandra and condos at the site. Two Canal Street placed last in the committee’s ranking.
A lease agreement between the city and the Carpenter team received unanimous approval from the New Orleans Building Corp.’s board in April. The City Council is scheduled to vote on the agreement at its next meeting.
The lawsuit contends the selection process was invalid because it did not follow the public lease law, which requires leases to be awarded to the highest bid received from a qualified bidder.
The city’s selection process was conducted under the guidelines governing the procurement of professional services, “while only making reference to the proposed incorporated 99-year lease term that would be negotiated as part of the procurement process,” the lawsuit says.
The city made the distinction so that it could control the outcome of the selection process, the suit says.
The selection committee consisted of five city employees, all appointed by the mayor.
The Two Canal team asserts that it offered the city the most money, with an upfront payment totaling $65 million this year, and that it should have been awarded the lease agreement based on public lease laws.
An evaluation of the financial offers, conducted for the selection committee by the law firm of Stone Pigman and real estate consultants Jones Lang LaSalle, concluded that the Carpenter deal would be more profitable to the city over the life of the lease.
Daniel Davillier, an attorney for Two Canal Street, said the consultants’ report summarizing the financial offers made by each team was “very flawed” and had the effect of “overinflating the value” of the Four Seasons proposal.
“The consultants actively manipulated and distorted the proposals to such an egregious extent that (Two Canal Street’s) submission was materially changed and materially undervalued,” the lawsuit says. “This is precisely the kind of secretive, biased influence that the public lease law is designed to eliminate.”
Part of the financial analysis was an estimate of the property taxes each group would pay, based on the assumption that the Assessor’s Office would value the building at half of the construction cost. The Carpenter proposal came out on top in that measure because its construction budget was nearly $100 million greater than that of its nearest competitor.
But Davillier called that formula “improper and inaccurate” and said that after conversations with Orleans Parish Assessor Errol Williams, his clients were under the impression that a formula based on net operating income and not construction cost would form the basis for the site’s assessment. That calculation would have worked in Two Canal Street Investors’ favor, he said.
Another attorney for Two Canal Street raised that same complaint when the NOBC board voted on the lease last month.
NOBC Interim Director Cedric Grant dismissed it then, saying the Carpenter team had the best shot of putting together the financing for its proposal.
The Carpenter team said the $364 million Four Seasons project will be financed with $238 million in debt, $86 million in equity and $40 million in private capital. The team also will pursue historic tax credits.