A few weeks back we reported that negotiations between the city of New Orleans and developer Gatehouse Capital Corp. for the opportunity to redevelop the former World Trade Center building had ceased.
Gatehouse Capital Corp. was selected by the city to redevelop the property in 2013. Gatehouse, in conjunction with local development partner DAG Development, had proposed a 245-room W Hotel and 280 luxury apartments on the 13th through 30th floor.
Since then, the parties had been negotiating a potential deal. Negotiations, ongoing for over 6 months, reportedly fell apart over financing and the proposed deal structure.
The city recently informed the developer that its final offer for the development had been rejected.
On May 16, David Garcia, the development partner behind DAG Development, wrote an Op-Ed piece in the Times-Picayune outlining what what went wrong and why the deal fell apart. Mr. Garcia explained:
Our team’s initial lease offer was supported by two independent $10 million appraisals for the as-is WTC property with no parking garage. In an attempt to reach agreement with the city, we ultimately increased our lease offer during negotiations from $10 million to $25.6 million, which was more than double our two appraisals, and was even higher than the city’s own $23.5 million appraisal.
But when we jumped over the city’s bar, the city moved the bar inexplicably higher. The city’s final lease proposal required more than $100 million in present value, with more than $1.5 billion in projected lease payments during the 99-year term. Based on our team’s experience with similar large, mixed-use developments and other 99-year leases across the country, we considered this lease demand to be unreasonable and un-financeable – killing the feasibility of our WTC project.
The city did not seem interested in discussing these realities. Our team was allowed to have only three brief meetings with city staff during our eight-month negotiation period – and we were never allowed to speak with the mayor, City Council, or any city economic development leaders to potentially assist. We were unsuccessful in our repeated attempts to increase communication, or broaden our discussions to include other third-party experts the city may trust. Negotiations imply two sides engaging fully, and that simply was not the case here.