Falstaff Apartments was to become Renaissance Property Group’s signature post-Katrina development. The abandoned brewery had followed the downward fortunes of the Tulane Avenue corridor for decades, but with RPG’s acquisition in 2006, it would soon lead its resurgence. The redevelopment challenges were myriad and as monumental as the 220,000 square foot complex itself.
Even before taking on seven feet of floodwater, the property was mired in lawsuits, tax foreclosures, and environmental liens stemming from the previous owner’s illegal asbestos abatement activities. And like all developers operating in post-Katrina New Orleans, RPG faced the daunting challenge of attracting outside capital to a ruined city burdened by a host of negative perceptions, including economic stagnation, crime, governmental corruption and an inherent vulnerability to natural disasters.
New Orleans needed something to offer investors, and with the passage of the Gulf Opportunity Zone law, it received it in the form of an abundance of tax credits and other development incentives. One of the more obscure incentives in the GO Zone legislation enabled RPG to affect the multi-million-dollar environmental abatement of the facility, from September ’06 through February ’07, satisfying a precondition to mortgage financing. Recognizing the need to support housing for a workforce, the City of New Orleans approved a rezoning of the property and awarded $1M in HOME funds for the project. Critically, the project was among the earliest winners of a GO Zone tax credit award—although ironically, its early success meant that it missed out on the profusion of CDBG funding that later projects enjoyed. And the reconstruction plans met with an enthusiastic reception from the Historic Preservation Office and National Park Service, which issued the required Historic Rehabilitation Tax Credit approvals. Nevertheless, tax credits have value only when they are monetized, and in early 2007, most investors remained skeptical of New Orleans.
At the same time, construction costs were ballooning, and RPG found that the construction budget formulated in early 2006 was inadequate a year later. Recognizing that the rebuilding of the city was just getting underway in earnest, and that costs would not retrace anytime soon, Mr. Miller saw that he must either cut costs by reducing the scope of the project, or approach the state for additional resources, risking a recapture of the tax credits already allocated. Finally, he decided to remove approximately 30,000 s.f. from the project, bringing sources and uses in balance (the building area in question would later be developed as a second phase of the project known as Dorgenois Lofts). Shortly afterward, the project finance team was cemented, and in April 2007, the financing of the Falstaff Apartments, featuring a direct equity investment from Aegon Realty Advisors and a Freddie Mac mortgage arranged by Column Financial (now Walker & Dunlop). After a rollicking 18-month construction campaign, the project opened its doors to residents in 2008.