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Gambit Weekly Downtown Rebound

Canal Street and the rest of the CBD are buzzing with activity.

By Mike Stagg

July 8, 1997:  On any given day over the past five years, there have been signs of what has turned into a construction boom in the New Orleans Central Business District.

This boom differs from the ones on Poydras Street and along the Riverfront. Unlike that earlier growth, what is happening now is not represented by cranes hoisting concrete, steel and glass to make new buildings. The icons of the current boom are the waste chutes and refuse skids used to remove the innards of existing buildings that are getting new innards -- and new life.

The current commotion has been built on the shoulders of decades of preserving and strengthening the elements that make New Orleans unique. In the 1960s, the city preserved its connection to the Mississippi River in the CBD and the French Quarter. In the 1970s, the Louisiana Superdome highlighted expansion along Poydras. In the 1980s, the World's Fair ignited the redevelopment of the Warehouse District. And then there is Canal Street, the Great Wide Way that has survived the ebb and flow of forces that have ruined great streets in other urban centers. It remains integral to this growth spurt.

All these developments benefited the CBD.

Whatever other problems the city might have, New Orleans never lost its downtown, and the rewards of that are apparent now. Now, a list of new projects moving from the drawing boards into reality means that the boom in the New Orleans CBD shows few signs of slackening anytime soon.

CBD Mainstays

From the Aquarium of the Americas to the New Orleans Regional Medical Center, from the Warehouse District to the Superdome, from Canal Street's retail strength to the burgeoning arts district along Julia Street, the CBD pulses with life.

The Ernest N. Morial Convention Center (itself a remnant of the 1984 World's Fair) has made the city a major player on the convention and trade show circuit, driving up demand for hotel rooms, which developers and national hospitality chains have swooped in to satisfy. Hotels are moving from the planning stages to occupancy; condominiums and apartments have broken out of the Warehouse District across Poydras and into what was formerly office or warehouse space between Canal and Poydras streets.

Three major shopping centers (Canal Place, New Orleans Centre and the Riverwalk) cater to tourists and locals alike and spread retail traffic away from Canal Street and across the CBD.

Randy Gregson, executive director of the Downtown Development District, said the roots of the current boom can be traced back to the 1960s, when French Quarter preservationists blocked the construction of a riverfront expressway that would have effectively cut off the city from the Mississippi River.

"The efforts made to protect the French Quarter have worked to the benefit of the CBD," Gregson said. In addition to preventing the construction of the expressway, which would have meant no World's Fair in the Warehouse District, no Aquarium of the Americas and no Woldenberg Park, Gregson said the decade-long moratorium on construction of hotels in the French Quarter wound up spurring hotel development along Canal and further into the CBD.

"You have hotels promoting their proximity to the Quarter even though they are in the CBD," he said.

The persistent allure of the Vieux Carre as a tourist destination has helped keep demand for hotel rooms steady and has fueled other aspects of the hospitality industry that are essential elements of the CBD mix. Restaurants, nightclubs and art galleries are businesses whose vitality can be traced to the strong tourist trade. Gregson said the retail trade along Canal Street is one reason why the CBD has remained stable, and he credits the Regional Transit Authority with keeping Canal Street alive.

"You need to think in terms used in the aviation business to understand the key role the RTA has played in keeping Canal Street vibrant," Gregson said. "In the RTA, Canal Street is both a hub and a destination. Just about every bus line in the city connects to Canal Street, and you cannot underestimate the impact that has had in terms of keeping the CBD tied in with the city."

While worries still exist about the quality of some of its retail outlets, concerns about Canal's overall viability are distant memories.

The New Orleans Regional Medical Center (NORMC) -- which comprises LSU and Tulane medical schools, Charity Hospital, the Veterans Affairs Hospital, University Hospital, Delgado School of Nursing and Tulane University Hospital (now operated by Columbia HCA) -- runs from upper Canal to Poydras and from Loyola Avenue out of the CBD to Galvez Street. It has quietly been establishing a reputation for world-class health care and research. And the University of New Orleans Technology Center on Canal serves as an incubator for bringing technology developed by NORMC researchers to the market -- a classic attempt to foster technology transfer from the lab to the marketplace.

While NORMC doesn't grab consistent headlines, its importance to the CBD can be gleaned by one number: 15,000. That's how many people work in NORMC and its related businesses.

Local architect John Williams has been working on Canal Street for 15 years and considers himself a "champion of the cause." He's currently developing an "action plan" for Canal, and he considers NORMC the `driving force' for the area.

Echoing the words of developer Joseph Cannizaro, the major developer on Poydras, Williams said, "As Canal goes, so goes the city."

Master Recyclers

One characteristic of the current boom has been the knack of local developers for turning adversity into advantage. No better example of this exists than the Chateau Sonesta Hotel, which was the brainchild of developer Pres Kabacoff and Historic Restorations, Inc. When Dillard's bought D.H. Holmes department stores in the late 1980s, the downtown location was targeted for closing. The loss of a $25 million per year retail establishment would have been a tough blow for any city to weather, but particularly a city that was, at that time, down on itself.

Kabacoff, however, saw an opportunity there, and with needed cooperation from the city, he was able to get the Sonesta hospitality chain to invest in his project, which opened to rave reviews. The project now is poised to open its entertainment section fronting Canal Street later this year. In addition to the hotel and entertainment offerings, HRI also created apartments in the Holmes Annex across Iberville Street in the Quarter.

Kabacoff and HRI continue to advance residential projects in the Warehouse District and beyond. He believes strongly in the viability of the CBD as a residential community and has continued to put his company's assets where his heart is.

"I think its a natural," Kabacoff said. "I think having people, particularly people with wealth, live in the CBD is good for the city. I think you have to be selective; you have to be able to make the numbers work.

"There are some tax breaks available for historic properties. Not all buildings qualify, but if you can find one that does, then you're that much further along in being able to make a project viable."

While tax breaks can make a project financially attractive, they also mean that the city is not reaping all the benefits it might otherwise derive from the current boom.

First District Assessor Patricia Johnson, whose district includes the CBD, said restoration tax abatements that have aided Kabacoff and other developers work by shielding the full value of the renovated properties from property taxes.

"What these tax plans do is lock in the value of these properties at the assessment they had before they were restored for at least five years after completion of the project," Johnson said. The breaks can be renewed for another five years after the expiration of the initial five-year shield. "So, it could be as much as 10 or 12 years before the full appraised value of some of these renovated properties will be reflected on the tax rolls."

The city, of course, derives other direct benefits from the conversions, not the least of which is the expanding employment base needed to provide the services and amenities needed by tenants.

Other developers have followed Kabacoff and HRI's lead in identifying buildings that offer conversion opportunities. Condominium conversions have crossed the Warehouse District's border on St. Charles Avenue and onto streets like Girod and Baronne. The conversion boom has prompted the DDD's Gregson to describe New Orleans developers as "master recyclers."

And there is another, unintentional side-effect.

Cannizaro, who helped lead the way in the redevelopment of Poydras Street in the 1970s and 1980s, said that while the current boom is primarily hotel driven, it is having a positive effect on office space.

"By taking office space off the market through conversion to hotels and apartments, we're finding that rates on office space are rising, enabling building owners to get a better return on their investment," Cannizaro said. If the trend continues, he said, it could create opportunites for new office construction in the next two to five years.

Key Developments

The outlook for the future looks every bit as promising as what has taken place in the past three years in the CBD. While a slew of projects have been announced, Kabacoff cautions that "only about 30 percent of them ever actually get done." Here's a list of projects in various stages of development that bode well for the future of the CBD:

  • The University of New Orleans/Ogden Arts Center. With its Technology Center on Canal Street, its CBD campus on Carondelet Street and its partnership in the Ogden center on Lee Circle, the university that Earl Long had to force on city leaders four decades ago will have significant influence in three distinct areas of the CBD.

  • The Insectarium. The project is planned for part of the old Customs House on Canal Street across North Peters Street from Canal Place. As a result, the Audubon Institute has a hammerlock on the northeast corner of the CBD. The Aquarium of the Americas, the IMAX Theatre and Woldenberg Park give it control over a large chunk of the riverfront, and the insectarium will extend that reach up Canal Street.

  • The Babydome. As if having the world's most versatile stadium wasn't enough of an asset on upper Poydras, the Superdome Commission is building a 20,000-seat arena next door to serve as host to venues not quite up to filling the Dome. The arena will satisfy a long-recognized need in the city for a mid-sized arena suitable for hosting basketball, boxing and entertainment events.

  • Morial Convention Center Phase III. This complex just keeps growing upriver, which enables it to keep landing more and larger conventions and trade shows. The continued success of this facility is helping to once again transform the Warehouse District. A case in point: The St. Mary apartments are now in the process of being converted into a Courtyard by Marriott (the company's second in the CBD). Look for more hotel developments along Convention Center Boulevard in the future.

  • Ritz-Carlton Hotel. Architect Williams is part of group transforming the upper floors of the Maison Blanche Building on Canal Street into the latest addition to the preeminent luxury chain. Williams is working with Baton Rouge architect Bob Coleman and the Whitecastle development group, which includes Stewart Juneau, Bill Hindman, Bernard Mason and Rick Hodges. The Ritz will have 655 total rooms, including 210 suites, and Maison Blanche will maintain a presence on the first and second floors and the mezzanine.

  • Canal Place expansion. The downtown shopping hub will welcome the much-anticipated Pottery Barn store in October.

  • Walgreen's. This national drugstore chain is helping to prove its commitment to urban downtowns with an ongoing expansion of its artsy Canal Street location. One side benefit of the deal, said the DDD's Gregson, is that the expansion consumed the Cine Royale theater, which specialized in X-rated movies.

  • The Cotton Mill. Kabacoff and HRI have undertaken the redevelopment of the Cotton Mill, that large building with the water tower and clock spire along the downriver side of the Crescent City Connection. The bottom floor will have retail and restaurant establishments, while luxury apartments will fill the middle floors. Eighteen condos have been built on top (10 of which have been sold).

  • Streetcars on Canal Street. Putting streetcars back on Canal Street, tying the St. Charles line in with the Riverfront, and adding a spur on North Carrollton Avenue to the New Orleans Museum of Art could be the engine that pulls the good news about development on the lower end of Canal Street out to Claiborne Avenue and the outer edges of the CBD.

Weak Spots

Okay, so Pollyanna hasn't moved into a suite at the Fairmont. There are some trouble spots in this otherwise rosy developmental picture.

The big one, of course, is that Harrah's casino remains in limbo, and its behemoth building at the foot of Canal Street threatens to become an albatross. No matter what the Legislature does or does not do (the session ended last Monday without any resolution on the new pact with the state), the fate of the land-based casino and its related projects is critical to the health of lower Poydras and Canal. Don't think so? Then drive along the partially completed parking garages extending up Convention Center Boulevard for a reality check.

Even in bankruptcy, the casino casts a giant shadow in the CBD. Case in point: Plans to convert much of the World Trade Center into a hotel are driven by the belief that the casino will become a reality.

The uncertainty surrounding the casino also could be affecting efforts to convert the Lykes building on Poydras into a hotel. Meanwhile, the Piazza d'Italia option keeps floating from developer to developer, but no one has been able to work up a hotel deal that can win financial backing.

Cannizaro, for one, does not feel the casino project is controling the fate of lower Poydras Street or any other projects. He said that the Convention Center and tourism are the engines of this boom and that, while the casino could add to that, it is not a make-or-break project.

He predicted developer Darryl Berger's group will succeed in lining up partners and financing to convert the Lykes building into a hotel. And eventually, he said, the Piazza d'Italia will follow.

"My concern about the casino is that it reinforces the idea that it is difficult to do business in our state. The current status of the project reinforces that idea," Cannizaro said.

Crime also continues to be a major issue. Every tourist robbery or murder sends spasms of fear throughout the hospitality industry. Kabacoff, for one, feels the emergence of the New Orleans Police Foundation as a means of delivering needed community support for the New Orleans Police Department is crucial to countering recurring images of tourists victimized by crime in the city.

In its recently revised strategic plan, the DDD made safety and cleanliness in the CBD its priorities.

"Streets and sidewalks are cleaned regularly now," Gregson said. "Downtown has never been cleaner."

The only economic cloud on the horizon, in Gregson's view, is the continued viability of the current oil and gas boom. No need to look back much further than the oil bust of the 1980s to understand why no one is taking anything for granted this time around.

Kabacoff seems to have hit upon a perspective that everyone concerned about the well-being of the city should consider: "Things are never as good or never as bad as they seem. They're always somewhere in-between."

Still, in the face of growth on this broad a scale on so many fronts, it's difficult not to be optimistic about the prospects for the New Orleans CBD. Downtown is booming, and the smiles couldn't be brighter.

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