Gatehouse proposes hotel, apartments
A developer who has proposed converting the former World Trade Center building into a hotel and apartment complex came a step closer Monday to winning the right to redevelop the long-vacant riverfront landmark.
The board of the New Orleans Building Corp. voted unanimously to begin negotiating the terms of a lease agreement with Gatehouse Capital Corp., despite objections from a rival developer that the city’s selection process was flawed and the board should reconsider the choice.
The terms of a lease agreement could be hashed out by the end of the year, said Deputy Mayor Cedric Grant, the NOBC’s acting chief executive.
The NOBC is a public benefit corporation in charge of developing various pieces of city-owned real estate, including the former WTC building.
Among the five board members voting in favor of starting negotiations were two City Council members, Jackie Clarkson and Stacy Head.
During the negotiation period, the NOBC is expected to push Gatehouse, with headquarters in Dallas, to increase its proposed lease payment to the city and to make a stronger commitment to the city’s disadvantaged business enterprise requirement than was included in its original proposal.
Gatehouse has proposed turning the 33-story building at the foot of Canal and Poydras streets into a 245-room W Hotel with rental apartments on the upper floors.
A selection committee appointed by Mayor Mitch Landrieu picked the Gatehouse project in August as its favorite of three proposals to redevelop the site, though panel members said the proposal had two major shortcomings.
First, the developer’s commitment to dedicate at least 35 percent of its contract work to DBEs, as required by the city, did not identify the specific disadvantaged businesses with which it would partner.
The omission was not enough to declare the developer noncompliant with the DBE requirement, the committee decided, but the city said it would press Gatehouse to make formal commitments with one or more disadvantaged businesses — in practice, those owned by minorities or women — before a lease agreement is finalized.
Arkebia Matthews, director of the city’s Office of Supplier Diversity, said Gatehouse presented a revised DBE plan on Friday. It is now under review.
The selection committee also suggested that the NOBC try to negotiate a higher lease payment from Gatehouse, which in its original proposal offered to make a single upfront payment of $10 million to the city in return for a 99-year lease.
That would work out to an annual lease payment of $391,000 based on a present value calculation, an amount “significantly lower” than fair market value, an attorney for the NOBC said in August.
Gatehouse has since offered to increase its initial offer, such as by paying the city 105 percent of the building’s fair market value as determined by a third-party appraiser.
The aging structure is being appraised — a process that will take about 60 days, Grant said.
But the building corporation will negotiate with Gatehouse in the meantime.
Talks between the parties will proceed despite objections from James H. Burch LLC, the runner-up in the selection process.
The Burch team in a Sept. 12 letter called on the NOBC to reject the selection committee’s recommendation and to disqualify Gatehouse from consideration on the grounds that it omitted some required information from its proposal, modified the original proposal after the submission deadline and did not offer the best value to the city.
Like Gatehouse, the Burch team proposed turning the former office building into a mixed-use hotel and apartment building.
The panel decided that Gatehouse presented the strongest performance history and financial plan of the three respondents.
James Burch challenged that conclusion at Monday’s meeting, saying the selection committee failed to perform due diligence and reached a recommendation that was “not based on fact.”
The Burch team has said that the panel misinterpreted and misunderstood its funding sources and financial capacity and should therefore re-evaluate the proposals.
“If you go forward with this, you announce to the world that the bidding process means nothing,” Burch said. “Anyone who would invest a lot of money and a lot of time, seeing what they have seen here, would be a fool.”
There was no discussion after Burch’s comments, and the board voted to accept the selection committee’s recommendation shortly thereafter.
The Burch team said it will meet to discuss its options. “We’d like to see justice done,” Burch said after the meeting. “We’re not in it for retribution.”
Should the NOBC and Gatehouse come to an agreement, it would still need the approval of the City Council.