NosyRosie 
Member since Dec 29, 2008


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Re: “Site Specific

Land Acquisitions in Mid-City Raise Questions About Speculation, Malfeasance
by A. Caritas Monday, Dec. 08, 2008 at 1:18 PM


That the city's Redevelopment Authority would sell off so many parcels of land directly within the VA-LSU project's footprint raises serious issues about the propriety of the agency's decisions as well as inter-agency cooperation, or lack thereof by city offices.


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Quietly, without notice in the press or the neighborhood itself, a single investor has been buying up houses, empty lots and old warehouse buildings in the lower Mid-City neighborhood, all in and around the boundaries where the proposed joint VA-LSU hospital complex is to be built. The purchases began in 2006 and have continued into this year. Millions of dollars were spent snatching up properties, mostly dilapidated homes and lots. All have been purchased by limited liability corporations, over 100 of them created by a sole real estate investor to acquire more than 118 properties in the area.

Nearly all of this land was sold by the city itself as blighted properties ready for post-Katrina redevelopment. Yet the city has now committed itself to buying back some of these same properties in order to hand them over to the Veterans Administration and Louisiana State University for their new hospitals, as the final deal between these entities requires. That one investor could buy up so much land in the exact area to be developed by the hospital projects, even during the expected run-up to the project's formal announcement, when its exact scope and likelihood of approval was widely known, raises serious questions about the propriety of these land transfers.


Hospital Plans

On November 25, 2008 a group of city, state and federal officials formally announced their agreement to build the massive LSU-VA hospital complex in the lower Mid-City neighborhood of New Orleans. If and when completed, the multi-billion dollar complex will be the single largest post-Katrina urban redevelopment project to date along the Gulf Coast. The twin hospitals will occupy more than 70 acres of land bounded by Claiborne Ave., Tulane Ave., N. Rocheblave Street and Canal Street. More so, the project is the lynch-pin to the Greater New Orleans Bioscience Economic Development District (GNOBEDD), an ambitious initiative crafted by city and state officials, administrators of all the area's universities, and prominent members of the business community. GNOBEDD envisions a future in which New Orleans is a hub for biotechnology research with non-profit and for-profit laboratories and companies scattered around the anchoring hospital complex. GNOBEDD's boundaries include the VA-LSU footprint and extend much further into Mid-City and back into the CBD. It's an over-ambitious plan that already involves major federal, state, and local investments in new facilities beyond the VA-LSU complex (such as the Louisiana Cancer Research Consortium), and it is widely assumed that it will boost property values and spur development across the entire special district. A map of GNOBEDD can be viewed here:
http://maps.google.com/maps/ms?msa=0&msid=116295609132882725642.0004596b1110a5966b5e8&hl=en&ie=UTF8&ll=29.958801,-90.088406&spn=0.037999,0.076904&t=h&z=14

November's joint announcement came as no surprise as both the state and VA had announced their intentions to build new hospitals back in late 2005, in the immediate aftermath of Katrina. In fact, LSU hired a consulting firm (ADAMS Management) that published a report shortly before hurricane Katrina recommending the construction of a new hospital within the same area now being prepped for the combined mega-project. From early 2006 through the present the efforts of city officials, LSU Health Science Center administrators, and the VA to finalize their agreement was public knowledge. The VA was reportedly skeptical of the Mid-City site until relatively recently, but local officials sweetened the deal with promises of buying up the neighborhood themselves while LSU agreed to a plan that would adjoin the hospitals.

Developers looking to rehabilitate housing across the city have been keen to keep an eye on major state redevelopment efforts such as this: normally it steers investors away from properties which in all likelihood will be seized and demolished by the city under eminent domain. This case appears starkly different with one investor spending millions to acquire properties directly in the project's footprint, and many more in the adjoining neighborhoods.

While the VA's half of the complex is already funded and moving ahead, the state's commitment toward building a brand new LSU facility is not yet financially clear. City and state officials have ensured the public that they would quickly piece together the hundreds of millions necessary for construction though.

Irregardless of the LSU facility's funding shortfall, the city's recovery chief, Ed Blakely, publicly stated that city funds would immediately be marshaled to proceed with buyouts of land in the Mid-City neighborhood for both the VA and LSU sites. “We'll start tomorrow with the acquisition phase and work towards a clean slate,” Blakely explained during the November 25 announcement.

The project agreement inked by all parties requires that the city buy out property owners in the neighborhood, demolish structures, clear the land, and finally hand it over to the VA and LSU as primed and ready for construction. Prepping the way for this was a November 2007 moratorium on building permits issued in the project's footprint that halted all reconstruction efforts. It was a firm signal from the city to homeowners and developers alike that the neighborhood was all but condemned.

In order for the city to acquire title to the hundreds of homes, warehouses, empty lots and historic buildings in the area - nearly all of which will be razed - they are utilizing a controversial legal tool called “quick take" which allows the city to seize properties, paying owners what the city estimates their land and buildings to be worth. If it similar to quick take proceedings that have been implemented in other locales, the city may then immediately proceed with demolition and redevelopment, well before the legality of land seizure is decided (if any owners file suit), and before the purchase price is settled upon as fair by all parties. Purchase prices will likely be based on tax assessed values of property, but the city has yet to publicly state whether this is in fact their policy.


Mid-City Buy Outs

The immanent city orchestrated buy out of the lower Mid-City neighborhood is, however, not the first mass buy out to proceed in the area. In early 2006 an investor named Pincus Friedman began creating an array of limited liability corporations, each serving as a holding company for properties in the Mid-City area, many of them directly in the footprint of the VA-LSU project. One of Mr. Friedman's primary local agents facilitating these numerous purchases is Ryan Adams, a lawyer with the major New Orleans based law firm of Sher Garner Cahill Richter Klein & Hilbert. Mr. Adam's main areas of practice include real estate and health care. He is also a board member of the Young Lawyer's Division's Real Property, Probate, as well as a member of the Louisiana Chapter of the Urban Land Institute.

In May of 2006 Mr. Friedman and his attorneys created a company named 2330 Palmyra Street, LLC in order to acquire a property at this same address. Located squarely in the middle of the proposed LSU-VA hospital complex footprint, this would be the first among over 100 acquisitions made by Friedman in and immediately adjacent to the area. The majority of Mr. Friedman's earlier buy outs would be made using the same procedure: by creating independent LLCs of the same name as the address in question. All of these LLCs have listed their business address in the same office building at the base of Canal Street.

According to information available through the Louisiana Secretary of State and New Orleans Board of Assessors web sites, Friedman has created over 118 independent limited liability corporations in order to buy up homes and lots in and around the Mid-City hospital site. Most purchases were made between May and October of 2006. The last acquisitions under the LLCs were made as late as June of 2008, including addresses like 2627 Banks St, a lot purchased for $12,500 from the city of New Orleans, just blocks away from the VA-LSU project site. Mr. Friedman appears to own 22 properties directly in the footprint of the hospital complex, most of them along Palmyra and S. Tonti Streets.

A total of fifteen properties within the VA-LSU project footprint were sold or transferred after the November 2007 moratorium on building permits was issued by the City Council. Several were buy outs of homeowners through the Road Home Corporation, a sensible transaction. Two on Palmyra Street, however, went to PF Developers for a combined sum of $274,000. A third property, the dilapidated Grand Palace Hotel on the corner of Claiborne and Canal, was auctioned off to a Washington DC based investor named Robert Taylor.

The Grand Palace's price was $3.3 million, significantly reduced from past pricings. The day after the sale the Times-Picayune noted that, "It is unclear what will happen to the property now that it has been sold. The hotel is in the footprint of Louisiana State University's plan for a downtown teaching hospital." Whether the city cuts Mr. Taylor a special deal and allows him to keep his building while others are forced out via eminent domain, or whether his hotel will also be bought by the city remains to be seen. The city has, however, scheduled a December 17 hearing on possible health code violations related to the Grand Palace.

In addition to the smaller LLCs chartered to acquire and hold hundreds of specific properties, Mr. Friedman and his partners have created several other companies as larger holding corporations for multiple site throughout the city. These include a firm called PF Developers, and a series of corporations named NORA One, Two, and Three, LLC, NORA Developers, NORA Acquisition LLC, the NORA Group LLC.

A map of some properties acquired by Mr. Friedman in and around the Mid-City site can be viewed here:
http://maps.google.com/maps/ms?ie=UTF8&hl=en&msa=0&msid=100302979363458327594.00045cd6ce70fc1399688&ll=29.986796,-90.010724&spn=0.151954,0.307617&t=h&z=12

The NORA acronym appears to refer to the New Orleans Redevelopment Authority, the city chartered agency responsible for disposition of adjudicated properties. Official NORA minutes from April 2008 show that Mr. Friedman has attended the agency's meetings representing his companies, as many other for profit developers commonly do. PF Developers was selected among 22 other firms in August 2006 as recipients of thousands of blighted properties seized by the city due to back taxes. At the time PF received 100 of the 192 parcels it requested making them one of the preferred developers to receive adjudicated properties from the city for rehabilitation and re-sale.

A search of property transfer records compiled and published by the Times Picayune shows that PF Developers has been most active in acquiring properties close to the VA/LSU project site throughout 2008. PF Developers has also acquired blighted properties from the city in the 8th and 9th Wards and a small concentration of lots in the Hoffman Triangle area.


Malfeasance or Incompetence?

That the city's Redevelopment Authority would sell off so many parcels of land directly within the VA-LSU project's footprint raises serious issues about the propriety of the agency's decisions as well as inter-agency cooperation, or lack thereof by city offices. Now that the VA project is moving ahead full steam and the city's recovery director has stated that they will also put funds toward buying out land for the LSU side of the project it appears that the city is forced to buy back property it handed over to Mr. Friedman and other developers over the last two years.

So while one office of Nagin's administration worked hard to manifest the VA-LSU hospital project, another bargained off properties within the project's footprint, committing the city to purchasing these very same lots back as part of the development deal agreed to by federal, state, and local authorities. Whether Mr. Friedman's companies profit off their holdings, or lose money and time due to city incompetence awaits to be seen. If not a case of malfeasance this episode of circular buy outs in Mid-City appears at least to be an example of inefficient government.

In a larger sense the real estate market in Mid-City is already attracting speculators and powerful developers who are basing their acquisitions on the VA-LSU project and the wider GNOBEDD scheme. Whether this rush for land will play out fairly for existing homeowners, renters and small businesses also awaits to be seen.



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Posted by NosyRosie on 12/29/2008 at 6:09 PM

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