Regional Markets: South Central
Condos reshape market
Developers looking to profit in the land of Mardi Gras are focusing on rehab and condo conversion.
By Eric Wong
(Apartment Finance Today, May 2005) New Orleans – Most of the multifamily activity here is coming from out-of-state investors looking for condo conversion opportunities in urban infill areas.
These conversions will diminish the supply of apartments, so owners can expect multifamily prices to stay high and rents to increase by as much as 5% this year, said Larry Schedler, president of Larry Schedler & Associates, Inc., a local multifamily brokerage firm.
Within the past year, nearly a quarter of the apartments in the New Orleans historic center have been or began being converted into condos. Apartment buildings are selling for conversion at more than $100,000 per unit, said Schedler. Three of these include the 221-unit St. Charles Regency Apartments, the 94-unit 3915 St. Charles Apartments and the 105-unit Julia Place Apartments.
Condo conversions and rehabilitation continue to be the main development activity. In eastern New Orleans, there are more than 50,000 units in the pipeline, said Schedler.
Most new multifamily construction taking place is of high-end luxury projects, to justify the costs, he added.
The overall occupancy rate remains relatively high, although it hit a three-year low in 2004, at 92.2%. That should improve in 2005, to between 93% and 94%, said Schedler.
Net absorption of units is projected to improve slightly by 114 units in 2005, a slight recovery from the negative absorption of 549 units in 2004, according to Reis, Inc., an independent third-party market research firm. No new apartment units were completed in the city in the first three quarters of 2004. But in the last quarter, 280 apartment units opened, and 174 additional units are expected to open in 2005.
The region experienced fewer job losses compared to other markets because it didn’t depend on the high-tech sector, said Schedler. Most of the jobs here are in education, health and social services, and entertainment and food services.
New luxury enters St. Tammany
St. Tammany Parish residents have some of the highest income levels statewide, and they are creating demand for new luxury multifamily properties. Last year, six new projects entered this northeastern submarket of the greater New Orleans area, which will increase the apartment inventory there by more than 50%. It will take about another year for these units to be absorbed, said Schedler.
The marketplace is very stable here, said Richard Richter, a principal of Harborside, LLC. He just finished developing the $15.3 million, 168-unit Harborside Apartments, a waterfront luxury development here with a West Indies theme. “We believe that the property will have a strong profit outlook,” said Richter. The property has a waterfront gazebo, a fishing pier, docks with boat slips, a clubhouse, a business center and a fitness center.
Its one- and two-bedroom units range from 732 square feet to 1,028 square feet in size, and rents range from $725 to $1,075. Furnished and corporate units are available at higher rents.
The cost per square foot was $72.20. The apartments secured a $14.8 million, 40-year Sec. 221(d)(4) loan at 5.48% from Prudential Huntoon Paige Associates, Inc. J. M. Madderra/Cazalot Associates brokered the deal.
In Gretna, on the other side of the Mississippi River, construction of the 280-unit Calypso Bay should be completed this month. It’s the first new apartment project in the West Bank submarket in 23 years. Financing was provided by Hibernia National Bank.
Calypso Bay, which also features a tropical island design, has one- to three-bedroom units ranging in size from 748 square feet to 2,482 square feet, with rents from $800 to $1,700.
Some of the apartments have two balconies. The second balcony connects the master bedroom to the kitchen, which is “perfect for lazy summer mornings,” said Jacquelyn Bruchi, president of Shadowlake Management Co., Inc. Shadowlake is the property manager.
Amenities include a fitness center, waterfall, swim-up bar, and sundeck. Bruchi said that Jefferson Parish had recently invested heavily in the transportation outlets and drainage facilities in the West Bank, making this a highly desirable area. It is also located a few miles away from the New Orleans central business district and the French Quarter.
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