Wednesday, November3, 2010
After a 16-year-old mortgage comes due, the Lafayette Neighborhood Economic Development Corporation appears poised to regain ownership of the Evangeline hotel downtown. By Nathan Stubbs
As Nathan Thornton describes it, when the city of Lafayette helped work out a deal in 1993 for the state to donate the old Evangeline Hotel to the nonprofit Lafayette Neighborhood Economic Development Corporation and have it redeveloped as low income housing for the elderly, there was little short term gain for LNEDC. "You have to wait 15 years," says Thornton, a counselor at UL's Small Business Development Center, "but at some point you're going to have an asset with value with no debt."
Wednesday, November3, 2010
After a 16-year-old mortgage comes due, the Lafayette Neighborhood Economic Development Corporation appears poised to regain ownership of the Evangeline hotel downtown. By Nathan Stubbs
As Nathan Thornton describes it, when the city of Lafayette helped work out a deal in 1993 for the state to donate the old Evangeline Hotel to the nonprofit Lafayette Neighborhood Economic Development Corporation and have it redeveloped as low income housing for the elderly, there was little short term gain for LNEDC. "You have to wait 15 years," says Thornton, a counselor at UL's Small Business Development Center, "but at some point you're going to have an asset with value with no debt."
Dating back to 1928, the Evangeline Hotel downtown is one of the oldest extant buildings downtown. Legend has it that Elvis stayed there while passing through Lafayette in the 1950s before he became a big name act. But by 1993, it was an Asbestos-ridden, dilapidated building abandoned by its most recent tenant, the state Department of Motor Vehicles. Viewing it as a liability, the state contacted the city, and then-Mayor Kenny Bowen helped to broker a deal that included LNEDC, a nonprofit that helps local small businesses secure loans, and prominent New Orleans developer Pres Kabacoff, head of HRI Properties. (Back then former state Rep. Dickie Breaux of Jeanerette was also involved as a partner with HRI.)
At the time an LNEDC board member and its loan fund manager, Thornton has been involved with the deal from the beginning. "The incentive in these type projects was to give to basically a fledgling organization," Thornton adds, referring to the local economic development corporation.
After 16 years, LNEDC appears poised to regain ownership of the building. The group recently filed for foreclosure against 302 Jefferson Street LLC, the HRI subsidiary set up by Kabacoff and company to manage the property. In September, the court ordered the property be sequestered and that the economic development entity be appointed keeper of the mortgaged property with full power to collect revenues and rentals.
LNEDC attorney Wayne Shullaw says his client is asking for a judgment against 302 Jefferson Street LLC, after which point, the property can move to a sheriff's sale. Shullaw estimates that could take up to six months. At the same time, however, LNEDC is in ongoing negotiations with 302 Jefferson over ownership and management of the property, which could preempt any foreclosure and public sale.
"We are trying to negotiate an amicable resolution with 302 Jefferson," Shullaw says, declining to give any specifics on what is being discussed. He did say the matter shouldn't affect occupants of the Evangeline Apartments. "There will be no interruption in occupancy," he says. The attached Cite des Arts portion of the building is owned separately and won't be impacted by any deal on the old hotel.
David Abbenante, president of HRI Management, says his company hopes to be able to keep the historic downtown Lafayette landmark in its extensive property portfolio. "We were interested in purchasing the note at some type of discount," Abbenante writes in an email, "and or working with LNEDC on that particular property and perhaps other properties in Lafayette. Time will tell if that will work out."
Currently, 302 Jefferson Street LLC owes the local economic development corporation more than $2.3 million on the property. In June of 1993, the state Division of Administration donated the property, at the corner of Jefferson and Vine streets, to LNEDC. In the Act of Donation, dated June 1993, the value of the property is listed as $45,900. Six months later, in December, 302 Jefferson Street LLC signed a $1.2 million deferred mortgage agreement with LNEDC on the property. Essentially, LNEDC turned the property over to HRI to redevelop as low income apartments. HRI was able to obtain and sell approximately $5 million worth of tax credits through the Louisiana Housing Finance Agency to fund the renovation expenses. (The tax credits were purchased by Premier Bank, which is now Chase.) It qualified for the tax credits by addressing both downtown historic restoration and affordable housing needs.
The mortgage stipulated that HRI would manage the property and pocket all revenue from the apartments for a 15-year period - later amended to 16 years - at which point HRI, or 302 Jefferson Street LLC, would have the option of purchasing the property. Because the purchase price agreed to now totals approximately $2.36 million - a $1.2 million mortgage balance and $1.16 in additional interest accrued at 6 percent a year (HRI also paid a $50,000 sum up front) - most expected the property would eventually revert to LNEDC. The note matured March 1 of this year.
LNEDC Board President Joe Dennis says his organization is interested in taking over the property and also in moving management of the building away from HRI and over to C.S. Management Inc., a local firm that is already handling LNEDC's other property, Sterling Grove Apartments. Dennis added that any profit generated from the apartments would help fund LNEDC's small business loans.
Abbenante, meanwhile, is still optimistic HRI will keep some stake in the property.
"We love the property," Abbenante says. "We love the residents and what's happened down there. Fifteen years ago, that was kind of a barren end of town, and look how vibrant it's become now. And our residents I think are part of that. We're happy to have been a part of it for 15 years and hope we get the opportunity to stay with it."