When Jefferson Parish finally allowed A. David Lynd to visit Laurel Gardens, his 60-unit property in Metairie, La., one week after Hurricane Katrina ravaged the Gulf Coast, he didn't know what to expect. He found rain-soaked units, debris on his grounds, sheetrock damage, and, perhaps most shocking, 39 of his residents still living in their units. "We tried to get them out," says Lynd, COO of The Lynd Co., an apartment manager and owner based in San Antonio, Texas. "There was no water and no electricity. There was nothing, and these people were still living there."
But just because his residents considered the units livable–or at least better than any of the other housing available in the New Orleans area at the time–doesn't mean HUD, which covered the rent at Laurel Gardens, did. "The government wouldn't pay on units that were uninhabitable or less than habitable [approximately 15 units]," says Lynd, who found insurance companies to be equally stubborn, but with a different point of view. "The insurance companies are telling me that I have a lease in place and a guy living there, so I should be able to get something."
The situation leaves Lynd with few options. "I have a big catch-22 where I can't get any money from HUD," Lynd says. "I can't get any money from the residents, because they can't pay. And I certainly can't throw them out, because the parish won't let me."
It's a complicated collection of issues facing Lynd, who finds himself the same difficult straits as many other apartment owners and managers with properties in New Orleans. Whether it's not being able to evict residents or their possessions, an inability to collect insurance money, the ongoing scarcity of labor, or challenges with HUD, landlords in the Crescent City are encountering countless obstacles to reopening their properties to meet the crushing housing demand from Katrina rebuilding contractors, FEMA workers, and returning residents, all of whom are converging on the area in search of places to live.
Who's Got Space?
Hang out in a hotel lobby in the New Orleans' central business district and you're bound to see them: the post-Katrina workforce. In one corner, you'll find FEMA workers wearing their government-issue navy blue windbreakers. Look in another direction and you'll notice the dusty guys. They're the construction workers and environmental remediation engineers and samplers. All of these people have descended on New Orleans to help clean up the city, and they all need a place to stay. "The labor coming in to rebuild will dominate the housing that's available," says Ric Campo, CEO of Camden Properties, an apartment REIT based in Houston.
But where is that available housing? While the New Orleans metropolitan population did plummet from 1.3 million people before the storm to an estimated 871,982 people (including contractors) in late February, the amount of housing did as well. Hurricane Katrina and the subsequent flooding destroyed 186,903 owned homes and 182,416 rental homes in the New Orleans metro area, according to GCR & Associates, a New Orleans-based planning and research firm. Not surprisingly, contractors and residents are clawing for any available space.
For the lucky ones, usually contractors, living in New Orleans these days means staying in the swanky Pere Marquette in the business district. But for others, it means far less hospitable accommodations. Some are stuffed on a boat docked on the Mississippi River. "I had an interior room for the first three weeks," said one worker living on a boat. "I thought I would go crazy."
Those who prefer land-based shelter can move into one of the tent cities that have sprung up between on the vacant land between a heavily looted Wal-Mart and the River Garden HOPE VI project in the New Orleans's St. Thomas District. But don't expect toilets or even running water. With options like these, it's little wonder that companies such as Domino Sugar, a subsidiary of American Sugar Refining, which is owned by Florida Crystals Corp. of West Palm Beach, Fla., have resuscitated their old company towns and are using them as housing for their employees, according to a story in The Washington Post.
Even small multifamily owners have followed this blueprint and decided to provide housing to contractors repairing their properties. A beat-up travel-trailer sits unhitched in the driveway of one of Spiro Latsis' Metairie rental properties. The setup certainly isn't posh, but it's better than a tent. "My contractors live in that trailer," says Latsis, co-founder and CEO of Spartan Properties, pointing at the small camper. "They take it from job to job."
Add the number of residents who are returning to New Orleans, and it's easy to see why the waiting lists are growing long at apartment properties. "We have a large number of existing residents who're eager to return and about 750 people on the waiting list," says Laird Sparks, investment manager for Greystar Real Estate Partners in Charleston, S.C. "But my sense is that many [people] are on many lists around town. We want to reoccupy [with] our existing tenants first. With Tulane and Loyola opening and the [central business district] and French Quarter up and running, people are coming back to the area."
Korey Francis, another Greystar employee and New Orleans native, sees the demand firsthand as director of resident relations at The Saulet, one of Greystar's New Orleans properties. "People call trying to get an idea of when they can lease one of these units," he says. "It's in high demand. One of our competitors is at 100 percent occupancy and eventually capped its waiting list at 3,000."
That demand has driven prices up to levels never seen before in the Crescent City. "If you look at apartment and single-family housing rents in the surrounding area, they've doubled because they're being rented to companies that are housing employees that are involved in rebuilding and clean-up work," Camden's Campo says. "It will be difficult for people to find reasonably affordable housing in the surrounding area."
Getting 'Tacked'
Getting "tacked" is just about as fun as it sounds. Stories abound about Katrina evacuees returning to their New Orleans apartments last fall only to discover an eviction notice on their door and their belongings on the street. Such strategies didn't work for long; Big Easy lawyers soon got all evictions in Orleans and Jefferson parishes stayed.
While such legal help is a well-meaning effort that is intended to protect the residents who encountered hell and high water while evacuating New Orleans, is is also exacerbating the city's current housing scarcity. Without the ability to evict an absentee or a squatting resident, even temporarily, it's very difficult for a landlord to make a hurricane-ravaged apartment livable again. "I can't even get in there to fix up the unit," Lynd says, speaking about his Laurel Gardens property. "You can't rebuild a unit with the guy living there."
Most cases aren't as challenging as the situation facing Lynd, where (non-paying) residents are still living in a seriously damaged property, preventing him from either collecting rent or getting an insurance check to rebuild. Instead, landlords are dealing with possessions and furniture abandoned by their former residents when the storm hit. "If you have someone's personal property, you couldn't move it out without some kind of eviction procedure or by enactment the abandonment clause," says Theodore Fatsis, an apartment owner who owns 24 units in Metarie.
Fatsis wanted to move quickly after the storm to enact the abandonment clause so that he could move his residents' moldy personal items and begin rebuilding. But bureaucracy intervened. "The justice of the peace wasn't up and running for three or four weeks after the hurricane," Fatsis says. "If you're dealing with mold remediation, a month is a long time for that stuff to be cooped up. Instead of ripping four feet of sheetrock, all of sudden you had to rip right eight feet" because of the delay in starting the restoration work.
David Abbenante, director of property management for Historic Restoration, a New Orleans-based owner and manager that handles more than 2,800 apartments and condos, took a systematic approach to evictions. "We set up a call-in line for residents and posted the numbers to contact via our Web site," Abbenante says. "We then posted a 'disposal of personal items' form on the site as well. We asked residents to come in and retrieve their personal belongings from the damaged units."
The company got 100 percent cooperation from residents at two of the three properties where evictions were necessary. Most personal property was destroyed by mold or taken by looters, causing many residents to approve disposal.
At the fourth, a 126-unit low-income housing community, 46 residents still had not gotten in touch with the property manager as of press time. "We gave a final notice as of February 28 and we will now start the eviction proceedings on the units to prepare for the remediation and rebuild of the property," Abbenante says. "We have been very reluctant to take this step but we are now at a point where ... we need to get moving."
He is doing his best to approach the situation delicately. "We will do a picture inventory or all items and if possible, try to salvage anything that may be personal to the individual and have the civil sheriff dispose of the rest during the eviction proceeding."
Lynd plans to put his residents' items in storage once his insurance money comes through. "We will scoop them up, tag them to the unit number, and put them in a drop ship container during construction," he says. "In the end, we will turn it over to authorities as unclaimed property."
Obstacles Abound
There aren't many unwanted items sitting outside Latsis' Metairie property. In fact, you can't even tell the property withstood a massive hurricane. All the debris around the property, which sits a few blocks south of Lake Ponchartrain, has been swept up. The only exterior indicator of the storm? A broken window on the second story still awaiting repair.
Take a glance inside this property, though, and things look different. Both sides of the duplex were been taken back to the studs. "We renovated these units just before the storm," Latsis says wistfully. "We'd put in nice porcelain floor tiles and new everything. Then the roof blew off right into the backyard, and we got 18 inches of water in a neighborhood that's never flooded before. Now it's been trashed."
To rebuild the property, Latsis needs insurance money. He expects the entire repair bill for the 12 units to total about $300,000. "Insurance–that's been the most difficult problem for everyone in the city, large and small," he says. "It's been tough getting insurance to pay up. You can only do so much with your personal savings. The rest has to be covered by insurance. We may have to go into litigation to get some amounts, but in the end, I foresee the insurance covering everything."
Waiting for insurance payments requires serious patience from all involved. To start construction as quickly as possible, an apartment owner needs an understanding and flexible contractor, according to Abbenante, who estimates he'll need $20 million to $25 million to fix Historic Restoration's 425 units at 11 properties. "If you moved quickly on repair work prior to the insurance firm 'signing off' on the costs, then it is likely that the contractor is now waiting for their payment, as processing of contractor payments has been agonizingly slow throughout the city," he says. "If you are obtaining estimates and seeking insurance approval prior to moving forward, you probably are still waiting as bids take a long time and good luck receiving more than one."
Why are bids so hard to come by in New Orleans? A scarcity of labor. "Labor is very difficult to get down there," Campo says. "The cost of labor is skyrocketing as a result of the limited supply. My friend owns two hamburger franchises. He's paying his employees $20 [an hour] instead of $6 [an hour] and they're only open until 9 p.m."
Latsis quickly arranged for contractors after the storm, but he's still having problems with certain skilled trades. "You can't find skilled labor to do sheetrock work and cabinetry," he says. "When you do, it's extremely expensive. The labor costs are much more expensive than what the insurance companies are estimating."
Even with insurance reimbursement, city approvals, and reasonably priced labor, though, a multifamily firm can still find themselves stuck in neutral.
Consider the situation of Michaels Development Co., a Marlton, N.J.-based firm that owns about 600 apartments in the New Orleans area. Bob Greer, the company's president, and his insurer think 400 of those units located in the city's devastated Ninth Ward should be demolished and new ones rebuilt to replace them. So does the city, and contractors are lined up to begin the rebuilding.
But there's a problem.
"HUD is unable to make a decision to let us rebuild or not," Greer says. "Here we sit, marshaling all of our forces and keeping track of our residents who want to come back. All other agencies involved in this want us to rebuild. I guess HUD feels they don't have enough to comfort them in the investment of rebuilding."
Others also remain cautious about the Crescent City. "There's a combination of obstacles to getting housing built, but the issue right now is the levees," says Mo Leaverett, executive director of Desire Street Ministries, a community service group in New Orleans. "That's the first issue that creates the other [issues] for me. Who's going to invest and insure in an insecure environment? Those people wanting to put a lot of money into redevelopment are concerned about the security and stability of the city."
Many are looking to Washington for answers. "The federal government has to build the levees to a point where people and businesses feel confident in coming back," Latsis says. "The levees are a very, very key issue. That's the linchpin in whether New Orleans has any kind of resurgence."
While Latsis and Abbenante continue to fight red tape so they can rebuild their units, Lynd wonders how to deal with his unexpectedly occupied property, and everyone waits for federal decisions on the levees and more, one starts to feel there are no real winners in this story, despite the billions of dollars being spent on rebuilding New Orleans.
But Greer says the biggest losers aren't his colleagues. They're his residents. "After all of these years of them living in an area of drugs and social misbehavior and all of the illness that go along with public housing, we finally took it down and rebuilt it brand-new–new streets, new walks, new houses, new community centers, new everything," he says. "It's the first nice thing that happened to many of those people. Now that the flood has come, they're back in confusion, uncertainty, and sadness."
–Les Shaver is senior editor at Multifamily Executive.
–Margot Carmichael Lester is a freelance writer in Carrboro, N.C.
Crescent City Voices
'It Lives With You'
Cindy Bowles laughs when a visitor asks for the bathroom. She walks through a maze of metal studs to a roughed-in space surrounded by refrigerators. A large painting is propped in the doorway. "Here you go," she says, gesturing grandly. "I'll guard the door."
It's not much, but when you've got an entire building needing repair, incremental improvements like a working bathroom are important.
As Bowles, manager for HRI Properties' American Can Apartments in New Orleans' Mid-City neighborhood, surveys the damage, her phone chirps constantly with calls from tenants, contractors, and maintenance workers.
"This is all we've got," she says, waving her mobile phone. "No land phones. But I hear we're close to getting Internet." She smiles like a kid on Christmas morning. As she walks through the property, she's picking up garbage. Sometimes, she says, she even cleans the pool. "You just can't keep up," she admits. "We're desperate for staff."
Bowles breezes through the gutted lobby and into the parking lot. Standing a few hundred feet from the site of a rescue helicopter crash, she lets her guard down.
"There's no such thing as regular hours right now," she notes, looking tired for the first time this afternoon. "We've been going nonstop since the storm. We don't eat lunch.
I don't have any furniture." She pauses.
"How long before things get more normal?" She asks, looking around. "I go home and still think about it. It lives with you."
–Margot Carmichael Lester
'One Body, One Spirit, One Hope'
Jim Kelly might as well be at the pulpit as he sermonizes eloquently about the need to create housing for New Orleans' poor, elderly, and disabled residents. Tall and confident, he has faith that New Orleans will rise again.
"There's a line from Ephesians–one body, one spirit, one hope," he says with conviction. "That's what we need here. Affordable housing is in critical need if we're going to truly re-inhabit our community."
Kelly is CEO of Catholic Charities, the largest developer, owner, and manager of affordable multifamily housing in New Orleans. All of its 2,300 units were damaged; about 1,300 remained offline in January.
He preaches the gospel of mixed-income redevelopment to anyone who'll listen, including Congress. "I don't think anyone in our nation is going to say that having all poor people in the same neighborhood is going to be effective," he says. "[Mixed-income housing is] the only way we can develop a true appreciation and respect for one another."
It's also good business. "If we don't invest in a mixed-income model, you won't have workers to run businesses, hotels, the convention center, restaurants, and normal everyday services our community needs," he explains. "Mixed-income housing is for the health of the redevelopment. If you do all upscale, you will cut off your nose to spite your face. You won't have the infrastructure that's provided by people of all income ranges. If we don't do it, we won't recover."
–Margot Carmichael Lester
After The Money
Securing the insurance payments is only half the battle.
Spiro Latsis' voice rises in exasperation. "A building permit must be pulled by a licensed Jefferson Parish contractor, but it's impossible to find such a contractor during these times," laments the co-founder and CEO of Spartan Properties, a family-owned residential and commercial management company with 26 rental units in Orleans and Jefferson parishes.
Even if you do, he says, the lines are out the door, and the wait is hours long. "Many of the developers I know have completed repairs without permits."
With or without permits, beginning the work is a challenge. "You contact your loyal contractors or vendors, who assure you that they can meet a deadline," explains David Abbenante, director of property management for New Orleans-based Historic Restoration. "Two days into their work they may lose half their staff due to another contractor hiring them away or some of them just burning out and leaving the city for good."
Though resolute, Abbenante is clearly frustrated. "For the first time in my career, I don't know what to do speed up work on properties," he admits. "What else can we do but yell, beg, plead, and continue to offer checks to expedite the process? Every traditional carrot that can be dangled has been dangled in front of contractors, and I am sure they want to take a bite, but no one seems to get there."
–Margot Carmichael Lester
Lessons From The Storm
Hurricane Katrina forced Gulf Coast native David Abbenante to evacuate for the first time in his life. He ended up leasing space for a makeshift office and living in an apartment with 18 family members, two dogs, and a cat. Looking back, the director of property management for New Orleans-based Historic Restoration offers a few lessons from the storm:
- Do not rely on cell phones as the only source of contact. Get a landline number for employees who are evacuating during the storm and have a back-up Web site where staff can report in.
- Take out that old contingency plan and update it to address issues experienced in New Orleans: no power for months, residents unable to access the property, and unsafe drinking water.
- Make priority service agreements with vendors in the event of a disaster.
- Provide housing, subject to availability, for vendors' employees, your key employees, and others vital to the rebuilding.
- Establish personal communications. Residents want to talk to a person, not receive an email or simply check a Web site. Historic Restoration manned an emergency phone line for residents; it rang non-stop.
- Read your insurance policy and understand what is not covered. Most flood policies don't include business interruption coverage.
- Never, ever, ever open a refrigerator that was full of food and sat without electricity for more than 30 days.
–Margot Carmichael Lester
Blank Slate
Katrina's devastation gives a historic city the chance for a fresh start.
"Mother Nature taught us a real lesson," said independent real estate broker Judy Fisher, standing in the midst of reconstruction and piles of debris in New Orleans' Faubourg-St. John neighborhood. "It's survival of the fittest down here. It's no more complicated than that."
"We need big developers to bring in crews," she says authoritatively. "We need the best and brightest minds in the real estate industry to look at doing projects here. Do some flyovers and see what can be done. It's an especially good time for environmentally sound projects because people will listen now."
She's not the only one. Jim Kelly, CEO of Catholic Charities, which develops, owns, and manages 2,300 affordable housing units across town, also sees the need for outside involvement.
"I hope developers who come to New Orleans truly do believe in mixed-income apartments," he says. "And I hope that developers who come will try to use New Orleans folks to partner wherever they can so they're not simply carpetbaggers."
Mo Leaverett, executive director of Desire Street Ministries, a local church and community support organization, says the hope for a brighter future hinges on one key tenet.
"The issue isn't just creating housing," he says. "It's creating community. Developers should work closely with churches and small business owners to figure out what's needed locally to create intact families and stakeholders in the community. Katrina has helped us create more of a blank slate. If God grants us favor, we can do it."
–Margot Carmichael Lester