What Was and What Will Be: Helping Rebuild New Orleans with the Community Green
1 Aug 2012
By Virginie Arnaud LePape and Jon Kelly, NCB Capital Impact
To understand a project’s significance, one must visit it at the beginning. This story starts when mud was still caked on the floor and the water line was two feet from the ceilings of buildings in the Hurricane Katrina-devastated New Orleans neighborhood called Broadmoor. In 2005, the storm destroyed buildings, shuttered businesses and displaced the people who lived and worked in the neighborhood. When the levees failed during the hurricane, more than 10 feet of water surged through the area. The devastation was so severe that the Federal Emergency Management Agency (FEMA) designated the area as “Green Dot” meaning the area was deemed not worthy of rebuilding.
What FEMA didn’t understand was the residents’ resolve; more than 80 percent returned. When they did, they launched an initiative to build the Broadmoor Education Corridor. The idea was to create a mini-town center within walking distance of residents’ homes. The initial goal was to rebuild the damaged library and create a state-of-the-art charter school. Once residents completed those, they turned their attention to providing much needed public health care services and community amenities, such as recreational facilities.
When complete, the Broadmoor Education Corridor will eliminate all trace of the devastation caused by Hurricane Katrina. In its place will stand four newly-renovated buildings, including a new Tulane University-supported community health center that is expected to serve 1,300 patients annually, and commercial space for not-for-profits, social innovators and a bakery. The 25,000-square-foot project will create 85 construction jobs and more than 200 permanent jobs in the community. This new development will not only be another indicator of New Orleans’ strong recovery, but a transformative project that will complete the Broadmoor neighborhood’s renaissance.
A New Beginning
Located near the infamous Superdome, the Broadmoor neighborhood is at the nexus of four neighborhoods and is one of the city’s major access points from the suburbs. It is a highly distressed census tract with a poverty rate of more than 55 percent and an unemployment rate four times the national average. The area is also categorized as a Hub Zone, a New Orleans Renewal Community and a Medically Underserved Area. Buildings range in age from 40 to 90 years old and, before the restoration began, were all uninhabitable, deteriorated from age and damaged by the hurricane.
Into these conditions came Green Coast Enterprises (GCE), a socially and environmentally responsible real estate developer that works toward a triple bottom line of people, planet and profit. The company builds environmentally sound and affordable structures in Southeastern and Gulf Coast urban areas in need of community renewal. GCE aims to create storm-resistant buildings, and to develop a sustainable model, which, through replication, will help a broad range of socio-economic groups. It named the Broadmoor commercial corridor project “The Community Green” and recently closed a $7.3 million new markets tax credit (NMTC) transaction to finance the acquisition and renovation of the buildings. The four renovated buildings, most of which are historic structures and will be renovated in accordance with the National Park Service™s historic renovation standards, will target LEED Gold certification, be environmentally sound and utilize smarter design that will respond to local hazards.
The developer selected a group of local and mission-driven partners to finance its project, combining federal NMTCs with federal and state historic tax credits (HTCs) and public and private capital. The completed transaction resulted from a year of
collaboration and negotiation between several private partners, including New Orleans-based First NBC Bank, a committed financier of high-impact projects; NCB Capital Impact, a national Community Development Financial Institution that provides mission-driven facility financing in areas of healthcare, healthy food and education; Capital Link, a not-for-profit that provides capital and technical assistance to community health centers; and Stonehenge Community Development (SCD), a national tax credit investor targeting investments with significant minority impact. The state of Louisiana and the city of New Orleans were key public sector partners. In addition, Partners for the Common Good and Bend the Arc: A Jewish Partnership for Justice’s Isaiah Fund provided bridge financing for the public funding.
A Creative and Flexible Structure
The Community Green would not have been possible without a creative and flexible financing structure. Forty percent of the project costs were financed by tax credits. The project received a total of $3.3 million in tax credit equity through the federal and state HTC programs and the federal NMTC program. Further benefit came from a below-market interest rate loan.
The NMTC transaction was structured around two qualified equity investments (QEIs) totaling $7.3 million. NCB Capital Impact provided a $4.2 million allocation and Capital Link provided $3.1 million of its Go Zone allocation to the project. NCB Capital Impact and First NBC Bank each provided $700,000 in leveraged debt for a total of $1.4 million. The structure also leveraged $1.3 million in HTC equity and $1.75 million in public financing, which boosted the NMTC equity to $2 million. First NBC is the NMTC and the federal HTC equity investor. SDC is the state HTC investor.
Private funding alone was not enough. The public sector partners also provided vital, flexible capital. The state provided a $1 million loan through the Disaster Recovery Unit of its Office of Community Development. The New Orleans Redevelopment Authority awarded $750,000 in loans under its commercial corridor financing program.
If Not for Tax Credits
Community Green is the ideal model of NMTC benefits. Without tax credits, it is unlikely the project would be moving forward. As Will Bradshaw, president of GCE, said, “Our project would not have been possible without NMTCs and the collaboration and commitment of our financing partners.” Instead, what would remain is a blighted corridor in an otherwise thriving neighborhood. Today, work is well under way and neighbors can see the progress. Long-time residents remember the exciting and vibrant neighborhood Broadmoor once was. All of us involved in this project are glad to tell them that it will be that way again.
Virginie Arnaud LePape, is a senior loan officer and Jon Kelly is director of business development at NCB Capital Impact. They can be reached at VArnaudLePape@ncbcapitalimpact.org and JKelly@ncbcapitalimpact.org.