NORF

I remember noticing this thing gearing up some months ago around the time the Trump Administration was rolling out its new Opportunity Zone rules.

New Orleans Redevelopment Fund has launched its latest real estate investment initiative designed to provide tax benefits to investors with capital gains while helping fight blight in the area. The NORF 3 Opportunity Zone Fund wants to raise $30 million, a news release said. It would be the largest fund to date for NORF, a private real estate developer founded in 2013 that specializes in the adaptive re-use of historic buildings and urban infill.

The Opportunity Zone program provides tax incentives for investors to re-invest capital gains into funds that promote development in economically distressed areas of the United States. The program offers deferral of the original capital gains tax until 2026 if gains are invested within 180 days of sale; reduction of 15 percent for the original capital gains tax if gains reinvested in an Opportunity Fund are held for seven years; and permanent exclusion of capital gains for gains accrued after investing in an Opportunity Fund if the investment is held for 10 years.

Key details of the NORF fund include sponsor commitment of 15 percent of the fund up to $4.5 million. Investors must be accredited and must have capital gains in need of deferral. NORF has identified properties in New Orleans, Baton Rouge, Houston and San Antonio, Texas and is eyeing other areas of the Gulf South, the news release said. The sites will be mostly multi-family, mixed-use commercial and hotel/hospitality.

All I can find today is that short description from City Business in March which appears to be sourced to a press release. But I also remember there being a more glowing profile of the firm itself, probably in the Advocate, but I can't find exactly the article I'm thinking of now.  I think they're still having trouble with archives and link rot at the Daily Georges.

I noticed them again in May when it was becoming clearer that the Trump rules were likely to be conducive to parked money and/or land flipping schemes. The rush to figure out an angle was described by investors as being "like the Wild West." This NORF group continued to show up in several articles as a prime angler.  Already they specialized in converting government tax incentives into real estate profits. So this was really just the next evolution of that business.

The initiative by The New Orleans Redevelopment Fund aims to take advantage of opportunities created by last year's federal tax cuts as well as the Historic Tax Credits program, and represents a big leap for the local developers, who currently have a portfolio of about $40 million in properties. The new investment round is targeting $30 million in equity from existing and new investors, as well as $70 million in debt financing.

The group has plans for two commercial developments in New Orleans, said Cullan Maumus, director of development. One will be a conversion of a warehouse in the Tulane/Gravier area into retail space catering to the medical district. The second development, which the group expects to finalize in the second quarter of the year, would be a hospitality development in the Central Business District.

Most of the group's 37 projects to date have been residential, though it has had some larger conversions including a warehouse at 2740 St. Louis along the Lafitte Greenway, where the firm is relocating its main office from Tulane Avenue.

Among those 37 residential projects was this Mid-City condo development sold to the public as "affordable housing for teachers and nurses" garnering much well-deserved ridicule this spring. I can't confirm this is the same building they "evicted dozens of tenants" from, but it seems to fit.

Anyway, all of this is just background. Today we learn that the "hospitality development" referenced above is the Warwick Hotel on Duncan Plaza.

The former Warwick Hotel, a derelict building that faces City Hall across Duncan Plaza, is set for a $60 million makeover, the latest in a series of recent moves by real estate firms to redevelop properties on once-neglected blocks of the Central Business District.

The New Orleans Redevelopment Fund, a private investment group focused on property rehabilitation, purchased the 130,000-square-foot building in June for $8 million.

We learn also that,as expected, the project is funded the old fashioned way. On the backs of great big taxpayer subsidies geared especially toward helping rich people make more money. 

The Warwick building is eligible for historic tax credits, as well as the "opportunity zone" tax breaks that were part of 2017 tax package passed by the Trump Administration. These and other public incentives have been key to attracting developers for many of the properties in the CBD, Ragas said.

Indeed, NORF began a new fund in March to attract investors looking to take advantage of the opportunity zone tax breaks, which allow investors to put off and potentially sharply cut their capital gains taxes if they invest in designated areas.

Meanwhile, there is a major housing crisis in the City of New Orleans. You might have heard about it.  Errol Williams says there's not much our tax policy can do about that.

Errol Williams, Orleans Parish Assessor, attended the meeting to help clarify any concerns. Many people came to the front to ask questions.

“We applied the formulas equitably among everybody,” Williams said. Williams said if someone has an assessment increase that they feel is wrong, to bring it to his office. When asked about Smith's large assessment estimate, for example, though, Williams said he didn’t think the value increase was extreme.

“In the past four years there's been substantial increase in values in perspective neighborhoods.”

Williams said while people fear they are being pushed out of their homes this way, gentrification is “happening all over the country.”

“Gentrification is happening not just in New Orleans but all over the country and what you're seeing is people are buying in neighborhoods, renovating their properties and selling it for substantial more. So we can't ignore that. I can't treat them separately,” Williams said. Williams called said it is “a tough situation.” He also said it’s important for property owners to bring their issues to the Assessor's attention.

Not much tax relief for homeowners or the people they rent to who will surely see their costs go up as well.  Not unless they all go out and start their own investment funds first.