invested in revitalizing a 100-year-old historic icon
in up-front rent to LSU
in maintenance responsibility transferred
Plus $250K a year in rent, escalating 10% every decade. More than one million square feet, abandoned since Hurricane Katrina, returned to commerce through a competitive process that held up to public scrutiny.
What I did
I managed the selection process for LSU and led the procurement team through the evaluation. I was also LSU’s point person directing the work of our JLL consultants on the project.
Three qualified firms were invited to respond to a detailed RFP; two submitted. The two finalists proposed fundamentally different concepts for the same building, which is the hard case in any procurement — an evaluation has to compare them honestly and still look fair afterward, to the firm that lost, to the Board, and to a New Orleans public with strong and divided feelings about this building. After presentations, discussions with each finalist and a review of best and final offers, the committee’s recommendation was unanimous.
The financial result is the part worth stating plainly: a building that cost LSU roughly a million dollars a year to keep empty now produces rent instead, and LSU stopped bearing its operations, maintenance and deterioration costs when the lease began.
Summary of the Matter
Since its evacuation for Hurricane Katrina in 2005, the former Charity Hospital building in New Orleans has remained unoccupied, abandoned, and deteriorating — which costs the LSU Health Sciences Center – New Orleans over $1 million annually to maintain. With the construction of the University Medical Center, Charity Hospital is no longer needed as a healthcare facility, nor is it feasible to restore it as a functioning hospital. Although there have not been comprehensive studies to provide consistent recommendations for alternative uses, the current state of the building is significantly hindering the continued development and revitalization of the New Orleans medical district. As the owner of the building, LSU must take effective action to find a new use for the building and find a commercial partner who can transform the building for the ultimate benefit of the LSU Health Sciences Center – New Orleans and the entire New Orleans medical district.
In September 2017, the LSU Real Estate and Facilities Foundation (REFF) engaged the Urban Land Institute and subsequently, through a competitive selection process, engaged the services of consulting firm Jones Lang LaSalle (JLL) to explore redevelopment options and market the project to prospective developers for the purpose of returning the building to commerce while simultaneously promoting economic development in the surrounding neighborhood. A Project Management Committee was created to spearhead the task, with appropriate stakeholder membership including New Orleans civic leaders, the Louisiana Commissioner of Administration, and the Spirit of Charity committee formed by the Greater New Orleans Foundation with the purpose of engaging the New Orleans community in discussions about the redevelopment of the Charity building and, more broadly, the opportunities it would provide for the New Orleans Medical District.
A highly competitive selection process resulted in three qualified firms being invited to respond to a detailed Request for Proposals, with two firms ultimately submitting detailed proposals. After presentations, discussions with each of the two finalists, and review of best and final offers, the REFF Project Management Committee unanimously recommended the selection of a preferred developer.
By entering into this lease arrangement with REFF and the Developer, LSU will immediately cease to be responsible for maintenance, operations, or further deterioration of the building while benefiting from the substantial capital investment necessary to render the building useful and safe again. Instead of a $1 million annual liability, LSU and REFF will receive $250,000 in annual rent, escalating by 10% every 10 years, on top of $11,850,000 in up-front rent payments.