[StBernard] Plans for St. Bernard's blighted Village Square apartments are long on talk, short on action

[Westley Annis]

Plans for St. Bernard's blighted Village Square apartments are long on talk,
short on action
by Chris Kirkham, St. Bernard bureau, The Times-Picayune 
Sunday January 11, 2009, 8:23 PM
Slideshow: http://adjix.com/rx2


A block off one of St. Bernard Parish's busiest thoroughfares, a 34-acre
reminder of Hurricane Katrina sits untouched, ungutted and uninhabitable. 

It's a ghost town of decaying low-rise apartments known as Village Square, a
scourge for parish officials and residents long before the 2005 storm and
now one of the largest concentrations of blight in flood-torn St. Bernard.

Some of the buildings were torn down after being condemned, but more than
half of the 100-plus buildings remain just as they were when the waters
receded. Broken glass and bits of insulation litter walkways; doors and
windows are open to the elements; mildewed clothes still hang in closets. 

"I have to walk outside and look over there every day," said Bryan Smith,
who lives on East Philip Court, a block north of the Village Square ruins.
"Just by it being open to the public like that, it keeps the door open for
anything to happen." 

Since early 2006, the parish has discussed an across-the-board,
multimillion-dollar buyout of the entire tract using federal money, in an
effort to avoid the dense collection of dilapidated rental properties that
had grown up in the years prior to Katrina. In the months after Katrina,
parish government placed a ban on rebuilding multifamily housing, preventing
most landlords from reinvesting in the area. 

The idea was to create more open green space, attract more commercial
development such as stores or restaurants, and possibly use the space for a
new hospital to replace the flooded Chalmette Medical Center, which has been
demolished. 

But the project -- the largest concentrated redevelopment effort in St.
Bernard since the storm -- has been bogged down as financing and agreements
among private developers, the parish and Village Square's more than 100
separate landlords are worked out. 


Village Square property owners, many saddled with mortgages on now-worthless
land, have complained of being strung along with buyout promises when they
could have recouped money by reinvesting on their own. Parish officials
acknowledge the delays, but they say the real estate market in Village
Square never would have rebounded on its own. 


"People have been waiting because this is a way for them to get out of a bad
situation," said St. Bernard Parish President Craig Taffaro. "They were
hoping for an investment bonanza, and unfortunately that area wasn't a good
investment." 

Public-private venture 

The plan to redevelop the Village Square tract involves a combination of
public and private financing, with the parish forming a private holding
company to take on the 121 properties. 

An outside private investment partner, a subsidiary of CBO Financial of
Maryland, will actually buy out the properties on behalf of the parish
holding company and be reimbursed with federal money. It's an overall $13
million investment, $4 million of which is generated through a federal U.S.
Treasury tax-credit program aimed at rehabbing low-income communities. Part
of the money to reimburse CBO will also come from $6 million in federal
Community Development Block Grants, as well as FEMA money designated to
create green space. 

CBO gets a debt-free stake in all of the property and the chance to profit
from future development in exchange for arranging financing, securing tax
credits and essentially managing the property. The parish, meanwhile, is
able to redevelop a blighted area without having to use its own money. 

Village Square Redevelopment LLC, the parish holding company composed of
Parish President Craig Taffaro, the St. Bernard Parish Council and other
members of the parish redevelopment commission, is offering landlords $8 per
square foot for the land. About three-quarters of the landlords have signed
agreements to close on the buyout. 

After acquiring the land, CBO will be able to use proceeds from additional
tax credits to develop the land. A similar method was used to redevelop
neighborhoods in Baltimore, Md., next to Johns Hopkins University. 

"Village Square is considered a severely distressed low-income community,
and that's part of the interest that we had in coming down to St. Bernard
after the storm," said Dmitri Wasilewski, vice president of projects and
development with CBO Financial, which assisted the parish in applying for
the Treasury tax credits. "This is big, even across the country." 

'Get it over with' 

Last week, Taffaro signed an agreement with CBO that will allow the outside
financing to go forward. The first closings could happen by the end of the
month, with the entire acquisition completed by May, Wasilewski said. Once
completed, the parish will use an existing FEMA-financed contract to
demolish the remaining buildings. 

As of last week, 58 vacant buildings remained in Village Square, with 50
vacant slabs interspersed throughout. 

For the 121 owners whose property has sat idle for more than three years,
patience is waning. Many have continued to pay mortgages and property taxes.
More than a year ago, CBO had discussed the option of paying $15 per square
foot. But it became clear that the federal money to secure financing for
that deal would not be enough, sending it back to the drawing board. 

"If anybody thinks the landlords are making out on this, they are insane,"
said Edwin Dudoussat, a St. Bernard resident who for about 15 years has
owned three Village Square buildings with 18 apartments. "I think we are
getting taken advantage of, but at this point I'm just ready to get it over
with. I'm just ready to get the whole thing behind me with Village Square." 

Based on the square footage of his properties, he'll get about $49,000 for
each building. Before the storm, he had gotten offers of more than $200,000
for each property, he said. 

Early investor 

With a building moratorium in place through late 2006, and then again last
September, the option for most was to simply wait on the government to come
through with a plan. But one investment group, Renola Homes of San Diego,
decided to invest in early 2006 before the ban took effect. 

So in the midst of decrepit buildings and overgrown lots sits the Palm
Garden Apartments, a newly renovated 91-unit complex that will likely be
bought out and demolished less than four years after being rebuilt. Steve
Whitehead, a vice president with Renola, said the buyout discussion warded
off other outside investors like him who could have turned the area around
more quickly. 

As it stands, he's having trouble filling the units. He'll be offered more
than the $8 per square foot figure because of his improvements -- likely the
value of his improvements -- but it won't be enough to recover from the
investment, he said. 

"It's a perfect example of what we're frustrated about: We wanted to bring
in good tenants, but how do you bring in good tenants when there's this
dilapidated stuff all around you?" Whitehead asked. "Essentially all we're
going to do is, at best, break even, and then we're losing all the mortgage
we've paid." 

Health clinic possible

For future development in Village Square, the most concrete plans involve
the buyout and the rebuilding of a state public health clinic that used to
be behind Lacoste Elementary School. The goal is for a mixed-use
development, with much less residential space than before. 

CBO and the parish have discussed building three 40-unit apartments for
senior citizen housing, but any additional investment on the land would have
to be approved by the parish redevelopment commission. 

A portion of the land, including all the apartments along De La Ronde Drive,
will be bought out using FEMA Hazard Mitigation Grants, meaning the land
must be permanently reserved as green space or parks. 

There is still discussion of using the land for the parish's first
post-Katrina hospital, even though the Arlene and Joseph Meraux Charitable
Foundation recently pledged to donate a 10-acre tract of land across from
the parish government complex for the hospital. 

Nearby property owners who have reinvested say they are ready for anything
besides the mammoth ruins, which they say draw rats and insects in the
summer. 

"Get me a makeover over here," said Smith, the Chalmette homeowner in the
shadow of Village Square. "Put a big pretty glass hospital over here or some
stores. Something." 

Chris Kirkham can be reached at ckirkham at timespicayune.com or 504.826.3321.