The long expanse of land straddling oak-lined Nicholson Drive is by now supposed to be a vibrant, mixed-use development, not only linking LSU to downtown Baton Rouge but also breathing much-needed urban renaissance life into a blighted Nicholson Corridor.
At least that’s what we were told when The River District project was announced with great fanfare. The stark-contrast reality is this 42 acres of unfulfilled in-fill promise sits as empty as the day it was purchased almost 15 years ago by Lafayette oilman Michel Moreno, who saw the property seized in 2015 by Goldman Sachs when his $52.4 million loan went into default.
The days of the property becoming an “urban village”—as pitched by renown Lafayette architect Steve Oubre not long before Moreno’s financial fortunes reversed—are long over. For the past year, the land has been sitting on the market without any takers.
“It’s a giant property and a giant project,” says Ty Gose, the NAI/Latter & Blum broker representing the seller. “Putting the pieces of the puzzle together takes time.”
NAI/Latter & Blum has already begun the jigsaw-like process, recently partnering with Lafayette-based Hargroder Real Estate to pair the primary 32-acre property with another 10 acres owned by Carencro businessman Carrol Castille, which encompassed the remaining 25% of the original PUD.
Now that all 42 acres are being packaged as one tract, Gose hopes the new marketing technique will spark renewed interest from investors, who might have an easier time developing the land by dealing with just one property owner and transaction instead of multiple. Gose expects to see some transactions in another six months, with a couple projects being finished “within a year or two” of closing.
It’s the latest move in the long-stalled effort to develop the property, a complex rigamarole that goes back some 15 years. But will a packaging perk be enough to allow one developer to waltz in and execute a vision that benefits the community at large?
Despite its prime location, local real estate experts say the property comes with several challenges. For starters, they contend the seller’s high asking price—a negotiable $25-per-square-foot—serves as a major deterrent to developers. What’s more, the original River District plans—which included office space and apartments—will likely have to change, considering currently oversaturated markets in the local Class A office and multifamily spheres.
Once these pieces are accounted for, maybe the rest of the picture can materialize.
The price of progress
Historically, most problems with developing the corridor have come down to dollars and cents.
Problems surfaced in the early 2000s, when Moreno started acquiring the Nicholson Drive land in more than 50 separate transactions for a total of $23 million. Therein lies the first issue, say real estate sources: Moreno paid too much for the land.
“The property was quite expensive, one of the more expensive properties in the parish from a developer’s standpoint,” recalls attorney Charles Landry, who represents Commercial Properties, the Baton Rouge Area Foundation’s real estate arm. “[Moreno] was assembling residential lots, but the houses had a negative value to them because he had to tear them down.”
The economy then took a downturn with the 2008 financial crisis, with Moreno later becoming embroiled in several lawsuits. In late 2013, his Lafayette oil business, Green Field Energy Services, went bankrupt. GE Oil and Gas later sued him personally for $27 million. The following year, the bankruptcy liquidating trustee sued him for $230 million.
In July 2015, Goldman Sachs sued Moreno for defaulting on a $52.4 million loan, a portion of which had financed his acquisition of the Nicholson Drive property. Less than two years later, the bank took back the land for $20 million and put it on the market in March 2018, where it’s been sitting quietly since.
Real estate experts speculate that’s because the bank’s asking price is nearly 40% more than the $18-per-square-foot price Moreno paid when he acquired the property in the mid-2000s.
“I think it’s going to be difficult to find a developer who would do it for that price,” says Tom Cook, an independent appraiser with Cook, Moore, Davenport and Associates.
One source familiar with local real estate estimates the property is actually worth anywhere from $6- to $8-per-square-foot, in which case the total lot value would be between nearly $11 million and $14.6 million. Instead, the seller’s asking price comes out to $45,738,000—three to four times the estimated value.
Regarding the price, Gose says the development and acquisition are too complex to cover on the database therefore the top end price is all that is publicly available.
Others, like David Trusty, a broker with Coldwell Banker Commercial, attribute the standstill to the property being broken up in many pieces for a long time.
“No one would pay for that broken property,” Trusty said before the 42 acres became formally available as one tract.
For Gose, the partnership with Hargroder Real Estate ushers in a new era of possibility. The three contiguous tracts—one on either side of Nicholson, and a third on the other side of the railroad tracks—offer the buyer complete control over the entire PUD, bringing the number of decision-makers down to one.
Future: Change of plans?
The original River District vision looked something like this: Locals would’ve hopped on former Mayor Kip Holden’s proposed 3.4-mile streetcar line to enter the mixed-use development, which would have housed 1,800 condominiums and apartments, as well as a 220-room hotel, 100,000 square feet of office space and another 100,000 square feet of retail space, including a neighborhood grocery store. But now, there are some problems with that vision:
No. 1: The streetcar is no longer in the picture, since Mayor Sharon Weston Broome scrapped the plan in favor of a Bus Rapid Transit system.
Nos. 2-3: There’s already too much Class A office space, with occupancy rates dropping from 93.5% in 2015 to 85.6% in 2018. The multifamily market is also overcrowded, with vacancies at 7.8%, well above the 7% national average.
No. 4: There’s less need for a grocery store, since Matherne’s now anchors the nearby Nicholson Gateway development.
Moreover, the River House—a 224-unit multifamily complex on the site of the former Prince Murat Hotel—opened in 2017. Its owners recently refinanced, indicating strong performance for the residential section. However, both its 34,000-square-foot office portion has been for sale or lease for more than a year, while its retail portion remains on hold.
All things considered, some plans will have to change.
First and foremost, Cook says a strong entertainment anchor that attracts young people is critical.
“The bones are there, the potential is there,” says Cook, “they just need an anchor to get it off the ground.”
A concert venue or assembly hall had previously been envisioned for the site of the 20-acre, decommissioned Central Wastewater Treatment Plant. City-parish officials are now considering putting the property on the market in a year as is, meaning it would be up to a developer to demolish the facility.
Still, many see promise for the corridor, citing its ideal location in between two of Baton Rouge’s busiest areas.
Landry, the attorney who represents BRAF, says the area should build off the success of the Water Campus. He says the corridor’s removal from a historic overlay district should also provide long-term benefits.
“If anything, the property has gotten better because of the success of the Water Campus and [Nicholson Gateway],” says Landry, the attorney who represents BRAF. “Those are additional draws in terms of restaurants.”
Trusty, who also owns some property in the area, says a new developer would have to be someone who respects the history of the site once nicknamed “the golden corridor.” He says the space needs places where community members can gather, pushing for walkability and affordable housing for young professionals.
“It’s kind of like osmosis—a rising tide lifts all ships,” Trusty says. “We still have to reinvent our city, and we’re doing it one zone at a time.”