A lot of unknowns, but expect the market to stabilize

With the recent flood damaging or destroying tens of thousands of homes in our area, everyone is looking for an analysis of how the local real estate market will emerge, how property values will be impacted and so on. The short answer is no one really knows for sure, because we don’t have any market evidence at this point. Not enough sales and lease transactions have taken place to gauge the flood’s impact on property values.

We do know some things. More than 107,000 disaster claims have been filed with the Federal Emergency Management Agency, which estimates only about 15% of the homes in East Baton Rouge Parish and 20% in Ascension and Livingston parishes had flood insurance. However, claims do not represent the total number of homes impacted. The most recent estimate is that 60,000 homes may have flooded in all three parishes.

For the sake of argument, let’s say 80% of those homes—about 48,000—were not insured for a flood. That’s a lot of housing stock. The question that keeps coming up is, will those houses be repaired?

Consider Livingston Parish. The average home price in Livingston is about $180,000, and most homes there were purchased with Federal Housing Administration or Rural Development loans, which require very little down payment, leaving homeowners with minimal equity position. These homeowners likely don’t have cash reserves available to make repairs.

The average size of those $180,000 homes in Livingston is about 1,500 square feet, and if demolition and rehabilitation run $50 per square foot—which many say is a conservative estimate—the repairs would cost about $75,000. If insurance isn’t available, the homeowner then has to get a Small Business Administration home repair loan.

Let’s assume a $180,000 home has a mortgage balance of $170,000. Will the homeowner put up an additional $75,000 for repairs and increase their total investment to $245,000 for a home that’s only worth $180,000? Will they make the choice to be “upside down,” owing more than the house is worth? The pessimist could argue that many of these homes will be abandoned and not repaired. However, other factors must be considered. The SBA loans have low rates for long terms, and it appears they are relatively easy to obtain. Some grants are also available that don’t have to be paid back.

If we think about this on an individual basis: The 35-year-old homeowner in Livingston Parish, with a job and two kids in school, will think about where else they can go. Little housing stock is available, because supply and demand were pretty well in balance before the flood. If the homeowner abandons their home and mortgage, they may not qualify for another home loan for a long time.

Most of the homes without flood insurance should get an SBA loan, and although the homeowner will be upside down, the home will be repaired. I’d expect this will happen with the vast majority of homes in Livingston Parish, as well as in Central.

I’ve heard people compare the flooding in our area to Hurricane Katrina’s devastation on the New Orleans market, but there are dramatic differences. The water stayed in New Orleans for much longer and did far more damage. Many of New Orleans’ major employers moved their offices and facilities to other areas, including Baton Rouge. The New Orleans economy was already suffering, and job growth was stagnant.

That is not the case in the Baton Rouge metro area today. Damage was not significant enough to make employers move, the industrial corridor is still growing and there is no evidence that job growth will slow dramatically. Our unemployment rate, at between 5% and 6%, will continue to drive the need for homes and apartments.

In addition, the Baton Rouge area has not lost basic services, such as hospitals, like New Orleans did. Our basic services, including grocery stores, restaurants and other retailers, have all reopened or are working hard to do so. I drove though the Bass Pro development in Denham Springs, which had extensive flooding, and noticed almost all of the retailers and restaurants were open. The nearby Juban Crossing development also took on water, but it immediately had people working to repair every store. The Walk-On’s restaurant at Juban Crossing has already reopened, about three weeks after being flooded.

I don’t expect a lot of housing stock to be demolished or dumped on the market, or prices to be dramatically impacted. In the short run there will be an increased demand for rental properties, and homes that did not flood will benefit from those folks who chose not to repair, but I believe the vast majority of our housing stock will be repaired and the market will stabilize. How long that takes is anybody’s guess. My guess is we should hit whatever the new normal is in about 12 to 24 months.

Another factor to consider is the permit process for renovations. Local builders will tell you it’s already difficult to get a permit to build in East Baton Rouge, Livingston and Ascension parishes. The East Baton Rouge Department of Public Works already appears to be overloaded, and this will obviously make getting a permit a more difficult and lengthy process.

Will that lead some homeowners to do renovations themselves? That’s a real possibility. A great number of the damaged homes did not lose electricity, so those homeowners don’t have to get an occupancy permit from DPW to obtain utilities. Those individuals can simply demo, repair and move back in.

However, if some repairs take place without proper permits, it may present a problem in the future. Looking forward, prudent buyers and lenders should be checking to see if flooded homes were permitted properly and if proper mold remediation was completed. Both will need to be careful when purchasing or making a loan on flooded homes, which may make them more difficult to sell.

Another factor: How will FEMA determine substantial damage? Some older homes in flood zones may have to raise the elevation of their slab in order to get flood insurance going forward. To what elevation will new homes be required to have their slab built in the future?

The list of lingering questions goes on and on.

In summary, most of the homes that have been damaged will likely be rebuilt. As time goes on people will recognize that this was a flood that happens once every 1,000 years and the market will stabilize. Homes that flooded will have to bear that stigma and may suffer some loss in value. Homes that did not flood will be in higher demand. But by and large, in the end we will be OK.

I am reminded what my pastor Donnie Wilkinson said shortly after the flood: “In the end we will be all right, and if you are not all right, it just means you have not reached the end yet.” The market will be all right in the end, so don’t panic. I think we will all be surprised how fast it recovers and stabilizes.

Oaks of Kingsbridge apartments sell for $43K per unit

The new owner of the 14.3-acre Oaks of Kingsbridge apartment complex off Sherwood Forest Boulevard paid about $43,000 per unit to purchase the property.

In all, the New Jersey investor paid a whopping $14.75 million for the 343-unit complex, located at 11888 Longridge Ave., just off South Sherwood Forest Boulevard between Coursey Boulevard. and Interstate 12, according to documents filed Monday in the East Baton Rouge Parish Clerk of Court. 

The purchaser was The Villas at Stone Creek LLC, a New Jersey investor represented by Mathias Deutsch. The seller, Three Forty Three Oaks Ltd., was represented by Bratten Realty General Partner Richard S. Owen. The sale took place on March 31.

The unit mix is fairly diverse with more than 15 different floor plan options, ranging from one bedroom/one bathroom units to two bedroom/two bath units with a loft. The one bedroom units make up about 30% of the total project, with the remaining units being either two bedroom flats or townhouses.

The Oaks of Kingsbridge was about 80% occupied at the time of sale.But when Cook, Moore & Associates surveyed rental rates and occupancies there in November, it was 90% occupied.

Chad Rigby with Stream Realty Partners, who brokered the transaction, says the new owner intends to do major renovations to the project.

“The property was constructed sometime in the early 1970s, and although it had been well maintained, it was in need of some improvement,” Rigby says. The new owner has committed to spending about $4.5 million in renovations, which will bring their total investment in the project to $19.25 million, or about $56,000 per unit.

“Currently, the project has an antiquated chiller boiler system that services the entire project, but the new owner will remove the boiler and chiller system and replace it with individual AC units for each unit. He also intends to add washer and dryer hookups in select units and renovate the exterior,” says Rigby.

When the renovations are complete, the complex will be renamed The Villas at Stone Creek. Renovations should begin within the next 30 days.

A Metairie businessman paid $2 million for the Oaks of Kingsbridge office building and property at 3233 S. Sherwood Forest Blvd. in October.

Tract near Bass Pro Shops sold for new upscale restaurant and retail shopping center

The developer of Bass Pro Shops in Denham Springs has sold a 1.404-acre retail site across from the outdoor megastore to a local investor group planning to build a new retail shopping center there called The Shoppes at Bass Pro.

Developer E. Jacob Fakouri, through E.J. I-12 LLC, sold the plot on Monday for $970,080, or about $15.85 per square foot, to a group of local investors known as N&J Land Company LLC, owned by John Lund of Baton Rouge and Nick Xiao of Walker. The property is located directly across from the Bass Pro Shops between the shop’s retail parking lot and the Hooters.

The site’s new owners plan to construct an upscale restaurant and retail building measuring 13,445 square feet, which will include two outdoor patios. Committed tenants for the new center include Sarita’s Mexican Grill & Cantina and a new high end Japanese sushi and hibachi restaurant. The two restaurants will be situated on the end-caps of the proposed center.

Joe Moore, of RE/MAX First commercial, represented Fakouri and preleased 5,200 square feet of the proposed building.

“Preleasing helped facilitate financing of the proposed 13,445-square-foot center,” Moore says.

Lund is a successful developer and retailer. Xiao has started numerous restaurants and shopping developments throughout south Louisiana. Lund and Xiao have other retail developments planned for Walker and Watson in the near future.

Old Blockbuster in Walker sells, will become new concept store for Olinde Hardware and Supply

Olinde Hardware and Supply Company LLC has purchased the old Blockbuster store on Walker South Road and will transform the former video rental chain’s location into a new concept store.

The company purchased the building at 28195 Walker South Road, across from Walmart, from Birmingham, Alabama-based Foster Family Investments LLC, for $900,000. The price comes out to about $168.75 per square foot.

“We have not made any definite plans on how we will utilize the space just yet,” says Tom Olinde, one of the company’s managing members. “We have several new concepts we are testing, and this location suited our long-range plan.”

Foster Family Investments purchased the building in 2003 for $1.28 million. Blockbuster was already leasing the building and continued doing so after the sale.

The building has been on the market for more than 16 months at $1.05 million.

“We had the building available for lease or sale, but most of the potential tenants and buyers wanted to convert the building to restaurant occupancy, and those users needed more parking than the site could provide,” says Dottie Tarleton, the broker with Stirling Properties in Baton Rouge who represented the seller.

Ricky Hill with NAI/Latter & Blum represented the buyer.

Relief Windows buys new building to accommodate growth

Relief Windows has purchased a 7,300-square-foot building at 11236 Pennywood Ave. Owner Brandon Hollie, through a new limited liability company called PJH Holdings LLC, bought the building from J.B. Levert Land Co. in a sale that closed Feb. 4 for $600,000, or about $82.20 per square foot.

The property, situated in Cloverland Industrial Park between Airline Highway and Siegen Lane, is relatively close to Relief Windows’ current location on Pecue Lane.

Relief Windows specializes in installing replacement windows and doors in homes and commercial buildings. It serves south Louisiana and southern Mississippi.

“Relief Windows got a quality building in a centralized area of town to accommodate their growth,” says Grey Hammett III, with Mike Falgoust & Associates. Hammett represented Relief Windows, and the sellers were represented by Mathew Laborde with Beau Box Commercial Real Estate.

It’s My Party purchases site on Perkins Road for $435K

Perkins Road will be home to a new indoor playground.

It’s My Party, which is operated under a limited liability company called Home Run Real Estate, has purchased a 1.75-acre site on Perkins Road, just east of Staring and Essen lanes for the planned playground.

It’s My Party is an indoor play facility with inflatable games such as a 24 foot-high slide, a 70-foot obstacle course and an assortment of bounce houses. The company specializes in birthday parties, team events, lock-ins and field trips. Currently, the operation is located on Anselmo Lane.

The new site was purchased from the succession of Samuel Simon Morris on Jan. 21 and closed for $435,000, or about $5.70 per square foot.

It had been marketed by Brent Struthers at Beau Box Commercial Real Estate.

Troy Daigle at Donnie Jarreau Companies represented the purchasers.

“It is a very functional site for the new location of It’s My Party,” Daigle said. “It has 165 feet of frontage on Perkins Road and it has a strip of land that is about 30 feet wide that provides access to Staring Lane so it has access from two major streets.”

In other news, JNR Hospitality, a limited liability corporation, intends to develop an Americas Best Value Inn at the intersection of Airline Highway and Swamp Road in Prairieville.

The hotel operator purchased a 1-acre site near the intersection on Jan. 29 for $345,680, or about $8 per square foot.

The proposed hotel will have between 50 and 70 rooms. The property purchased is situated behind the Taco Bell and is accessed by a private driveway off Airline Highway and Swamp Road.

“It is a new prototype Americas Best Value that will set a higher standard than other franchise hotels in the area,” says Naresh Patel, who represents JNR Hospitality.

Daigle also represents the seller and buyer in this transaction.

Auto Yes acquires site near dealership at Florida and Sherwood Forest for expansion

Pre-owned auto dealer Auto Yes, perhaps best known for its quirky TV commercials featuring a dancing clown, has purchased a roughly 2.5-acre tract at the southeast corner of Florida and Sherwood Forest boulevards.

The land wraps around a CVS Pharmacy at the corner and is adjacent to Auto Yes’ dealership at 11522 Florida Blvd., which the company plans to expand with the purchase. Auto Yes closed on the deal on Tuesday last week for $208,000, or about $2 per square foot. The dealership purchased the property as Big Dog Group LLC.

According to Mike Stinson with Saurage Rotenberg Commercial Real Estate, who brokered the transaction, the property had been marketed at $450,000 for nearly three years. The seller was made up of three entities: RE Concepts LLC, Future Trends LLC and Stone Resources LLC.

The property has a fairly interesting history. A California developer purchased the entire corner at Florida and Sherwood Forest boulevards and then subdivided it to develop the CVS. The developer then sold the CVS to a real estate investment trust and kept the remaining 2.5 acres. The property taxes were not paid, and the three entities that sold it to Auto Yes acquired the site through a tax sale by paying the property taxes for three years.

New restaurant planned for Sportsman’s Park in Gonzales

A new, unnamed franchise restaurant will open in the Sportsman’s Park development located next to Cabela’s in Gonzales following the recent sale of a roughly 1.6-acre tract. Acadiana Development of Gonzales purchased the land just before the end of last year for $992,000.

“The new owner has a build to suit contract for a franchise restaurant concept, but does not want to release who they are at this time,” says Justin Langlois of ‎Sperry Van Ness | Graham, Langlois & Legendre, who represented the buyer in the deal. “Before Acadiana purchased the property, we had the property under contract for more than a year with a different franchise, and when that deal fell through Acadiana approached us about this site.”

The seller was Carlisle Resort LLC, represented by Brent Rhodes at Saurage Rotenberg Commercial Real Estate.

The site had been listed for sale for $18.50 per square foot before selling at just over $14.25 per square foot. The new restaurant will benefit not only from the Cabela’s store, but also from the significant amount of hotel space that has been developed surrounding it in the last few years.  There are now seven hotels located within Sportsman’s Park, and another is under construction.

Juban Court condos sell

The Juban Court Condominiums in Livingston Parish have been sold for $9 million to Juban Crossing Condominiums LLC. The group, represented by Bubba Lewis, purchased the the 83-unit condominium at $108,433 per unit from Wolf et. al. LLC, represented by Charles Bondy, in a sale that closed Dec. 23.

Wolf et. al. LLC purchased the condos and a 2.65-acre commercial use parcel in July 2013 for $7.2 million, and then did some minor renovations and instituted two rent increases. The parcel, valued at about $500,000, was not part of this most recent deal.

The property had not been actively marketed for sale when some brokers with NAI/Latter & Blum approached the group about selling, Bondy says. Deane Bryson, Ty Gose and M. David Treppendahl combined to broker the transaction.

“It worked out to be a good deal for both the buyer and seller. There is so little good quality multifamily property available in the Baton Rouge area that it made good sense to purchase something with a stable income,” Bryson says.

North Carrollton warehouse/office building sells for less than $20 per square foot

The Melrose area off Florida Boulevard between North Lobdell Boulevard and North Ardenwood Drive, also known as Mall City, has struggled in recent years to maintain sale prices and lease rates.

But the building that formerly housed Spedmill Inc. has been purchased by Gregory Gauthier from Campus Federal Credit Union as an investment. Gauthier bought the 9,423-square-foot building at 1132 N. Carrollton Ave. in a sale that closed Dec. 17 for $185,000, or about $19.63 per square foot.

The building consists of 2,089 square feet of office space and 7,334 square feet of air-conditioned warehouse space.

“The former occupant produced flame resistant clothing, and the building was converted from its original office warehouse use to accommodate the sewing machines and other equipment necessary to facilitate that use,” says Richard Daviet, who brokered the deal with fellow NAI/Latter & Blum broker H. Ben Johnson.

“The 7,334-square-foot warehouse was heated and cooled to accommodate the last user, and it is not easy to find that, especially at less than $20 per square foot,” says Johnson. “You can still get a lot for your money in Melrose.”