AFL-CIO plans to invest $700 million in New Orleans projects
This is only the beginning of what promises to be the hottest building boom in the nation over the next 7 to 10 years. So far, in the last three months 70,000 building permits issued by the city totaling billions of dollars.
By MICHELLE ROBERTS
Associated Press Writer
NEW ORLEANS (AP) -- The AFL-CIO plans to invest $700 million in housing and other projects to help rebuild this city left staggered by housing shortages and other infrastructure problems after Hurricane Katrina.
The money will come from the union federation's pension fund and its lenders - investments that should make money for the fund while aiding a city left hobbled by the enormous disaster, said AFL-CIO president John Sweeney in an interview Tuesday. It also will create union jobs in a region with an enormous number of construction projects.
The union planned to officially announce the investment at a news conference Wednesday. "I was horrified that so little has been done," said Sweeney, who last visited New Orleans about a month ago and saw tracts of housing left in ruin since Katrina struck Aug. 29. "It feels like it's the city that America forgot." The investment plan includes $250 million in financing for housing construction over the next seven years, with more than 5,000 rental units expected to be built. Another $100 million will be equity investments for commercial real estate and revitalization projects.
The AFL-CIO already has applied to get title on 200 properties controlled by the city because owners failed to pay taxes on them. Most are in the Treme neighborhood, a predominantly black working-class neighborhood adjoining the French Quarter.
Another $250 million has been set aside for home mortgages for city employees, union members and residents of neighborhoods where AFL-CIO projects will be located.
Up to $100 million will be used to finance hospitals or nursing homes, using federally insured loans. "Hopefully, it will jump-start some investment" from other private entities, Sweeney said.
The investment plans are similar to ones the union has executed in Chicago and New York. The AFL-CIO created a $750 million investment program in Chicago last year, mainly targeting affordable housing, and one in New York after the Sept. 11 terrorist attacks.
Such real estate investments have done well in the past, said Stephen Coyle, chief executive of the AFL-CIO's Housing Investment Trust. They attract other investors into neighborhoods and have turned once-blighted areas into desirable real estate, he said. The fund's primary duty is to make money for retirees and future retirees, but Coyle said the fund has a socially responsible bent and has been able to merge financial goals with social ones. "It's a double bottom line for us," he said. "You can invest in communities and build these communities and still bring your investors good returns."
The AFL-CIO, a federation of labor unions, has 10 million members, including retirees. Two pension funds bear the union name; both are real estate funds and combined hold roughly $5.6 billion in investments. Larry Hass, a New York lawyer who specializes in pension fund law and previously worked at the Securities and Exchange Commission, said pension funds have been investing in real estate for more than 40 years and are the biggest real estate investors in the country. They've had a lot of success in real estate deals involving urban developments, where their initial investments have made properties more attractive sooner than they might otherwise have been. "The pension funds that have been successful at this see opportunity," Hass said.
Coyle said private investors talking about developing in New Orleans after Katrina have stayed mostly on the sidelines so far. But after successes in other cities - including the Mexican border community of Laredo, Texas, and Hoboken, N.J. - Coyle believes the fund can get similar results in New Orleans.
"We look at New Orleans the same way and say, 'Look, the levees will be repaired. The insurance issues will be resolved,'" he said. "This is the beginning of ending the talking and starting the rebuilding."
On the Net: AFL-CIO: http://www.aflcio.org