Obstacles Abound
There aren’t many unwanted items sitting outside Latsis’ Metairie property. In fact, you can’t even tell the property withstood a massive hurricane. All the debris around the property, which sits a few blocks south of Lake Ponchartrain, has been swept up. The only exterior indicator of the storm? A broken window on the second story still awaiting repair.
Take a glance inside this property, though, and things look different. Both sides of the duplex were been taken back to the studs. “We renovated these units just before the storm,” Latsis says wistfully. “We’d put in nice porcelain floor tiles and new everything. Then the roof blew off right into the backyard, and we got 18 inches of water in a neighborhood that’s never flooded before. Now it’s been trashed.”
To rebuild the property, Latsis needs insurance money. He expects the entire repair bill for the 12 units to total about $300,000. “Insurance–that’s been the most difficult problem for everyone in the city, large and small,” he says. “It’s been tough getting insurance to pay up. You can only do so much with your personal savings. The rest has to be covered by insurance. We may have to go into litigation to get some amounts, but in the end, I foresee the insurance covering everything.”
Waiting for insurance payments requires serious patience from all involved. To start construction as quickly as possible, an apartment owner needs an understanding and flexible contractor, according to Abbenante, who estimates he’ll need $20 million to $25 million to fix Historic Restoration’s 425 units at 11 properties. “If you moved quickly on repair work prior to the insurance firm ‘signing off’ on the costs, then it is likely that the contractor is now waiting for their payment, as processing of contractor payments has been agonizingly slow throughout the city,” he says. “If you are obtaining estimates and seeking insurance approval prior to moving forward, you probably are still waiting as bids take a long time and good luck receiving more than one.”
Why are bids so hard to come by in New Orleans? A scarcity of labor. “Labor is very difficult to get down there,” Campo says. “The cost of labor is skyrocketing as a result of the limited supply. My friend owns two hamburger franchises. He’s paying his employees $20 [an hour] instead of $6 [an hour] and they’re only open until 9 p.m.”
Latsis quickly arranged for contractors after the storm, but he’s still having problems with certain skilled trades. “You can’t find skilled labor to do sheetrock work and cabinetry,” he says. “When you do, it’s extremely expensive. The labor costs are much more expensive than what the insurance companies are estimating.”
Even with insurance reimbursement, city approvals, and reasonably priced labor, though, a multifamily firm can still find themselves stuck in neutral.
Consider the situation of Michaels Development Co., a Marlton, N.J.-based firm that owns about 600 apartments in the New Orleans area. Bob Greer, the company’s president, and his insurer think 400 of those units located in the city’s devastated Ninth Ward should be demolished and new ones rebuilt to replace them. So does the city, and contractors are lined up to begin the rebuilding.
But there’s a problem.
