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The Domain Companies, a New York firm best known locally for developing the South Market district on Loyola Avenue, has finalized a deal to take over the stalled redevelopment of the old Charity Hospital, which is more than three years behind schedule and has at least doubled in cost.
Domain and another New York firm, LMXD, will now take the lead in trying to bring the abandoned Tulane Avenue landmark back to life as a mixed-use complex anchored by Tulane University and made up of offices, medical research facilities and ground-floor retail space.
CEO Matt Schwartz said he isn’t ready yet to unveil updated plans for the building but says the project’s most important component—Tulane’s presence as anchor tenant—will remain the same. Other elements, like the specific number and configuration of apartments, research labs and offices, will be adjusted to make the project more financially feasible.
“Some of it will have to be retooled to make sure the different components are speaking to each other,” Schwartz said in an interview Tuesday. “We are looking at rightsizing the different components for viability, finance ability and making sure we’re targeting the right market and right demographics for what will work.”
The project was originally estimated to cost $250 million, which was later revised to $300 million. After the pandemic, interest rate increases and inflation drove up construction costs. Sources familiar with the project said it could cost as much as $600 million now.
Schwartz won’t say. He also cannot say how long it will take to finish planning and secure financing, but hopes that will be complete by the end of this year, at which point construction could begin. A targeted completion date, once hoped for in early 2025, is now set for some time in 2027.
“I think that date is achievable,” he said.
‘The right team in place’
Domain’s involvement is significant for the project, which is seen as key to a long-envisioned biomedical district stretching from Mid-City to downtown and encompassing the Tulane and LSU medical campuses and several hospitals.
The firm has a proven track record in New Orleans, where, besides South Market, it has played a key role in breathing new life into the Tulane Avenue corridor with large apartment complexes like The Crescent and The Preserve. It has also converted historic buildings into downtown hotels, developed several restaurants and built out shared office spaces in the Contemporary Arts Center.
The Domain Companies is also making a name for itself in the high-stakes real estate market of New York City, where it has done more than $2 billion worth of mostly mixed-use, mixed-income projects. It often partners with LMXD on its projects, which currently include a $370 million mixed use community in Long Island City.
Stakeholders in the Charity project say Domain has the wherewithal to tackle the ambitious Charity overhaul, which is complicated because of its age, asbestos-ridden condition, historic status and massive size of one million square feet.
“We like the current plan for the building,” said Rob Stuart, president and CEO of the LSU Foundation, which owns the building and selected the previous development team in 2018 in a competitive bid process. “We think it makes the most sense. We have the right development team in place now.”
Unanswered questions
LSU originally selected a development team known as 1532 Tulane Partners, which is made up of Joseph Stebbins, whose firm CCNO Development has built multifamily projects in New Orleans, and Yoel Shargian, CEO of an Israeli company, El Ad Group.
On paper, 1532 Tulane remains a developer in the Charity project. In late December, it signed a new development agreement with Domain and LMXD, according to Stuart, who said LSU was briefed on the agreement but has not seen the contract and does not know the specific terms of the deal.
“That is between them,” Stuart said. “I do not have an interest in how they put their agreement together. My interest is in how the project goes forward.”
Schwartz also declined to discuss the extent of 1532 Tulane’s involvement, how much they have spent so far and how much work has been done.
“That entity (1532 Tulane) is still in place but we are engaged by that entity and we are taking the lead in developing the project,” Schwartz said.
1532 Tulane has declined to comment. Prior to finalizing the deal with Domain and LMXD in December, 1532 Tulane made its annual lease payment of $250 million to LSU and has met all its financial obligations, according to Stuart, who has blamed the pandemic, soaring interest rates and higher construction costs for derailing the group’s progress.
Though 1532 Tulane could have been fined by LSU for missing key performance deadlines in the original lease agreement, Stuart said those had been waived because there was a new path forward.
He said LSU could not provide a copy of the revised lease agreement.
Also unclear is how much money has been spent on the project so far by SKK, a Boston-based investment group that was brought in by 1532 Tulane in 2021 and agreed to back the project with up to $75 million, according to court records in a lawsuit related to the project.
SKK did not respond to a request seeking comment.
Looking forward
Schwartz said past problems with the Charity redevelopment are now water on the bridge, and that the project is on an upward trajectory.
“I think the most exciting part of this story is the investment that Tulane is making in downtown New Orleans and developing a downtown campus,” he said. “This is truly, I believe, the most important development in New Orleans today, perhaps in generations.”
Tulane President Michael Fitts said the university remains committed to the project, as it has “since day one,” and is looking forward to a hoped-for 2027 move-in date.
“I think everyone has much more confidence in the new developers and their ability to deliver,” Fitts said.
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