Two New Orleans Landlords See
Opportunity in Apartment Building

Weeks before Hurricane Katrina hit, Ken Heller and Howard Stone were weighing offers for their 443-unit apartment building in New Orleans. One reason they were going to sell was the risk of a big storm. "We said that is not an exposure we want to have," Mr. Heller says.

Now, despite flooding in the lobby and roof damage that will require $4.5 million for repairs and cleanup, the two men are considering whether to keep the building, known as the Esplanade at City Park, or raise their asking price above the $46 million they originally hoped for.

"We are convinced now that it's worth more than we were contemplating selling it for before," says Mr. Heller, who has been fielding calls from corporations looking to rent huge blocks of apartments at healthy prices.

The Esplanade at City Park before Hurricane Katrina. The building has 443 apartment units and was built in the 1970s.

Landlords throughout New Orleans and other areas hit by Katrina have had similar roller-coaster rides in the past few weeks. Early reports from inside the Esplanade sounded dire. When Messrs. Heller and Stone finally sent in repair crews, they feared the worst. "We were not certain what we would find," says Mr. Heller.

More than a month after Hurricane Katrina, their fears are gone and the landlords see opportunity. Mr. Heller says the building, which isn't far from downtown businesses and houses as many 1,200 people, could be rented to corporations involved in the rebuilding effort and could also be turned into condominiums, given the massive loss of housing around the city. It is expected to reopen by mid-December.

The hurricane has created a desperate need for rental apartments in New Orleans and also raised concerns about price gouging. Mr. Heller says he and his partner will honor all leases of previous tenants. They have set up a Web site for tenants to check in and find out when they can retrieve their personal belongings. Many of the tenants are older and have lived in the Esplanade for years, some going as far back as the 1970s, when the building opened.

As good as things appear now, there were some rough periods. As many as 220 people were stranded in the Esplanade for days after the storm. The building manager, Voncelle Zeringue, and her family fed and took care of some of the residents. Some were in wheelchairs. One man was on dialysis. Ms. Zeringue provided them with food from a restaurant on the lower floor and used floodwater to flush toilets. After several days, people were ferried to a nearby helicopter landing zone. An older man died in the evacuation, Ms. Zeringue says.

The Esplanade in the weeks after the hurricane, as restoration crews worked to dehumidify the building.

It is unclear how many residents will return to the Esplanade. The management has contacted about three-quarters of them. Mr. Heller says many of the older residents may relocate closer to their families.

Mr. Heller, who is based in California, was in constant contact with Ms. Zeringue throughout the storm and in the days afterward. He would relay information from TV news reports by cellphone, and she would tell him about the building's condition.

Mr. Heller says the early information allowed him to quickly hire a restoration team and begin securing scarce equipment, such as generators and dehumidifiers. The two partners, who own apartments around the country, are used to being cautious about buying equipment. "We were making commitments to equipment, some of which we might not need," says Mr. Stone.

When they visited the building a few weeks ago and saw the damage, they were convinced they had made the right moves. They expect that the Esplanade will cost about $1.5 million to clean up and another $3 million to restore, most of which will be covered by insurance. The building, which sits on slightly higher ground than other parts of the city, was spared major flooding.

Most of the windows withstood the punishing winds. If they decide to sell, they may have a simple, new pitch. "It's a very solid building," says Mr. Heller. "And now we know it can survive a Category 4 or 5 hurricane."

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