The lead developer of the Hard Rock Hotel, which collapsed while under construction in 2019, has begun construction on a major new project in a former downtown office building two blocks from the site of the fatal disaster.
Mohan Kailas and his partners in the new venture are planning to turn the 31-story skyscraper at 1010 Common Street into a mixed-use complex with two hotels, including a 250-room Fairmont Hotel with a rooftop pool.
The project, which will cost more than $90 million, will also include an extended stay Element Hotel and six floors of office space.
It’s the first big project for Kailas, a seasoned developer with several successful real estate projects under his belt, since the Hard Rock fell. The collapse killed three construction workers and injured dozens of others. Kailas was never accused of criminal wrongdoing in connection with the disaster. In legal filings and prepared statements, Kailas and his partners have blamed the project’s engineer and steel provider for the structural failure, which remains the subject of more than 100 unresolved lawsuits.
A report on the collapse from the federal Occupational Safety and Health Administration fined Metairie-based Heaslip Engineering, owned by James Heaslip, $154,000 due to "willful" and "serious" safety violations for “inadequately designed…steel connections” and “design flaws” on the top three stories of the building. Heaslip has denied any wrongdoing and was never charged. OSHA also cited the building's steel contractor and several other contractors for minor violations.
Reasons for delays
Kailas has been working on the 1010 Common conversion for several years. He first announced plans for the two-hotel concept in 2019, but the project stalled in 2020.
In a statement, Kailas attorney Paul Thibodeaux said the delay was not because of issues related to the Hard Rock. He attributed the pause to the pandemic, which shuttered the city’s hospitality sector for months, and the subsequent rise of interest rates that pushed borrowing costs higher.
“The two projects are unrelated and involve different ownership groups and different design and construction professionals,” said Thibodeaux. “Further, after thorough investigations, OSHA, the Office of Inspector General and a New Orleans grand jury specifically did not implicate or even mention the Hard Rock ownership group in the collapse.”
The developers are moving forward now, Thibodeaux said, because of “the recent stabilization of the financial, real estate and New Orleans hospitality markets.”
'Breathe new life'
The ambitious conversion, which is expected to be completed by the time New Orleans plays host to the Super Bowl in February 2025, will mark the return of the Fairmont brand to the Crescent City. The luxury flag last flew at 1010 Common’s neighbor, now known as the Roosevelt Hotel, from 1965 to 2005.
The new Fairmont will occupy a dozen or so floors near the top of the building, according to construction documents. The hotel will include 250 luxury rooms, more than 20,000 square feet of event space, a full-service spa and multiple full-service food and beverage venues, including a rooftop pool and speakeasy bar overlooking downtown.
The building’s lower floors will be converted into a 216-room Element Hotel by Marriott, which is an extended stay brand. Multi-brand hotels are an increasingly popular trend in hospitality because they attract more than one type of visitor at a single property, helping to increase occupancy rates.
The 1010 Common building also has an attached 14-story parking garage that will be overhauled and will have six floors of newly renovated office space.
“The redevelopment promises to breathe much-needed energy into an area of downtown that sits at the foot of the Medical District, in between the Superdome and the French Quarter,” said the project’s ownership group in a prepared statement.
Faith in New Orleans
Kailas bought the building at 1010 Common for $16.6 million nearly a decade ago. At the time, the aging high rise was just 40% occupied and struggling to hang on to tenants. Situated on the edge of the Central Business District, the 500,000-square-foot building was one of New Orleans’ first modern skyscrapers and was home to the Bank of New Orleans when completed in 1971.
Kailas and his partners in the project, which include Atlanta-based investment group Monarch Private Capital, will use federal historic building tax credits to help finance the building’s conversion. The tax credit program enables developers to recoup 20% of what they spend rehabilitating a building.
Because 1010 Common is 54 years old and is on the National Historic Register, it qualifies for historic building credits. Rick Chukas, a Monarch partner and managing director, said the firm was interested in the project because “we like the location, the building has a great story and a wonderful footprint in downtown New Orleans.”
Chukas said the firm also has faith in the future of the New Orleans hotel market and in Kailas specifically.
“We like the sponsor, Kailas, as a developer, and the fact that a Fairmont and Element are going in there,” he said. “We are well aware of that situation (with the Hard Rock) but obviously that did not preclude us from moving forward.”
Besides the investment from Monarch, the project will be financed with bank debt. Records filed with the Orleans Parish Clerk of Court show the ownership group secured a $90 million mortgage from the State Bank of Texas, a Dallas bank that specializes in hospitality projects.
A Lake Charles contractor that specializes in low-rise motel projects, Patel Construction, is doing the project. New Orleans-based Rozas and Ward is the architect.
While work on 1010 Common gets underway, attorneys for the families of three construction workers killed in the Hard Rock Hotel collapse and hundreds of others who say they were injured or harmed have been talking with lawyers for the project’s developers, builders and insurance companies about a settlement.
In the years since the collapse, roughly 135 lawsuits have been filed by or on behalf of 400 or so family members of deceased victims, injured construction workers, bystanders and nearby business owners against various entities involved in the case, including: 1031 Canal Development, LLC, the development group behind the project; Kailas Companies LLC, Harry Baker Smith Architects, Heaslip Engineering and Citadel Builders. 1031 Canal and Kailas Companies are both owned by Mohan Kailas.
1031 Canal, in turn, has sued several contractors, including Citadel Builders, and the City of New Orleans.
So far, only a handful of suits have been settled.
Attorneys that are part of a committee engaged in court-ordered settlement talks are under a gag order and cannot discuss the negotiations. But lawyers who are not part of the committee have voiced frustration with the slow pace of progress.