The evictions were announced after an engineering team hired by the property owner, C.G. Multifamily-New Orleans L.P., concluded that "the property has serious structural defects," says Saulet spokesman Greg Beuerman. "Based on their recommendation, we decided to vacate the buildings. We are the first ones to say that it [less than a month's notice] is a limited amount of time, but it's a matter of safety issues."
The Saulet apartment complex has been riddled with alleged construction defects for years. C.G. Multifamily filed a suit in Dallas County, Texas, against contractors two years ago after water and termite damage were found on numerous balconies. Since Hurricane Katrina, the alleged structural defects have worsened, and mold damage has become an issue, Beuerman says. Due to the damages, the majority of the 703 apartments have remained empty since the storm, compounding the company's financial woes, he adds.
Saulet's owners hired engineering experts to test the structural integrity of the buildings at the end of June, when the company's primary lender, Fannie Mae, "agreed to provide a very limited amount of funds to do a very limited amount of things," Beuerman says. It was only then, he says, that the extent of the damages and the safety risks became apparent, forcing owners to evict tenants and close Saulet indefinitely.
In addition to damages to the property, C.G. Multifamily also has been strapped with financial troubles. The company filed for Chapter 11 bankruptcy protection June 12 because it could not continue to pay its staff, its light bill or provide security at the complex, Beuerman says.
Beach and other residents who signed one-year leases on June 1 say they were given no indication that the property owner was on the verge of filing for bankruptcy protection or that they might face eviction due to the company's mounting financial woes and ongoing safety issues at the complex.
"They entered into a lease agreement with me knowing that they were about to file for bankruptcy," Beach says. "You can't just say one day 'I'm going to file Chapter 11.' It takes time to go through that. So they had everything in the works before I signed a lease."
Beuerman says the complex's owners had hoped to secure additional operating funds from Fannie Mae to avoid filing for bankruptcy protection.
"Up until the last minute when the bankruptcy was filed, we were hoping Fannie Mae would do the right thing and cough up the money to make the needed repairs," Beuerman says. "The owners did not intend to close the property or file for bankruptcy when those leases were signed. That's just not good for business."
The apartment complex only signed one-year leases if a tenant needed a new roommate or if a tenant's lease expired, Beuerman says, adding that Saulet "has not been open to new leases" since the end of August 2005. The majority of residents still living in the apartment complex signed a lease prior to the storm; others signed month-to-month leases. Since the storm, he says, all residents were required to sign a liability waiver, stating they understand the property has "substantial risks."
"There was regular and detailed communication [with residents] as to what was happening with the property from everything from security to mold," he says.
C.G. Multifamily has attempted to secure additional operating funds and put its debt in forbearance since Sept. 1.
"In anticipation of a huge exodus of residents and rents, the owners of Saulet went to Fannie Mae days after the storm and asked for immediate debt forbearance," Beuerman says. "But Fannie Mae rejected that request, and the owners were responsible for paying approximately $1 million to Fannie Mae for the months of September, October and November. And that's money that could have been put back into the buildings so that residents could move back in."
In an email response to questions, Fannie Mae spokeswoman Christina McHenry said the mortgage lender "has been able to provide forbearance from legal action due to our desire to work with these, and other borrowers, through this extremely challenging process." She added that Fannie Mae "has released insurance proceeds several times over a period of months to cover life safety issues, utilities, and physical security of the property. We continue to do that."
At the end of 2005, Fannie Mae agreed to put some of the company's insurance proceeds toward strictly "vital repairs" -- such as boarding up broken windows and removing refrigerators that posed a health risk -- "as opposed to doing any kind of reconstruction of the buildings that would have allowed people to move back in," Beuerman says.
Approximately 2,000 people are currently on a waiting list to move into Saulet, but Beuerman says the future of the once-highly occupied luxury apartments lies with Fannie Mae and the bankruptcy court. "We want to rebuild and have residents move back in," he says. "We hope it [Saulet] will again be a strong economic catalyst for the city."
CORRECTION: In last week's cover story "Saints Preserve Us," we failed to include biographical information about the story's author, Adam Norris. Norris is a sports anchor at WGNO/ABC26 TV. Gambit Weekly regrets the omission.
- Tracie Morris Schaefer
- Jennifer Beach says she believes Saulet owners knew theywould be filing for bankruptcy when she signed her one-year lease. The owners say they hoped Fannie Mae would come through with financing to keep the apartments open.