H.M. Favrot tells Amanda Barber how his real estate development company is continuing to recover from Hurricane Katrina.

When Hurricane Katrina swept through Louisiana, it took with it not only the heart of New Orleans but also many of the buildings. For close to 40 years, H.M. “Tim” Favrot, Jr., chairman of Favrot & Shane Companies, focused the nature of his business on developing and building apartment complexes throughout the New Orleans area. After the hurricane, the focus changed.

Of the nearly 8,000 units currently owned by Favrot and his team, 3,500 were rendered uninhabitable by the hurricane, either from flooding or wind damage. One year later, more than 90% of the units are again habitable, and only 300 are left to renovate. While many businesses in the same situation are still waiting for their insurance reimbursements, Favrot & Shane has managed to pull its head above water.

“We had sufficient financing relationships to establish lines of credit with a number of different lenders and banks,” said Favrot. “Pending the settlement of our insurance claims, we managed to gather enough money to move ahead rapidly with the repair work.”

H.M. Favrot

Every five years Favrot and his team rehabilitate and upgrade each of the company’s 50 or so apartment complexes. Because they were in midst of that repair schedule when the hurricane hit, most of the necessary workers and crews were already lined up to begin work.

“We had to gut many of the buildings, remove sheet rock, and get down to the bare studs to get rid of mold,” said Favrot. “We were fortunate to get enough people to start working within a week of the storm.”

Building relationships
Other than a slow period in the late ’80s and early ’90s, when the country experienced a savings and loan crisis that pushed many apartment developers into bankruptcy, Favrot said his company has continued to grow at a steady rate. For most of the past 30 years, the company has had at least three to four apartment complexes under construction at a time. This consistency enabled the growth of strong relationships with vendors in the region.

“We pay our bills, keep busy, and are a continual source of business,” said Favrot. “We are also our own general contractors and architects.”

Favrot and his partner, Henry Shane, started out as architects, developing real estate on the side to make ends meet. They began by doing conventional architectural work, but when Favrot and Shane became partners, they decided to branch out from customary architecture for clients and into development. The two started off with small 15- to 20-unit apartment complexes, but by developing experience and a sturdy team to support them, Favrot and Shane graduated to 250-unit buildings.

“The development of our construction company came together right at the beginning,” said Favrot. “We needed to hire some people to manage the construction end of the business because we were developmental architects. Some of those people are still with us after 30 years.”

Today, the company continues to do everything from design to construction and has developed a property management company. Under the guidance of Favrot and Shane, the company developed an architectural division called Favrot and Shane Architects, a construction division called Lake Development Construction, and a management company called 1st Lake Properties.

“Our focus was to develop real estate, primarily with apartment properties,” said Favrot. “We built up credibility with our local banks, and then we started working with conventional lenders, insurance companies, and local and out-of-town mortgage brokers. We’ve fostered those relationships, and that is what kept us open after Hurricane Katrina.”

The road ahead
For the past three years, Favrot & Shane have successfully acquired properties in surrounding areas of New Orleans such as Baton Rouge, Slidell, La. and Jackson, Miss. After the hurricane, many of the company’s lenders suggested looking at properties even farther away that were not as vulnerable to hurricane-type situations.

“We did buy complexes in these areas, but we haven’t built anything new in these adjoining communities,” said Favrot. “We’ve only acquired, renovated, and improved properties. We hope to eventually acquire some land and get back into new construction, but we haven’t since the storm.”

Favrot said from time to time his company refinances and improves properties because of the lull in new construction. As time passes, inflation and improvements to properties facilitates higher rent. By increasing rents, Favrot hopes to build enough equity to continue to do improvements, keep the money flowing, and get back into new construction without having to depend entirely on bank loans.

At 76 years old, Favrot has started focusing on his transition out of the business. His son, James, has taken over the financial aspects of the job, balancing the books for each of the company’s divisions. Although he is not an architect, Favrot believes his son’s vision for the future will ensure the company’s growth. Additionally, his partner’s two daughters, Stacey and Michelle, have taken over the management company and work with Favrot’s son on the finances.

“It’s up to the next generation to follow through and grow the company,” said Favrot. “They may focus more on property acquisitions rather than creating properties from scratch, but they will continue to build.”