A continuation of the UO post Dayton Downtown Housing of the Recent Past.  This time we will look at three “problem projects” and two projects that are still active, but not under development yet.

 

Bankruptcys and Fails

 

Two residential conversion failures. One was high-profile, the other not so visible since the building remains occupied. Together they might have soured investors and developers and public officials on risky downtown housing projects.

 

The Schwind

 

The building was built in the first decade of the 20th century as offices, but converted into a hotel in the 1920s, part of the Ludlow Street hotel corridor. In 1971 it was converted into 109 subsidized efficiency apartments, perhaps one of the first hotel-t0-housing conversions in the city. This was erroneously called Ludlow Manor in the previous post, but I think was named Moraine Apartments.

 

One the ground floor is one of Dayton's last "Greek restaurants" (owned by Greeks), the Moraine Embassy, which used to have a real 1950s-60s "cocktail lounge" atmosphere. A place that would have been popular with the so-called cocktail nation, but that scene never made it to Dayton.

 

 

 

 

The Schwind was one of two surviving "sliver buildings", high-rises sitting on a narrow downtown lot. The other is a block to the east on Main Stret.

 

 

 

Apparently the city had plans for this building. News reports say it bought the building for $10 from HUD and was trying to work with non-profits to do a renovation. Instead it was sold to Rain & Associates in 2004. Sales price was not disclosed, but it was not to exceed $250,000.

 

As we've seen Bill Rain, of Rain & Associates, was one of the first loft developers, and one that moved to other projects, with Ice Avenue being the last one before this.

 

The following bar chart gives key events and some financial things gleaned from reports on the bankruptcy proceedings.

 

 

The paper says that Rain had an estimate of $671,000 to do the renovation to 81 efficiency units, a mix of market rate and subsidized "affordable" rents. This seems pretty low compared to other conversion projects built just before this one, even for a project that pretty much had the requisite plumbing since it already was efficiency apartments.

 

Construction schedule apparently was for completion in July 2005. This was missed and construction stopped in November 2005. The bank sued for bankruptcy and the building was eventually sold at sheriffs sale for $230,000 to Bob Shiffler (who also owns the other sliver building in the pix above).

 

The DDN article on the bankruptcy sheds some light on the finances. Not all of this was owed because Rain & Associates did make some payments. What’s interesting is the city had actually made money on this project ($10 purchase from HUD and sale to Rain at some higher amount), yet loaned back money to do the project.

 

Note that there was some indirect HUD involvement. This was probably why there was affordable housing in the mix, as HUD has required this in projects it other cities.

 

So what went wrong? Perhaps an unrealistic construction cost estimate. This probably seemed a less complex and expensive project than it really was. It seems the actual financing was for more than the reported construction estimate, so the developer might have revised the price upward, apparently not enough.

 

Saint Clair Lofts

 

This building remains occupied and media reporting on the economic troubles was not high-viz, so it might not be seen as a "failure". Apparently the bankruptcy court disagreed, thought its uncertain what the denoument of the legal proceedings actually was.

 

 

 

DDN stories on this building imply that Citywide Development (Dayton’s development quango) officials were shopping this building to out-of-town developers starting in 1992. In 1997 Somerville Development of Mission Viejo California became interested (they were consulting on another un-named project in Dayton), and in 1998 bought the building. Press reports do not say from who, and neither does the auditors database.

 

Also in 1998, but before the sale, the project recieved a loan from a "revolving loan pool" (perhaps the Downtown Housing Loan Pool mentioned in the previous post).

 

It took a long time to arrange financing and get construction underway, reportedly putting the project 6 months behind schedule. The actual financing was unclear, but the bar chart below provides a summary of what is known based on press reports then and at the time of the bankruptcy.  It seems that out-of-town finance played a big roll (ARCS from Nashville, LaSalle Bank from Chicago, etc).

 

As the first big loft conversion there the project was offered as a model on how to finance big loft conversions. The developer was quoted:

 

Saint Clair Lofts will establish a baseline for appraisals and make future large rehabs easier to finance, Hannen said. "You should look at this as a `comparable' for bringing future money to downtown Dayton. After this, everything else gets a lot easier."

 

St Clair Lofts was a leasing sucess, renting out at 90% occupancy by 2003. Three years later it was in bankruptcy court. And the name of the owner changed from Somerville Development to St Clair Arms LLC (yet no ownership change in the auditors records).

 

The bar chart below provides some detail (and click on it to enlarge)

 

 

The project fell behind on its mortgage payments and the principle lender initiated foreclosure proceedings. The last press report indicates that the bankruptcy judge was going to appoint a receiver but was to be decided between one proposed by LaSalle Bank and another proposed by St Clair Arms. After that report there is nothing more on the receivership or financial condition of the building.

 

Based on the auditors records the building is still owned by St Clair Arms LLC, but the property taxes have not been paid since 2007. This would be the first missed tax payment since the early days of the project.

 

If the building did go bankrupt that might mean the city, Citywide, and other investors lost money on the project? It's unclear as to the situation of these other players.

 

It was reported that a leading partner was killed in a car crash and another became seriously ill.  The wife of one of the partners, who was inexperienced in real estate development, ended up trying to manage the deal, and apparently it was too much to handle.  So perhaps there were management issues, in that the partnership didn’t have a continuity plan. Or this could be a rationalization for an economically troubled project.

 

There isn’t enough follow-up reporting to judge one way or another. But all we do know for certain that the financial problems were severe enough for the primary investor to go to court.

 

103 N Patterson

 

This was a project announced twice.  Etmans film developing was here, went out of business in 1998 or 99.  It was bought in 2001 and the new owners wher going to open a muffin and bagel place on the first floor, offices on the second, and loft apartments on the upper floors. 

 

Nothing happened an in 2003 the papers report that Weston Lorenz of the local publishing family had bought it and was going to redevelop it as offices, maybe a second floor bar, and loft apartments on the top floor.  Another mixed use concept like we’ve seen before.  As late as 2004 an architectural firm was reported planning a move here from suburbia.  Then nothing. 

 

An attempt last year to turn the ground floor into a blues bar “Riff Raff on the Canal” also failed (reportedly this was an underfinanced attempt).

 

 

On paper this looks like a good location.  The baseball park is a block north and there are two successful nightspots right next door (Southern Belle and Canal Street Tavern).

 

And just for grins, the first developer bought from Etman for $175K in 2001, then sold it to Lorenz Properties LLC for $265K in 2004.  In 2006 Lorenz properties sold it to another Lorenz for $260K.  So irrational exuberance followed by slight deflation??

 

 

Stalled Developments

 

These are the last active downtown housing efforts:

 

 

The Merc

 

Announced in 2005  The Merc was the last loft conversion proposed in the Webster Station/Downtown area, and is still alive.  The developer has past adaptive-reuse experience as he did the Cooper Lofts in the early 2000s.  The project is supposedly ready to go;  all the developer needs a commercial tenant to finalize financing.  This is mostly a mixed use development.  I think the intention (or preference) was to go condo, but historic tax credit provisions force rentals in the early years of the project.  Incidentally there is no city or quango financial support for this project.  According to the paper the project will add 12 loft units in the first phase; ultimately they want to add a total of 30 units.

 

 

Litehouse

 

Announced in 2008, The Litehouse is a “green” townhouse project by the developers of the Firefly building, using prefabrication.  I think they are around $250K (which is about what some of the earlier lofts cost).  To date only the model has been built. 

 

 

…but the intent is to fill in the parking lot adjacent to the model with a little townhouse community.  This would be an example of the green movement arriving in Dayton and changing what is being proposed for downtown housing.

 

Mapping the Merc and Litehouse (outlined in orange on the map below) one can see how the Litehouse development will mostly finish its block, creating a little urban living neighborhood of conversions and infill.  The Merc would be the eastern anchor of the Third Street loft strip in Webster Station.

 

 

Together, full build-out of the Loft and Merc will bring the inventory close to the 500 unit mark of the 1990s downtown housing market studies or assumptions.

 

 

As one can see on the graph there have been no new loft conversions or new developments open since 2004.  There are no new developers, either, as the current projects are by previous loft developers.

 

Some guesses as to why the downtown housing development has stalled:

 

Real Estate Speculation: Some have said that building & land owners went into speculation mode, raising property prices and killing the trend as the higher prices made conversions un-economical (this opinion was held by people active in adaptive re-use and was reported in the media). 

 

Government Attitudes: Others have said a change in city government meant less risk- taking by the city and it’s quango, thus financial support dried up.  The $30M loan pool is not being used or has disappeared or been dissolved. 

 

Weak Regional Economy:  The economy went into recession in late 2001 and 2002 after 9-11.  For the Dayton region this was a long period of malaise and decline as the local economy never really came out of recession due to declining manufacturing.  It could also mean finance was difficult due to diminished expectations on the part of financial institutions for Dayton’s economy:  that these types of projects might be too risky.  A weak economy also means it’s tough to land retail and office tenants as part of a mixed-use development.

 

Lack of Market:  Or it could be that the yupscale model of lofts and new construction and as high-priced condominiums & rentals only goes so far in this market, and that the market is limited anyway, as indicated by the studies of a 500 unit market for downtown housing.  To some degree there is a “cultural” factor involved, too.

 

Development Costs:  Related to the market issue and real estate speculation, development costs could be so high that units can’t be priced lower, so developers have to reach for an upscale market.

 

The forthcoming “Greater Downtown Plan” apparently will be addressing housing issues, and indications they will be looking at 3CDC (or whatever that group is called) in Cincinnati as a model for executing the plan, so what ever 3CDC is doing re housing may be applied here in Dayton. 

 

We won’t see where we really are at until we move out of the financial crisis and credit frees-up.

 

Thanks again!