Kansas City, Kan. Although loft conversions have been done for more than a decade in bustling Kansas City, Mo., its sister city in Kansas has seen its downtown lag for lack of housing. That is finally changing, thanks to the $6.7 million conversion of the old city hall into 42 mixed-income loft apartments.
Funded largely with federal low-income housing tax credits (LIHTCs) and historic tax credits, the rehabilitation preserved many of the structure’s architectural details while creating eight studio, 27 one-bedroom and six two-bedroom apartments, and a 1,479-square-foot penthouse. Twenty-seven apartments are affordable to households earning no more than 60% of the area median income, and the remainder rent for market rates.
The Renaissance revival-style city hall was built in 1911 and shuttered in 1972, when a new city hall was constructed across the street. For 32 years, the civic building structure – listed on the National Register of Historic Places – lay vacant.
In the fall of 2002, the city put out a commercial request for proposals (RFP) in a final attempt to remove the blighted structure from downtown.
“Over a period of 20 or 25 years, there had been seven or eight attempts to convert the building to commercial use. Of course, buildings of that size and layout don’t work for modern offices anymore,” said John Harvey, president of nonprofit City Vision Ministries.
In partnership with Bank of America Community Development Corp. (CDC), City Vision Ministries responded to the RFP with a housing proposal. The city had not received a viable commercial plan, so, after a year of negotiations, the codevelopers were awarded the building, which they purchased for $10.
Although the acquisition cost equaled a donation, the civic building’s years of abandonment revealed themselves in the renovation costs.
“The building was in pretty sad shape,” said Harvey. “The roof had been compromised for a number of years, so it had water all down through it and tremendous damage to walls and plaster. We didn’t close on the financing until June or July of 2004. So, until then, every time we had a big rainstorm, our rehab costs would go up, because more and more of the interior fell in. When we started out our budget was $4.8 million, and we ended up at $6.7 million.”
Meeting the costs were $2.6 million in federal LIHTC equity and $1.15 million in federal historic tax credit equity syndicated by Enterprise Social Investment Corp. (now known as Enterprise Community Investment, Inc.), a $1.35 million construction loan from Bank of America, $1.26 million in state historic tax credit equity, $83,000 in city Community Development Block Grant funds used for asbestos abatement, and $250,000 in developer equity.
Bank of America purchased the tax credits from Enterprise, while Enhanced Historic Credit Partners, LLC, purchased the state historic tax credits.
However, it was a $3.65 million bridge loan from Bank of America that proved critical to the development’s financial feasibility. Because Bank of America CDC guaranteed the loan, the project qualified for a lower rate and an 85% loan-to-value (LTV) ratio instead of the standard 80% LTV ratio, according to David Puricelli, senior vice president at Bank of America Community Development Banking.
The biggest challenge was the tax credit process because it was City Vision Ministries’ most complex LIHTC development and its first historic preservation project. “We have primarily done ownership affordable housing, [including] one LIHTC townhouse project,” said Harvey. “We had a lot of experience rehabbing older homes, but none doing a historic preservation project like this. We really got baptized [by fire].”
However, the result is a loft development far more affordable than those in neighboring Kansas City, Mo. “It’s a much larger city, and they’ve had downtown loft development going on for 15 years,” said Harvey. “The pricing has really escalated. We’re talking three minutes from our location – right across the bridge.”
It is difficult to imagine that most of that housing is comparable to the City Hall Lofts in Kansas.
In addition to creating apartments with 12-foot ceilings and exposed brick, the city hall renovation preserved numerous historic elements, including ornamental plaster molding, walnut paneling, and marble, wood and mosaic tile floors.
Eighteen units feature closets, pantry areas and storage spaces in old built-in steel vaults. The penthouse occupies a portion of a women’s jail, which Harvey said was added during Prohibition days, when the city “started having female criminals.” The iron bars of an old cell now divide the kitchen and living space.
However, the blight and lack of redevelopment that have long plagued downtown meant that overcoming perceptions of crime and safety issues was critical to the development’s success.
Accordingly, a two-floor police maintenance garage included as part of the deal was converted into a crucial parking garage. “That really turned out to be one of the biggest marketing advantages,” said Harvey. “Sixty percent of our market is single females, and they need to be able to drive into a secure garage and walk into their building if they are going to feel comfortable living there.”
Completed last July, City Hall Lofts has drawn diverse tenants and was 98% occupied as of December 2005. Residents include young singles, low-income seniors, low-income families who lived in the neighborhoods abutting downtown, and commuters and other downtown workers.
Rents for the tax credit units range from about $415 to $680 per month. The market-rate units range from about $510 to $1,000 per month.
“Our downtown has a lot of federal, state and local government offices [and] about 10,000 government workers. One of our strategies was believing that some of those folks would like to just walk to work,” said Harvey. “And, in fact, we were able to attract quite a number of downtown employees – some of them are market [renters] and some are clerical folks qualified for the tax credit units.”
Harvey said that mixed-income developments are key to reviving the downtown, which has no grocery store, retail stores or sit-down restaurants. “Kansas City, Kan., is a weak market town, and we don’t worry about gentrification at all,” he said. “We need to attract middle-income residents into our urban core, and we’ll do anything we can to get them in here.”
The increased foot traffic brought by City Hall Lofts is already having an effect. After the project was announced, three small ethnic cafes opened up on an adjacent street. “It’s really helped bring a little energy,” Harvey said.