Monday, February 9, 2009

Whistling Past the Loft Graveyard

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 restaruants" (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 here.

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 procedings.
(the above chart can be enlarged by mousing over and clicking).

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 an efficieny apartment building.

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 Schiffler (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. Whats 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-vis, so it might not be seen as a "failure". Apparently the bankruptcy court disagreed, thought its uncetain what the denoument of the legal proceedings actually was.

DDN stories on this building imply that Citywide Development 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" (prehaps 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.

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 procedeings. The last press report indicates that the bankruptcy judge was going to appoint a reciever but was to decided between one proposed by LaSalle Bank and another proposed by St Clair Arms. After that report there is nothing more on the recievership 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.

That a building with 90% occupancy could fall behind on payments to the point of going into recievership seems to indicate that rents were not bringing in enough money to meet financial obligations or there was bad management. It was reported that a leading partner was killed in a car crash and another became serioulsy ill, so perhaps there were management issues. Or this could be a rationale for economically troubled project.

There isnt 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.

The failures of these projects in 2005 and 2006 marked the end of the downtown housing trend. No new developers have entered the downtown market and no new units have opened since 2004.

Two strikes and downtown housing is out?


Anonymous said...

Nice work Jeff, very interesting. I lived in the coverted YMCA building apartment. Loved it. Esaily, the best apartment I ever lived in even with the high rent. Would love to read story on that place someday. At the time, loft apartments were becoming very hip and business was booming. I take it the economy has thrown a wrench in those plans. Too bad. BTW, can you link the article in the DDN? Would like to read it.

I heard Devotchka's "how it ends" and made me think of Dayton so I stopped by this blog. I know you do more historical pieces but would like to get perspectives on the joint strike fighter that is coming to Dayton and how much of a economic 'savior' it will be. Personally, not certain, seems like most of the development will centered in Fairborn where the base is located, but some of it may spill over. Anyway take care and keep up the good work.

Jefferey said...

i don't know specifics of whats happening at Wright Patterson, though Ive done some blogging on the IT & Sciences employment in Greene County and on defense earmarks, so can't really say about a specific program (I think this is all secret anyway).

As for The Landing there is a huge backstory, which I did a big post on over at Urban Ohio. That post ended in the late 1970s. The missing piece is the 1980s, which is when the YMCA must've been added to the project.