$18M downtown housing project stalled


$18M downtown housing project stalled

Sinclair Community College students this month were supposed to move into a 350-bed housing complex near campus that Dayton officials hoped would be a cornerstone of downtown revitalization.

But federal rules and financing problems have delayed the $18 million Student Suites project on Fourth Street, and the site sits empty, except for debris and a few idle pieces of construction equipment.

The developer has yet to secure financing for the project, and its opening has been pushed back, likely until the fall of 2016.

Previous attempts to create downtown housing there for Sinclair students failed.

Federal deed restrictions, which were blamed for halting the project’s progress last fall, have not been resolved. The city has spent about $1.2 million on the project, but the majority of that was reimbursed by the state or counted as matching funds.

Despite the problems, developers and city officials said they believe the housing project will succeed and will transform that part of downtown.

“We are in the process of putting the funding together once again for the project,” said Steve Papa, owner of Student Suites. “We hope to be restarted, rekindled, by the first of the year.”

Sinclair students are an untapped market, and drawing hundreds of young people to live downtown could be a real shot in the arm for the city’s economy, officials and past developers said.

Gone, but problems not forgotten

The vacant Schwind high-rise at 25 to 27 S. Ludlow St. was demolished in August 2013 to make way for the student housing project, which officials announced months earlier.

Student Suites, a Missouri-based developer, wants to build a multi-story housing complex between Ludlow and Wilkinson streets, featuring limited retail on the ground level and housing on the upper levels. A year ago, the developer said the goal was to open the new housing by August of this year.

The project was in cooperation with Cox Media Group, which owned the former Dayton Daily News building on Ludlow Street. Cox agreed to contribute $1 million to help knock down the newspaper building and clean up the property, before donating it to the project.

But even 50 pounds of dynamite could not give the beleaguered Schwind property a fresh start.

After the demolition, Student Suites said its financing for the project fell through because of a federal deed restriction on the Schwind land, which prevents it from being used exclusively for student housing.

The city was unable to deliver on its promise to the developer that it would be able to transfer the deed restrictions to another property.

“We underestimated the complexity of navigating this process,” said Aaron Sorrell, Dayton’s director of planning and community development.

Developers twice before tried to create housing at the Schwind property aimed at Sinclair students. Twice they failed. Yet local officials insist this time will be different.

The Schwind saga

The Schwind Hotel was built in 1913. In the 1970s, the hotel was converted into a 101-unit apartment building called the Moraine Apartments, with the help of funds from the U.S. Department of Housing and Urban Development (HUD).

In the early 2000s, Moraine Apartments stopped making its mortgage payments, and HUD initiated the foreclosure process. HUD took ownership of the property, and transferred it to the city of Dayton in 2003.

In 2004, the city transferred the Schwind property to Rain & Associates, which proposed creating affordable and market-rate apartments.

Bill Rain, the property’s former owner, said he planned to largely market the housing to Sinclair students, whose incomes fulfill HUD’s income-eligibility requirements.

HUD has two restrictions on the property’s deed.

One says that any profits from its sale must help pay down the outstanding balance on the HUD-insured mortgage. HUD is owed about $480,000 from when the Moraine Apartments went belly up.

The other restriction says that 41 housing units must have affordable rents, based on federally defined income levels.

Students can be eligible for HUD-funded affordable housing units. But the agency will not allow developers to build housing exclusively for students when HUD funds benefited the project, city officials said.

Rain’s project stalled and the lender called the loan because of lack of progress at the site.

Rain said he walked away from the property, but first helped arrange a short sale.

Schwind Building Restoration bought the property in 2007, in the hopes of creating student housing. Shortly after that, the housing bubble burst, and the economy tanked.

“It wasn’t great timing,” said Bob Shiffler, the former owner.

Shiffler in 2013 transferred the Schwind property to the Montgomery County Land Bank. The land bank removed the tax liens and transferred it back to the city.

The city agreed to transfer the deed to Student Suites when it cleared up the liens and restrictions. That has not happened.

Papa, the developer, said the housing project would have moved forward last year were it not for the issues with HUD, because the financing was ready to close.

But he said Student Suites “licked its wounds,” regrouped and redesigned the student housing complex, breaking the project into two phases.

The Schwind property is now part of the second phase, which gives the city time to resolve the HUD restrictions.

Phase 2 would also include the historic portion of the old Dayton Daily News building at the corner of Fourth and Ludlow streets, developers said. Developers said it is possible that the Student Suites project could open before the fall of 2016, but they are not making any promises.

Sorrell said the city will get the deed restriction transferred.

He said the city is in talks with Lakewood Apartments at 980 Wilmington Ave. to accept the restrictions.

Once the deed restriction is transferred, it should be easier to obtain financing for the deal, Sorrell said, adding that Student Suites has a proven track record of developing student housing around the country.

“Student Suites is working hard to get this project over the finish line,” Sorrell said. “These are complicated deals, and the student housing niche adds to the complexity of the project.”

Student Suites does not expect to deviate from its plans of seeking financing to build housing strictly for students, but it would not matter much to do so, said Dick Davis, a partner with Student Suites.

“Even if we did get financing to allow other people to live there, unrestricted, we still want to make it primarily for students,” he said.

Students, developers, city officials and others say housing near Sinclair’s campus undoubtedly would appeal to many of the school’s more than 22,000 students.

Some students want the complete college experience, which means living with other students as well as close to classes, said Rain, the Schwind’s previous owner.

Shiffler said Student Suites’ proposal is a great fit for that area and would accelerate downtown’s revival.

“Student housing would be a huge boon,” he said. “The impact of 300 people living downtown is big, and if it works, and they fill it, and it’s successful, I’m sure there would be 300 units behind it.”

Community colleges are in high demand because many people want an education but do not want to be want to be saddled with debt, Davis said. Community colleges also appeal to people who eventually want to transfer to a four-year university.

If successful, the Student Suites project would help Sinclair move toward its long-term goals of better connecting its campus to downtown.

Some officials said they envision Fourth Street becoming like Brown Street, near the University of Dayton, which has a string of shops and eating places that rely on foot traffic from students.

“I would consider living there,” said Michael Cummins, 26, who lives in Fairborn and studies liberal arts at Sinclair. “Being closer to campus would be helpful. … I think it would be really popular.”

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