Developers learned Wednesday they were awarded low-income housing tax credits to support converting part of the iconic downtown property into housing for artists and creative people.
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“This is huge for the Arcade,” said Dayton City Manager Shelley Dickstein. “I think it represents a turning point and an opportunity to bring back and build on a historical legacy for downtown.”
The Ohio Housing Finance Agency deemed the project — called the Art Works Lofts — so important and transformative that it awarded $1 million annually for 10 years from this year’s tax credit allocation program, then also pledged the same amount of funding from next year’s program too.
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Officials and developers hope the artist housing project will be an economic spark that leads to the redevelopment of the entire seven-building complex, with future phases including retail, commercial, office and hospitality spaces.
“Art Works Lofts will not only provide much-needed affordable housing for individuals and families, it will also create employment opportunities, generate economic activity and importantly, will serve as the impetus for further redevelopment in downtown Dayton,” said Kelan Craig, director of planning, preservation and development with the Ohio Housing Finance Agency.
The long-empty Arcade complex is located in the heart of downtown.
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Earlier this year, developers applied for low-income housing tax credits for new family housing units. The development partnership consists of the city of Dayton, local developer Miller-Valentine Group and Maryland-based Cross Street Partners.
But the credits are highly competitive. The Ohio Housing Finance Agency had $4 million to allocate, but received 17 requests for more than $12 million in funding.
Despite stiff competition, the Art Works Lofts project was granted $1 million in annual tax credits for 10 years to create new, mostly affordable apartments.
The project also competed for a special local initiatives allocation, which the state offers to proposals that “contribute to a comprehensive, multi-phase or community development effort,” according to the state.
The artist housing project met the special development criteria and has been granted an additional $1 million in annual tax credits for 10 years, said Craig, with the Ohio Housing Finance Agency.
The funding, which will come out of the 2017 allocation program, will support a second phase of housing planned for the historic property. About four buildings are targeted for rehabilitation.
Only one other project across the state earned a local initiatives allocation, and the projects earned conditional awards because they could have a catalytic impact in their communities, Craig said.
The first phase will create about 66 housing units designed for artists and creative types.
The apartments will be on the upper floors of the 10-story commercial building and the five-story apartment building along Fourth Street.
The roughly $10 million construction project will create a mix of one-, two- and four-bedroom units, offering energy-efficient designs and modern amenities, according to the application requesting credits.
Other planned components include studio and gallery space, a mixed-media room, a theater space, a cyber cafe and rooftop deck. The housing will be a mix of below-market and market-rate apartments.
The second phase of the project will be similar in scope and will involve the Ludlow Street office building and likely another building on that block.
The total number of apartments at the end of both phases must be at least 125. Ground-level spaces will be reserved for future retail and commercial uses.
The second phase also may restore the rotunda, which is one of the most revered portions of the property, officials said.
The artist housing is partly meant to jump-start the renovation of the entire Arcade. Officials envision constructing new office, commercial, retail and arts and hospitality spaces.
The initial phases of the renovation could run between $30 million to $50 million, according to MV Residential Development.
The Arcade complex has been vacant since March 1990, but occasionally held some special events after that time.
The complex, which nearly occupies an entire city block, has been a massive eyesore that has deterred investment in a central part of downtown, officials said.
Over the years, a variety of revitalization proposals were offered for the Arcade, yet none moved forward.
This time, however, conditions are different, like the renewed interest in downtown living, and funding has been obtained for an adaptive-reuse project, Dickstein said.
The $20 million allocation is a big win that greatly improves the chances that a renovation project can succeed financially, Dickstein said.
“This (provides) a considerable amount of money that (developers) now don’t have to go out and secure high-interest debt on,” she said.
The low-income housing tax credits are the largest primary funding source for the project, but developers will pursue state and federal historic tax credits, said Pete Schwiegeraht, senior developer of MV Residential Development.
“We’re excited to get this first step done, and we’re eager to embark on the next steps,” he said. “We’ll have more to share on the larger project in coming weeks.”
The plan is to apply for historic credits later this year, with the hope of winning an award and starting construction in 2017 with an opening date the following year, he said.
The goal is to make the Arcade the activity center of downtown once again, Schwiegeraht said.
“It’ll create an attractive, arts-based destination for downtown,” he said.