The state has awarded $5 million in historic tax incentives to help rehab a highly recognizable downtown property, but another one — the Dayton Arcade — was left out, potentially threatening the timeline for its redevelopment.
The Centre City building — a vacant highrise at 40 S. Main St. — won state support for its owners’ plans to create 164 new apartments and ground-level commercial space. The award was announced at a Tuesday press conference.
“We’re pleased with the faith the state has shown in us by making this award … and it makes this project easier to come together,” said Paul Ruby, vice president of American Investor Immigration Funds, which is behind the project.
Owners say they will invest $46.4 million to repurpose the 21-story building, which plays a significant role in “The Nine,” a revitilization strategy for a nine-block area in the heart of downtown.
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The Centre City’s allocation was partly overshadowed by the Dayton Arcade’s failure to obtain historic tax incentives, which developers have characterized as an important piece of financing for transforming the complex.
“This is obviously disappointing news and we need to regroup and figure out what the strategy is going to be to fill in the source of funds we hoped to get from the state credit,” said Joshua Parker, principal of Maryland firm Cross Street Partners, which is a development partner on the project.
On Tuesday, the Ohio Development Services Agency announced it has awarded $22.8 million in state historic preservation tax credits to 18 applicants statewide.
The incentives are expected to help rehab 33 buildings and attract about $225.6 million in private investment, state officials said.
The Centre City building was one of two projects across Ohio to nab $5 million in credits, the maximum award available. A $53.5 million project to rehab the Halle building in Cleveland was the other top winner.
Centre City, the former home of United Brethen publishing house, sits in the heart of downtown at Main and Fourth streets, across from the proposed site of Levitt Pavilion Dayton, an outdoor music amphitheater at Dave Hall Plaza.
The building has Chicago-style architecture and was among the tallest reinforced concrete buildings in the world when its tower opened in 1927. The original 14-story office building was constructed in 1904.
The building, vacant for years, was purchased for nearly $1.7 million in July by a group called Centre City Partners LP, according to county real estate records. The limited partnership was incorporated by First Developers LLC in Virginia.
The Centre City project earned a score of 94 out of a possible 100 from the state, which was the second highest score in this funding round.
The strong showing likely owes in large part to the owners securing about $6.5 million in EB-5 funding for the building’s rehab, said Ruby.
American Investor Immigration Funds specializes in utilizing the federal investment program, which puts foreign investors on the fast track to getting a green card if they fund U.S. business ventures that create jobs.
Construction on the Centre City building could begin spring or summer of next year, and it could take 16 to 17 months to complete, Ruby said.
“We’ve got a pretty good team,” he said. “I was pleased with our application and really pleased the state received it so well.”
Some city leaders and developers were surprised and disappointed to learn the Dayton Arcade’s request for $5 million in state historic tax credits was shot down completely.
The arcade project received a score of 85 from the state, barely missing the 90-point cutoff for an award in that category.
“While the denial of state historic tax credits for the proposed Arcade redevelopment was unexpected, the outcome is not unusual for redevelopment efforts of this type,” said Shelley Dickstein, Dayton city manager. “In addition, the Centre City redevelopment project receiving historic tax credits is an indicator of further progress.”
The development partnership working on the arcade include Dayton-based Miller-Valentine Group and Cross Street Partners.
The team will explore alternative ways to close the financing hole that the state tax credits were supposed to fill, said Parker. They intend to apply for credits again in the spring round. Applications are due at the end of April.
It is too soon to know how this will impact the redevelopment timeline, but the goal remains starting construction in the first half of next year, Parker said. Earlier this year, developers were awarded $20 million in low-income housing tax credits for the initial phases to create affordable housing for artists and creative types.
“We’ll certainly try again to stay on the timeline to maintain the financing we have put together,” Parker said. “We’re very bullish on Dayton … but the arcade is a complicated deal.”
Rehabbing the arcade would be difficult to complete across all of its phases without some state historic tax incentives, Parker said.
The tax credit program is highly competitive. The state received requests for more than $74 million in funding from 44 applicants.
Adapative reuse projects are complex and challenging, requiring many layers of financing, and setbacks like this are common and patience is a must, said Dayton Mayor Nan Whaley.
“We’ve had projects not get state historic tax credits in the first round, but come back and get them in future rounds,” she said.
Whaley and City Manager Dickstein plan to lead a tour through the arcade for members of Ohio’s legislature Wednesday.
Phases 1 and 2 for redeveloping the arcade are expected to cost about $70 million and would deliver a completed product that includes the restoration and reuse of the rotunda, street-level activated storefronts and housing, co-share and public spaces, officials said.
The trajectory of downtown, south of Third Street, has greatly improved in just the last several years, and large unused or underutilized properties are now primed for renewal, said John Gower, urban design director at CityWide Development Corp.
“There is no easy buttons on any of these projects,” he said.