Recently, Lawrence CDC held a neighborhood meeting to discuss redevelopment potential for vacant and blighted buildings on the former Fort Benjamin Harrison at Lawton Loop East. The following “FAQ” presents facts and certain conclusions drawn by Lawrence CDC pertaining to the topic. Many of these topics were originally discussed at the neighborhood meeting in brief form and have been expanded and clarified here.
Q1. What is Lawrence CDC’s history and role in redevelopment at Fort Harrison and in Lawrence?
Lawrence CDC was established as “Lawrence/Fort Harrison Development Corporation” in 1996. It is an Indiana not-for-profit corporation with IRS 501c3 tax-exempt status. The Lawrence CDC name was adopted later and registered with the Indiana Secretary of State. The CDC was created by the City of Lawrence and Fort Harrison Reuse Authority to facilitate development and redevelopment, to promote positive development and redevelopment, and to promote the creation of safe and decent affordable housing in Lawrence and the former Fort Harrison.
The CDC may act as developer, as it did in its major developments on Fort Harrison. Benjamin Square (the housing development at 56th & Franklin) and the Ivy Tech building were CDC developments. Currently the CDC owns several vacant lots in Lawrence and property on Franklin Road that is held for future redevelopment.
The CDC also acts as advocate for positive development and property improvement, working with developers and property owners. The CDC funded startup of the Lawrence Redevelopment Commission (the Pendleton Pike/Franklin Road redevelopment area). In 2011, the CDC co-founded and has been the major sponsor of the Lawrence Art Center on Franklin Road. In 2013, the Lawrence Redevelopment Commission established a Commercial Façade and Property Improvement Fund, administered and promoted by the CDC.
The CDC has access to, or preference in obtaining, some kinds of low-cost capital and development funding that are not typically available to for-profit developers. The CDC has standing under Indiana law to receive grants and loans for redevelopment from the Indiana Housing and Community Development Authority, the City of Lawrence, the Lawrence Redevelopment Commission, and the Fort Harrison Reuse Authority. This capacity is important in the case of buildings that have a gap between cost of rehabilitation and eventual property value.
The CDC in general will accept lower financial returns and higher risk than market-driven developers, which adds to its usefulness in difficult scenarios where there are non-financial benefits to redevelopment.
Q2. Who controls Lawrence CDC?
Lawrence CDC directors originally were appointed by Lawrence city government and FHRA, but that is no longer the case. The bylaws have evolved over the years, and the organization is now governed by a self-electing board with term limits. Board members are required to be residents of the City of Lawrence and may not be elected officials. Non-residents and elected officials may serve as advisory (non-voting) members. A list of directors may be found on the website at www.lawrencecdc.org. Current directors live in various Lawrence neighborhoods, including Lawton Loop.
Lawrence CDC has one paid staff member, its executive director. Directors serve voluntarily and without pay. Independent contractors perform functions such as property maintenance, accounting, and IT/web development.
Q3. Is Lawrence CDC part of City government?
No. As with most other community development organizations in Marion County, Lawrence CDC is independent of City government and the two redevelopment districts. The CDC sometimes cooperates with those entities in planning or executing programs and developments, as described elsewhere.
Q4. What buildings on Lawton Loop need to be redeveloped?
Four vacant, blighted, deteriorating buildings are located north of the corner of Lawton Loop East Drive and Otis Avenue. Three are “identical” former barracks buildings, and the fourth is the historic base PX building.
Q5. What was the original use of the buildings?
The three barracks buildings were originally the on-base housing for enlisted men. The original US Army community on Lawton Loop was diverse, including living space for the full spectrum of Army personnel from privates to the highest ranking officers. The fourth building was an active hub, originally the base PX (Post Exchange store) and later the non-commissioned officers’ club.
Q6. Who owns the four vacant, blighted, deteriorating Lawton Loop buildings?
Four separate owners. As of May, 2013, the southernmost barracks building is owned by the Merici Village Apartments developer. The second building north of Otis is owned by an Indianapolis businessman. The third is under sale contract to local developers, who are working with Lawrence CDC to formulate an appropriate redevelopment proposal. The fourth, the former PX/NCO Club, is under sale contract to a church.
Q7. What uses are allowed in the vacant Lawton Loop buildings?
Lawton Loop East south of Kent Ave. is a “mixed use” district according to the Fort Harrison Master Reuse Plan. Currently-occupied buildings there contain offices and multi-family housing (condominiums), allowed under the plan. Apartments are another form of multi-family housing; they are allowed but none currently exist.
A 2012 amendment to the reuse plan clarifies that affordable rental housing may be developed in the vacant barracks buildings. This plan amendment helped to make the Merici Village Section 42 tax credit application score better in the statewide competition. In 2012 the development was not competitive and failed to obtain tax credits. Credits were awarded to Merici Village in 2013 and construction will start mid-year.
Q8. How much will it cost to rehabilitate the remaining Lawton Loop barracks buildings for residential re-use?
Each building is approximately 36,000 square feet, not including attic space. Hard construction costs for residential reuse, including construction management and general contractor profit, are estimated at $100+ per square foot. This is more than $3.6 million. (The buildings have no electrical, plumbing, or HVAC systems; many doors are historically inappropriate; the large front porches are missing.)
Acquisition plus “soft” costs, including design and project planning, historic preservation consultation and documentation, financing fees, interest carry, environmental study and remediation, legal and title, market study and marketing expense, permitting, insurance, interest reserve and lease-up costs, contingency funds, developer fees, etc. are estimated at up to $1.2 million. This is a total of about $4.8 million for one building. If two buildings are redeveloped at the same time, per-building cost would be slightly lower because some soft costs would not be doubled.
Q9. Can the Lawton Loop barracks buildings be redeveloped as condominiums?
The potential to redevelop the buildings as large “luxury” condominiums is not good.
The 15 remaining 2,400 square foot Lawton Loop East luxury condominiums (of 16 total in the Davis building) were almost 85% complete when foreclosed. Those units have been selling in the low-to-mid $200,000 range, between $83 and $100 per square foot. At the high end, 15 x $240,000 is only $3.6 million in sale revenue, and this is feasible only because the bankrupt financial institution (ultimately FDIC) took a significant loss when the Davis building was sold out of foreclosure.
Redevelopment as 16 (one building) or 32 (two buildings) more 2,400 square foot “luxury condo” units could require more investment in unit finishes and longer holding time (to cover a several-year sell-off period) than for apartments, resulting in higher construction and interest carrying costs. Selling prices would probably have to be in the $350,000+ range to earn a profit, or nearly $150 per square foot…which is much higher than any current selling prices on Lawton Loop. Finally, financing of new condominiums for both developers and buyers is still very difficult.
Q10. Can the Lawton Loop barracks buildings be redeveloped as market-rate/luxury apartments?
The potential to redevelop the buildings as apartments is better than as 2,400 square foot condominiums.
If each barracks building were redeveloped with one and two bedroom market-rate apartments competitive with the new apartments elsewhere on the Fort, the renovated buildings would probably be valued at around $3.4 to $3.7 million each based on potential operating cash flow. This means there is a development gap for market-rate units in a single barracks building of $1.2 million or more to cover the total cost in the high $4 million range. The gap closes somewhat if two buildings could be developed at the same time, since some development costs wouldn’t go up much by adding a second building. The development gap could be closer to $1 million per building for two buildings of market-rate apartments, depending on acquisition price of the second building and several other factors, including rents and demand.
Q11. Is the Lawrence CDC involved in the Merici Village Section 42 development?
No. Lawrence CDC has no financial or ownership interest in the Merici Village development.
The Merici Village developer proposed a 2012 Master Reuse Plan amendment, for which Lawrence CDC advocated, and which FHRA adopted. The Plan amendment added affordable housing apartments in the vacant Loop buildings as a planned use.
Q12. What is the current status of the Maude Building?
Financially: the building was foreclosed, and the owner has signed a contract to sell the building to developers who wish to include Lawrence CDC as an owner-partner in a redevelopment entity. The future partners have done considerable due diligence and research over the past 1-2 years.
Physically: while the masonry walls and wooden floor decks are in generally good condition, there is little metal remaining in the building. Door and window systems need to be replaced. The roof is leaking in places. Many walls have been partially torn out by metal scavengers. Animal excrement and carcasses are present in the attic. There may be asbestos-containing materials present, as well as possible lead paint contamination inside and out. The building has been designated as a brownfield in recognition of the possibility of contamination.
Q13. Is there a plan for redevelopment of the Maude Building?
The development team has studied funding alternatives including Section 42 tax credits, historic preservation tax credits, and various sources of grants, loans, and additional capital to cover the sizeable development funding gap. The final plan will depend in part on the financing source(s).
There is currently no finalized plan for redevelopment, though the partners intend to create apartment units. Apartments could have the potential for conversion to condominium units at some future date if the market is more receptive than it is currently. Design and redevelopment planning will proceed as promptly as possible.
The developers approached the FHRA to discuss financing options for the Maude building, and the FHRA board asked the CDC to hold a neighborhood meeting. Part of the purpose of the May 9 neighborhood meeting was to update the neighbors (especially in regard to the Merici Village development which will start construction soon), and part was to discuss and gauge reactions to different possible redevelopment schemes for the remaining buildings. Both have been accomplished.
Q14. What’s the hurry to do something now? Haven’t the buildings been vacant 18 years already?
Physically, the barracks buildings continue to deteriorate and must be stabilized soon or they will become ever more difficult and costly to redevelop. The Maude building has a significant roof leak. Even though the walls and foundations are in good condition, the roof is in bad shape and more roof leaks will eventually cause interior structural damage. The buildings are unheated (entirely without heating equipment), and water infiltration can badly damage a building quickly when it is present through freeze/thaw cycles.
Financially, interest rates are most likely the lowest they will ever be in the lifetime of anyone reading this. They will only go up as time goes on, driving development cost up and ongoing cash flow for a development down. Construction costs are beginning to rise from the depths of the recession and are not expected to decline in future years. Prompt action is needed to save and preserve these stately and historically significant buildings before costs rise significantly and increase the development gap.
Lawrence CDC has concluded that redevelopment should proceed promptly to minimize costs and prevent further deterioration.