Developers who bought the vacant Berdan Building in Toledo’s Warehouse District said Tuesday they need one more piece of financing — approval for $2 million in federal money from City Council — to proceed with plans to renovate the blighted structure.
“There are a lot of steps before we can commence construction, but this is the last major financing hurdle,” said Richard Karp of Berdan LLC.
Council reviewed funneling $2 million in federal money toward a $30 million plan to transform the building at 1 S. Erie St. across from Fifth Third Field into 115 apartments. Previous estimates valued the project at $20 million.
“We already have an investment in the Warehouse District with the Standart Lofts,” said Mr. Karp. “This shores up our investment that we’ve already made.”
After more than a decade of attempts to renovate the Berdan Building, the project seems closer to reality than ever before, councilmen said.
“Over the past three years, we’ve watched this building sit vacant,” said Councilman Adam Martinez at council's agenda review meeting Tuesday. “There is some real cash involved, which is different than the last developer.”
Councilman Joe McNamara said the plan presented by Mr. Karp and his partner, Kevin Prater, is “much better.”
The Lansing-based developers bought the Berdan Building this year and announced plans to renovate it into living and retail space. Berdan LLC paid $700,000 for the property, according to records on file with the Lucas County auditor.
Mr. Prater and Mr. Karp redeveloped the nearby Standart Lofts, a 75-unit apartment building.
Since renovation of the Berdan Building was delayed, the $2 million was loaned to the North Toledo community group United North for its $7 million housing project, Cranes Landing. Investors in the Cranes Landing project repaid the $2 million, making it available for the Berdan Building, said Deputy Mayor Steve Herwat.
Council is expected to vote next week to approve reallocating $2 million from the U.S. Housing and Urban Development Neighborhood Stabilization Program 2.
“While the $2 million of NSP2 funds represents less than 7 percent of the $30 million total development cost, it is a necessary piece of the redevelopment financing in conjunction with $5 million of state of Ohio historic preservation tax credits, federal historic tax credits, conventional debt, and developer equity,” said a statement from the developers. “Construction is expected to commence in 2014 with completion in 2015.”
The funding includes $5.64 million from federal historic tax credit syndication proceeds; $5 million from state historic tax credit proceeds; $2 million from HUD; $11.3 million owner equity, and $6 million in conventional senior debt. The owners are required to maintain eight apartments at HUD-designated income-restricted levels for 15 years.
Mr. Karp said the Berdan is in worse shape than the Standart Lofts before it was renovated, “so it requires more financing.”
Kathleen Kovacs, commissioner of Toledo’s neighborhoods department, said the city could be liable to repay the $2 million if the developers do not complete the project or do not maintain the eight income-restricted apartments.
Ms. Kovacs said the city will have a mortgage on the building until it is complete and the eight income-restricted apartments are rented. There will be a restrictive covenant on the property requiring the owners to maintain those eight apartments.
The building has holes in the roof, buckling floorboards, and evidence of small fires set inside. Many windows have been broken or missing for years, and the brickwork requires major restoration. It is a Toledo landmark and an example of early 20th-century commercial style, according to the 1974 application for it to be listed on the National Register of Historic Places. The building was completed in 1902 and has terra-cotta molding around its main doorway and elsewhere.