Dozens of low-income residents of a major downtown apartment building could face higher rents or have to move if Toledo City Council proceeds with a deal to refinance millions in debt at a lower rate to save the property owner about $1 million over the next 13 years.
Council could vote Tuesday to sell $5.37 million in general obligation bonds at a 2.85 percent interest rate — down from the current rate of 6.25 percent. The bonds are a refinance of what’s left from the $7.47 million bond lent in 1995 to Macy’s Apartments LLC — now known as LaSalle Apartments LLC. The money was used to remodel and rehabilitate the former Lasalle’s department store building into apartments.
“Over the remaining life of the bond, that is going to save $1,019,252,” said Toledo Deputy Mayor Paul Syring.
Under the original deal, the property owner was required to offer 40 percent of its 131 apartments to low-income or income-restricted tenants. That mandate was part of the deal with accepting a 15-year tax credit, which has now expired. There was also an income restriction attached to the current bond, but with the pending refinance, the property owner is allowed to transform every unit to market rate.
“As long as those bonds are outstanding, that income restriction is required,” Mr. Syring said.
“The current owner of the property has either notified or is notifying, as required by law, the tenants who reside with rent and or income limitations, of their rights, and they are allowed to remain at their current rents in their current leases, as long as they remain income eligible, for two or three years,” he said.
A property manager for the building refused to answer questions.
“They contacted us several weeks back wanting to brainstorm with us to see if revenues could be enhanced since we hold the debt on the project,” Mr. Syring said. “The project is cash flowing but just barely and one proposal was to take advantage of the drop in interest rates."
He said the city is the first lien holder on the building, and the property owner pays the city for the amount due on the bonds. “They have never fallen behind,” Mr. Syring said. “The city’s only recourse is to look at that asset, which is the building and rents received and that is the risk the city took on in 1995... They did ask that they be allowed to use to tap into a reserve fund on an interim basis while this refinancing goes on.”
The city of Toledo sold bonds in the late 1990s to help finance the redevelopment of the former Hillcrest and Commodore Perry hotels into rental apartments for market-rate and lower-income tenants. Expenses soon outpaced revenues at both downtown apartment buildings, which ultimately put the city on the hook for the debt payments. Since the early 2000s, the city has paid about $1 million of general fund money each year for debt on the Hillcrest and Commodore Perry, as well as Museum Place, another apartment development. The city expects to continue paying the debt until at least 2025 and it will own none of the buildings, said Jennifer Sorgenfrei, spokesman for Mayor Mike Bell.
Both the Hillcrest and Commodore Perry were foreclosed on and sold at sheriff’s sales to corporations affiliated with banks.
Councilman Adam Martinez, chairman of council’s neighborhood committee, said he would support the refinancing of the bonds.
LaSalle Apartments, which is 97 percent occupied, is owned by Housing Horizons, a subsidiary of Kimberly Clark. One-bedroom apartments rent from $650 to $775 a month and two-bedroom apartments rent from $825 to $1,400.
Contact Ignazio Messina at: email@example.com or 419-724-6171.