HUD loan key to Ridpath redevelopment
After more than three years of watching private developers struggle to save the derelict Ridpath Hotel, Spokane city officials are prepared to arrange limited financing to help convert the building into affordable downtown housing.
Chief Financial Officer Gavin Cooley said the city is likely to apply for a $2.5 million “plug” loan through the federal Department of Housing and Urban Development and use it to help a private developer start rehabbing the empty hotel, which closed in 2008.
This would be the second time the city used the Section 108 Loan Guarantee Program. City officials used it to help finance construction of the River Park Square mall garage, an arrangement that sparked years of controversy and lawsuits. River Park Square is an affiliate of Cowles Co., which owns The Spokesman-Review.
Ridpath developer Ron Wells said he’s planning to spend $17.9 million to consolidate the fragmented ownership of the hotel and convert the building into 201 apartments and eight lofts. He’s arranged $10.5 million in financing from a commercial mortgage lender based in Pennsylvania. Two other investors say they’re willing to invest $4.5 million because they would earn Federal Housing Administration-approved tax credits or historic renovation tax credits.
Wells said he was told by a number of tax credit consultants to seek the help of the city in obtaining the HUD Section 108 loan.
Wells has redeveloped a number of historic Spokane buildings, including Steam Plant Square. He first announced more than a year ago the plan to convert the main Ridpath building, 515 W. Sprague Ave., into a combination of small and standard-size apartments.
Cooley said the city is using a financial consultant, New York-based National Development Counsel, to review the proposed loan’s details.
He said the plan would require the developer to prove that annual cash flow would be at least 120 percent of the annual repayment amount the city would owe to HUD. Cooley added that the loan’s collateral would be the Ridpath property.
The HUD Section 108 application will go through several steps, including review by the City Council and Mayor David Condon, Cooley noted.
Cooley said Condon and council members view converting the Ridpath as key to eliminating an area of downtown blight, as well as helping develop affordable housing in Spokane.
City Council President Ben Stuckart said he expects critical questions will be asked before the city completes the application. But he’s convinced there’s wide support for the loan.
“I believe one thing that will keep the city on the right track is helping more people live downtown,” Stuckart said. “Once we have more downtown density, the stronger our economic base will be and the better the downtown retail scene will be.”
Stuckart said the controversy following the River Park Square deal caused city officials to pull back from using Section 108 loans, which are available to municipalities that receive Community Development Block Grant funds, aimed at assisting lower-income communities. “I believe it’s a good tool to have in our toolbox for economic development,” Stuckart said.
Wells said his research convinced him downtown Spokane has a strong appeal for young professionals, seniors and retirees wanting an urban housing alternative.
The loans involving FHA and HUD Section 108 money require that roughly 70 percent of the Ridpath apartments be priced for “workforce” tenants who earn no more than 60 percent of the median annual income for Spokane County. The median income is roughly $27,000 for a single resident.
Wells’ development company, Ridpath Club Apartments LLC, would become the sole owner of the apartments inside the Ridpath Tower, from the first to the 11th floors.
The tentative plan is to have 110 “micro” one-room apartments, 41 larger studio apartments and 50 one-bedroom apartments.
The affordable-housing apartments will rent starting at $495 per month. The other market-rate apartments will start at $795 for a single bedroom, ranging upward to $1,300 per month for larger units, Wells said.
“I can see (micro-apartments) appealing to workers downtown, clerks, baristas, people who are going to school part time and earning money at the same time,” Wells said.
Rents would cover all utilities, he added.
The HUD Section 108 loan program is targeted primarily at urban development projects that encourage local business activity and housing rehabilitation.
Cooley said the HUD application timeline generally requires the city to complete the process within six months.
Wells said he hopes the applications go to the federal agency by August. If approved without much delay, all the acquisition deals would close by Dec. 1, with construction starting immediately.