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MHA takes on downtown

BRICK BY BRICK:Dust and debris fly as demolition work on the former Hotel Marion continues Friday.

BY Lucas Robinson - lrobinson@chronicle-tribune.com

The city has a problem. Despite two nearby universities and some large industry like the General Motors plant, for-profit market-rate housing is not immediately available in central Marion. With private developers unwilling to invest, the Marion Housing Authority has taken up the task of constructing housing that appeals to young professionals and out of town commuters.

While traditional duties of a housing authority involve the creation and maintenance of government supported affordable and Section 8 housing, funding cuts at the Department of Housing and Urban Development have prompted some public housing authorities to break into the commercial real estate business to generate revenue. That effort has arrived in Marion.

After talking with people in the administration of Mayor Jess Alumbaugh as well as local business people, Steven Sapp, CEO of MHA, reacted to a problem in the city caused by its own economic realities.

Specifically, local employees are either burdening themselves with a commute or rent during the work week rather than seek out housing options inside Marion.

“The truth is we need market-rate housing,” Sapp said. “The demand is there. We know the demand is there.”

Upon entering office, Alumbaugh, according to Sapp, expressed concerns about the amount of affordable housing projects in Marion. The mayor viewed introducing market-rate housing as key in a process to “revitalize downtown.”

MHA has been the principal vehicle for addressing the issue of downtown housing in recent years. Seemingly, the venture addresses both the city’s housing problem and MHA’s lack of funding.

“They’re looking at these investments as ways to create revenue and develop housing,” Alumbaugh said. “... We’re grateful they’re willing to invest. It’s created a spur in the community.”

Since mid-2016, MHA has purchased four properties across downtown Marion. Of these, it’s work on the former Hotel Marion and the Centrum Mall that have been the agency’s most ambitious. MHA has also purchased a property at 141 E. Third St. and the two structures known as the Maidenberg Buildings on 319 E. Second St. On all of these properties, local architectural firm Halstead Architects is contracted to handle blueprints and construction.

The first property incorporated into this project is Hotel Marion. Acquired from the previous owner by MHA in August 2016 for $160,000, the structure is currently being demolished to make room for what Sapp said will be known as 34 East. The property is slated to contain 42 units of two bedroom, two bathroom apartments. The lower level will be home to numerous vendors, of which Sapp says MHA has several letters of intent from a grocery store, a restaurant and daycare center.

Demolition of the structure, being handled by Dave’s Excavating, was began in early April and was initially meant to last a month. Yet much of the hotel’s main tower still stands. Sapp noted the demolition was behind schedule, but said that “it’s not going to slow down actual development” of the project.

Riley Tangeman, assistant development coordinator for MHA and director of community relations for the Refinery Business Center, stated the project was in no rush.

According to Tangeman, MHA is “still securing our funding and our plans” for construction of 34 East, which will allow the crew to be “taking it’s time” with demolition. Currently, MHA intends to start laying foundation for the new market apartment structure in the fall, with construction continuing throughout 2019.

As MHA is limited in how it can allocate funds that have ties to HUD, the agency had to turn to outside investors for support.

Up to 25 percent of funding for the Hotel Marion project will come from New Market Tax Credits. Such tax credits are extended to projects in low-income areas by investors so as to spur market development. To become eligible for the tax credits, the area in question must meet several criteria, such as being located in a food desert and having a low median household income. Those tax credits are limited in how they can be distributed. MHA created a separate nonprofit called Building For Change to be able to take advantage of the tax credits. The nonprofit is under the umbrella of MHA, and therefore is able to apply for grants and tax credits in ways a public housing authority cannot.

New Market Tax Credits must be handled by a “community development entity.” For the Hotel Marion project, Sapp said the community development entities handling the allocation of the New Market Tax Credits is Ice-Miller Strategies LLC and Baker Tilly Virchow Krause LLP. 

Much of the other funding sources for the project will come from reserves produced by non-government affordable housing complexes owned by MHA.

“We have different types of reserves,” Sapp explained. “We have money that’s directly tied to public housing ... Those dollar reserves cannot be touched. That is money generated from HUD.”

Funds, according to Sapp, will therefore come from properties that “generate revenue and have no government ties.”

“We can use that revenue for anything we want to use it for,” Sapp said. “We can leverage those properties or any properties we own that have no government ties. We can use those funds for development.”

The specific property being leveraged by MHA to fund the Hotel Marion project, Sapp confirmed, is the senior living affordable housing project Hilltop Towers.

Sapp currently estimates the total cost of the Hotel Marion project to be $10 million. Of that amount, 25 percent would be covered by a New Market Tax Credit and the remaining difference by the leveraging of MHA’s private assets. 

The second property purchased in this process by MHA is what Sapp refers to as the 141 Building on Third Street.

MHA purchased the property from the Community School of the Arts on Nov. 8, 2017 for $25,000. Sapp plans to fill the upper level of the structure with four two-bedroom loft apartments and one single-bedroom apartment. On the lower level, Sapp said he has been in negotiations with a restaurant to fill what is intended to be commercial space.

Construction of these apartments will be handled by students at the Marion Regional Career Center so as to conserve costs, according to Sapp. A partnership between MHA and the Career Center was confirmed by Patricia Gibson, director of communications for Marion Community Schools.

The most recent addition to MHA’s network of properties are the two Maidenberg Buildings located in a joint lot on 319 E. Second St. Purchased by MHA from Maidenberg Associates for $250,000 on Jan. 2, 2018, the upper portion of the two-story structure is projected to contain four to five two-bedroom, two-bath loft apartments. For the smaller structure located technically on Branson Street, Sapp said he plans to utilize the space for commercial vendors.

According to Tangeman, she is the other key member of MHA working with Sapp on the 141 Building and Maidenberg Buildings, and said “most of the commercial and community development projects are under my role.”

She said MHA’s plan is for her to “take over” direction of the development of the Maidenberg Buildings in the future.

The MHA’s efforts, however, are not limited to commercial housing projects. On Nov. 13, 2017, MHA purchased the Centrum Mall for $140,000 from Chad and Erin Seybold, family of former Mayor Wayne Seybold. Since then, MHA has commenced efforts to rejuvenate the former mall as a viable commercial and community space. In April, MHA demolished the facade of the structure, and, alongside Halstead Architects, plans to restore the structure’s front to resemble how it looked in the early 1900s.

The Refinery Business Center, a business incubator and asset of MHA currently located on South Western Avenue, will eventually relocate to the Centrum Mall to help fill commercial space.

The Refinery was on the brink of failure when MHA acquired it, Tangeman said, and that its relocation to the 20 to 30 suites available at the Centrum Mall is necessary for it’s “stabilization.”

“We saw it as our responsibility to step in and do what we could to make it sustainable and permanent in the community,” she said.

The rejuvenation of the Centrum Mall compliments the development of the Fifth Street Commons, currently a parkling lot across from the Old Centrum Mall and a project overseen by Thriving Families Thriving Grant County.

To Sapp, work on the Commons “really fits the model” of the type of community space MHA wants to create with its projects.

“It still speaks to having that quality of living, that additional space for people to be able to meet, conduct business how they see fit,” Sapp said.

Like the Fifth Street Commons, much of the work being done by MHA could be said to contribute to the Marion 2030 Plan.

Initially developed in the spring of 2008 and revisited in 2014, the plan outlines an ambitious goal for how the city can be revitalized by the year 2030. Along with the commons, part of the 2030 plan calls for a bike path and river walk along the Mississinewa River.

Though MHA has not had “detailed plans or conversations” concerning the connection between their commercial projects and the 2030 Plan, Sapp said he had spoken with Alumbaugh about the bike path. Such a path would go past the Maidenberg Buildings and could possibly connect to the area near the Hotel Marion project.

“It makes sense for all of this to sort of connect,” Sapp said. “... If the resident is staying there (34 East) they’ll have access to the river walkway.”

Sapp, who has worked at MHA for 20 years, admits his agency is in uncharted territory and that he and his staff will be learning along the way. He noted the agency’s projects are “new for Marion Housing Authority, but it’s not new for the housing industry.”

Michael Hicks, director of the Ball State University for Business and Economic Research, stated the agency’s undertaking should be approached with caution.

Hicks warned some government agencies often “have no particular expertise to do this.”

“It’s not common that housing authorities deal with private sector housing deals in this way, but it’s not unheard of,” Hicks said. “... This is a knee jerk response to market outcomes you don’t like.”

However, Sapp has overseen construction of numerous affordable housing complexes during his time at MHA. He also has reached out to local actors and resources with more experience in commercial projects. Though Alumbaugh commented the MHA will be “learning a bit as they go,” the mayor expressed total confidence in Sapp.

“They know how to do housing,” Alumbaugh said. “... They have a good management that has not become a problem for our community ... I have no doubt Steve Sapp is a bright man. I think we’re moving in the right direction.”

“In my mind, we’ve done the numbers. It’s a high percentage calculated risk,” Sapp said. “Yes there’s a risk to it, but it’s a risk worth taking because we’re confident that it will work. We’ve ran the numbers and we know, if the demand is there it will happen.”

The many active commercial projects of MHA are in their early stages. Yet they still represent a significant disruption in the housing market of Downtown Marion. If successfully completed and filled with tenants, these projects would utterly reshape the area. 

“I hope we look back five or ten years from now and say ‘Wow, this doesn’t look how it use to look,’” Alumbaugh said. 

It is now up to Steven Sapp and MHA to finish the work they have started.