Downtown Wichita’s on-again, off-again $65 million Exchange Place apartment project is on again under new management.
The Wichita City Council voted 7-0 Tuesday to approve Texas developer John McWilliams’ acquisition of the 230-apartment Exchange Place project from Real Development principals Michael Elzufon and Dave Lundberg. McWilliams, a veteran redeveloper with loans guaranteed by the U.S. Department of Housing and Urban Development, plans to break ground next summer on the project if HUD approves a $30 million loan as expected.
It’s the largest downtown residential project – including a 273-stall, high-tech parking garage – since the passage of Project Downtown, the city’s master plan for downtown redevelopment, almost two years ago.
“We’re very excited about coming to Wichita,” said McWilliams’ local attorney, Harvey Sorensen.
The transaction, which McWilliams said last week includes compensation to Real Development for its work lining up tax credits for Exchange Place, removes Elzufon and Lundberg from the pair’s most visible pending Wichita project. The Minnesota Guys will continue to operate their remaining Wichita properties – including the Wichita Executive Centre at 125 N. Market – following this sale and an auction of three smaller buildings.
“As with all good things, it is worth the wait, and I think we’ve finally arrived at the point where this is worth the wait,” said Vice Mayor Janet Miller, whose district includes the Exchange Place project.
The switch to McWilliams includes tighter financial guarantees for the city, including a $1 million cash escrow fund to guarantee any shortfalls in the city’s $10.3 million in tax increment financing for the project. It also reduces the city’s upfront bonding for that project by almost $2 million. That remaining $2 million will be paid over time to the seller of the downtown property at Douglas and Market.
In addition, City Manager Robert Layton said the HUD loan includes enough cash to pay all of Real Development’s delinquent local vendor bills on its Wichita Executive Centre project. That project’s contractor, Key Construction, is one of the largest unpaid creditors, at approximately $1 million.
“I feel very good with these changes, that we’re bringing in somebody else with more credibility to carry this out,” council member Michael O’Donnell said. “Although I wouldn’t have supported this project at its inception, it’s my duty to make sure the city’s resources are taken care of. We need to make sure we have the right people in place, and I feel like Mr. McWilliams is that person.”
Allen Bell, the city’s urban development director, told the council that he’s confident the Exchange Place project will generate enough TIF revenue to service the bond financing for the city’s investment, based on “conservative” valuation estimates.
“And we have projects on the horizon in that area that if they come to pass, will have an impact on the TIF prospects,” Bell said.
McWilliams joined Real Development’s Exchange Place efforts about six months ago because of his HUD project expertise as the government changed its commercial lending rules to require experienced developers. He has specialized in government apartment project partnerships for 12 years, building about 5,000 units in his career.
The sale to McWilliams, first reported by The Eagle earlier this week, is the latest twist in the six-year saga of the Exchange Place project, which has included three development agreement amendments and no progress whatsoever on construction. The first two development agreements were with Real Development, but the project has been idled for more than two years by Elzufon and Lundberg’s ongoing financial problems.
Council member James Clendenin said he’s ready to see work at the corner of Douglas and Market.
“I drive down Market Street every single day to come here and it’s a sad drive, that part of the drive,” he said. “Downtown reflects on the city as a whole, each one of our districts.”
Miller said she’s optimistic McWilliams can pull off the multimillion-dollar project.
“Downtown has seen an extraordinary revitalization over the past few years,” Miller said. “Over the past four years, private investment to public investment downtown is at a 4-to-1 ratio, which is a significant change.
“This project is another catalytic project that moves downtown forward greatly.”