Deal gives new life to Exchange Place project in downtown Wichita
09/30/2013 5:49 AM
08/06/2014 8:39 AM
A Texas residential real estate developer has acquired Real Development’s Exchange Place project in downtown Wichita, reviving what city officials proclaimed a dead project earlier this fall.
John McWilliams of Talos Holdings in Dallas will go before the Wichita City Council on Tuesday, the first step in reviving Project Downtown’s largest residential project, idled more than two years by the ongoing financial problems of Michael Elzufon and David Lundberg, known locally as the Minnesota Guys.
McWilliams, 55, whom city officials call an expert in executing commercial redevelopment underwritten by the U.S. Department of Housing and Urban Development, will become the point man for a plan to convert the two buildings on the north corners of Market and Douglas into 230 apartments, along with a high-tech parking garage. Elzufon and Lundberg, who have come under increasing fire at City Hall after financial problems and after being named in a state securities investigation, will no longer be involved, city officials said.
The financial terms of the deal were not disclosed, but McWilliams said Real Development will be compensated for its work lining up tax credits for the project. McWilliams joined Real Development’s Exchange Place efforts about six months ago because of his HUD project expertise.
McWilliams, who has specialized in government apartment project partnerships for 12 years, sees a lot of potential in Wichita’s downtown — if city officials are prepared to move quickly.
“Most of what I see downtown are smaller projects,” he said. “In order to get momentum, you need a big project like this.”
He called the $65 million Exchange Place project a “perfect storm” of financing potential that probably will lapse soon as interest rates rise.
“You’ve got the HUD rehabilitation program, you’ve got interest rates at historic lows,” he said. “The Real Development people did a good job with the city, state and federal tax credits.
“If this window goes by, it might be 10 more years or you might never get a project like this. You’re never going to get a conventional developer to come in and take the risk on a project like this. Maybe in a primary market, but never in a second tier market, not in this environment and market.”
Lundberg said Friday that the Exchange Place deal gives Real Development more cash to upgrade the Wichita Executive Centre, including plans to revive the old Wichita Royale hotel, and to pursue development projects in Georgia and New York.
“From a time standpoint, what Michael and I are good at is developing projects, getting design done, finding tax credits, finding money to finance these things,” he said. “In this instance, we’re letting John do what he’s good at: build them, run them and own them.”
Real Development also announced last week that it’s auctioning three of its smaller Wichita downtown properties: the Farmers and Bankers Building, 200 E. First St.; the Landmark Square Building, 212 N. Market; and the former Hubris Communications building, 216 S. Market. The auctions and the Exchange Place deal essentially pare its Wichita portfolio by half, leaving the Wichita Executive Centre as its biggest project.
Two City Council members said they’re receptive to partnering with McWilliams on the downtown residential project.
“This is a man with considerable expertise in HUD projects, about a dozen, and he’s a perfect fit for their new regulations that require expertise in a HUD project,” Vice Mayor Janet Miller said Friday. “This is a big positive for Wichita.”
Council member Jeff Longwell said the city’s priority now is advancing the Exchange Place project.
“And this man has a good track record of getting these projects done,” Longwell said. “And frankly, if he’s not taking over this project at this point, it’s not getting done. It’s good news for our city, because it’s really the only way at this point this project gets done.”
The ownership change won’t have any effect on downtown redevelopment’s progress, said Jeff Fluhr, president of the Wichita Downtown Development Corp.
“It tells you that the concept itself at Exchange Place is a strong one,” Fluhr said. “It’s not uncommon at all for one developer to acquire real estate and for whatever reasons, the project can’t be completed.
“Here, another developer is stepping in to finish the project ... and it reinforces the fact that we’re seeing a strengthening of the investment environment in downtown Wichita.”