LOUISVILLE, Ky. —Residential development downtown and the creation of a downtown entertainment area called Fourth Street Live were some of the things the Wichita Visioneering group learned about during its second day of a three-day examination of Louisville's core revitalization and economic development efforts.
Barry Alberts, former executive director of Louisville's Downtown Development Corp. who is now an urban planning consultant, told the Wichita group of 50 business, academic, civic and government leaders that when officials started the residential development portion of the city's master plan, they did so carefully.
Officials, he said, "didn't want to get too far in front of it" because they didn't have a strong enough base to build upon.
In other words, residential development has come along slowly but steadily. About 2,200 residential units have been created in the city's downtown since the effort began.
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Alberts said to get the residential projects started, officials used a combination of streetscaping projects by the city and the creation of a Downtown Housing Fund to stimulate interest from developers.
The fund, which operates as a limited liability company, comprises a pool of money from which developers can — if approved by the fund's loan committee — tap to use as bridge financing in getting their projects fully financed from traditional lenders.
Investment in the fund came from the city and private industry, specifically more than a half-dozen area banks and companies with a downtown presence, such as Humana and Louisville Gas and Electric. It started with $5.5 million, half of which came from the city and the other half from the banks and companies who were investors in the fund.
The fund, says JPMorgan banker Louis Straub II, doesn't provide "free money" to developers.
"It's a loan with much more favorable terms" than developers would get through a traditional bank loan, Straub said, with interest rates a percent below a senior loan rate and flexible payment terms. The life of the loans range from one to seven years, Straub said. Once a loan is paid off, it is rolled back into the fund.
"Our purpose is to deploy capital to build a project," he said.
Larry Leis tapped the DHF for his Park Place Lofts project, which comprises 22 condos and seven commercial spaces. He used his $100,000 DHA loan to finance the commercial space portion of the project.
"That $100,000 made all the difference in the world," Leis said.
Straub said that none of the residential projects the DHF helped fund has failed, though they did have to write off the interest on one project.
The fund has helped to finance 298 residential units, Straub said. The fund will sunset in 2012, he said.
"But we are contemplating a second fund for downtown commercial and retail," he said.
A dedicated fund
Gary Schmitt, executive vice president at Intrust Bank, said the creation of such a fund in Wichita is possible.
"I think so," Schmitt said. "It won't be exactly the same."
But there is precedent for Wichita-area banks getting together to help finance downtown projects. He said it was done in the case of the Hyatt Regency Wichita, for which local banks came together and created a participation loan to finance the hotel.
"History has shown that the banks will come together for the betterment of the community," Schmitt said.
In addition to learning about Louisville's housing fund, the group listened to a presentation by a partner in the development of Fourth Street Live, an entertainment and retail area on downtown Louisville's Fourth Street.
Mike Leonard, chief operating officer of Hogan Real Estate, said there are a host of challenges to starting such a project, including a certain amount of residential development.
More important is a developer who is suited to such projects, because they don't happen quickly and the difficulties are numerous.
" (You) need a developer who doesn't think like a suburban developer," Leonard said. These projects have to be labors of love. They are challenging from day one until today. You have to work them every day."
Fourth Street Live opened in 2004. Leonard said it attracts 4.5 million people a year.
What Louisville offers
The group started Tuesday with a brief presentation from Jim Wood, president and CEO of the Louisville Convention & Visitors Bureau. Wood told them that tourism has a $1.7 billion economic impact on the city that's home to the Kentucky Derby, which by itself draws 150,000 visitors to the area.
Tourism is Louisville's third-largest industry.
Wood said that several years ago his agency made a decision to ramp up its efforts to attract more conventions and trade shows to Louisville, which included bringing in decisionmakers to the city to show them firsthand what his city could offer them. The city also undertook an expansion to its downtown convention center and added the Marriott Louisville Downtown, a $110 million project and a key part of expanding its room availability for conventions.
The result? The city has gone from hosting 18 conventions to 40-45 a year, he said.
Later on Tuesday, the group toured Louisville's KFC Yum Arena, which had its grand opening this week and will host its first event, an Eagles concert, on Saturday. The 22,000-seat arena is downtown and is funded through a variety of sources, including the city and a state-created tax increment financing district.