WICHITA — The $2.3 million boost in city financing that Real Development wants for its downtown residential project at Exchange Place is a risky deal for city taxpayers even under optimistic scenarios, according to a report released this afternoon.
The report, prepared over the weekend by Stanley Longhofer, director of Wichita State University's Center for Real Estate, sets the stage for Wichita City Council members to deny additional financing in its 9 a.m. meeting Tuesday.
That would be a major blow to Real Development's plan to renovate several downtown buildings near Douglas and Market into a sprawling, high-end condominium project.
Real Development — also referred to as the Minnesota Guys — has said the council's denial of a $2.3 million boost to the $9.3 million already approved could sink the project.
That's because developers say they need that much to lock in a $30 million federally backed loan.
That loan would be the lion's share of the money to renovate the buildings into 233 new apartments, a high-tech parking garage and ground-floor storefronts.
Longhofer's analysis, which was requested by City Council members, shows that Real Development made assumptions on rental rates, condo sales and occupancy rates that could be hard to achieve.
Projected apartment rents in Exchange Place are set at $1.12 to $1.48 per square foot. That's higher than any current rents downtown, although Longhofer reports that new projects — The Flats 234 and Finn Lofts — are said to have similar rates.
Developers want to convert the apartments into condominiums starting five years from now.
That would triple what's downtown now, and more condos could be sold based on existing real estate studies.
But even with current market rates and quick condo sales, the project might not generate enough property taxes to pay back the city's investment.
For more on this story, see Tuesday's Wichita Eagle.