Though many already consider the Minnesota Guys a distant memory, the men behind the troubled Real Development didn’t officially close their final Wichita deal until Friday.
They signed over their rights for the Exchange Place project to John McWilliams, a Dallas developer who joined the project in 2012 to help with a HUD loan.
McWilliams is now preparing to move forward with the $66 million development in the heart of downtown. It will revitalize two empty, deteriorating buildings – the pink marble Exchange Place and the white brick Bitting Building on the northeast and northwest corners of Douglas and Market – and add a new parking garage and apartment building where the Lerner and Michigan buildings currently are.
“It’s a real deal now – pardon my pun,” says Dave Wells, president of Key Construction, the contractor on the project.
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“We’re looking forward to starting a wonderful project yet this year,” he says. “It’ll be a first-class deal from start to finish.”
The tax credits have been the holdup.
“The deal was dead,” McWilliams says. “There were no federal tax credit buyers for the last year and a half.”
That was due to what’s known as the Boardwalk court case, which involved a development deal in Atlantic City, and the Internal Revenue Service’s response to it.
Now that that’s been resolved, McWilliams says a few things related to his $32 million HUD loan have to happen before construction starts.
HUD requires that Wells rebid the construction costs. There also has to be an updated market study, and then there’s a handful of administrative things related to the loan.
It’s been extended three times, most recently to Nov. 21, during the wait on the tax credits.
“HUD was kind enough to keep extending it,” says McWilliams, who has been doing HUD projects for 15 years and says he’s developed 5,000 units.
“A downtown renovation deal is right up their alley.”
Finally, McWilliams will then have to close on the loan.
“Then we go to work,” Wells says.
“And so we are moving fast and furious toward Nov. 21st for closing,” McWilliams says.
They estimate the project will take 20 months to complete once construction begins, though some phases will be finished earlier.
The 11-story Bitting Building is expected to be done within 14 months. It will have 66 apartments ranging from a 400-square-foot studio to an 1,100-square-foot unit. There will be commercial space on the first floor, and there’s an existing parking garage to the west of the building.
“We’re trying to maintain the 1911 character of the original building,” says Brad Teeter, a partner at Spangenberg Phillips Tice Architecture, who is the architect on the project.
Exchange Place is a 1915 building that had a major addition and renovation in 1956, and it’s the later character Teeter says he’s trying to keep there. The 9-story building will have 139 apartments ranging from 450 square feet for a studio to 1,300 square feet for a two-bedroom, two-bath unit.
The new 5-story building, Douglas Apartments, will have 25 apartments in addition to a 290-stall parking garage that will be for residents of the building and Exchange Place. The rooftop will have a reflection pool, hot tubs and cabanas for residents and, for a fee, the public.
Teeter says the original goal was to save the Michigan Building.
“The project has just gone on for so long that building just gets worse every year,” he says. “It was really beyond salvation.”
Teeter says the plan is to save some stairs and “very nice looking” handrails with an ornate pattern from the Michigan building and use them in Exchange Place.
It’s been almost a year since anyone connected to the project has been in the buildings.
“There may be some additional damage, but we took a lot of that into account,” Teeter says.
McWilliams says for typical renovations of historic properties, developers might have a 5 percent contingency for additional expenses. He says this deal has more like an approximately 11 percent contingency.
In addition to the HUD loan, the city of Wichita is putting in $12.5 million through tax increment financing to fund the parking garage and other qualifying expenses related to public improvements, such as sidewalk repairs. There are $9 million in state tax credits and somewhere between $7.4 million and $8.1 million in federal tax credits.
Teeter says he “started working on the Bitting Building right at 10 years ago” when Real Development hired him.
He says where most apartment buildings have only a few uniform floor plans, the layout of these buildings will create a variety of floor plans. It’s “one thing that’s really going to make it unique.”
McWilliams calls the apartments “Class A urban lofts” that will range in price from $825 to $1,600. There are high ceilings, exposed duct work and concrete and wood floors.
“It’ll be the nicest-quality project in the city,” he says.
McWilliams says most of the projects that have been happening downtown are of a smaller scale where this is a significantly larger one.
Along with removing two “eyesores,” City Manager Bob Layton says the Exchange Place buildings more importantly will be “reutilized in a way that’s going to be beneficial for downtown as well as the community as a whole.”
“This is great news.”
Jeff Fluhr, president of the Wichita Downtown Development Corp., says the project is “quite dynamic.”
In addition to helping the core of the city, Fluhr says the Exchange Place project is significant when paired with the redevelopment of Union Station and the development of the River Vista apartments at Douglas and McLean.
“Our downtown just on Douglas alone could see three major projects moving forward concurrently, which is tremendous not only for downtown but our city as a whole.”
More residential development means more commercial development, Layton and Fluhr say.
Teeter says it “is a snowball effect for all those services (residents) need.”
With more than 1,700 residential units in existence downtown and another almost 500 in the works, Wichita hasn’t quite hit the threshold for attracting a major grocery store there yet, but Wells says “this gets us a lot closer to it.”
“It helps stimulate all of the other development downtown,” he says of adding apartments.
Teeter says it’s important to save and modernize historic structures, too.
“You hate to see these old buildings downtown sitting and deteriorating,” he says. “It’ll be great to see people in them again.”