COLUMBUS, Ind. — The city’s multifamily urban grocer project is moving forward, despite some concerns from a councilman about the downtown development.
The city council on Tuesday approved a resolution for the Columbus Redevelopment Commission to enter into a project agreement with developer Flaherty & Collins. The vote was 5-1, with councilman Jerone Wood voting against the proposal. Councilman David Bush was not on the WebEx call for the virtual meeting and therefore did not vote.
Prior to the vote, Wood said that while he knows the high quality of Flaherty & Collins’ work, he’s concerned that the new multifamily development might put a strain on other apartment complexes.
“I feel like it may take away from some of the existing properties that we currently have in Columbus that are already struggling to meet occupancy rates,” he said. “… That’s my reservation, when it comes to bringing more market rate apartments here to Columbus, where we have quite a few of them already.”
Wood has had experience working with apartments, and his wife is a property manager who conducts regular market surveys.
“I’m kind of familiar with some of the other properties, as far as like the River Stone, Spruce Ridge, State Street Apartments, where I used to be employed,” he said. “I know they’re not doing very well. … I know some are close to the 70s, low 80s.”
Flaherty & Collins general counsel Deron Kintner said that according to CoStar, a company that provides real estate data, the Cole, River Stone Apartments and Westwood Pines Apartments have occupancy rates of more than 90%.
Kintner said Flaherty & Collins has been watching the rental properties off of I-65 for years due to their success.
“Those properties do extremely well,” he said. “… Most communities like that aren’t seeing rents at that level and occupancy that high. And that has continued through the pandemic.”
According to the Cole’s website, four apartments are listed as currently available, and seven more will become available by early May. For River Stone, 26 are listed as currently available. For Spruce Ridge, 16 apartments are listed as currently available. For State Street Apartments, two are listed as currently available.
Kintner added that it would likely be three years before the multifamily development opens, so hopefully there will have been time to recover from the pandemic.
City Councilwoman Elaine Hilber expressed some concern about how Cummins Inc, one of the city’s main employers, has shifted to remote work amid COVID-19.
“If they don’t ever bring those employees back downtown, how will that affect the apartments and your business model?” she asked.
Kinter said that they’ve tried to plan for that possibility as best they can and added that Flaherty & Collins believes in both Columbus and Cummins.
“Is there more risk than there would’ve been 11 months ago?” he said. “Probably, but there was always some risk of something. But I also know of Cummins’ commitment to Columbus, and we feel good about that. But we also feel that, again, Columbus has charm to it and a character that certainly Cummins has contributed to and is a big part of but that’ll be there regardless.”
He added that the risk in regards to economics and performance mainly falls on the developer.
Rob Hunden, of Hunden Strategic Partners, said, “Even though people are getting the chance to work from home, it may or may not be permanently, and it may be a few days a week.”
He said that this means that workers will likely still value the opportunity to live within walking distance of their employers so that they can go into work when necessary. He added that people who are working from home will want “outdoor, urban experiences.”
Hunden also said that both his firm and Stifel Financial Corp. have run financial models based on the projected rent and net operating income.
“We did verify and validate that there is a feasibility gap there, which is why there’s this incentive amount that’s involved,” he said. “And that actually is pretty standard with most of their deals.”
As stated in a commission resolution concerning the project agreement, the Columbus Redevelopment Commission will contribute “land, cash and a bond to be valued at some $11.8 million” to the project, which is estimated to cost $40 million. The developer will pay about 70% of the project cost.
“The $11.8 million is in addition to the land. … I think the current thinking of the redevelopment commission is that they would put some of that $11.8 in in cash, and then the balance would come through a bond,” explained Bruce Donaldson, who is a bond counsel with Barnes & Thornburg.
“It’s important to understand that the bond will be paid for by property taxes that the project will generate,” said Mayor Jim Lienhoop. “So even though we look at it in terms of a contribution by the city … a good portion of it is expected to be a self-financing activity.”
Per a memorandum from Pope, Flaherty & Collins’ proposed development includes:
- Approximately 200 market rate apartments
- 6,000 square feet of amenities/leasing space
- 12,000-15,000 square feet of grocer space
- 400 parking spaces
- A 10 foot wide pedestrian path along Second Street
Pope said previously that of the parking spaces, 50 will be for the urban grocer plan, 100 will be given to the county, and the remaining spaces will be for the apartment complex.
Lienhoop said in his State of the City address that the city expects construction to begin in early 2022. Andrew Lanam of Stifel Financial Corp., who has served as a financial advisor to the city, said in January that completion of some or all of the units would likely occur in fall of 2023, with people beginning to move in late 2023 and an increase in renting occurring in 2024.
The project agreement also states that both the city and Flaherty & Collins intend “for the developer to complete a second phase of the project incorporating a multi-family residential development” on an eastern site adjacent to the site of the multifamily urban grocer piece.
“There is the potential for a future development there. Right now we don’t know what that development will be. The agreement is such that if the city is ready to move forward with developing the site, then we will ask Flaherty & Collins if they are ready to expand,” Pope said.
The multifamily urban grocer development started out as part of a larger joint project. Originally, when the city was narrowing down developers for its hotel conference center project, finalists were told that they could get “bonus points” if they brought a multifamily urban grocer to the city as well, Pope said.
For the hotel conference center development, the city chose Sprague Hotel Developers, who partnered with Flaherty & Collins (with the latter company providing the multifamily urban grocer piece).
However, because of the COVID-19 pandemic, the multifamily urban grocer project and the city’s plans for a hotel conference center were later split off into two separate projects, rather than taking place simultaneously.
Sprague Hotel Developers put the hotel conference center project on hold in July until the hospitality industry recovers from the impact of the pandemic.
Hunden expressed optimism that conversations with Sprague could resume sometime in the next few months. He said that as vaccinations increase and the COVID-19 situation improves, there will be a “new normal” and “robust economic results.”
“And I think we’re going to start talking to the Spragues real soon, probably, my guess is by late spring,” he said. “We’re expecting a real hard, positive turn by March, April, May as these vaccinations keep rolling out.”
Pope’s memorandum noted that “Proceeding with the multi-family/downtown grocer project will increase the chances of a successful hotel/conference center project in the future.”
