Too many questions on building project

The proposed redevelopment of the Broadway Building with the use of public funds has too many questions to go forward at this time.

Chicago-based developer ReTown wants to create 58 one- and two-bedroom units for residents age 55 and older inside the Broadway Building, 301 Broadway.

Developer James Louthen of ReTown estimates that it could cost up to $12.53 million to renovate the structure, which was built in 1926. The building once was known as the Spitzer Plaza Hotel and Lorain Renaissance Inn, and it sits on the banks of the Black River.

Louthen is banking on the city contributing more than $1.07 million from the city’s pool of federal aid, known as Community Development Block Grant and HOME funds.

Leon Mason, director of the city’s Department of Building, Housing and Planning, says he does not support the plan because it is flawed and he calls it “a joke.”

On Sept. 27, Mason told The Morning Journal that Louthen’s project does not qualify for the city money and that the financial plan is a bad deal for Lorain calling it “extremely concerning.”

Two years ago, Lorain City Council approved a resolution supporting the project.

Louthen said Council was aware of the potential need for a public-private partnership and use of some public funds to rehabilitate the building, which is understandable.

Louthen is correct in asserting the project is unique and it’s a precious opportunity to complete this development. We have written previously in support of this redevelopment as a component in the revitalization of downtown.

On Aug. 18, Mason received ReTown’s outline for the rebirth of the building. The proposal included a list of financial sources, including Ohio Historic Tax Credits worth $3.71 million; Ohio Housing Tax Credits worth $3.23 million; $4 million from the Residential First Mortgage Loan; and owner equity valued at $515,000.

On Aug. 31, Mason appropriately replied with a letter to the federal Department of Housing and Urban Development sharing his concerns about whether the city could add $1.07 million to the plan.

• For the city’s HOME money, it was difficult to ascertain the market demand in the neighborhood for the project in downtown Lorain;

• The project plan included $290,000 in fees for the architect and historic consultant, which Mason described as “exorbitant”; and

• The request lacked financial commitments by the development team and relied heavily on public funds, which Mason said the situation was “eerily similar” to circumstances of an Illinois project in 2013 involving Louthen, in which the development team provided no up-front equity or lender financing.

Based on those concerns, Mason said the project doesn’t qualify for the requested funds from both the Block Grant and HOME programs.

Mason’s concerns were shared by the Columbus field office of the Department of Housing and Urban Planning, according to a Sept. 16 email from Richard Hendershot, program manager in that office, and indicated that federal staff would do further review when more information is available from the developer.

Also of concern is Louthen’s involvement with a development in Cook County, Ill.

In his Aug. 31 letter to HUD, Mason referred to a Jan. 27, 2014, report by Cook County Sheriff Thomas J. Dart.

In October 2013, Dart began investigating the development that Louthen was involved in with the village of Robbins, a historically African American suburb of Chicago, that sits atop a potentially valuable deposit of stone for construction.

In Robbins, ALM Resources LLC, a company managed by Louthen, pitched a plan to build a quarry mining complex to bring new business and jobs to the village. The quarry project was promoted “as a publicprivate partnership to bolster a blighted area.”

The investigation found the Robbins agreement had terms that disproportionately favor the developer, ALM Resources, and the agreement allowed ALM Resources to withhold all payments to the village until the project was fully operational, that is, until the project could sell stone for construction by the Illinois Department of Transportation, the sheriff’s report said.

Mason wrote, “Unfortunately, this is eerily similar to the proposal submitted to the city of Lorain, as it lacks developer financial investment and there exists a request for an ‘upfront’ commitment which is not advisable by HUD.”

If City Council approves city financing, Mason said he would recommend Mayor Chase Ritenauer veto the legislation “because this is not a legitimate project.”

Of course, Louthen can secure private financing and complete the project without using Lorain’s federal funds.

As it stands now, this project is just too risky for the city’s participation.