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Lugar Tower project delayed by lack of tax credits

March 26, 2010

Plans to renovate Lugar Tower in downtown Indianapolis and build another apartment building nearby likely will have to wait another year because the project didn’t receive the necessary tax credits to help fund it.

The Indiana Housing and Community Development Authority, which annually administers the federal tax-credit program for low-income housing projects, received 68 applications statewide and awarded them Thursday to 23 of those applicants. The Lugar Tower application wasn't chosen.

Owned by the Indianapolis Housing Agency, the 15-story, 220-unit tower at 901 Fort Wayne Ave. was built in 1974. The authority wants to renovate the complex and build another nearby at a cost of about $30 million, much of which would be backed by the tax credits.

Lugar Tower’s application simply didn’t score well enough compared with others, said Jacob Sipe, IHCDA’s multifamily director.

“There were a lot of deals that were strong, he said. “We just ran out of credits.”   

In the meantime, the project has been placed on a waiting list and still could move forward this year, but only if additional tax credits become available, or if projects that received credits fall through.

Lugar Towers is sixth of nine projects on the waiting list. The authority would need to reapply for the credits next year if the project has not received federal support by then.

The news wasn’t all bad for IHA. Three of its other projects will move forward, including a $32.2 million redevelopment of the Caravelle Commons Apartments at 16th Street and College Avenue The 65-unit complex will be demolished to make way for 155 new units, a community center, computer lab and recreational facilities.

The authority bought the complex in March 2009 from the Near North Development Corp., which took over the failed co-op in 2003. Near North stepped in to refinance, renovate and stabilize the property with an eye toward eventually selling it to a more appropriate owner.

A new Caravelle Commons, along with plans for a new Kroger supermarket at 16th and Central Avenue to replace an old and cramped existing store, could represent a turning point for the blighted stretch of 16th Street.

The $3.3 million in credits that will be doled out annually over the next 10 years for Caravelle Commons is the largest amount IHCDA has ever awarded, Sipe said.

Authority Executive Director Bud Myers said he is pleased with results of the selection process, despite Lugar Tower’s exclusion.

“I’m excited about the outcome,” he said. “We’re hoping to get some affordable housing downtown that the common man can use, but we’re on the wait list. So I’m very hopeful that it will happen.”

The authority’s Beechwood Gardens at 2915 N. Graham St. and Hawthorne Place at 5244 E. 32nd St. also received federal  backing. The cost to refurbish the two buildings, which were bundled into one application, is expected to run $21 million. Together, they contain 321 units.

The authority administers the federal program that awards tax credits to developers to renovate, acquire or construct affordable rental units. A dollar-for-dollar credit provides an incentive for private developers and investors to provide low-income housing. By reducing a developer's federal tax liability, or by selling tax credits to investors, the program can help cut the cost of development.

The amount IHCDA had available this year, bolstered by stimulus funds and more disaster credits, drew more interest from developers, Sipe said, even thought the credit market is rough.

Many investors have pulled back from buying tax credits, and Freddie Mac and Fannie Mae, both of which were large purchasers, quit acquiring them after the housing market collapsed.

The authority closed last month on $23.5 million in tax-credit equity to fund the rehabilitation of 538 apartments in four complexes that received credits from IHCDA last year.

Renovations now can proceed on the following four projects:

• Twin Hills, 2210 E. 36th St., a collection of 64 mostly two- and three-bedroom apartments in 18 two-story buildings;

• Blackburn Terrace, 3091 Baltimore Ave., a 243-unit complex of mostly two- and three-bedroom units in 60 low-rise buildings;

• Laurelwood Apartments, 3340 Teakwood Drive, a 135-unit property in 39 two-story buildings; and

• Rowney Terrace, 1353 S. Riley Ave., with 96 units spread over 32 buildings.

Bruce Baird, IHA’s director of strategic planning and development, said he's confident the agency’s latest projects will receive support from investors as well.

“These are big developments,” he said. “We couldn’t raise these kinds of funds otherwise, and it allows us to make major upgrades to our properties.”

Recipients have two years to complete the projects once they receive the tax credits.
 

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