The developer Flaherty & Collins is finalizing plans
for a second phase of Cosmopolitan on the Canal that calls for 162 more apartments, a 180-space parking garage and a small
amount of retail space at a cost of about $24 million. The new section is proposed for a triangle-shaped parcel bordered by
Michigan and Senate streets and Indiana Avenue, just south of the existing building.
The first apartment phase of Cosmopolitan is 100 percent leased, which suggests Flaherty could have demanded higher rents, said Jim Crossin, the company's vice president of development. Flaherty plans to bump up rent rates, which range from $1,000 up to $2,500, as terms expire, and charge more initially for the new units. "It's now clear to us we can build more residential units like Cosmopolitan and be able to lease them up," Crossin said.
The commercial space in Cosmopolitan is another story. About 12,000 square feet remain on the first floor after Flaherty last week landed its first tenant: The branding and advertising firm Three-Sixty Group has agreed to take about 5,000 square feet and move from its current home in the Century Building. The firm is taking space along Michigan Street.
Flaherty, which bought the land for Cosmopolitan from OneAmerica, hopes to secure a city incentive deal and begin construction on the second phase by early 2012. No rendering was available, but Crossin says it will have a similar design to the first building, standing about 70-feet tall at the corner.
(Courtesy photo / Carl Van Rooy Photography)
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If we're lucky, this will produce a chain reaction where all the One America surface lots are eventually condensed down to one (unavoidable) parking garage on the NW corner of Illinois and New York.
However, 100% occupancy and premium rents should mean that the city is done with subsidies. If the deal can't stand on its own, it shouldn't be done.
The first phase of Cosmopolitan won a 10-year tax abatement worth about $2.7 million, so the project owes its success at least in part to an incentive deal. It also came together before credit markets froze up. The developers expect they will need a richer incentive deal for the second phase.
Another issue to consider: North of South is primarily an apartment development, and theoretically would be competing with a new phase of Cosmopolitan, and it is getting the majority of its financing from the city. (Even Buckingham's equity contribution to the project is actually just a waiver of its customary development fees.)
The bottom line, according to several developers, is the economics of these types of projects (ones that include parking garages and rise more than a few stories) still do not work here without some city assistance.
I'll also point out that a $2.7M abatement for 10 years for 218 apartments is about $100/mo / apartment. If they're talking about increasing rent for the new units, that pretty much nullifies the argument for an abatement.
If I were the city, I'd balk at the abatement request and dare F&C to walk away.
Cory-Nice follow up; however...Let's not confuse minimal tax abatement (added it's over 10 years and equal to roughly 10% of the developers investment) with guaranteeing over $98mm in a corporate welfare scheme concocted by insider political cronies. Dollars invested/abated/guaranteed by the city for apartments, retail, or hotels adds NO VALUE what so ever to
The city should be guaranteeing best of class jobs and education. Not the "fluff" apartments and retail proposed in Buckingham's ill plan.
Investment in Education and Jobs/Businesses has the absolute highest return to a community and tax coffers.
I hope to see more REAL DEVELOPERS, EMPLOYERS, and EDUCATORS continue to take risk and progress the development of strategic, strong nodes in our city; and for the city to continue to offer carrots such as reasonable tax abatements to help in the initial "risk" period of lease-up/start-up.
F&C deserve kudos for taking the risk known as Architecture with a capital "A". I'll leave the subsidies debate to the wiser voices in this forum.
If the bulk of the occupants are students, of course you can jack rent. Universities have been jacking tuition to the stratosphere over the last 15 years. Of course this is just another example of why a four year degree will end up costing as much as $100,000 in the near future. I feel sorry for the kids mostly. They get to carry another $100-$150 (or more) a month debt load.
Along a similar line of thinking, even if these aren't students, who are they? I'm seeing college students with tens of thousands of dollars in college debt and the thought process of some are "I'm gonna live large, because I'm already a debt slave." It is unfortunate that people can't have affordable housing in a downtown urban environment. Of course these will be the same people demanding something be done about their debt load when they hit their 30s and realize they will never have a dime to their name.
I don't think one should have to make $70K+ just to be able to live downtown and also have the ability to save some money for the future.
When I moved into the Gardens of Canal Court 6 years ago, I was put on a waiting list for 5 months before I got an apartment. Regardless who's living there, the demand is enormous.
That means someone who makes $40k a year can "affordably" pay roughly $1000/mo in housing costs. Most (but not all) 1BR apartments are cheaper than that in downtown. Even down to $30k income -- $750/mo -- there are lots of 1BR options. Two $30k earners in a 2BR can afford most apartments in downtown.
For the record, the Cosmo's price point is not a good benchmark for affordability. Indy apartments really don't get any more expensive.
And remember that a mortgage payment is not directly comparable to a rent payment. Rent includes insurance, maintenance, amenities (e.g. exercise room, pool), some utilities (usually water), etc.