Developer of $66M apartment project downtown requesting $9.8M in TIF bonds

charles street porject on Pennsylvania
The project would be built on a currently vacant lot on the northeast corner of Pennsylvania and Vermont streets. (Image courtesy of Charles Street Investment Partners)

The Boston-based firm behind a proposed $66 million apartment project on Pennsylvania Street downtown plans to ask city officials for nearly $10 million in financing aid for the mixed-use development.

Charles Street Investment Partners principal Frank Dellaglio told IBJ on Monday that he intends to request $9.8 million in developer-backed, tax-increment financing bonds for his 213-unit project at 421 N. Pennsylvania St., a site that currently is a surface parking lot.

The 11-story development will include studio, one-bedroom, two-bedroom and live-work units; about 8,800 square feet of first-floor retail space; about 18,600 square feet of office space; and a 214-space parking garage. A portion of the building would be terraced, creating open pool and recreation areas with green space on lower floors.

The Indianapolis Metropolitan Development Commission will hear from the developer during a Wednesday pre-meeting session but won’t vote on the request until its July 17 meeting, when a declaratory resolution will be up for consideration. The City-County Council would weigh in on the request, and then the final MDC vote likely would be Aug. 21.

Under the proposal, the city would establish a single-site TIF district for the project, rather than adding it to the existing downtown tax-increment financing district. The developer, which would be responsible for paying off the bonds, would receive 80% of the increase in property tax revenue generated by the development for the next 25 years to retire the debt, with the city receiving the other 20%.

The TIF bonds are crucial to move the project forward, Dellaglio said.

“Simply put, the project would not be viable without the participation of the city with the developer-backed bonds,” he said.

About 42 units in the development will be set aside for workforce housing, which has rents that can range anywhere from $200 to $1,000 lower than market-rate, depending on the unit type, Dellaglio said.

The city said the developer has committed to maintain the workforce housing for the life of the bonds.

Scarlett Martin, administrator of community and economic development for Mayor Joe Hogsett, said the city is generally supportive of the project.

She said the workforce housing component played a big role in the city’s decision, as did the fact the site generates little revenue for the city right now as a parking lot.

“Workforce housing units are a really important thing for [the administration],” Martin said. “And being able to turn the [lot] into this mixed use development … allows us to capture more tax revenue than we do right now.”

She said even with the city losing 80% of the increase in property tax revenue generated by the development, it would still receive more than it does from the parking lot.

Plans for the project have dragged since at least 2017. Residents in an adjacent property pushed back against Charles Street's original proposal over concerns about potential sightline obstructions.

The project has gone through several rounds of design changes since it was announced, which has increased the development’s cost dramatically.

The original $15 million concept called for a seven-story building with 160 units, 2,200 square feet of retail space and 157 parking spaces, but the design was updated in late 2018 to include 209 units and increase the parking space count. 

Dellaglio said it’s “been a long collaborative effort with the neighbors and the city to get to where we are,” pointing to efforts to work with representatives of The Residences at 429, a condominium and office building directly to the north.

“There's certainly a meeting of minds that needed to occur,” he said. “I think as a … new entrant to the Indianapolis market, we wanted to be as neighborly as we could and work with the folks around us to make sure that they were happy with the project.”

Dellaglio said if all goes according to plan, Charles Street would break ground by the end of the year, with a projected completion of mid-2021.

Seattle-based firm NBBJ is the architect on the project.

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