ONE ELEVEN: A dozen contemporary-style apartments , some of which will overlook teh Roux House on Third Street, will be built next to the Shaw Center.
Monday, August 13, 2007
Like many cities around the country, Baton Rouge has spent the better part of two decades trying to transform its sleepy downtown into a thriving urban center.
It's making progress. Consider what the Shaw Center for the Arts and Friday evening concerts have done to attract crowds to a business district that used to roll up the pavement religiously at 5 p.m.Yet a big piece of the puzzle remains missing-namely, places for people to live. Only 1,000 residential units exist in what is considered the downtown area and only about 1% of those are actually in the business district, with the rest lying in nearby Spanish Town and Beauregard Town.
"The residential component is essential to downtown redevelopment; it's paramount," says Davis Rhorer, director of the Downtown Development District. "We don't have that right now."
But that is about to change with the groundbreaking of two residential developments that will add nearly 100 new units of affordable housing to the heart of the CBD by the end of 2009. The projects, which are being done by the Baton Rouge Area Foundation through its developer, Commercial Properties, will be the first new residential projects downtown in some 50 years and, if successful, could do for downtown living what the Shaw Center and Tsunami did for its nightlife.
THE BROWNSTONES: These 70-unit apartments, resembling the brownstones lining New York's sidewalks, will be bigger than those at One Eleven, and possibly even less expensive.
"This is the next step in the evolution of downtown," Rhorer says. "It will forever change the dynamics of downtown."
In more ways than one. Consider that the projects will add nearly 10% of housing virtually overnight to the available downtown stock. More significantly, they will make the urban living experience available to a broader group of middle-income workers and 20-somethings who will bring with them diversity and a customer base for the restaurants and retailers who are expected to follow.
"We're building a project that's affordable in terms of the state-worker model," BRAF President John Davies says. "We want to make this an affordable option for state workers."
The projects kick off more or less simultaneously this week. The first is a 12-unit apartment complex called One Eleven that will be constructed in a new building next to the Shaw Center on what is known as Rue Albritton, the paved walkway on Third Street leading into the building. The mixed-use structure will have office space on its bottom floor and apartments on the top three. Architects Remson-Haley-Herpin designed the building.
The contemporary-style residential units will range in size from 850 to 1,000 square feet, not including balconies, and will rent for $1,000 to $1,200 a month. The flats on the second floor will be either one- or two-bedroom units, while the third and fourth floors will offer split-level, loft-style apartments with 13-foot ceilings. Upper-level apartments will also have a second balcony, which will overlook Rue Albritton and the patio of the popular Roux House bar next door.
"The question the 50-somethings ask us is, 'Who wants to live above a bar?'" says Commercial Properties' Camm Morton, who has worked in partnership with BRAF since 2002. "The answer we get from the 20- and 30-somethings is, 'We do.'"
As currently envisioned, the office space on the first floor of One Eleven would be occupied by the Arts Council of Greater Baton Rouge, which will relocate from its current headquarters in the old Bogan Fire Station on Laurel Street. Having the Arts Council in a complex with the Shaw Center for the Arts seems logical enough and planners hope to foster a natural synergy between the city's major arts organization and its premier arts venue.
"Their location in One Eleven would be a tremendous asset to the Shaw Center," Rhorer says.
Another element of the plan at the Shaw Center calls for converting the long-abandoned Stroube's Building on the corner of Third Street and North Boulevard into a New York-style steakhouse. Capital City Grill owner Rick Volland will own and run the establishment, which will have a bar indoors as well as on the second-floor terrace. The tentative name of the restaurant is Stroube's Chop House, in recognition of the historic building in which it will be located.
"Basically it's going to be an upscale but casual steakhouse/chop house," Volland says. "We'll have a lot of booths with rich, dark wood."
Commercial Properties' other new development, The Brownstones, will be five blocks away on Laurel and Fifth Streets, near the old Bogan Fire Station. It will be built on the site of what is an existing parking lot, the abandoned New Richmond Apartments building and two former state office buildings, all acquired several years ago by Commercial Properties Realty Trust. It will consist of 70 residential units designed to resemble in appearance and ambience New York's brownstone-style apartments.
Like the units at One Eleven, The Brownstones will initially be built as apartments, though some may eventually be converted to condos, and will average some 1,000 square feet with rents about $1,200 a month. Parking will be sub-grade, with 100 spaces underneath the first-floor units, and the entire building will sit four stories high.
"They'll be a little bigger than the apartments at the Shaw Center but will rent for the same price point-maybe even a little cheaper," Morton says.
STROUBE'S CHOP HOUSE: Its tentative name in recognition of the historic building on Third Street and North Boulevard, Capital City Grill owner Rick Volland will open a New York-style steakhouse.
Restaurants, as well as some retail, are also planned for The Brownstones, which was designed by Chenevert Architects. Plans call for a redevelopment of the Bogan Fire Station, which will house smaller eateries and shops, as well as office space. That building will connect to The Brownstones by a contemporary glass structure that will serve as the main entranceway for both the apartment complex and the retail/office building.
"We've had discussions with quite a few upscale groceries and pharmacies that are interested in being down there," Morton says. "There are also quite a few companies looking for office space downtown."
The total price tag for both developments is projected to be in the $20 million range, with One Eleven estimated to cost around $4 million and The Brownstones approximately $15 million, including the Bogan Fire Station redevelopment. The restaurant at Stroube's will be a build-out, meaning Volland and Commercial Properties will share the cost, estimated to exceed $2 million.
While that's not a whole lot of money for a development that will impact and change the dynamics of the entire downtown area, it is a good deal of green for projects that will depend almost solely on mid-market rental rates to carry the conventionally-financed note. How do Commercial Properties and BRAF intend to make it work?
For one thing, land acquisition isn't an issue. The state owns the site for the One Eleven development and has an agreement with BRAF to develop it for residential use. As for The Brownstones' site, Commercial Property Realty Trust owns that property outright, which includes the parking lots, New Richmond Apartments building and state office buildings. The REIT acquired the parcels and buildings three years ago for an undisclosed amount that Morton says averaged slightly more than $30 a square foot. That was market rate at the time but a good deal less than the $60-plus per square foot comparable downtown property is going for today.
Morton says that doesn't really make a difference in terms of how he is able to make the developments affordable.
"You still have to make a return on your investment so whether I have debt or not is inconsequential," he says.
Still, with downtown property selling for more than $60 a foot in some cases today, compared to say $15 a foot by Towne Center and $3 a foot in nearby suburban parishes, land acquisition costs can be a considerable barrier to creating affordable places to live downtown. Having the property free and clear with no debt makes The Brownstones more doable than they might otherwise be.
Commercial Properties can tackle a project that other developers might shy away from for two key reasons. First, the company's sizeable financial resources allow the company to wait a longer period of time-years longer if necessary-to recover its investment. Second, that financial strength and its association with BRAF allows for a greater risk tolerance on projects deemed critical to the betterment of the local community.
Still, Commercial Properties isn't a non-profit, and Morton is under investor pressure to turn a profit on the deals. Consequently the projects underwent a variety of designs as construction prices have escalated to keep costs under control.
The One Eleven project, for example, may not be large in scope, but the tight construction zone, nestled between the Shaw Center and Roux House, does present several technical and financial challenges.
The Brownstones will have sub-grade parking as opposed to a structured lot, which will a save some $2 million. Also, The Brownstones is being constructed as a low-rise rather than the high-rise that was originally envisioned. That essentially cuts the cost of the project in half.
"Basically we're trying to compete with suburbia by using suburbia tools in a downtown setting," he says.
Moreover, BRAF's Davies says Commercial Properties is willing to take a smaller return on investment than what another developer might be able to take
"We're doing this for the social benefits," Davies says. "We made a decision as a board that we can take an under-market return in order to make improvements to the quality of life in the Baton Rouge area and to advance the Plan Baton Rouge plan, which calls for having an exciting, 24-hour urban city."
Perhaps, but Morton bristles at the notion Commercial Properties is not out to make a profit on the deals. "We have a board, we have investors and we have to pay taxes like everyone else," he says. "This is a great project, but we wouldn't do it unless we could turn a profit."
Developing both complexes as apartments, rather than condos, will also help make the deal an easier sell to the banks that will be asked to finance it once it gets under way. Condo financing is getting tougher in many markets around the country, as banks worry about overbuilding. While that's not so much a problem in Baton Rouge yet, financing apartment construction is easier because lenders don't require pre-selling before agreeing to back the deal.
"Apartments are easier to get started because banks will ask if there is a demand for rental and it's a pretty tight rental market downtown," Morton says. "So instead of spending the next six months pre-selling, we can build them as apartments and get started right away."
Which doesn't mean the units won't be converted into condos down the line. Morton has already received some inquiries about doing that, which suggests to him a demand for affordable owner-occupied housing downtown. But for now, he's going after the rental market, which he thinks will be relatively easy given the limited scope of the project.
"There are an awful lot of people who want to be downtown," Morton says. "I don't need a very big piece of pie to make this work."
There's no market survey to indicate just how strong that demand actually is, but there is the experience of other cities in the South, which have seen demand for downtown living go through the roof in recent years. Consider that Raleigh, N.C., will have nearly 8,000 residential units by the end of 2009, compared to 5,300 today. In downtown Nashville, Tenn., the number of units is projected to top 5,000 before the end of the decade, compared to some 2,100 today, about twice as many as Baton Rouge.
"We have waiting lists four-deep to get into the Royal Bank of Canada building, one of our newest high-end condos," says Tracey Lovejoy, vice president of the Downtown Raleigh Alliance, adding that merely to hold a spot on that list costs $5,000.
But while it has been easy in both Nashville and Raleigh to attract wealthy professionals and well-heeled empty-nesters to upscale condos that seasoned developers are only too willing to build, finding ways to build affordable, downtown housing has been a bigger challenge. Like Baton Rouge, land-acquisition costs make the deals nearly prohibitive in many instances.
"It's too expensive to build downtown because of land values," Lovejoy says. "And there doesn't seem to be a lot of public incentive to help developers. So if they're looking at building an apartment complex, for instance, I'm sure they're thinking it's just not affordable."
One way Nashville has addressed that challenge is by offering TIFs, or tax increment financing, to developers who build affordable housing. Under legislation put in place by the state, the city allows developers to fund part of their infrastructure construction costs with TIFs if they agree to set aside 20% of their units for so-called work force housing. To qualify for work force housing, a renter or buyer has to earn at least 80% of the state's median family income, which would be $32,000 a year for a single person.
Photo by Brian Baiamonte
THE NEXT STEP: Downtown Development District's Davis Rhorer says the residential component is the next step in downtown's evolution.
"That would be a good salary for someone starting out," says Tom Turner, president and CEO of the Nashville Downtown Partnership. "That's exactly the kind of people you want living downtown."
TIFs are not a legitimate option for Louisiana because of the state's unique tax structure. Besides, they only go so far in offsetting the high cost of downtown land, which is as expensive in Nashville as in Baton Rouge. But even if TIFs are not a viable solution for Baton Rouge per se, they suggest that creative solutions involving public-private partnership exist when there is a will to create them.
Another challenge Nashville and Raleigh have faced is in attracting groceries and other stores to their downtowns, despite the growing number of residents. Major retailers typically don't look at an area until it has 10,000 residential units or more, and while Raleigh has waiting lists to get into its upscale condos, it still lacks a critical mass of middle-income residents.
"You have to figure out how to get to 10,000 units to get retailers to look at you, and that's what we're trying to do," Lovejoy says. "I think the question is, 'Do we really have the population to get to that level?'"
Baton Rouge is still a long way from having to answer those kinds of questions, but it also will need more retailers and grocers for downtown to continue to grow. Morton says he's heard from some specialty grocers who are interested in opening near The Brownstones. Plans are also on the drawing board for even more affordable housing in the Onyyx Building at the corner of Third and Convention. The building has been eyed as a possible site for an artists' colony, with small units specifically designed to attract the visual and performing artists who bring to diversity and culture to a city but typically live on a shoestring.
That would be good news to those at Forum 35, the local civic group of young professionals, which has been pushing for downtown housing as low as $600 to $800 a month. The group's president is enthused by the plans for the new developments and believes it's a good first step, but she would like to see developments with units that are even more affordable.
"It would be great to have something a little less expensive for the arts community and for people just getting out of college who want to live in the hip place in Baton Rouge," says Heather Sewell Day, president of Forum 35.
Downtown advocates believe that will follow, though it will take time. It's like a chicken-and-egg phenomenon. With a critical mass of residents will come more infrastructure and commerce, which will attract more residents who will create a demand for more housing at different price points. How long it will take remains to be seen, but Day joins others in believing Baton Rouge is on the brink of explosive downtown growth.
"I think the young people are going to demand it and there are a lot of 30-somethings who are here to stay," she says. "We want a more progressive Baton Rouge. If we're going to be here, we want to make it cool."