FCC senior apartments put on hold
- Published: June 18, 2009
The senior apartment building that Friends Care Community plans to build downtown has been delayed due to financing issues, Friends Care Director Karl Zalar said last week. Friends had hoped to break ground this spring on the project at the corner of Xenia Avenue and Limestone Street. But instead, the group’s financial consultants have recommended they look for additional funding sources in order to qualify for a loan and be able to sustain the project in the long-term, according to Zalar, who said the extra work is likely to delay the project an estimated six to eight months from now.
According to Friends Care Board Chair Mary White, the financial difficulty culminated in the economic downturn.
“It’s been hard trying to figure out how to make a good business plan in this economy,” she said. The way the consultants put it, Zalar said, was “without a better bottom line on profits and losses, financing is going to be more difficult now.”
Friends got approval in March from the Village Planning Commission for the planned unit development whose single building was to have 30 one- and two-bedroom units. In February, developers announced they had added energy-efficient features to the structure, which was now to become the first commercial passive building in the country, meaning that it would take 90 percent less energy to heat and cool the building than a traditional structure.
It was the right decision, Zalar said, but it was an expensive one. Originally projected to cost $2.8 million, the passive elements kicked the project estimate up by about $900,000, he said, to an estimated $3.7 million, which was more than project leaders had expected.
The additional cost of the passive design, coupled with the tight financial market, pushed the profit margin down to what Friends’ financial consultants said was an unsustainable level, Zalar said. In other words, without raising the projected lease fees, the apartment revenues would pay for the loan and ongoing bills, but would not cover long-term maintenance fees or costs for repair down the road.
Friends is committed to maintaining or lowering the estimated $650 to $850 monthly rental fee for the one- and two-bedroom apartments, Zalar said, so passing the costs on to renters was not an option. And project leaders are also committed to forcing the project to stand on its own without having to rely on revenue from the Friends Care campus on Herman Street. The next step was to look for money elsewhere.
“If we can get assistance from the Department of Energy or federal assistance, we could drive the rents down more…because if you get too much beyond that, you start losing the people you’re trying to serve,” Zalar said.
So Friends is seeking public funds to supplement the project. One such source is the U.S. Department of Housing and Urban Development, which could provide loans through the Federal Housing Authority. To qualify for those funds, Friends needs to provide results of a recent feasibility study that shows a quantifiable need for senior housing in the village. So Friends hired a Columbus firm to analyze the senior housing market in the Miami Valley area this month, showing the number and cost of available rental units as well as the senior demographics within that area. (Friends had previously used the Wright State University Cost of Living study from 2003 to determine the need for senior housing in Yellow Springs, but that study is now too old and too limited in scope.)
“It’s about demand in the area, to see how many senior apartments are available in the area and if there is still a need for more,” Zalar said. “We’re not expecting significant changes — we feel the need is still there.”
And judging by the number of inquiries Friends has received about its apartments, the need in Yellow Springs may be increasing. Eight months ago, Friends had a list of 15 people who were definitely interested in an apartment if the rent was within their income level. As of last week, there were 40 people on that same list.
“It’s encouraging to know that many people are interested,” Zalar said.
Because the structure is now slated to include super energy-efficient features, project leaders are hoping it can qualify for grants from both the Department of Energy and the federal stimulus bill, Friends Care Apartment Committee Member Carl Champney said last week. Friends has sent preliminary grant proposals to both sources and is waiting for an invitation to submit more formal applications. With help from members of the Community Solution, the proposals will target funds for passive structures and conservation-oriented construction.
And Friends has always anticipated a local fundraising campaign to support the project, which has now also been delayed, Champney said. The passive design will also save occupants money in utility bills, which Friends might roll into the total lease payment to reduce overall cost for renters.
If Friends ends up securing additional funding, the project might possibly then qualify for traditional loans, Zalar said.
“We’re trying every possible avenue for financial assistance to reduce the overall cost of the project,” he said. “The bottom line is we want this to be excellent housing for seniors and be in the mid-range of affordability, and without help, it will be difficult to keep rents where we projected or lower.”