Workforce Housing Renovation in Grand Rapids
Baker Lofts reuses a 100-year-old factory for affordable housing in downtown Grand Rapids. Image courtesy of Gary Breen, Concept Design Studio.
Once characterized as a dying city, Grand Rapids, Michigan, home to 190,000 people, is undergoing a major revitalization. According to Connie Bohatch, Grand Rapids’ managing director of community services, the city’s downtown and surrounding area have seen significant public and private investment, mostly over the past three years. New projects include a $48 million expansion of a rehabilitation hospital; the new $9 million University Preparatory Academy middle/high school; and a $30 million public-private initiative known as Downtown Market, a LEED-certified 138,000-square-foot indoor-outdoor market that includes restaurants, a farmers market, and greenhouses. This commercial development has also created a growing need for rental housing that workers at these and other facilities throughout the city can afford. Baker Lofts, a mixed-use, affordable development that opened in June 2013, both addresses this need and potentially paves the way for new market-rate developments.
Redevelopment for Affordable Housing
The 125,000-square-foot, 100-year-old former furniture factory across from the Downtown Market was being used for storage when it was purchased by Ann Arbor-based LC Companies in 2012. After a nearly 12-month renovation, Baker Lofts — named for the furniture company that once occupied the building — opened with 24 one-bedroom and 63 two-bedroom apartments. Half of the 87 units are earmarked for people who make 60 percent or less of the area median income (AMI), or about $35,800 for a family of four; the rest are for those earning 40 percent of AMI ($23,900 for a four-person family).
The development was built to meet the growing need for affordable rental housing for people who work in Grand Rapids. According to Bohatch, this workforce housing is intended for workers who want to live downtown, usually younger employees in the service industries. But service-industry wages, Bohatch explains, put market-rate homes out of these employees’ reach. According to LC Companies’ Mike Jacobson, most of Baker Lofts’ tenants work in or very near the center city. Jack Bernhard, a community banker with JP Morgan Chase who worked on the project, adds that the residents, who work in businesses that affect people’s lives, are an essential part of the community fabric. The development’s downtown location also allows residents to get to work without much driving, saving tenants money and reducing greenhouse gas emissions. For residents with longer commutes, a new bus rapid transit line, currently under construction just around the corner, will link the cities of Grand Rapids, Kentwood, and Wyoming — a public investment that will also benefit downtown workers who live farther afield.
Outside the energy-efficient building, an on-site courtyard and proximity to downtown jobs and services helped Baker Lofts attract tenants quickly. Image courtesy of Gary Breen, Concept Design Studio.
Baker Lofts, for which LC Companies is seeking LEED certification, consists of four residential stories above administrative offices and 13,000 square feet of commercial space on the ground floor. The loft-style apartments feature 11-foot ceilings, exposed brick, large windows, window coverings, dishwashers, and washer-dryer connections. A common room is also available to residents. “We were full the minute it opened,” says Jacobson, who added that the apartments have a wait list. Talent 2025, a nonprofit that is evaluating local industries’ needs for skilled labor through 2025, is a tenant on the ground floor, and as of November 2013, LC Companies was in discussion with a restaurant and other retailers for the remaining ground-floor commercial space.
Baker Lofts Financing
The $31 million deal required $25.9 million from the sale of low-income housing tax credits (LIHTCs) to JP Morgan Capital through syndicator RBC Capital Markets. The housing tax credits ensure that the housing will remain affordable for at least 15 years. The developer also received $5.6 million in state historic tax credits over two phases, which are critical to meeting the costs of renovating the building while also maintaining its historic windows and other features. In addition, the developer is making a four percent payment in lieu of taxes (PILOT) to the city. Although the property is tax-exempt, the owner is paying a fee to cover a portion of the city’s expenses for general services that even tax-exempt properties generate. The PILOT, says Bohatch, helped make the property competitive in its application for LIHTC funds.
Developing an Affordable Neighborhood
Bernhard adds that, although he was unsure of downtown’s viability three years ago, recent investment in the district and the resulting demand for housing meant that “the time was right” for Baker Lofts’ transformation. Additional housing projects have since come online, including Tapestry Square, a mixed-use building with 32 apartments reserved for people earning up to 120 percent of AMI. LC Companies is currently renovating another former warehouse for affordable apartments one block away from Baker Lofts. As Bohatch points out, such investments ensure that, as the neighborhood continues to develop and attract market-rate housing, it will remain an affordable place to live for people who work nearby.