Fresh off taking a likely bath in its defaulted bond issue to keep Yarnell's Ice Cream in business, the Arkansas Development Finance Authority has been struggling this week with refinancing deals on a couple of cratered historic renovation projects in downtown Little Rock.
It has completed new financing, with new management, for the Kramer School Lofts project in the old Kramer School. It is also working on new financing for the East Side Lofts (below).
Read on for Leslie Newell Peacock's report on these two projects.
The Downtown Little Rock CDC, a nonprofit development agency, has stepped in to keep the struggling Kramer School Lofts, a project of the Vanadis Group, from going into foreclosure. The CDC’s Little Rock Redevelopment Corp., working with Regions Bank and the Arkansas Development Finance Authority, has gotten a $452,164 loan from ADFA, at 1 percent interest, to pay off some $200,000 owed Regions and a previous ADFA loan of the same amount.
The Vanadis Group, owned by Paul Esterer and Todd Rice, had defaulted on the mortgage last year and Regions, ADFA and the CDC have been working since then to find a way to keep the lofts’ affordable housing available. The lofts had had financial difficulties for years stemming from unexpected heating and cooling expenses and other problems.
Scott Grummer, director of the DLRCDC, said current tenants won’t have to move, but all new tenants will have to meet the stricter income requirements of the new ADFA loan, made under the FAF (Finance Adjustment Factor) program; the requirements will limit income levels to 50 percent of area median income. (Previously, tenants could earn up to 60 percent.)
Another renovation of a historic property for low-income housing, East Side Lofts at 14th and Scott, a housing project in a former junior high school, is also in arrears. The ARC of Arkansas, the sponsoring organization, has not made payments on its two ADFA loans, which total $944,000, for nine months. Sara Oliver, vice president of housing with ADFA, said the ARC has turned over 49 percent interest to a new general partner, to be formed by Henry Management Co., which will also now manage the property. Oliver said the change was requested by RBC Capital Markets, the purchaser of the tax credits that financed the East Side project.
Vanadis restored the 1895 Kramer School, at 7th and Sherman Streets, with 22 loft apartments in 1997. It used financing by the tax credit syndicator National Equities Fund (which holds 99 percent interest in the the Kramer School Investment Corp.), an $830,000 section 108 loan from the city, a loan from First Commercial Bank (now Regions) and a HUD HOME loan from the city.
Grummer said there are no more outstanding bills owed by Kramer. He said that the CDC, which also operates the Mahlon Martin Apartments on Main Street, could operate the lofts more cheaply through cost-sharing with those apartments. He acknowledged that making a go of the Kramer School lofts was still a risk, given the new income restrictions.