Ridpath Hotel rehabilitation financing nears completion
Downtown revitalization project awaits city loanJune 19th, 2014
Ron Wells, the Spokane real estate developer who specializes in rehabilitating historic buildings, says investor groups are close to securing a complex financing package to convert the long-vacant Ridpath Hotel downtown into a vibrant residential and commercial complex.
Wells heads Wells & Co., which designed the $17.9 million project that he says will include 201 apartments mostly described as affordable housing units, six luxury condominiums, and street-level commercial space at the former hotel, at 515 W. Sprague. He expects renovations to begin there late this year or early next year.
Wells says Berkadia Commercial Mortgage LLC, of Horsham, Pa., recently offered a $10.5 million loan toward the project, which has preliminary approval from the Federal Housing Administration.
Berkadia, of Horsham, Pa., is one of the nation’s largest providers of FHA-insured loans for multifamily housing projects.
“Based on every indication from the lender, Berkadia is anxious to get this done,” he says.
Two national investor groups have submitted separate proposals to buy up to $4.5 million in federal income tax credits to help finance the project. Both proposals, however, require the city of Spokane to apply on the developer’s behalf for a supplemental loan through the U.S. Department of Housing and Urban Development’s Section 108 program, Wells says.
Section 108, a loan guarantee provision of HUD’s Community Development Block Grant program, provides communities a source of financing to promote private economic revitalization projects. Local governments that provide such financing pledge current and future block grant allocations to cover the loan amount as security for the loan.
HUD also oversees the activities of the FHA.
“Everybody’s working diligently to get a final loan package,” Wells says. “The entire timing and final run to the altar rests with the city.”
Gavin Cooley, chief financial officer for the city of Spokane, says the city is looking at committing up to $2.6 million in annual HUD-related allocations, most of which would be in the form of a Section 108 loan.
Cooley says the city has hired the Seattle office of New York-based National Development Counsel as its consultant on financing for the Ridpath project.
“We’re feeling extremely confident that things are lining up the way we would expect them to be to make this a project we would like to be involved in,” he says. “Barring any unforeseen circumstances, I would expect the request to go before the City Council with a recommendation for approval.”
While financing for most historic rehab projects is highly bureaucratic, the Ridpath project is more complex than usual, Wells says.
“It’s like we got to the finish line, and they moved the finish line down the course,” he says. “But they didn’t move it out of reach.”
The project had hinged on consolidating the fragmented ownership of the hotel, parts of which had been sold to a number independent investors since 2006, after a Las Vegas-based hotelier bought the Ridpath.
Ridpath Club Apartments LLC will be the sole owner of the apartment complex, which includes the 36-stall underground parking facility, and the first through 11th floors of the 13-story hotel, with the exception of the 4,000-square-foot former art gallery space on First Avenue, Wells says. The Federal Deposit Insurance Corp. took ownership of that space when it seized Colfax, Wash.-based Bank of Whitman, which had an outstanding mortgage on the property.
Wells says that property isn’t essential to the overall project.
“The FDIC wants to get rid of it, but has to clear up the title first,” Wells says. “We want to buy it, but we’re not so hot about it that we would pay more than it’s worth.”
Wells says a confidentiality agree-ment prohibits him from disclosing the purchase price of the majority of hotel and tower, which Ridpath Club Apartments LLC plans to acquire from Las Vegas-based 515 Spokane Partners LLC when the Berkadia loan is approved.
The Ridpath Club Apartments project also includes the east annex, which is attached to the Ridpath tower at the southwest corner of First Avenue and Stevens Street.
The annex, which also is known as the “Y” building because it once was occupied by the YMCA, has four above-ground floors and a basement.
An affiliated company, Ridpath Penthouse LLC, will have majority ownership of the top two stories of the Ridpath tower, where six two-floor penthouse condominium units will be developed ranging in size from 1,200 square feet of living space to 4,000 square feet of space, Wells says.
Wells says an investment partner in the project, Paul Mann, who has participated in several Wells & Co. projects, described the Ridpath project as the most complicated he has ever seen. Wells says Mann has quipped that any sane person would have dropped the project long ago. “He’s glad that’s not me,” Wells jests.
Wells & Co. first approached the city’s building department about the project in September 2012, and the project is ready now for final review for building permits, he says.
The final loan application for the project will be submitted in August, Wells says. “It will take six weeks to approve, and we should be able to close by November or December,” he says. “As soon as the Section 108 loan is approved in its final form, work can start immediately.”
Walker Construction Inc., of Spokane, would be the contractor on the project, and several subcontractors also have been selected.
“They’re ready to jump on it,” Wells says.
The Ridpath Club Apartments would include 110 one-room micro-apartments, 41 larger studio apartments, and 50 one-bedroom units.
The target market will be young professionals. To qualify for affordable housing tax credits, most of the units will be limited to tenants who earn not more than 60 percent of the median area income, Wells says.
For the purposes of affordable-housing income limits, HUD estimates 60 percent of the area median annual income in Spokane County at $26,640 for a one-person household, or $30,480 for a two-person household.
The micro-apartments would average 250 square feet of living space and monthly rents would start at around $455. The larger studio apartments would range from 330 to 500 square feet with rents starting at $495 a month. The one-bedroom apartments would have up to 1,000 square feet of living space.
The basement of the annex features a 40-foot-by-70-foot Italian tile and marble swimming pool that will be restored as a common amenity for all of the Ridpath Club Apartments residents, Wells says.
A total of 44 apartment units will be located on the second through fourth floors of the annex, and the street level will have commercial space, Wells says.
Preliminary plans show other amenities of the Ridpath Club Apartments would include a 5,800-square-foot ground-floor and balcony-level restaurant, common areas for larger-group gatherings on the mezzanine level, private theater rooms, a 36-stall basement-level parking facility, and a storefront commercial fitness center.
The Wells & Co. plans don’t include the Halliday Building, a vacant two-level structure attached to the hotel at the northwest corner of Sprague Avenue and Stevens, a portion of which was occupied by the Hart & Dilatush Pharmacy for 34 years before the pharmacy moved to the Bank of America Building in 2008.
Meantime, Wells & Co. recently designed projects to repair portions of the second third and fourth floors of the hotel that were damaged by water from a ruptured pipe.
The projects also included electrical upgrades and other code-related improvements.
Dallas White Corp., of Las Vegas, was the contractor on the project, which totaled $409,000.