Downtown Springfield to get new $50 million apartment complex

  • "I think it'll have a great impact," says Springfield architect tied to the project.
  • The developer wants to use federal "opportunity zone" and Missouri blight tax incentives to help finance the project.

Leveraging a part of the Republican Party's signature 2017 tax reform that was intended to benefit wealthy capital-gains taxpayers and impoverished communities alike, a Los Angeles-based development firm plans to build a $50 million apartment complex on 1.8 acres off downtown Springfield's St. Louis Street, along Benton Avenue.

The five-story, 194-unit project would repurpose land once home to a dilapidated residential hotel frequented by adults and children living at the edge of homelessness. Groundbreaking is slated for next month; leases might be signed as soon as spring of 2021, said officials tied to the project.

"I think it’ll have a great impact," said Rob Haik, principal architect for H Design Group in Springfield, which is working with Kansas City-based Hollis + Miller Architects to design the project for College Town International LLC, the California developer.

A rendering of a proposed $50 million apartment complex for 505 E. St. Louis St. in downtown Springfield. Developers want to leverage both federal capital-gains tax incentives for "qualified opportunity zones" and local property tax abatement for blight-area redevelopment.

The 225,000-square-foot complex would be CTI's first venture in Missouri. It will include studio, 1-, 2-, 3- and 4-bedroom apartments. Tenants would get the option of renting by the bedroom at market rates — which are yet to be determined but will be "competitive" prices, said CTI managing partner Dan Weinstein in an interview with the News-Leader Friday. 

The site was formerly occupied by the Arbor Hotel, demolished 12 years ago after the city found numerous code violations on the property, including accumulated trash and "parts of the building so deteriorated they may fall off," past News-Leader reporting shows.

The site is now partly overgrown with brush and trees and is vacant, with the exception of a small unoccupied building at the southwest corner. The collective market value of the site's four land parcels is pegged at about $718,000 by the Greene County Assessor, a sharp contrast with the vision of CTI and its architects. Haik told the News-Leader Friday that the new fully furnished apartments will be something else.

"The spaces will be finished to a higher class than Springfield is accustomed to," Haik said. He said the building is intended to give off an "urban" vibe, using materials and a design "vernacular" in keeping with downtown's mix of new projects, rehabbed buildings and existing historic structures.

It will offer residents — some 525 people, Weinstein said — a variety of amenities including a private bathroom for each bedroom, lounge areas, a community kitchen, a fitness center, an artificial-turf dog park, internal courtyards, a wading pool, a possible coffee shop on the first floor and an underground parking structure with roughly 170 spaces.

The target market? Students, recent graduates, young professionals in their 20s and others. CTI typically develops projects "in close proximity, walking distance, to major universities," said Weinstein, the managing partner.

"Here's one thing I can tell you that we've seen consistently really across the country," he said. "Students really are longing for a college experience," said Weinstein, who noted that he attended a commuter college and moved out on his own after living with his family during part of his education.

"So in many examples, colleges and universities have had to make a decision on where to spend their dollars, often focused on the academic side, building academic buildings," he added. "So I think we are trying to fill a void in an area where we think the demand will exceed the supply."

He believes the location is desirable for downtown workers and students with Missouri State, OTC, Drury and other schools.

"We've had a chance to meet with President Smart," Weinstein said, referring to Missouri State's chief executive, Clif Smart. "We're very impressed with him, we like the trend in enrollment growth."

Capital gains tax breaks

The deal is expected to rely on lender financing and public tax incentives.

Weinstein said his company has lined up multiple term sheets from lenders who are willing to finance the project, and that CTI will select a lender in four to six weeks. Thus far, he said, the complex is self-financed.

He said CTI became interested in the site because it lies in a "Q.O.Z.," or qualified opportunity zone. As part of the Tax Cuts and Jobs Act of 2017, the Trump administration designated about 8,800 opportunity zones in low-income census tracts across the United States, according to a New York Times report published in late August.

Under President Donald Trump's 2017 tax reform law, about 8,800 federal "opportunity zones" offering investor incentives were designated across the United States. In Springfield, 10 low-income census tracts in three areas were  designated.

In Springfield, there are three opportunity zones: Downtown, where the CTI project site is located; a separate splotch of "central Springfield" between Sunshine and Sunset streets; and a big chunk of north Springfield that dwarfs the other two zones. 

The idea for opportunity zones was to allow investors to sell off investments like stocks but postpone paying capital-gains taxes on the proceeds. (As it turns out, federal taxes on gains made from selling capital are levied at lower rates than taxes on ordinary income earned through labor, as the USA TODAY Network recently reported.)

The catch: To qualify, investors' proceeds from selling equities like stocks must go back into the opportunity zones, duly certified by the feds as economically distressed.

And as the New York Times Times reported, once opportunity zone projects are up and running, "any profits" investors harvest from apartment rents or sales of cold brew out of that first-floor cafe on St. Louis Street "can avoid federal taxes altogether." 

Asked about it, CTI's Weinstein said, "I think that investors are going to want to make a decent return, but if you can invest in a community and help lift all boats with a rising tide, I think that's something that's very appealing. I think that the cities that are getting behind (opportunity zones) should be commended for that."

He said he thinks the project will be helpful and spur more development in Springfield.

"We wanted to make, from an aesthetic standpoint, a project that would be a significant part of the revitalization of the downtown area," Weinstein said.

Local tax abatement

There's another layer of tax breaks that could come into play for this deal.

Matt Schaefer, senior planner with the city of Springfield, confirmed Friday that CTI applied for real property tax abatement under Missouri's blight law in mid-July. (The entity that owns the land, LW MSU LLC, was formed in Delaware in April and registered in Missouri in June, state records show.)

"The process usually takes roughly 70 days," Schaefer said in an email to the News-Leader. The tax abatement proposal for the "STL 505 Redevelopment Area" would go before the city Land Clearance for Redevelopment Authority on Oct. 1, followed by a planning and zoning commission meeting Oct. 10, and it could reach City Council Oct. 21 for a first public reading. Council would decide the fate of the application thereafter.

The most recent version of the blight application provides an outline of CTI's view that the project site qualifies as a Missouri blight area "due to its age, inadequate/outmoded design, physical deterioration, and economic underutilization."

Because of those factors, CTI argued: "the Redevelopment Area has become an economic and social liability, which is conducive to crime and the inability to generate reasonable taxes."

In its application, CTI also wrote that one day, Greene County might be able to assess the value of the project for tax purposes at $36.9 million, netting local governments $3.9 million in new revenue. (The assessed value is currently just $229,950.)

If City Council buys into this line of argument, property tax on "STL 505" could be partly abated for up to 25 years.

Could any of this happen without the tax breaks?

"Certainly without the opportunity zone, I think it would be very unlikely," Weinstein, CTI's managing partner, said on a call from California. "Not at this level. You might get a project, but it would be nowhere near this ambitious."

More news on development in Springfield:

Board denies blight application for planned $500M development in south Springfield

Here are 3 ways to help plan Springfield's future without leaving the house

Federal grant paves way for $2.5 million expansion of eFactory