Lofts 29: Places in the Heart
Dec 30, 2015 03:31PM ● Published by Jason Huddle
Lofts 29: Places in the Heart
Seeing a building – one that has long stood vacant – get a facelift breathes new life into a community. To see it transformed into a vital component of a city center is cause for celebration.
Built in the 1920s, what most remember as the Heilig-Meyers furniture store at the corner of Cabarrus Avenue and Church Street is now Lofts 29: home to residential tenants already occupying more than half of the recently-completed 26 apartments.
Widespread deterioration of the 29,898-square-foot three-story structure had most likely meant eventual razing, giving way to a vacant .3566-acre lot that was worth more ($140,000) empty than with the building on it (less than $0). That’s because its owner – the City of Concord – would have had to spend $160,000-plus to get the building torn down.
Nearly a decade of trying to find a buyer or come up with a viable plan for the site yielded a possible Walgreens, but that never came to fruition. Then, in February 2014, Concord City Council voted to initiate the bidding process that saw Special Purpose Entity – a joint venture between investors with CommunitySmith, LLC (Managing Partner Holten Wilkerson) and Rehab Development Inc. – buy the property from the City for $1; the sale closed at the end of July 2014.
Joining them in the venture is Level 2 Development, a real estate development firm based in Washington, DC. They are 27 percent equity partners in Lofts 29.
“Level 2 is thrilled to be investing in Cabarrus County and to play just a tiny role in the great work being done in downtown Concord,” Jeff Blum, principal and co-founder of Level 2 Development, says. “The city is already amenity rich with restaurants and a thriving music scene. We know that residents of Lofts 29 will enjoy a fabulous, walkable lifestyle that is the envy of many large and small towns alike.”
Rehab Development Inc. is the brainchild of Ed Lipsky, president of Rehab Builders, and Flay Blalock, co-founder of Rehab Engineering, as well as Patrick Reilly and Josh Lipsky. Based in Winston-Salem and founded in 2008, the design-build-development company currently concentrates on Main Street projects in the Carolinas, Virginia and Georgia.
But how does Rehab Development find dilapidated buildings in need of some major TLC? “It’s always different (in each case),” Patrick Reilly, president of Rehab Development, says. “People contact me or refer me; sometimes the municipality contacts me. We respond to RFPs (Requests for Proposals). Someone had shared a packet of available Concord properties with me...we stumbled across it.”
That packet prompted Reilly and his team to visit Concord and tour the available real estate in 2013.
“We came in and walked through all the buildings, the hotel, the theatre,” he says. “We actually looked at the Loft building last. This is a great building, but there’s not a dedicated parking lot. Project parking is always an issue.”
Not to put the cart before the horse, there were other issues to the acquisition and restoration of the property besides parking. Having been built more than 50 years ago, the Heilig-Meyers building is listed on the National Register of Historic places and sits in the Union Street North - Cabarrus Avenue Commercial Historic District. That means several things.
While there had been a Historic Tax Credit program in place upon the purchase of the site, the North Carolina Legislature discontinued the program at the end of 2014. Rehab Development was able to qualify for tax credits for the duration of that year – resulting in a $100,000 savings – but that figure could have been closer to $500,000 with the continuation of credits. Historic preservation grants and two grants approved by Concord City Council helped defray more of the cost.
In addition, the renovation had to follow the guidelines set by the National Park Service – the governing body of the National Historic Tax Credit – and the North Carolina State Historic Preservation Office.
“You might not be able to do everything you want to and you may have to do things you didn’t expect, but it’s more of an asset because the end-product is a little nicer,” Reilly says.
Reilly refers to the replacement of all the beadboard ceilings, which were original to the building but were initially planned only for the hallways. Additionally, “There were a lot of structural repairs, a lot of rot in there. You have to stabilize the building first so it’s safe to work. The roof was next. We shored up the exterior brick around the new windows. The water pressure wasn’t quite as good as we expected; that dictated what type of sprinkler system we needed to install. And the depth of the common area took a couple of parking spaces,” Reilly adds.
The ground floor common area is a definite perk. Besides a stocked fitness room, tenants will enjoy a lounge that also reflects the character of the building. The original staircase to the second floor remains intact, Rehab Development constructed a bar from reclaimed lumber (that continues along the back wall) and other materials from previous jobs, and the room will be completed with furniture and a big-screen TV.
Behind the common area, Rehab Development fabricated a parking garage, an additional $75 per month. Numbered storage closets face each space and an elevator is located in the rear of the building.
“There are more spaces outside, but not quite as many as there are apartments. Tenants will need to park elsewhere,” Reilly explains, alluding to ample after-hours downtown parking.
As for the number and layout of apartment units, “The building was basically a blank canvas; the windows dictated. I basically went under the premise that each of those windows on the side had an apartment of its own,” Reilly says. “You model all that, get a schematic on paper with as many units as you can to get the highest rent per square foot and generate as much revenue as possible. There are one-bedrooms sprinkled with a few two-bedrooms (at the front). There’s one dedicated studio. Maybe we’ll do a commercial space downstairs.
“We were able to demo almost all the walls, but the walls on the third floor were never covered. That meant we could leave exposed brick in there.” (The National Park Service requires any brick walls that had been plastered be sheet-rocked.)
Besides the exposed brick, units include high ceilings with exposed ductwork overhead, solid-surface countertops, tile backsplashes, stainless steel appliances and hardwood floors.
“Floors were patched where rot once existed, so it’s evident that there are two different floors. But historic restoration works that way,” Reilly says.
The 26 units are all-inclusive: water, electricity, trash removal, basic cable and wi-fi are included in the rent, which ranges from $755 to $1,195. The one- and two-bedrooms range in size from 560 to 909 square feet.
Sarah Morrison and Lori Love are property managers and realtors/brokers with MB Property Management. Known as the Love/Morrison Team, they’re handling leasing the apartments at Lofts 29. Even during construction, there’s been no shortage of interested parties who could obviously see beyond the blank slate.
“We have shown the lofts at least 40 times,” Morrison says. “We are currently at a one-half occupancy rate and these commitments were made during construction. We believe with construction completion in sight, we will see the remaining units lease quickly.”
And Reilly says there is almost no typical renter. “It’s a very diverse building. We have a few empty-nesters, but it’s whoever wants to live in that type of apartment. It’s downtown, it’s situated well for people without children,” he says.
“There has been good diversity in interest thus far,” Morrison adds. ”Young professionals, single folks, and even people who are at the point in their lives to downsize have shown good interest. The location is excellent, and prospective tenants are excited to walk to restaurants and shopping in downtown. The greenway is a wonderful perk, too.”
Rehab Development will remain owner/manager of Lofts 29 after its completion. Maintenance staff has been hired and the Love/Morrison Team will continue to act as leasing agents.
As with most construction projects, completion was delayed for unforeseen reasons. A Certificate of Occupancy was awarded on December 7, and many tenants were eager to get moved in right away.
“We’re giving our first renters a move-in package that includes downtown dollars. It’s to say thanks for being patient through delays, and it keeps it local,” Reilly shares.
And that’s at the heart of what Rehab Development does…renewing older city centers, building by building. “We’ve taken a building that had once been a proud part of a downtown area, had not been utilized in several years and would continue to be a blight to the area. We totally turned that around. It provides, in this case, the first critical mass to the downtown area,” Reilly says.
Reilly is also quick to point out that the Lofts 29 deal would not have gone nearly as smoothly without Diane Young, executive director of Concord Downtown Development Corp (CDDC). “The CDDC began a proactive effort to find the right developer for the Hotel Concord block in the fall of 2013,” Young says. “We began by looking at boutique hotels that had a similar ‘small room’ configuration to see how they made this work. Through this process we were introduced to Patrick Reilly, and after walking through the properties in this block that make up the larger project, he became extremely interested in the former Heilig-Meyers building, now Lofts 29.
“We are thrilled to have our first large infusion of downtown residential loft apartments be an example of high-quality workmanship and rental rates that will set the bar high for other projects to follow. We are starting out of the gate with a project we can all be proud of, and one that will contribute annually over an estimated $270,000 to the Downtown Concord businesses through purchases of goods and services.”
The North Carolina Main Street project released an economic impact report that mirrors what’s being done in downtown Concord. According to Sharon Decker, NC secretary of commerce, “Since North Carolina began its Main Street project in 1980, over $2 billion has been invested in Main Street districts, over half of which has come from the private sector. There has been a net gain of more than 18,000 net new jobs and 4,700 net new businesses.”
The report also refers to upper-floor housing, saying, “If a vacant storefront is a drain on the downtown economy, there is one strategy that can have a sizable positive impact: downtown upper-floor housing. This strategy is emerging as a major opportunity in North Carolina communities, with over half of towns already reporting downtown housing. In most communities, the range of rents is $400 to $800 per month, with some locations commanding up to $1,200 per month.”
“It’s labor intensive, but creates more jobs and creates taxes,” Reilly adds. He also has his eye on another downtown project: The Hotel Concord and adjacent former bank building.
Rehab Development envisions “34 apartments in the hotel building and four in the bank building. We’re trying to find an anchor tenant to take the (bank) space. We have one potential right now,” Reilly shares.
“I’ve been in the building a lot. That’s how I can come up with hard numbers. We’ve also had our environmental guy in there. We know we’d be using the existing walls, but combining rooms to create mostly one-bedroom apartments and some two-bedroom. We would try to maintain the current social activities in the hotel, have tenants utilize the back entrance so traffic doesn’t interfere with activities going on in the front.”
The Hotel Concord building is owned by two entities: Fifth Third Bank and Union Street Corp. And while Reilly is optimistic about this project, it’s currently in the discussion phase and no agreements have been made as of this writing.
One reason this project seems so enticing to Rehab Development is the reinstatement of the Historic Tax Credit. Local and state governmental leaders worked hard in 2015 to restore the program, which went back into effect on January 1. Projects that qualify as rehabilitation of income-producing historic properties can receive a 20 percent federal income tax credit.
So what was once debt for the City of Concord is now worth some $2.3 million and is a true indicator of what the historic downtown district can aspire to be. Hopes are high that Lofts 29 is just the first.
Written By: Kimberly Cassell
Photos By: Michael A. Anderson Photography