An out-of-town developer may back out of plans to build a $56 million luxury apartment complex in NuLu, according to the developer’s attorney, Jeffrey McKenzie, of Bingham Greenebaum Doll.
“Flournoy Cos. is frankly not able to go forward,” McKenzie said when addressing members of the Louisville Metro Council’s Labor and Economic Development Committee Tuesday afternoon. The council was set to vote on a tax incentive agreement between the city and Flournoy Cos. but instead tabled it.
The Georgia-based company has asked the city for just more than $5 million in potential tax incentives, and in return, city officials told Flournoy Cos. that it must include 18 workforce housing units in its development at 700 E. Main St. and 121 S. Clay St.
The workforce housing request is part of an initiative by Metro Council leaders to ensure that there is housing affordable to residents who earn 80 percent of the area median income for Jefferson County. Teachers and police officers are often given as examples of people who would benefit from workforce housing.
Flournoy Cos. previously agreed to rent 18 of its one-bedroom apartments at $947 per month, whereas a regular one-bedroom unit would go for $1,300 a month.
However, when McKenzie addressed the council committee Tuesday, he stated that the project can’t move forward if Flournoy Cos. is required to have the 18 cheaper apartments. Either that requirement would need to be eliminated, or the property owner, Service Welding & Machine Co., must agree to sell the properties on Main and Clay streets at a lower price.
Although the parties are still in negotiations, the seller hadn’t budged as of Tuesday, McKenzie said, noting that the option to buy the property expires around the end of this month.
“Right now, we have this development all the way to the finish line,” he said. “We are standing on the one yard line, and we are ready to punch across the line.”
A representative with PRG Commercial Property Group, who represents the seller, declined to comment.
During his comments to the committee, McKenzie said that construction costs continue to rise and the price of downtown property isn’t cheap. On top of that, he said, the workforce housing cuts into expected revenue.
Together, the 18 workforce units will bring in $77,328 a year less than if they were market-rate apartments. That adds up to $1.5 million over 20 years, McKenzie said.
“That’s the impact of each of those units,” he said. “This housing requirement, it is big.”
Metro council members in attendance at the Labor and Economic Development Committee meeting made it clear that they were not willing to budge, either, when it came to the workforce housing requirement.
“I think 18 is the floor,” Councilwoman Barbara Sexton Smith (D-4) said, noting her agreement with a similar comment made by Councilman Bill Hollander (D-9).
Both Hollander and Councilman Brent Ackerson (D-26) said they want downtown Louisville to house people earning a variety of incomes and requiring workforce housing in return for tax breaks is a way to help that.
“Downtown should not be developed as a residential area for the rich,” Ackerson said. “We need to develop downtown for everyone.”
If Flournoy Cos. was paying for the project entirely by itself, without taxpayer subsidies, then it could do whatever it wants, he said.
“They are not coming out here out of the goodness of their heart …they are here to make a dollar,” Ackerson said. If they can’t make the project work with workforce housing, “then let the deal fall apart. We have got to start setting some priorities.”
Without tax incentives, McKenzie asserted that Louisville would not be able to pull the large luxury apartment developments that were in development or under construction currently.
“Flournoy is a big proponent of mixing housing where it makes sense,” McKenzie said. “But you really have to look at the market.”
Financing for apartment projects is tightening and costs are rising, which could cool the multifamily residential market.
“I want Louisville to jump on this opportunity to spark housing development downtown, because I don’t think it will last,” McKenzie said.