The Metro Development Authority is expected Friday to give the final OK toward approving just more than $2 million in potential tax incentives for Virginia-based Middleburg Real Estate Partners.
The real estate company purchased the blighted Arcadia Apartments, home to low-income residents, for $9 million and announced plans for extensive renovations. Members of the Taylor Berry Neighborhood Association, where the apartments are located, and Metro Councilman David James, D-6, whose district includes Taylor Berry, praised the news earlier this year.
Michael Meyer, a principal with Middleburg Real Estate Partners, said the company plans to invest roughly $21 million in the renovations, which will include new siding, new roofing, low-flow toilets, energy-efficient windows and doors, and air-conditioning units, which he said the apartments don’t currently have.
Work is already underway and is expected to wrap up by the end of 2019.
The company plans to “return some housing that hasn’t been functional for a long time and provide a safe, affordable and a very nice product to people of the city,” Meyer told the Louisville Metro Council’s Labor, Economic Development and Contracts Committee earlier this month.
To help finance the renovations, Middleburg Real Estate Partners asked the city to create a TIF, or tax increment financing, district that encompasses only the property where Arcadia Apartments sits. The TIF, which the council committee and full Metro Council already approved, will make Middleburg Real Estate Partners eligible for a maximum of roughly $2 million in tax breaks.
The amount of actual tax incentive the company receives is dependent on how much value it adds to the property. The current taxable value of the property is $4.4 million.
As part of the agreement with the city, Middleburg Real Estate Partners must rent out at least 200 of the apartment complex’s 418 units at a rate affordable to people earning 80 percent or less of Louisville’s area median income (AMI). The breakdown is 27 one-bedroom units, 108 two-bedroom units and 65 three-bedroom units, according to the agreement.
Laura Ferguson, assistant director of the city’s economic development arm Louisville Forward, told the council committee that initially rents would likely be lower than the 80 percent AMI requirement.
She noted that the dilapidated nature of the Arcadia Apartments was negatively impacting the surrounding neighborhood, that it had only 45 percent occupancy, and without incentives, it was unlikely that the apartments would be upgraded.
Middleburg Real Estate Partners plans to take the buildings down to the studs, as well as add a dog park, a playground, two laundry facilities, grilling areas and surveillance equipment, Ferguson said.
Although it is not included in the incentive agreement, Middleburg Real Estate Partners plans to set aside 5 percent of its units for what it refers to as community heroes, including teachers and firefighters. They will receive a $100 a month discount on their rent.
“They are great tenants, and they deserve the help of the business community,” Meyer said.
The company also plans to introduce its “Shelters to Shutters” program in Louisville, where it offers a few entry-level jobs at the apartment complex and “steeply discounted” rent to homeless people. Meyer told the council committee that Middleburg Real Estate Partners wants to encourage other apartment complex owners in Louisville to do the same.
He said the company expects to hold onto Arcadia Apartments for decades to come. “We are long-term holders of real estate.”
The TIF for Arcadia Apartments moved through approvals with no opposition, which differs from other TIF districts in recent history. That may have something to do with the object of the TIF, a severely dilapidated apartment complex where nearly half the apartments will be workforce or affordable housing units. The complex also is located in an area that doesn’t see huge amounts of investment outside of nearby Churchill Downs and the University of Louisville.
Unlike Middleburg Real Estate Partners, developers that previously requested designated TIF districts were constructing luxury apartments that include only a small percentage of workforce housing units, if any at all, and the projects were located in already established or growing neighborhoods. Despite facing backlash, the TIFs were ultimately approved by Metro Council.
“In my opinion, a TIF — a government-assistance program, tax incentive, tax break — should be used to support projects that otherwise would not be supported on their own, that can deliver good to the community, and my opposition here is that we are talking about luxury apartments, luxury apartments in an area that is not blighted,” Councilman Brent Ackerson, D-26, said in 2016.
Some council members argued that TIFs also should be used to promote affordable housing. During the council committee meeting regarding Middleburg Real Estate Partners’ requested TIF earlier this month, council members expressed happiness with the company’s plans.
Correction: A previous version of this story incorrectly stated how much tax incentives Middleburg Real Estate Partners could receive. The amount is just more than $2 million.