Louisville’s Downtown Development Review Overlay Committee postponed a vote on a proposed $47 million downtown apartment project after concerns were raised about the lack of retail included along the South Fourth Street stretch of the development.
Cincinnati-based Capital Investment Group plans to purchase 535 and 539 S. Fourth St., as well as 321 W. Chestnut St., from KentuckyOne Health and build a 237-unit apartment building with 9,000 square feet of first-floor commercial space. The total project cost is $47 million, but the actual construction costs are $34.3 million.
“The city has done so much in the past few years, and we are looking forward to being part of the continued growth here,” said David Bastos, president of Capital Investment Group.
The development is expected to transform a block of the South Fourth Street retail corridor, and while all seven speakers who commented on the project were pleased with the aesthetic, each lamented the lack of retail included along Fourth Street. Plans currently call for retail along Chestnut and first-floor apartment units along Fourth Street.
“This is really beautiful. However, I do think we are missing the mark on the retail,” said J.D. Dotson, owner of the boutique Regalo. “We need more retail. We need people to stop and stay a while and shop and eat and drink cocktails, and having walls and windows, people are going to keep walking.”
Prominent Louisville developer Bill Weyland, who owns property across the street from the KentuckyOne Health buildings, said he liked the details in the design and the proposed materials but also criticized the lack of retail along South Fourth Street. Weyland noted that a master plan for the development of downtown Louisville approved by Metro Council in 2014 called for a “strong retail district” along South Fourth Street.
“The master plan gave several of us confidence to move forward beyond what has been termed ‘the dead block’ and create an anchor block in the 600 block, to add some strong retail, believing as these projects came along they would create that pedestrian connection with strong retail from the entertainment district down to Broadway. Significant investment has been made under that assumption,” he said.
Decades of work has gone into attracting tourists and drawing them to shopping and restaurant districts in the city, Weyland said. Standards are in place to “enliven” the pedestrian experience.
“I am deeply disappointed that the message this sends is that our city really doesn’t have the discipline to demand the development that meets the planning principles that were utilized in determining the location of strong, distinct districts,” he continued.
Weyland called for Capital Investment Group to rethink the dearth of retail on Fourth Street.
Research shows that there is a “very strong demand for the right kind of retail space in South Fourth Street” and that recent trends in leasing rates makes offering retail economically viable, said Rebecca Matheny, executive director of the Louisville Downtown Partnership.
Karen Welch, co-owner of CRAFT(s) Gallery, suggested a grocery store as one viable retail option for the development.
“You would be the mecca,” she said, adding that the development “is so close to being perfect.”
DDRO Committee member Anna Tatman also suggested Capital Investment Group look at the need for a dry cleaner, drug store or other retail that could benefit the estimated 400 residents of its proposed apartment development at Fourth and Chestnut streets.
However, it seems unlikely that Capital Investment Group will change its current plans to include more retail.
“We as a private company want to make as much money as possible,” Bastos said prior to the public comments. “There is not enough guarantee that we can make a return on that investment, which is why there is no retail on the Fourth Street side.”
The majority of Capital Investment Group’s revenues come from the residential side of developments, he said. The company plans to charge about $1.72 per square foot in rent for its various apartments, with rent starting at roughly $930 a month for a 540-square-foot efficiency. The development will include seven three-bedroom apartments; 92 two-bedroom apartments; 124 one-bedroom apartments; and 14 efficiency apartments.
Following comments from the public and from committee members, Bastos again stated that more retail is not financially feasible and that there is existing retail space that is underutilized along Fourth Street.
“In a perfect world, you could potentially do that with the right incentives,” he said. “We need to get people living downtown, and then we can get more stuff going on downtown.”
Capital Investment Group is currently in talks with Metro Council members and Louisville Forward, the city’s economic development arm, about tax increment financing (TIF). Based on their negotiations, Bastos said he expects to receive a $3.5 million tax benefit from the proposed TIF over a 20-year period.
In return, the company has agreed to make 10 percent of its apartments workforce units, meaning they would be affordable to anyone who earns 80 percent or less of the Louisville average median income. The workforce units will be a mixture of efficiencies, one-bedroom and two-bedroom apartments. Another benefit to the city, Bastos noted, is that it will start receiving property taxes on a property that currently pays none.
Company representatives talked to the city about additional incentive opportunities that would make the company comfortable with swapping out the first-floor apartments with retail, but nothing more was available, Bastos said.
Although the DDRO Committee can’t dictate how the company decides to use the first floor, members asked Capital Investment Group to re-examine their plans and tweak them to make the ground level more engaging for pedestrians. The project will go back before the DDRO Committee for a yes or no vote at 8:30 a.m. on Sept. 14.
“There is a need to have a better understanding of how they are dealing with that entire streetscape and pedestrian experience,” committee member Jon Henney said. “We need more information than I think we’ve received at this point.”
The Board of Zoning Adjustment must also approve the apartment project, but no date has been set for that meeting.