MUSKEGON, MI – A short-term loan from the City of Muskegon is slated to begin construction of a six-story downtown apartment building this fall.
The second phase of the Lake View Lofts building at 351 W. Western Avenue with 35 apartments was awarded a “bridging loan” of $ 450,000 by the Muskegon City Commission on Tuesday, July 29, according to city officials behind the row projects delayed by the coronavirus.
The interest-free loan to 351 Phase II LLC must be repaid within six months or the city will charge retrospective interest equal to the prime rate plus 2 percent and may pursue a late payment according to city documents. The loan is part of a financing package that also includes Michigan Economic Development Corp. Loans. and the PNC bank.
The first phase of Lake View Lofts opened about a year ago and includes the Boomtown Market on the first floor, offices on the second floor and 20 apartments.
Construction of the second building, which will be connected to the first on the corner of Western and Second Streets, is slated to begin in late September or early October. A restaurant is planned on the first floor,
Great Lakes Development Group developers told MLive last year that they were hoping the second phase would begin in the fall of 2019. Issues related to the building’s mix of residential and commercial uses and then the COVID-19 outbreak delayed funding.
A letter of intent to fund the project through the MEDC has expired, putting private lending at risk, city officials said. But the MEDC loan is back on track with a new letter of intent and is expected to be approved by the Michigan Strategic Fund board of directors in September, Great Lakes Development Group’s Chris Benedict told commissioners.
The MEDC loan is $ 1.67 million, according to the commissioners.
Once approved, PNC is ready to complete the underwriting of the project, which includes $ 4.5 million in funding from the state’s Opportunity Zones program, Benedict said. This program offers investors tax incentives for capital gains when they invest in low-income communities that have suffered from a lack of business growth.
In the meantime, the city loan will be needed to host concrete work as well as some final engineering and architectural work, Benedict said. If the developers don’t have a down payment for the concrete work, they will be pushed to the “back line” of builders waiting to start projects delayed due to COVID-19, he said.
This means that the groundbreaking for the second building of the Lake View Lofts would be postponed until next year.
Benedict said that despite the hurdles in funding, this process was easier than funding the first building. Part of this funding included the city guaranteeing rental payments so developers could take advantage of lower interest rates when some units were pre-let.
After all, due to the high demand for the apartments, the city did not have to pay rent. According to the commissioners, this demand led to rents 20 percent higher than originally forecast.
The city loan will be repaid in full once funding from MEDC and PNC is completed, Benedict said. He estimated the repayment would be made in mid-October.
The city loan comes from the Revolving Economic Development Fund.
Commissioner Ken Johnson said repaying the city’s revolving loan fund will be vital as it may be needed to support other developments in need of help due to COVID-19. He also expressed his support for the project, which he described as “an important part of the ongoing development of our inner city”.
The standard market apartments are located on the top five floors and, according to the city commission, consist of 25 one-room and 10 two-room apartments, all with a balcony.
The construction work should be completed by the end of 2021.
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