HERE apartment complex still lacks final occupancy permit; project’s tax rebate yet to kick in
Nearly a year after its opening, the HERE apartment complex still lacks its final occupancy permit and the ability to begin collecting millions in incentives from the city.
Scott McCullough, director of planning and development, said the project still has some corrections to make, but nothing out of the ordinary. He said the main issue is the complex’s parking shortage.
“There’s no safety issues; it’s really just supplying the parking demand,” McCullough said. “And then they sort of automatically get their units opened up as soon as it’s constructed to plan.”
The building cannot be fully occupied — and thus cannot receive its incentives –until the available parking meets the city’s code requirements. Because the tax rebate agreement was inactive, HERE was responsible for and paid all real property taxes on the complex in 2016, which amounted to about $260,000, according to the city’s annual economic development report.
Originally, the development was to have a robotic valet parking garage that would have had the capacity to serve the entire complex, but the company responsible for producing that robotic system went bankrupt.
The 624-bedroom apartment and retail complex at 1111 Indiana St. received a temporary occupancy permit last year that allowed most rooms to be rented, but the parking shortage still prevents the complex from receiving its final permit. Without it, the complex cannot rent out about 75 bedrooms or begin receiving tax rebates from its incentives agreement with the city.
The City Commission approved a new two-phase parking plan last fall, which called for the demolition of two houses to construct a surface parking lot and the realignment of adjacent Fambrough Drive. The realignment would align Fambrough Drive with 11th Street and provide room for an expansion of the parking lot. The majority of the property that will make up the new lot is owned by the KU Endowment Association, which will lease the new lot to HERE.
The first phase of the parking lot is nearing completion, and McCullough said the city is meeting with representatives of the complex Thursday to review whether a portion of the unapproved units can be occupied.
“The point of (Thursday’s) meeting is to determine how close they are to getting that occupancy and laying out the path for occupancy so that they can get it for their August move-in dates,” McCullough said.
The complex’s Chicago-based developers are due to receive more than $8 million in incentives from the city. It’s estimated that the tax rebates, provided through the Neighborhood Revitalization Act, will provide about $5.7 million of rebates over the 10-year incentive period. Developers also received Industrial Revenue Bonds, which provided a sales tax exemption on construction materials that saved the project about $2.4 million.
In April of last year, the city signed a Memorandum of Understanding with the HERE developers updating the terms of the incentives. Economic Development Coordinator Britt Crum-Cano said the city will go by the MOU to decide when incentives become active.
“I think that that spells everything out,” Crum-Cano said. “To me that’s the current situation as far as occupancy and when their incentive kicks in.”
The MOU states that in order to receive any incentives under the NRA agreement, the complex’s construction must be “substantially complete” — defined as 90 percent complete — and provide parking for 100 percent occupancy of the residential and commercial units. The MOU also states that nothing in the MOU “shall be construed to extend the term of the NRA” and that incentives can’t be collected until the January following the city’s approval of the occupancy permit.
The previous City Commission provided the HERE project an 85 percent, 10-year tax rebate after the development group touted the mixed-use complex as being a major benefit for the city’s economy.
The seven-story luxury student housing complex includes about 240 units, but students sign individual leases for their bedrooms. The monthly rent for a bedroom ranges from $640 to $1,300 per month, depending on how many bedrooms are in the unit. The ground floor of the complex includes about 13,200 square feet of commercial space.
McCullough said the second phase of the parking lot and the realignment of Fambrough Drive will primarily be a development-funded project. He said a construction agreement between the city, KU and the developer will come before the City Commission at an upcoming meeting.