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Redevelopment of Arcade expected to take years

Baltimore, Dayton firms will take on the $12 to $15 million redevelopment of the long-vacant complex.

A new development partnership has announced plans to rehabilitate the Dayton Arcade in several phases, beginning with a roughly $12 million to $15 million project to create about 60 housing units and common spaces for artists and creative types.

The city revealed on Thursday that a memorandum of understanding has been reached to redevelop the long-vacant Arcade complex with Cross Street Partners, a diversified real estate services firm in Baltimore, Md., and Dayton-based Miller-Valentine Group.

The development partnership is under contract to purchase the Arcade property, which could be finalized in early 2017 if financing for the plan is secured, developers said.

The first phase of the proposal calls for renovating two buildings along West Fourth Street into affordable housing for artists and creative professionals.

The plan also involves constructing common spaces for creative programming, possibly such as art galleries and studios.

Future stages of development could include more affordable housing, market-rate housing, a boutique hotel and spaces for public uses and retail and restaurants.

“We see it as one of the most amazing event spaces a city could ever dream of — the Arcade atrium and the rotunda,” said Bill Struever, principal of Cross Street Partners. “It’s going to require a whole lot of work once we figure out a use program and figure out how to make it economic. We are just at the beginning stages of planning.”

Experience is key to success this time

City and local development officials said they are cautiously optimistic about the Arcade’s chances of being restored because the proposal comes from experienced developers who have a strong track record of adaptive reuse success.

Over the years, there have been a series of proposals for the Arcade complex that fizzled.

Officials also said people increasingly want to live, work and play in revitalized urban areas, and there are more financing tools available today than during past restoration efforts.

“We are capitalizing on the value proposition that urban environments have, which is unique historic fabric and unique built environments,” said David Williams, director of market rate housing for CityWide Development Corp., which is assisting developers. “All of the tools are here, we just need to re-polish the gem a little bit.”

But local officials cautioned that redeveloping the Arcade would be a massive undertaking that poses unique and formidable challenges.

Cross Street Partners will be in charge of the master development plan for the seven-building Arcade complex and Miller-Valentine will focus on the housing component, said Ed Blake, CEO of Miller-Valentine Group’s commercial construction division.

The development partnership is under contract to buy the Arcade from the current owner, Gunther Berg, according to Struever.

If the project is awarded low-income and state historic tax credits, the purchase of the Arcade property could close around this time next year, with construction beginning at that time, Blake said.

If everything went according to plan, the complete renovation of the Dayton Arcade could occur in about five years, but that is a long way from happening, Blake said.

Plan starts with 2 buildings

The first stage of the development plan involves restoring the Arcade’s 10-story commercial building and the adjacent five-story apartment building along West Fourth Street.

The two buildings contain about 113,700 square feet of space. The Arcade’s entire square footage exceeds 418,000.

Miller-Valentine Group and Cross Street Partners will work together to convert the buildings into affordable housing for artists and people who specialize in creative work, akin to the Artspace Hamilton Lofts project, which opened last year. The mixed-use housing and arts facility in Hamilton is home to a small community of creative professionals, including writers and graphic designers.

The initial housing project would establish a creative community that provides artists and others with affordable apartments and areas to collaborate, interact and show their work, Blake said.

The housing hopefully will be a catalyst that leads to a comprehensive and integrated redevelopment of the Arcade that features unique amenities and attractions such as restaurants and a boutique hotel, Blake said.

“We are pretty clear where we’re going with the first phase of housing, but there’s going to be a lot of ideation and shuffling around of other parts as we go through the process,” Blake said.

Miller-Valentine has announced its commitment to rehabilitating the Arcade as the Montgomery County Fairgrounds project it is spearheading seemed to hit a snag.

Struever, with Cross Street Partners, said work is just getting started on a collaborative planning process for the Arcade that will include the city, the arts community, the business community and civic leaders and university officials.

“We would really love to see the Arcade, as much as possible, as a public use, a public resource, a public treasure,” Struever said.

Struever said the financing needs to be figured out but conditions are right for urban revival projects.

“I think Dayton’s time is now, to be part of this resurgence,” he said.

How the project will be funded

To fund the first phase of the project, the partnership plans to apply for 9 percent competitive housing tax credits through the Ohio Housing Finance Agency.

The funds are awarded to low-income housing projects, and artist housing is eligible for the program.

Later this year, the state will award $27 million in annual housing tax credits that are spread over 10 years, for a total of $270 million in tax incentives, said Molly Moses, a spokeswoman with the housing finance agency. The deadline to apply for the incentives is Feb. 18.

The project’s success depends on obtaining housing tax credits, and state and federal historic preservation tax credit awards also will be a crucial part of the financing package, developers said.

Struever said the hope is to close on financing for the entire Arcade restoration at the same time, but cautioned that the planning process is in the early stages.

“We are a long ways from being able to say we’re going to make it work,” he said.

Cross Street Partners has worked on a wide variety of historic renovation and mixed-use development projects across Baltimore and the nation.

The firm played a major role in transforming old buildings into new spaces, including an old brewery, former industrial sites and a public marketplace.

Cross Street Partners was the developer of the world headquarters for Under Armour, the sports apparel company.

Most of the upper commercial floors of the Arcade buildings have been unoccupied since about 1978, and the complex was dealt a devastating blow when the indoor shopping area closed in early 1991, city officials said.

In subsequent years, there were proposals to make the Arcade an aviation hall, a museum center, a mix of art offices and apartments and an office center for tech companies. None of the projects materialized.

The complex’s utilities were shut off when it was transferred ownership in 2005.

Berg bought the property in 2009 and unveiled ambitious redevelopment plans. But those fell by the wayside, and city inspectors a couple years later declared the building a public nuisance.

But this revitalization proposal involves an experienced development team who have a bevy of funding sources they can access, said John Gower, Dayton’s urban design coordinator.

‘Not a sprint, this is a marathon’

Previous redevelopment attempts came during times when people were fleeing urban areas, and today there are more economic incentives and financial tools to help close funding gaps, he said.

But Gower said the memorandum of understanding is really a roadmap for moving forward with planning.

“I need to caution everyone: This is not a sprint, this is a marathon,” he said. “We probably have 1,000 more hurdles in front of us.”

Gower said on a scale of one to 10 in terms of difficulty for redevelopment, the Arcade ranks a 12 or 14. But he said restoration is achieveable by “eating the elephant one bite at a time.”

Dayton Mayor Nan echoed Gower’s sentiments saying, “I am excited that we have partnered with a developer who has a long track record in successful adaptive reuse of historic buildings and urban mixed use development.”

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