Historic restoration in store for Commonwealth Apartments under tax credit proposal
CEDAR RAPIDS – Entering the Commonwealth Apartments is like taking a step back in time.
Built in 1925 as an extended-stay hotel, the building, at 1400 Second Ave. SE, features arched doorways and windows, black marble baseboards and elaborate decorative columns.
At nearly 90-years-old, however, the seven-story building could use some restoration work, co-owner Jeff Frese acknowledges, and is now on-target for help in preserving its rich history.
Developer Richard Sova of Illinois-based Landover Corp. plans to use historic tax credits and federal housing tax credits to restore the building as affordable senior housing.
Sova intends to purchase the apartment complex and begin work this fall on both the Commonwealth Apartments and a new affordable housing unit called Kingston Village in southwest Cedar Rapids.
Between the two projects, the Iowa Finance Authority earlier this month awarded $1.4 million in federal Housing Tax Credits to support the affordable units: $722,866 for the Commonwealth project and $678,154 for Kingston Village.
“This is going to save it for a long time,” said John Sullivan, a vice president for TWG Development in Indianapolis, which is partnering with Landover on the Commonwealth project. “It will be rehabilitated to restore all of the historic features as much as possible.”
TWG has done “quite a few” similar projects involving historic restoration in Indiana, Sullivan said, including 1010 Central, a downtown warehouse transformed into luxury apartments in Indianapolis.
“We were looking for historic buildings across the country,” he said, noting that this is the first project for TWG in Cedar Rapids.
Sullivan said work is being completed to nominate Commonwealth for the National Register of Historic Places. Already, the building is in the Second and Third Avenue Historic District, one of two local historic districts in Cedar Rapids.
The fact that Sova is working on a housing project in the historic district involves a bit of irony and serendipity.
Less than two years ago, Sova was nixed in his attempt to develop a $7 million affordable senior housing project just a block or so away from Commonwealth on Third Avenue SE. Intended to be built on a parking lot owned by St. Paul’s United Methodist Church, the plan involved trading the parking lot for five buildings, four of which were considered important structures in the historic district.
Because those buildings would have been demolished for church parking, the city’s Historic Preservation Commission opposed the plan, which was eventually rejected by the City Council.
“I kind of wish I had known about that ahead of time,” Sova said of the opposition. “I wouldn’t have gone forward with it.”
At the time, he said Landover wasn’t in the business of rehabilitating older buildings, but Frese approached him, anyway, about the potential for purchasing the Commonwealth Apartments.
“I had spent time there and I still wanted to do something there,” said Sova, whose family has roots in Cedar Rapids.
Now, the $12.8 million Commonwealth project has $2.375 million reserved in state historic tax credits for the work. The amount of federal historic tax credits will be known later, depending on the cost of the restoration work. Under the federal and state programs, nearly 50 percent of rehabilitation expenses can be recouped.
The project calls for renovating the interior of Commonwealth to accommodate 84 units for seniors, with 77 offered as affordable housing and seven at market rate.
Because some of the apartments were designed as little more than hotel “sleeping rooms,” Sova and Sullivan said interior renovations will include expanding some of the units into one- and two-bedroom apartments, reducing the 102 units down to 84.
Under the proposed project, some of the residents would qualify to live in the renovated Commonwealth Apartments and others will be offered assistance in moving, Sova said.
If all goes as planned, both projects are expected to be completed in mid-2015.
Under the affordable housing program, the Internal Revenue Service makes an annual per capita allocation of federal tax credits to each state. The Iowa Finance Authority allocates the credits to developers in Iowa.
The developers, in turn, sell the tax credits to investors to generate equity for the housing developments. The tax credits provide a dollar-for-dollar reduction to the investor’s federal tax liability on ordinary income.
This month, the agency awarded $7.7 million in tax credits to 15 housing developments in Iowa, after applications were received from 44 projects requesting more than $23 million.
While the paperwork involved is extensive, Sova said it’s the only viable system for the projects.
“These deals can’t be done without these tax credits,” he said.