LORAIN — A development deal for the historic Broadway Building is underway, but details of the project have leaders at City Hall feeling concerned about its viability.
Chicago-based developer Jim Louthen has proposed the building, which sits at Broadway and East Erie Avenue, be turned into a 58-unit apartment building for those ages 55 and older to the tune of $12.53 million — $1.07 million of which he wants the city to provide.
“I’m honestly so unsure of this deal that I would recommend that the mayor and safety-service director never sign off on this project,” Director of Building, Housing and Planning Leon Mason said. “I’m so confident that this is a bad deal that if it were to get financing from the city somehow, I would quit my job.”
Louthen, president of the development firm ReTown, and architect Gary Fischer initially showed interest in rehabbing the building in 2014, and while they got off to a slow start, the project picked up significant steam this year when the building’s owner, Spitzer Great Lakes Ltd., made a deal to donate the building for the development to the Lorain Port Authority.
The Port Authority would then lease the building to Louthen’s corporation, 301 Broadway Partners LLC.
Safety-Service Director Dan Given said while he and Mayor Chase Ritenauer would have to sign off on giving money to 301 Broadway Partners, Mason would be the one signing the checks, and the project doesn’t make him comfortable.
“It would be me allowing it to happen, but it would be Leon signing the checks and putting himself on the line for it,” Given said. “And it’s money we don’t have to give.”
Mason said while something needs to happen with the building, the deal with Louthen is not the answer.
“This is not a power play by me or anything,” he said. “I don’t want to sound like a typical public servant here either, but I have to do what’s best for this city. I’m just trying to take protective measures here because while Louthen wants to say none of this is going to be done with taxpayer dollars, isn’t all money that comes from the government taxpayer dollars? I don’t want the city to be defrauded out of money. I’m sick of people lying to this city.”
Mason said the deal alarmed him when Louthen and Fischer couldn’t pinpoint how much money they want from the city, bouncing from $1.75 million to $1.7 million to $250,000 and back up to $1.07 million.
Mason said Louthen officially submitted his proposal to use $675,000 of the city’s Community Development Block grants and $400,000 of its HOME funds, both of which come from the Department of Housing and Urban Development, on Aug. 25.
“With our revolving loan program on hold and subject to FBI investigation, we’re really not in the position to be loaning that kind of money anyway,” Mason said. “But I really just don’t think this is the best use of our federal dollars because the project doesn’t meet HUD guidelines. There are too many holes in this proposal Louthen submitted to the city.”
Mason said Louthen wanted a definitive answer about the federal grant money by Sept. 8, giving two weeks to approve what was at the time a $1.75 million loan.
Ritenauer said the heart of the issue is Louthen is asking for money the city doesn’t have.
“We’re open to giving tax abatements, because that’s an area of the city where that is allowed, and things of that nature,” he said. “But we can’t give them money that they can’t use. If we give them HUD money and we’re not supposed to, we will have to pay it back to the federal government, and I just really don’t think that’s something we want to be doing.”
Fischer, however, said he is confused at the city’s change of heart regarding the project.
“This is something we’ve been working on for a couple of years now, and the city’s known it was going on,” Fischer said. “We thought things were going really well, we were even getting help from Council members to get it across the goal line, and to be honest, we’re a little taken aback by Mason’s comments.”
Fischer said Mason’s claims the project didn’t work with HUD guidelines are “unfounded” and despite any issues, he’s still excited to be a part of the project.
“This isn’t any different than any other deal I’ve been a part of,” he said. “It’s going to take a little bit more will to get it through, but I think it’ll really be a great thing for this community and the downtown area.”
Ritenauer said the city hasn’t had a change of heart regarding the project but about how it’s funded.
“We want to support this in any way we can,” he said. “The city wants to participate, but we want to do it in ways that we’re allowed to. Since we were approached about this, we’ve exerted hours upon hours of city resources to look into it, and I think that shows we’re willing to work with them, but we want to do it the right way.”
Given said that while the city has known the deal was in the works for a couple of years, that doesn’t mean city leaders were intimately involved when it came to the funding of the deal because it was a private business deal among Louthen, Fischer, Spitzer Great Lakes Ltd. and the Lorain Port Authority.
In August, the Port Authority entered into an agreement with Spitzer that calls for Spitzer to donate the building to the authority if the proper financing for development was secured. The Port Authority would then lease the building to 301 Broadway Partners LLC.
The deal came on the heels of a rough year for Spitzer Great Lakes Ltd., which received several citations for the Broadway Building’s exterior in January from the city’s Department of Building, Housing and Planning.
The citations included failure to maintain the exterior structure in good repair, structurally sound and sanitary so it will not pose a threat to public health and safety; bricks that appeared to be detaching from the building; and two unsafe condition violations, which said siding and masonry joints were not maintained or weather-resistant, as well as that veneer, cornice, belt courses, trim and other decorative features were not property anchored or capable of supporting loads.
After the citations, it was several more months before the case appeared in the city’s housing court, which was founded in 2012 as a way to fight blight. The case’s appearance quickly followed a letter from Ritenauer to City Council that said the repairs needed to be made, a development deal needed to take place or the building needed to come down.
The letter echoed a similar request made by former 4th Ward Councilman Bret Schuster in 2013 at a City Council meeting, who referred to the building — empty since 2005 after the Spitzer Plaza Hotel closed due to declining occupancy rates — as “the piece of crap at the end of the street.”
According to Lorain Municipal Court records, Spitzer Great Lakes Ltd. has since paid the housing court fines totaling $2,172 for its building violations.
Mason said the bulk of his frustration comes from feeling that he and the city were being sold a bill of goods when it came to the project’s initial pitch but now the proposal is saying other things.
For example, Mason said the concept was pitched as market-rate housing for seniors, but upon further inspection of the proposal, only 10 of the units would be market rate and the rest would be affordable housing.
“I’ve seen the city be defrauded enough times with a lot of broken promises, and that’s all this deal is,” Mason said. “For example, we were originally told 58 market-based units for seniors. Well, 48 out of 58 of the units are actually affordable housing. And there is nothing wrong with affordable housing, but when we’re being sold a bill of goods, I expect it to be accurate.”
In a Sept. 16 email to Mason, HUD program manager Richard Hendershot said the rent rates listed in the proposal are above what they should be for affordable housing in the area, with one-bedroom unit rent listed at $650 and two-bedroom unit rent listed as $800. HUD limits are $614 and $773, respectively.
Hendershot also expressed concerns about whether the project is even eligible to received block grant money because the way it’s proposed, that money is just listed as a line item in the sources of funding and it can’t be.
“In regards to the proposed Broadway project in the city, the Columbus Field Office has concerns over the eligibility of the project with the use of HUD dollars,” Hendershot’s email said. “Within the proposal there is no explicit use for the CDBG funds, which can’t be used to the overall development of a project.”
Showing the money
While the project has received $440,203 in historic tax credits, as the building was added to the National Register of Historic Places in 1985, Mason said the remaining funding Louthen has lined up is rocky at best.
For example, Louthen was planning to receive housing tax credits from the Ohio Housing Financing Agency, which operations manager Karen Banyai said in an email to Mason that as long as the project qualifies for the tax credits, they would be received. However, Louthen missed the last application window for 2016 and will have to wait until January to apply for the credits.
Given said another investor listed in Louthen’s proposal, Victor Nardini, was initially very interested in the project and — upon doing more research — is now hesitant and still negotiating.
Nardini declined comment.
Mason said Louthen and Fischer should be putting some of their companies’ own money into the project rather than relying on the city.
“His company isn’t putting in any money to this project,” he said. “He has no skin the game here. If this project is so good, where is your money? You can’t ask me to put 1 million taxpayers’ dollars into this project if you’re not willing to take out loans from other people.”
Lorain Port Authority Executive Director Rick Novak said if Louthen and Fischer can’t garner the necessary financing, then the development process starts all over and the building remains with Spitzer Great Lakes Ltd.
“The board has gone through all of the project’s analyses and completed all of its agreements as far as leasing the building, so the ball is really in Louthen’s court at this point,” Novak said. “They’ve been keeping us updated about the status of the project probably every two weeks or so. I know they’re still looking at the financing because, with a price tag of over $10 million, it’s a complicated deal, but I know he’s looking. Funding opportunities for something like this really ebb and flow, so it’s all about finding what’s best.”
Given agreed the deal was complicated, but it was still going to come back to the taxpayers’ pockets.
“It’s just not something I feel good about doing right now,” Given said. “Especially with so many holes in the funding, coupled with the fact that we haven’t seen any engineering drawings — real, honest to goodness plans — rather than the sketches that are on Louthen’s website.”
Tough to verify
Louthen has several projects listed on his online portfolio at retown.com, with many in Illinois but also some in New Mexico, Florida and Michigan. He even includes the work he completed at Black River Landing in Lorain.
“ReTown President and Managing Director Jim Louthen led the redevelopment of Black River Landing, a project initiated by the Lorain Port Authority, into a $7 million multimodal center and riverfront park located on a 13-acre parcel along the Black River in Lorain, Ohio,” the website says.
Novak said Louthen’s experience with that particular project isn’t that extensive.
“He was an architect with the firm that designed the initial plans and was one of several consultants involved, but he ultimately left the firm before the project was done and wasn’t involved at the time of completion,” Novak said.
Other projects were completed so long ago that the municipalities’ representatives couldn’t recall if Louthen had done the work.
Michael Jacobs, deputy village manager in Palatine, Ill., said the Metra Train Station Louthen claims as his on his website was completed close to 20 years ago and there is no one left in the administration who would have worked with him.
Dawn Jenich, communications manager for the village of Mundelein, Ill., said due to the high turnover in City Hall, she could not find anyone who would have worked with Louthen on the downtown.
Evanston, Ill., City Manager Wally Bobkiewicz, who began working for the city in 2009, said he had never heard of Louthen or his work on the city’s Howard Streetscape project.
Mason said he had called several of the places where Louthen has said he has done work and couldn’t find any projects he had completed, but he did find the village of Robbins — 20 miles south of Chicago and facing many of the same problems as Lorain — where Louthen planned to develop a quarry and mine that would take over one-third of the town.
Robbins and the development with Louthen became the subject of a 2013 Cook County sheriff’s investigation after residents complained about a lack of transparency regarding the nature of the project and its conception.
“Our investigation has made it clear that the interests of the residents of Robbins were not protected nor were they the focus of the negotiations,” the investigation, which began in October 2013 and was completed in January 2014, read. “Based on the public outcry, it was clear that the residents had not been adequately advised about the project, nor included in its planning.”
The investigation found the agreement disproportionately favored Louthen, specifically the speed with which the legislation needed passed.
Louthen said the Robbins project was still going, but since it was a major citywide project, comparing it against Lorain’s Broadway Building wasn’t fair.
“Hurried and unscrupulous,” Mason said. “God, doesn’t that sound familiar? It’s basically what he’s doing here. I was given two weeks to make an investment decision on this project. This rings eerily similar.”
Mason said he’s also hesitant to do business with Louthen because he initially couldn’t find ReTown’s articles of incorporation with Illinois’ Secretary of State. Louthen told Mason in an email that ReTown isn’t incorporated in Illinois but its parent company, Town Builders LLC, is.
However, a note at the bottom of Town Builders LLC’s articles of incorporation says it is “not subject to series,” which Mason said means it is not eligible to serve as a parent company and therefore, ReTown should not exist.
Louthen said he has several companies under the umbrella of Town Builders LLC and if Mason, or other members of the city, had been concerned about it, they should have said something.
Fighting for a future
Mason said a whole new wrinkle gets added to the problem when people circumvent him and his department, making calls to agencies like HUD trying to get information.
“I’ve been saying since I took this job that I want to be transparent,” he said. “I can’t do that if I have Council members and other people in this government calling HUD and asking questions. Because then all they do is call me back and wonder who this other person is and why are they calling HUD. There’s a protocol for something like this that isn’t being followed. People are actively trying to cut my department out of this, and I’m not going to let my department and the city be painted in a negative light for doing the right thing.”
Councilwoman Mary Springowski, D-at large, said she has made calls trying to help this deal along because she feels as though it could be a catalytic move for the downtown’s revitalization.
“I was nervous about this project at first,” she said. “But I’ve gotten on board, and I don’t understand why the administration has seemingly reversed its position on it. I don’t want to see this building torn down. I want to see it saved, and if giving CDBG and HOME funds is what’s going to do that, I think it’s something we should really consider.”
Springowski said she feels as if the city took steps in the right direction with Black River Landing and its events such as Rover Fest and Rockin’ On The River, but more needs to be done.
“I’ve tried to talk to the administration about this, but it’s their way or the highway,” she said. “And this is why developers say there are too many obstacles when they try to come to Lorain, but maybe if they saw us work through this difficult deal with Louthen, they might be more willing to come here.”
Louthen said there’s not a line of investors and developers coming to Lorain, and he feels as though the city has skewed the work that’s been done on the project.
“If we have to fine tune this project without banking on city funds, that’s what we’re going to have to do,” he said. “But if this deal doesn’t go through, the future of the building is in jeopardy, and it’ll likely have to come down, and I know that’s not what the community wants to see.”
Ritenauer said while he gets that people want to see the building repurposed, the city can’t run the risk of getting emotional about it.
“There’s a certain nostalgia for people when it comes to this building, and I get that,” he said. “I want to see it repurposed, and I don’t want to see it come down either. But we have to look at this from a regulatory and financial perspective, and would making this particular deal by giving federal dollars be the best thing for the city?”
Mason said he understands that people want to see economic development, but there has to be a better deal out there.
“This is no joke. I’m not going to play with the public’s money,” he said. “There’s a distrust of City Hall going on here along with a deception from the people who are trying to push this deal through. My job is to do the best for the public, and this has more holes that a Swiss cheese factory. So many people want to jump, but if the public loses money, then it doesn’t work.”
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