A St. Louis-based lender has secured a $7.49 million loan for Financial District Properties' renovation of the landmark Union Arcade in downtown Davenport.
The loan's closing was announced Friday by Love Funding, one of the nation's leading providers of FHA multifamily, affordable and health care financing. The loan is part of the financing package for the $13.7 million project, which will convert the former office building into new housing.
Harry Cheatham, senior director of Love Funding's St. Louis office, secured the loan through the U.S. Department of Housing and Urban Development, or HUD, insurance program for substantial rehabilitation and construction loans.
To receive the HUD loan, Cheatham said a project has to create new rental units.
"They can be market rate, which is the case here, or they can be subsidized units or affordable housing units," he said.
Cheatham said the debt represents about 60 percent of the project's cost, with federal and Iowa historic tax credits making up most of the remainder. The project also will benefit from a 10-year tax abatement, which will provide more than $100,000 in savings annually.
Loves Funding is one of the Love Cos., a St. Louis-based investment holding company.
Bryce Henderson, Financial District Properties chief financial officer and chief operations officer, said this marks the first time the development company has utilized the HUD program. The project also received state brownfield tax credit and is in Iowa's Enterprise Zone, which provides a state sales tax refund and up to a $14,000 tax credit per housing unit.
Using the HUD program, he said, Financial District Properties was able to obtain low-rate, non-recourse financing during construction and a 40-year fixed-rate loan.
''The funding is all in place; now it's just a matter of getting it built,'' Henderson said.
In fact, under HUD rules, the loan had to close before the general contractor, Ryan Cos., could begin demolition and abatement work in the building.
"There has been some activity, but nothing of real note," Henderson said.
Trash chutes were installed last week for demolition to begin.
The near century-old Union Arcade will be converted into 68 market-rate apartments with 8,100 square feet of commercial space.
It is not the first downtown renovation for Rodney Blackwell and Financial District Properties. The company also is investing $10 million in creating 29 apartments in the Wells Fargo building.
"HUD is committed to helping preserve historic properties such as the Union Arcade building," Cheatham said. "The agency's loan insurance programs are an economical way for local planners and developers to revitalize urban areas while maintaining their historic legacies."
The ground level of Union Arcade was built in 1915 as the Union Savings Bank and Trust. The upper level was added in 1924.