The former Taylor School in Davenport and Villa de Chantal in Rock Island — both historic properties that developer Chris Ales had purchased to convert to senior citizen apartments — have been transferred to his lender, Wells Fargo, as part of an agreement that settles financial obligations to the bank, he said.
Ales encountered significant cash-flow problems last summer when funding dried up for the http://www.iowa.gov/state/main/index.html">State of Iowa historic tax credits, a key piece of the complex financing he uses for his projects, he said. Unable to sell the certificates to investors for cash as he had anticipated, he ran short of money to pay his bills.
“The delay in funds caught up with us and put us in a cash pinch,” said Ales, who is known for taking dilapidated properties and turning them into useful structures. “We pulled in the reins a bit.”
Work stopped on Taylor School and the Villa, and Ales put a number of his properties up for sale.
Wells Fargo representative Doug Gibson, based in Minneapolis, said he could not comment on any questions regarding Ales, including confirmation of a settlement or any hint of what the bank is going to do with the properties that are of special concern to city officials and neighbors in both cities.
“I can’t comment” was Gibson’s response to all of a reporter’s questions.
Officials in both cities are wondering about the properties’ future, and Davenport Mayor Ed Winborn has already sent a letter to Gibson stating the city’s “strong support for a positive redevelopment of the Taylor School property, 1430 Warren St.
“The city had earmarked funds for that project and will commit to similar (or expanded) support should another proposal to revitalize the historic structure come forward,” Winborn said in the letter dated June 7.
Both Ales and city officials observed that banks are not in the business of holding onto property.
“Lenders aren’t developers,” said Bruce Berger, Davenport’s housing rehabilitation program manager. “My guess is that they would be actively looking for someone to take it (the Taylor project) on.”
Ales said he believes the Taylor project is in a good position to move forward, no matter who the developer might be, because the Iowa Legislature recently approved substantially more money for the historic tax credit program — a move that benefits developers.
As a result of Senate File 566, more than $45 million will be pumped into preservation credits over the next three years. Annual funding will rise to $20 million, more than tripling the $6.4 million the state committed this year.
That “makes it practical and economical for someone to pick up and finish Taylor,” Ales said.
If he is asked by Wells Fargo to do so, Ales said he would complete by July 1 an application for historic tax credits for Taylor. Ales also said he would help apply for low-income housing tax credits — another key piece of financing — from the Iowa Finance Authority.
Ales was turned down in a bid for those credits in March. The awarding of low-income housing tax credits is a competitive process with projects ranked by a complex set of criteria that assigns points to them. The Taylor project scored 152, and the last project to receive credits scored 165, Shawna Lode of the Iowa Finance Authority said at the time.
“It’s a competitive program, and it was our turn to sit out,” Ales said. But because of that, he believes the Taylor project would stand a better chance of receiving funding the next time round.
Taylor School has largely been empty for almost two decades; many windows are boarded and some are open with the boards missing.
Residents in the vicinity have long hoped a renovated school would help in efforts to stabilize the neighborhood.
In door-to-door polling several years ago, neighbors were very supportive of having something built within the walls of the structure, “and my sense is that they still are,” said Jo Souder Vandecar, co-chair of the Taylor Heights Neighborhood Association. “I don’t believe people want it torn down.”
Vandecar hopes “a good transition is coming down the pike” between Ales and the bank.
When work stopped on Taylor School, Ales already had done a lot of interior work, including removing asbestos, tearing out boilers, gutting the classrooms and starting the framing.
The future of the Villa property — a former school/convent operated by the Sisters of Visitation at 2000 16th Ave., Rock Island — is more questionable.
The main circa-1900, Gothic Revival-style stone building burned in a spectacular fire during July 2005 with just the shell left standing. Ales had planned to try to re-create living space within that shell, but he never got to it.
His first priority was to rehab Lewis Hall, a newer portion of the Villa that was almost untouched by flames and where he was building 27 apartments.
Ales said he was “very close to being done when the wheels came off with our liquidity” and all work stopped.
Since then, the building has been heavily vandalized. “They broke almost every window and tore out the drywall and stole the copper pipes,” he added.
Lt. Steve Harder, the first-shift watch commander with the Rock Island Police Department, said records show four incident reports at the Villa property. They include broken windows and the theft of equipment from a construction trailer in July 2006 and more broken windows earlier this month, an incident that resulted in the arrest of five juveniles who were found at the scene, he said.
Alan Carmen, the city’s planning and redevelopment administrator, said the city has not heard anything about the property’s status for a considerable time. Any changes from what Ales had planned for the site would have to go before the Rock Island City Council and city planning commission, he said. And because the property is designated a local landmark, proposed changes also would have to be reviewed by the Rock Island Preservation Commission.
The Villa was used by the religious sisters until 1991 when they sold it because of high maintenance costs. The property was privately owned and had various uses after that, including the Morning Star Academy, a Christian school that leased space there. Ales bought the property in 2004 from his second cousin, Joe Seng, a Davenport veterinarian and Iowa state legislator.
In addition to transferring the Villa and Taylor School to Wells Fargo as part of the settlement agreement, the Jacobsen Building at the southwest corner of Davenport’s 4th and Harrison streets also went to the bank along with cash and “the rights to litigate” in regards to damages caused by the Villa fire, Ales said.
The agreement was signed June 8, he said.
In the past year, Ales also sold a shopping center in Illinois, the Marycrest Activities Center on the former college campus at West 12th Street in Davenport and the historic Renwick mansion, 10th Street and Tremont Avenue, Davenport.
The Marycrest property was purchased for $380,000 by an investors group; Gary Thrapp, an area landlord and carpenter, is now the sole owner. He hopes to meet the growing need for practice gym space for youth athletics and adult leagues, and to provide programs, tournaments and training. The purchase included the building, the 2.5 acres it sits on and the parking area that serves it, he said.
The Renwick mansion, on the campus of the St. Katherine’s Senior Apartments, was sold to Seng. He assumed the existing mortgage of $585,000, according to the Scott County Auditor’s office.
The dilapidated Renwick was a wrecking-ball candidate when Ales bought it and renovated it into elegant company headquarters. The mansion is an 1800s lumber baron’s home filled with extensive woodwork, and there is a chandelier in the tower.
“That one was probably the hardest (to lose),” he said of the Renwick. “A lot of time and effort and enthusiasm went into that building.”
But when the delay in funds for the historic tax credits became apparent about this time last year, “I realized early on we were going to have to sell some of the properties to survive,” Ales said. “We kept what I feel are the core assets, our historic buildings, our senior apartments and the resort.”
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His business is now back on an upswing, he said.
The passage of the new historic tax credit legislation “will put us back on track … and make it possible for us to finish our projects,” he added.
Historic preservation tax credits have gone to about 100 Iowa projects since 2000, and several developers around the state in addition to Ales ran into cash-flow problems when funding was reduced, said Gordon Hendrickson with the Iowa Department of Cultural Affairs.
Ales “absolutely” remains in very good standing with the historical society, he said. In fact, the society recently gave him an award for his work on the Welch Apartments project in Muscatine, Iowa.
In addition to putting more money into the program, the new legislation makes it possible for investors to redeem the tax credit certificates more quickly, which makes them more marketable. At one point last summer, Ales had certificates that were not redeemable until 10 years in the future, and no one wanted to buy them.
Under the new legislation, the certificates are “now limited to going out no more than three years,” Hendrickson said.
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More units under construction at Marycrest
While developer Chris Ales has “shed” several properties to pay his bills, he still owns numerous others that he said are operating on an even keel. Financial obligations remain, but Ales believes he has the means to pay them relatively soon.
Those properties include:
— Marycrest. The 20-plus-acre former Marycrest College campus on Davenport’s West 12th Street already has about 160 senior living apartments, and work is under way to build 20 more. The former nursing building will have 16 units, and the former library will have four units and a large community space that will serve the entire complex, he said. Financing for the Marycrest project is coming from Valley Bank, he said, and the City of Davenport recently approved a low-interest $275,000 loan of federal Housing and Urban Development funds for the project.
— St. Katherine’s. St. Katherine’s Senior Apartments, built within a former girls’ school and, later, care facility at 1021 E. 10th St., Davenport, has 38 units that are leased and doing well, Ales said.
— The Welch. The Welch Apartments building in Muscatine, Iowa, “is leased up and stabilized,” he said. “A permanent loan is about to be put into place.” The building has 20 apartments that include such historic features as bay windows with stained glass.
— The Hurst. The former Hurst Hotel/Apartments building in Maquoketa, Iowa, “is leased up, and we are waiting to receive and sell tax credits” to pay off lenders who have been “waiting patiently,” he said.
Once the new Iowa historic tax credit legislation goes into effect July 1, it will take about 30 days to process the paperwork, and then “we can use those funds (from the tax credits) to settle up with our creditors,” he said.
The Hurst has 22 apartments and includes such features as wide plank floors made of pine and a grand central oak staircase.
Both the Welch and Hurst are once-grand, circa-1800s buildings that had deteriorated to the point of being candidates for demolition when Ales bought them.
Ales also retains ownership of several other new-construction senior living centers in the Quad-City area, and he just attended the grand opening of a resort development at Table Rock Lake, Mo., with condominiums, a nine-hole golf course and an inn.
Employment at his companies once peaked at about 100 and dipped to 25-30 at its lowest point. It now is back to 35-40, and he is beginning to look for new projects.
“We’re back in the game,” he said.