Consider it an urban fairy tale – except it really happened.
There once was a rundown building in downtown Fort Wayne. Hundreds of people drove by every day, shaking their heads in sadness as weeds grew and bricks crumbled during the six years the former retail space sat vacant.
Then, almost seven years ago, Starbucks decided to open one of its popular coffee shops in that spot, the historic Firestone Tire Building, and preserve its 47-foot, art deco tower.
Today, the Jefferson Boulevard joint is jumping. So many caffeine-addicted customers flock to the spiffed-up building from early morning to late evening that it’s often tough to find a parking space.
Several local leaders hope to re-create that venti-sized success through the Downtown Development Trust, a non-profit that allows them to sell properties at a discount to folks who promise to open businesses bound to draw crowds.
The trust is in final negotiations to sells its first purchase, the former Instant Copy building at 232 W. Wayne St. Officials expect to close the deal in May.
Supporters say the trust is an important vehicle for downtown renewal. But at least one city official worries that developers might rely on attractive deals available from the trust and pass up other downtown real estate ripe for reinvention.
Nuts ’n’ bolts
The Downtown Improvement District, often referred to as DID, and the Fort Wayne-Allen County Economic Development Alliance jointly created the trust in early 2011.
The nine-member board doesn’t include any DID or Alliance staff. Even so, DID and Alliance staff are the muscle behind making the non-profit’s goals a reality.
Karl Bandemer, senior development officer with the Alliance, said the trust has less than $10,000 in the bank, the result of a couple of private donations. It’s not enough to pay a staff, so he and Rich Davis, DID’s president, intermingle trust business with their regular, economic development duties.
The men have studied successes in other revitalized downtowns, including Chattanooga, Tenn.; and the Michigan cities of Battle Creek, Kalamazoo and Grand Rapids.
Those cities have successfully battled the doughnut-hole phenomenon of a deserted downtown surrounded by vibrant suburbs by making sure their downtowns have destinations that attract people to shop, eat and live.
The trust’s current priorities for Fort Wayne include getting a grocery, more restaurants and affordable apartments to open downtown.
Bandemer wouldn’t reveal details of the Instant Copy building negotiations, but he said the sale won’t happen unless the potential buyer shows a clear plan to develop the building according to those priorities. If a first-floor retail business doesn’t open within 12 months, the trust could reclaim the building, he said.
Assuming all goes well, the trust could potentially buy and sell two or three more buildings before the end of the year, he said.
Why a trust?
As an IRS-approved non-profit, the trust can help make downtown development more affordable.
Let’s say an investment group or other organization owns an empty building on Berry or Wayne. If the owner doesn’t have plans for the building and would welcome a charitable tax deduction, it can sell the property to the Downtown Development Trust for less than full market price.
The trust isn’t in it to make a profit, Bandemer said. The trust would market the property, find the right developer and sell the building for what it paid for it – allowing the developer to reap the savings.
The cost of constructing or remodeling a 50,000-square-foot building in outlying areas is less than the total to do the same-size project downtown because of higher property prices, Bandemer said.
Steve Zacher, president of The Zacher Group, confirmed that downtown land costs more because availability is limited.
The trust is trying to eliminate that price difference.
It attempts to level the playing field, Bandemer said.
But, as we said earlier, the trust isn’t flush with money. The money it has in the bank wouldn’t be enough to buy even one property. That’s where the Community Foundation of Greater Fort Wayne comes in.
The foundation authorized a line of credit up to $1 million to allow the trust to begin acquiring real estate, said David Bennett, the foundation’s executive director. But each purchase first must be approved by a foundation subcommittee, Bennett said.
The loan is structured so it doesn’t have to be repaid until after the trust sells the property.
The foundation chose to back the project because it’s so important for a city to have a thriving downtown, Bennett said. Not only are younger professionals drawn to cities with active downtowns, but a dilapidated downtown would reflect poorly on Fort Wayne and the region as a whole, he said.
If the trust had deeper pockets, it could afford to buy attractive properties even when there wasn’t a clear exit strategy, the DID’s Davis said. Some other cities have the luxury of what they call patient equity, the ability to invest in property for years. But those cities are home to large, wealthy foundations that act as benefactors, sometimes pouring tens of millions of dollars into the acquisition fund.
The trust has applied for a share of the $75 million Legacy Fund, which came from the lease and sale of City Light to I&M. Bandemer hopes to win a slice of the pie – with strings attached. If a grant would include a requirement that the trust raise matching money, that might make it easier for the trust’s leaders to persuade other local foundations to make donations.
In the meantime, Bandemer said, We’ll work the best we can with what we have.
Remember the successful Starbucks renaissance of the former Firestone Tire Building?
That project was conceived and executed before the trust was formed, although the developer – Dallas-based Marathon Builders – was offered up to $105,000 in grants and loans from local officials as an incentive to clean the place up.
City Councilman Mitch Harper, R-4th, wonders whether the Downtown Development Trust could discourage such private investment.
Developers could disregard properties that don’t pass through the trust and emerge with a lower price, he said.
I think it’s a concern, said Harper, who sits on both the DID and the Alliance boards. It has to be part of the debate.
Mac Parker, the non-profit’s chairman, said the trust isn’t going to stifle private enterprise.
It’s not as if the trust can afford to buy all the vacant property in the downtown area. The goal is just to get some languishing properties into the hands of people with the ideas and energy to convert them into thriving destinations, Parker said.
A trust created to buy downtown property is new to this area but not an untried idea, Parker said. Kalamazoo created a similar non-profit more than 10 years ago and has since bought and sold millions of dollars in property in a successful bid to revitalize its downtown, he said.
Transparency is another issue.
Harper also worries that downtown property could pass from public ownership – and scrutiny – into the more opaque ownership of the trust. If city-owned property were sold to the trust below market value, he said, taxpayers would be the losers.
Parker couldn’t think of any city-owned property that’s ripe for the situation Harper described. What’s more, Parker doesn’t see any reason why city officials would sell property to the trust when they could sell it directly to a developer.
Anything that’s a new entity, particularly in Fort Wayne, he said, everybody has a lot of concern.