JEFFERSON — Efforts to redevelop the former Foremost Buildings Inc. property, which once served as Plant III for Schweiger Industries, are continuing to advance.
Gorman & Company Inc., Oregon, is looking to develop the existing structure, located on the banks of the Rock River at 134-138 W. Candise St. in Jefferson, as a workforce housing apartment building for approximately 40 one-, two- and three-bedroom loft-style units.
Due to the lower level being located in the floodplain, all units would be on the upper floors at street-grade level. The lower level would be covered parking for residents.
“This has been a two-and-a-half-year odyssey to redevelop the old Foremost Buildings site,” Jefferson City Administrator Tim Freitag said during Tuesday’s Jefferson Common Council meeting. “If we get to where we finish the project, I suspect you’d have to look really hard to find a more impactful project on the community, particularly downtown.”
Redeveloping the property is an “extremely challenging” undertaking that likely will cost more than $8 million, he noted.
Discussions originally involved the possibility of razing the structure. However, because of the thickness of the concrete, doing so would be incredibly expensive, as would clearing the site afterward.
“It’s just tough to make those numbers work in our market, and particularly downtown,” Freitag said. “So, we looked at a third alternative and we thought, ‘Is it possible to find a developer — an experienced one at that — that would look at converting this industrial building (and) repurposing it for a different use?’”
They found that developer in Gorman & Company, he said.
According to its website, Gorman & Company Inc. specializes in downtown revitalization; the preservation of affordable housing; workforce housing; and the adaptive reuse of significant historic buildings.
“Gorman was able to get the site under control, and then we had to all roll up our sleeves and figure out, ‘OK, how can you finance a project like this?’” Freitag explained. “I would say there’s really two funding prerequisites to having this project work.”
The first is tax credits from the IRS federal Low-Income Housing Tax Credit (LIHTC) program, which is administered by the Wisconsin Housing and Economic Development Authority (WHEDA). The second are tax credits from state- and federal historic preservation programs.
A tax credit lowers the amount of federal income taxes owed by owners/investors in qualified projects dollar-for-dollar.
The LIHTC, which are “highly competitive,” were awarded to the Gorman project in the amount of $548,182 a few weeks ago, according to the city administrator.
Gorman first had applied for the LIHTC funding in the 2017 cycle, but because historic tax credits were a project funding component and the state budget was proposing to eliminate said credits at the time, the Gorman project was deemed ineligible.
When it was determined that historic tax credits would remain, Gorman applied for the 2018 funding cycle and was selected as a recipient.
“There are about 50 projects statewide that get these things,” Freitag said. “The vast majority are in big, urban areas — Madison, Milwaukee, Green Bay — but there is a rural component to the program, and our project just outscored other applications, quite honestly.
“Those (credits) are pretty powerful,” he continued. “It might be $548,000, but you get to take that each year over a 10-year period, so you’re really leveraging something more over $5 million.”
In December 2016, Gorman’s Wisconsin market president, Ted Matkom, went before the Jefferson Common Council to give an update on the project. At that time, he noted that there are a lot of misnomers and misconceptions about WHEDA housing.
The term “workforce housing” often is abused, he said. However, it’s appropriate for WHEDA housing.
“There’s two types of housing that are affordable housing that I like to differentiate between,” Matkom said. “One is Section 8. That’s where the government pays your rent. That’s different from this. That is not what this is. This is Section 42 housing and it’s financed by tax credits.”
The Section 42 Low-Income Housing Credit Program supports a variety of housing opportunities.
“That taxpayer can build new housing or rehabilitate existing buildings,” according to the IRS website. “The housing can be apartments, single-family housing, single-occupancy rooms or even transitional housing for the homeless. A building may be mixed low-income and market-rate rental units and a portion of the building may be used for commercial use. Generally, the housing must be used on a non-transient basis … (and) must qualify as residential rental property.”
Developers such as Gorman typically will use tax credits to generate an equity investment in a property or project, which reduces the amount of lending and monthly debt service needed to finance a development, Freitag explained. In turn, that allows owners to charge reduced monthly rents.
Freitag said Gorman likely will convert the tax credits in one of three ways:
• Claim the tax credits directly against its own income liability.
• Sell credits to an investor in exchange for capital, or equity, for development of housing.
• Sell credits to a syndicator who bundles the credits from different developers and sells them to investors.
“They will sell the credits to an investor in exchange for capital, probably,” Freitag said. “There is a market for these things. They may not be dollar-for-dollar, could be 80- to 90-cents. So they’ll sell those on the front end to someone who has income tax liability — a bank, for instance, or an insurance company or something like that.”
The state- and federal historic property tax credits are “equally important,” he noted.
According to the Wisconsin Historical Society, the Federal Historic Preservation Tax Credit Program returns 20 percent of the cost of rehabilitating historic buildings to owners as a federal income tax credit. The Wisconsin Historic Preservation Tax Credit Program returns the same amount, but as a Wisconsin income tax credit.
In order to qualify for the programs, a building must be considered “historic.”
“A building is considered ‘historic’ if it is listed on the National Register of Historic Places or if the NPS (National Parks System) determines that it contributes to the character of a National Register historic district,” the Wisconsin Historical Society website states. “A building can also receive a preliminary determination of eligibility for the Register through the tax credit application process. In this case, the owner must formally list the property in the National Register prior to claiming any tax credits.
“If an owner is using only the state tax credit, a building is considered ‘historic’ if it is listed in the State Register or the National Register of Historic Places or if it contributes to the character of a listed historic district,” the website continues.
Freitag explained that, in 2016, at the urging of the Redevelopment Authority, the city hired a historic property consultant, MacRostie Historic Advisors, of Chicago, to conduct the research needed to determine if the 134-138 W. Candise St. building could be deemed eligible for placement on both the state and national registers.
“Based on the information provided, we believe the property may be eligible for listing in the State and National Register of Historic Places,” Wisconsin Historical Society National Register Coordinator Peggy Veregin wrote in April 2016. “It would be eligible … in the area of Industry for its association with Schweiger Incorporated, a furniture manufacturing company which capitalized on post-World War II housing trends and furniture needs to manufacture convertible furniture for the home market. This company outlasted other furniture manufacturers in Jefferson and represents an important local industry.”
The building is the last remaining of five buildings that housed the Schweiger companies, Freitag explained. The other four have been lost through various causes, including demolition and fire.
“We did not really emphasize the architecture down there,” he said. “Although, if you are in the bowels of the building, you will see the original old building, (but) then additions, at a number of times over the years, kind of encapsulated that.
“Rather, we focused on the historical significance of this company,” Freitag continued. “It was one of the largest furniture companies in the country, maybe the largest upholstery maker in the country, and, of course, it was extremely significant to the development of this community.”
Foremost Buildings Inc. purchased the building in the early 1990s, but began planning to move out of the floodplain following the 2008 flood. In 2013, the company relocated to the North Industrial Park.
According to Freitag, the building will “very shortly” be added to the State Register of Historic Places. He said he expects the process for placement on the National Register of Historic Places, which is under way, to take another three or four weeks.
“They’ve got a lot of things to work through because that building’s going to be altered,” he noted. “It’s an industrial building with a conversion to multi-family, so you’re putting in a heck of a lot of windows that don’t exist there and we have to make sure, historically, that gets done right so it doesn’t wreck the significance of the property. Those are the types of issues that they’re working through.”
In terms of local approvals, the council had authorized rezoning the property from a limited industrial district to a mixed-use district in June 2016, which allowed Gorman to apply for the LIHTC funding.
“The last significant local approval that I can think of is, they’re going to need a site plan review in front of the Plan Commission,” Freitag said. “Their thinking is that’s maybe May (2018).”
Gorman already has begun designing the project and about 40 percent is completed, he added. Should all the funding come through, the aim is to begin construction this September. Construction is expected to take a full year.