Historic TN Building Features Affordable Housing Again

The adaptive reuse of the historic Daugherty Furniture Company building in Clinton, TN, turning it into 39 units of affordable housing, is reviving one of its original uses, as the upper floors were devoted to housing when the retail property was built in the 1940s.

The building, finished in 1942, included 20 apartments and 20 tenement efficiencies above the furniture store, according to Kent Leach, founder of developer Hickory Creek Capital Partners, Lenoir City, TN.

“The top two floors were always affordable housing,” he says. The efficiencies “were very small, probably eight by ten. They had enough room for a bed and a desk, and they shared a bathroom like you would in a college dormitory.”

The 20 “normal” apartments had windows that faced outside, Leach says, but the efficiencies did not. They had windows that faced the hallway, which was lit by a skylight.

A dam built in 1939 by the Tennessee Valley Authority and the use of the nearby town of Oak Ridge for the military’s World War II nuclear effort the Manhattan Project created many jobs in Clinton and the need for housing and furniture for those houses.

“In order to enrich uranium, they (the Manhattan Project) needed lots of water and lots of electricity,” notes Leach.

“During this era, Anderson County saw a significant surge in population growth due to the influx of workers, which, in turn, spurred local economies by increasing demand for various household commodities, like furniture, hardware and appliances,” Leach says. “These items were essential for accommodating the rapidly growing workforce.”

“The town of Oak Ridge was built overnight,” Leach says. (Clinton is about 20 minutes north of Knoxville and ten minutes east of Oak Ridge.) The furniture store was right across the street from a hosiery mill, providing jobs for residents of the building.   

The building, erected by J.R. Daugherty and designed by architect Clem H. Meyers, was a furniture store into the mid-1980s until the owner passed away. The store was added to the National Register of Historic Places in 2010.

Supply Shortages
Since it was built during World War II, there were supply shortages that Daugherty responded to in a creative way. He had bought a coal mine, and he used some of the cart railings at the mine for metal in the building.

The property deteriorated after the family of the owner could not put together a deal to redevelop it around 2008. “The owner I bought it from bought it on the courthouse steps,” Leach says. “The building was in disrepair. The roof was leaking, and it was really in bad shape. But the exterior looked fine. The walls are 18 inches thick. It’s a fortress.”

The property being on the Historic Register turned out to be a plus for Hickory Creek when they applied for Low Income Housing Tax Credits since the designation gave them a couple of extra points on their score.

“Nine percent credits are really competitive,” he notes. In the end, the project qualified both for LIHTCs and Historic Tax Credits.

Originally, Hickory Creek wanted to develop 42 units in a five-story building, but this was a COVID deal. We applied for credits in March of 2020.”

With skyrocketing material and labor costs caused by the pandemic, Hickory Creek did not have enough tax credits, and the deal sat in limbo for two years. It received an additional allocation of credits in 2022.

“That was enough to get the deal to the finish line,” Leach says. In the meantime, interest rates were starting to climb, “so we were fortunate to close at the end of 2022.”

The design called for a few changes to the outside of the building, including a 30-foot-tall sign announcing the furniture store.

“We had to refurbish that,” he says. “We had to restore the awning in the front, and we did new storefront glass.”

A New Structure
Also, “We built another structure, which is a stairwell and an elevator tower on the back of the building.” The back “had a fire escape that was unsafe and needed to come off.”

Inside, the design kept an unusual feature, “milk doors,” small openings (18 inches tall) in the unit doors to allow for the delivery of milk.

The old tenement unit windows were recreated but then blacked out for privacy.

There was also a storefront entrance on the second floor that was preserved, and a mezzanine that was partly preserved. That creates a two-story effect in the lobby, where Leach says they will probably end up installing a museum of sorts with memorabilia from the building and an old cash register.

In addition, “There was a large walk-in vault on the third floor, and we incorporated that into one of the apartments. The vault actually has the washer/dryer and pantry shelving inside.”

Leach notes, “We’ve got 39 apartments with 18 different variations. It was very difficult to repeat the same thing from floor to floor.”

In a neat synchronicity, construction started Dec. 6, 2022, and the Certificate of Occupancy was received on Dec. 6, 2024. The Grand Opening was on January 23, 2025.

“We went over time and over budget a little bit, but we got it done,” he says.

The building ended up at 39 units instead of 42 after a redesign (Goss Design of Knoxville was the architect). Three of the units are multi-story, with circular staircases between the floors.

“Some creative things had to take place,” Leach says. “Just about every story had a different ceiling height, so that was a challenge.”

The one-, two- and three-bedroom units are about a third leased up, Leach says. “We’re being very selective. We’ve attracted a younger crowd that’s interested in that style of living,” he says, noting “Living in a loft is not for everyone.”

At 100 percent affordable, Hickory Creek was looking for working-class tenants. “The last tenant I talked to worked at a convenience store,” Leach says. And he says of the tenants in general, “Most everyone is very pleased.” One of the tenants, an administrative assistant in an elementary school who had lived in a loft-style apartment before, messaged Leach “I love it. I can’t stop thinking about it.”

Daugherty Lofts’ financing sources included $9.1 million in Federal LIHTC and $1.4 million in Historic Tax Credits syndicated by Hunt Capital Partners. Legacy Bank & Trust in Springfield, MO provided $10.6 million in construction financing and about $2.5 million in permanent financing. The Tennessee Department of Economic and Community Development provided $300,000 in state historic grant funding. River and Valley Department LLC provided a $650,000 soft seller note.

Total development cost is approximately $14.5 million, Leach says. Daugherty Lofts is Hickory Creek’s first affordable housing development.

Hickory Creek is primarily an alternative investment fund. Would it do another historic development like Daugherty Lofts?

“I think I’m satisfied with historic development,” Leach says. “This building had a lot of surprises for us. But I’m going to bring more affordable housing out of the ground.”