Creating Housing from Jewels: Dominium Renovates Unique Historic Buildings into Apartments

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Minneapolis-based Dominium is as much a developer of historic preservation projects as it is of multifamily rental housing.

The company, a major Midwest owner, developer, and manager of affordable, market-rate, and mixed-income apartment projects, utilizes federal and sometimes also state historic tax credits to help fund many of its developments.

These tax credits – and the equity they generate – help close the funding gap to enable Dominium to redevelop historic buildings, according to Dominium Partner Jeff Huggett and Senior Development Associate Owen Metz.

Huggett said the company will undertake an historic preservation project if the location makes sense and if the structure is an important part of a redevelopment district and contributes to a neighborhood or region. The historic buildings that Dominium renovates into apartments are usually in urban locations near jobs, shopping, services, and public transportation.

Huggett noted Dominium also looks for historic buildings with large windows that can be redeveloped to offer unique floor plans. Dominium’s renovated buildings and the apartments within are often much more distinctive than new developments, providing a cachet with consumers. “You can get amazingly unique structures,” says Huggett. “And unique structures usually provide unique living spaces for people. And our customers really appreciate that.”

The latest example is the Schmidt Artist Lofts in Saint Paul, Minn., Dominium’s largest project ever at a total development cost of $122 million. Recently closed and under construction, the project will include 247 affordable “live/work” loft apartments targeted to local artists, created from the renovation and adaptive re-use of the 400,000-square-foot historic brewhouse and bottling buildings that were once part of the former 15-acre Schmidt Brewery. Constructed in 1855, the complex was used to brew beer under various owners until 2002 but had been vacant for more than 10 years prior to the closing and was the subject of failed redevelopment attempts. Funding for the project includes equity generated by federal and Minnesota state historic tax credits and the federal low-income housing tax credit, tax-exempt bond financing, tax increment dollars, environmental grants, and other sources.

A local nonprofit is redeveloping nearby buildings that were part of the brewery complex for commercial uses.

A Preference for Artists

Huggett and Metz noted that a number of Dominium’s historic tax credit projects provide a preference in occupancy to artists. At each of these properties, a panel made up of residents or representatives of the local arts community screens applicants to verify that they are committed to the arts and meet certain threshold qualifying requirements. Dominium also crafts its marketing to appeal to artists. The Web site for Metropolitan Artist Lofts says, “Our goal is to create an energy-filled environment of collaborative inspiration.”

The developments are designed with features appealing to artists, including apartments that often have large windows and high ceilings. In addition, the buildings typically have fitness centers and common area spaces where artists – painters, sculptors, potters, dancers, musicians, actors – can work, practice, display their work, or put on performances. “We’ll do things like clay studios, paint studios, several mixed-media type rooms and studios, and performance spaces,” says Metz. “Residents don’t pay anything extra for it, so it increases the value of those units.”

Additional examples of Dominium’s historic preservation artist live/work loft apartment projects include:

  • Metropolitan Artist Lofts, St. Louis, Mo. Completed in the fall of 2012, this $23 million project contains 72 affordable one- and two-bedroom apartments, ground-floor studios and spaces for artisans, and underground parking created from the renovation and adaptive re-use of an historic eight-story building. “We achieved 100% occupancy in the first month of opening,” says Huggett. The building, in St. Louis’ Midtown Historic District and the Grand Center Arts District, was constructed in 1908 and once housed physicians’ offices but had been vacant for many years.
  • Leather Trades Artist Lofts, St. Louis, Mo. Opened in the fall of 2011 and fully leased within 30 days, this development has 86 affordable one- and two-bedroom apartments as well as studios and other facilities and spaces for artists. Constructed in 1912 and located in a former manufacturing district, the historic building originally contained a leather tanning business and for years had various tradesmen, craftsmen, and artists as tenants. Prior to Dominium coming along, though, it was vacant and had been the subject of several failed residential redevelopment attempts. The $20.8 million project was funded by tax-exempt bonds, equity generated by federal and state historic and housing tax credits, and other sources.
  • A-Mill Artist Lofts, Minneapolis, Minn. Dominium is redeveloping the former Pillsbury A Mill, completed in 1881 and the largest flour mill in the world for 40 years, into 251 live/work apartments for artists as well as studios and other facilities. Located on the banks of the Mississippi River, the property – a National Historic Landmark – will offer studio, one-, two-, and three-bedroom apartments. The building had been vacant for more than a decade and the prior developer had been foreclosed upon after a planned condo project failed. Dominium’s estimated $135 million project will be funded by tax-exempt bonds, equity generated by federal and state historic tax credits, low-income housing tax credits, environmental grants, and other sources.

Fundamental Requirements

According to Huggett, Dominium has developed some historic preservation projects that are 100% affordable apartments, some that are 100% market rate, and some that are a combination of affordable and market-rate. The company has been most active in developing historic preservation projects thus far in Iowa, Kansas, Minnesota, Missouri, Wisconsin.

The company’s first historic tax credit project was also the adaptive re-use of another former brewery, the former Blatz Brewing Company building in downtown Milwaukee, in the late 1980s.

In selecting historic buildings for projects, Huggett says that Dominium looks for properties, primarily urban, that are well-located. “They’re good real estate,” he notes.

Another fundamental requirement is a sufficient number of windows to allow for light-filled apartments and common spaces. “People love light,” Huggett says.

The last requirement is the ability to cobble together enough dollars and subsidies from different sources to make a transaction pencil out. “It’s important to have the proper amount of resources to bring back these jewels,” Huggett noted.

Metz said that some projects are feasible with just the federal historic tax credit and either the federal housing tax credit or market-rate rents. “But it’s unusual that you can get a deal to work without some other type of resource besides just the federal historic tax credit,” he notes. “That 20% credit just doesn’t do enough.”

Often the gap filler is a state historic tax credit. These are available in many states, including Iowa (25% of qualified rehab costs), Kansas (25%), Missouri (25%), Minnesota (20%), and Wisconsin (5%). Some states, such as Missouri, also have state affordable housing tax credits. Dominium also taps hard or soft debt of some type. Local tax abatement, tax-increment funds, and environmental grants or credits are other financing tools that it utilizes.