Salvation Army Revives St. Louis Neighborhood

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Decaying Landmark Orphanage is Centerpiece for New Midtown

For more than a century, 3010 Apartments has been home to some of the most vulnerable people in St. Louis, Mo.

The landmark building maintains hints to its history — the community room was once an ornate chapel. Common areas glow with the light from restored stained glass windows.

This March, 3010 Apartments began a new life , welcoming residents with a variety of special needs to 58 new, sparkling one-bedroom apartments. This historic restoration is the centerpiece of an expansive effort to restore vitality to the city’s Midtown neighborhood, an effort led by the Salvation Army.

The Salvation Army Midland Division spent more than $12.3 million to redevelop the three-story, brick and limestone landmark. The apartments are just a part of the Salvation Army’s Midtown Redevelopment Project, which will spend $42 million over four phases to redevelop the old orphanage as well as the vacant city block next door into a variety of community space, social services and 122 units of housing for people with special needs who are often threatened with homelessness. Among the housing units will be 16 beds at a residential treatment clinic on the site. A fifth, final phase of neighborhood redevelopment will add retail space and new apartments renting at unrestricted, market rate rents.

A history of help

In 1907, the Newsboys Home and Protectorate first opened as an orphanage on this site in St. Louis. The Salvation Army bought the landmark building in the city’s Midtown neighborhood in the 1970s and renamed it the Harbor Light Center. It then provided short-term institutional care to clients affected by addiction, chronic homelessness and other disabilities.

“This is a fairly bustling and dynamic area, just a couple blocks from Saint Louis University,” says Jerry Burka, a real estate consultant with Old Orchard Consulting who assisted the Salvation Army.
“There was some skepticism in the community (about this project),” says Gary Busiek, divisional social services director for The Salvation Army Midland Division, the developer of the new community. “The old building had aged over the years and needed updating.”

At public hearings regarding the parking required to support the Midtown redevelopment, the Salvation Army had to win over neighbors, who had watched the old orphanage crumble over the years and could not envision the effects of improvement. Many of them wanted the old structure to just go away. But the Salvation Army had a clear vision and a solid game plan.

The Salvation Army used four different kinds of tax credit financing to pay for the $12.3 redevelopment of the old landmark: federal and state low-income housing credits (LIHTCs), federal historic rehabilitation tax credits and Missouri State Historic Preservation tax credits.

The biggest challenge for the development was winning a reservation of LIHTCs. Developers regularly apply to the Missouri Housing Development Commission. for more than four times as many tax credits as state officials have to distribute. The Salvation Army had to submit three applications before it earned a reservation.

Their first application mixed just 28 residential units with a large amount of community space and space for Salvation Army offices. The non-residential space made the project seem expensive when state officials tallied the total development cost per unit. So the developers revised the plan to double the units to 58. They built much less community space than originally planned – though they still built quite a bit. For example, a deconsecrated Catholic chapel in the complex is now a multi-use community gathering space capable of holding 100 people. There’s also a computer lab and spaces for the residents to receive services from local providers ranging from case management and mental health counseling to addiction recovery.

“We don’t want the tenants to simply isolate themselves,” says Busiek. McCormack Baron Ragan Management Services, Inc., will provide property management services to the residential spaces at 3010 Apartments, which are now leasing up ahead of schedule and should be fully-occupied by June. This year, the Salvation Army plans to start construction on a Treatment and Service Center, the third phase of redevelopment at the site, just a city block away from 3010 Apartments. The Center will include 16 residential treatment rooms as part of a program certified by the Missouri Department of Mental Health for outpatient and residential treatment of addiction. Financed by the Salvation Army, the $6.5 million center is planned to open in 2016.

The Salvation Army is also planning t develop additional community space across the street from 3010 Apartments to serve the whole multi-phase redevelopment. The new Red Shield Center (named for the organization’s famous historic logo) will include a gymnasium with a second-floor walking track, a worship center and performing arts auditorium. There will also be recreation and social activity rooms for choral, dance, fitness and instrumental training. Young people and adults will be able to study and learn at audio-visual, computer, and study rooms. A capital campaign by the Salvation Army will help finance this fourth phase of redevelopment.

The fifth and final phase of development will include a mix of commercial and retail space and apartments renting at higher, market rates. The finished building should open by 2020, according to the Salvation Army.

It takes an Army

Due to support earned by its ongoing good works, the Salvation Army has a large balance sheet to help finance such development projects. It provided 3010 Apartments with an $8 million construction loan at a very low interest rate of 0.25 percent, though the loan also included a 3 percent loan origination fee.
The new community will carry almost no permanent debt – just a loan of roughly $700,000 provided by the Salvation Army with the same, very low, 0.25 percent interest rate as the construction loan.

Because of this construction loan, the developers didn’t need to access the equity from the property’s tax credits until close to the end of the construction process. That made the property more attractive to tax credit investors. The Saint Louis Equity Fund paid 91 cents on the dollar for the LIHTCs from the 3010 Apartments, and also bought the federal historic tax credits and state housing tax credits.

Another investor, Commerce Bank, bought the state historic tax credits from 3010 Apartments. These state tax credits don’t require investors to buy an ownership stake in the property, so Commerce Bank was free to simply trade dollars for tax benefits.

The Salvation Army, first founded in England in 1861 to provide food and physical assistance to the destitute, has evolved over two centuries into a modern urban force. St. Louis’s 3010 Apartments and the entire redevelopment of this Midtown neighborhood demonstrates the organization’s continued relevance.