YOUNGSTOWN, Ohio – It’s back to square one for efforts to redevelop 20 Federal Place following Youngstown city officials’ decision Tuesday to end its relationship with Dallas-based Bluelofts Inc.
Just hours before a scheduled meeting of City Council’s community planning and economic development committee Tuesday afternoon, the city “agreed to amicably part ways” with Bluelofts and advised state officials of the return of $24 million in historical preservation tax credits awarded to 20 Federal in late 2023, Adam Buente, assistant law director, reported to the committee members.
“Following an eight-month, in-depth review of the proposal from Bluelofts, the city has determined it is in our best financial interests to formally end our discussions with them,” the city said in a statement issued following the meeting. “While Bluelofts worked diligently to identify avenues to make the project feasible given current market conditions, the project’s complexity and the proposed development financing structures would have represented too significant of a financial risk for the city – and as stewards of taxpayer dollars it is our duty to pause pursuit of their proposal.”
The city had entered into a memorandum of understanding late last year with Bluelofts, the only respondent to the city’s request for proposals seeking a partner to redevelop the building. The proposal Bluelofts submitted to the city called for developing 100 student, multifamily and penthouse units, ground-floor retail, e-commerce and mini-warehouse space, medical suites and a wellness hub in the building.
The proposal also called for Madrone Community Development Foundation, a California-based nonprofit benefit corporation, to serve as the sole member of the limited liability corporation to own the project and work with the city and Bluelofts, according to the MOU.
Bluelofts had intended to use the tax credits and develop the building using a P3 ownership model, in which the LLC would serve as the owner of the project and use tax-exempt bond financing, Buente said. After several months, it was determined that the historic tax credits could not be used with the tax-exempt bond finance structure, and in May Bluelofts proposed a student housing model involving a cooperative agreement with Youngstown State University that would permit it to use the tax-exempt bond financing structure.
“That put us in a bit of a rock and a hard place, because at that late in the game, we needed to close on any deal using the historic tax credits by the end of November,” Buente said. The city subsequently was advised by its outside counsel and bond counsel that it would never be able to close a deal by its Nov. 30 deadline on a project that size.
Under the new proposal, Madrone also would issue a 30-year note to finance the project and had requested that the city serve as the “backstop” for the $4.5 million annually to service the debt, said Kyle Miasek, city finance director.
“What they had requested of the city is that after you took in all the revenue that would be collected, potentially from rental property and from commercial rental property, and then you paid out the expenses and the debt service, if there wasn’t enough revenue to cover all the debt service and the expenses, the city would be that backstop up to $4.5 million a year,” he said.
“If they were short $4.5 [million], which would be the debt service, the city would be responsible for 100% of it,” he continued. “When we considered all the factors that are in play today – with the whole idea of tariffs, deportation of international students, the uncertainty of certain economic activities downtown – we felt that to come to council and ask for that type of commitment was beyond the comfort of the administration.”
The city already had provided an approximately $1.7 million match for a $6.9 million brownfield remediation grant it received for the building, Miasek reported. Before closing the building for the remediation project in 2022, it was subsidizing the building’s operation at a rate of about $400,000 annually.
“It seems like it would have put an even greater burden on us than what we had before,” said Councilman Julius Oliver, 1st Ward, chairman of the CPED committee. He asked what the city’s options were.
“Just like any other piece of real estate, we have our options on how we’re going to sell real estate,” Buente said. Those include putting the building out for the highest bidder, attempting another request for proposals “pursuant to a downtown urban redevelopment plan” or partnering with other governmental entities, something that has been discussed internally.
“As Adam said, we’re going to use our partnerships. We have reached out to our closest partners to let them know that there’s still maybe some opportunity there, and we’re going to use what we have, everything that we have in our arsenal, to make sure that this is successful,” said Nikki Posterli, director of community planning and economic development and chief of staff to Mayor Jamael Tito Brown.
“It’s always disappointing when something doesn’t work out the way we want to,” Councilman Mike Ray, 4th Ward, said.
He also advised his colleagues that economic proposals and projects “fall apart all the time,” so the best thing to do sometimes is pull out and reevaluate what the situation looks like. “We didn’t get to make a deal this time. Hopefully, we’ll find something else,” he said.
The city’s official statement affirmed the city is “actively exploring alternative partners and approaches” and emphasized the project “remains an economic development priority” for Youngstown.
“We are committed to completing the development of this historic property that will help shape the future of our downtown,” the statement continued.