Sunday’s Star Tribune has a front page business section story about Artspace Projects, the Minneapolis-based developer that recently withdrew its proposal for the Historic Middle School complex in Northfield. People have started asking me, “if Artspace can do it on both coasts and many points in between, why couldn’t they do it in Northfield?”
The article in the Strib features a number of photographs of Artspace’s Washington Studios project in Duluth. I was the project manager at Artspace for that development and I thought that I might compare the financing for that project with the potential structuring for the Historic Middle School in Northfield as a basis for examining the feasibility of the potential project.
Much has been made of Artspace’s failure to be awarded the tax credits by the State of Minnesota in their first application last year. In this highly-competitive process, Artspace only missed being awarded credits by two or three points. I think that they got 80 points and they needed 83 to get credits.
In the Duluth project, Artspace was not awarded any credits in their first application, was awarded some credits in their second application and then was awarded additional credits in their third application. Artspace had advised the community before making the first application that it might be a similar experience for the Northfield project.
There has also been a number of references to Artspace’s inability to raise a million dollars in the community to support the project. Once again, a comparison to the project in Duluth is illuminating.
In addition to the almost $3 million of private equity and loans for the Washington Studios, Artspace secured over $1.5 million in subsidy money to keep the units affordable to low and moderate income households. Here is the structure of this financing:
Rental Rehab $285,000
HOME Funds $100,000
ISD Abatement $312,636
City Abatement $100,000
McKnight Foundation $265,000
Other Local Support $285,000
The Washington Studios has 39 units, Artspace was proposing 22 units for the Historic Middle School. Based on the Duluth structuring, the Northfield subsidy money might be structured along these lines:
Rental Rehab $160,769
HOME Funds $ 56,410
ISD Abatement $176,359
City Abatement $ 56,410
McKnight Foundation $149,487
Other Local Support $160,769
TOTAL of ABOVE: $996,747
I have heard that Artspace’s local fund-raising team had achieved $120,000 in commmitments, within striking distance of the $160,769 identified above as the Other Local Support. The above structuring does not include any money from the Community Investment Fund, $1.5 million available to support challenging community projects.
So, in answer to those that have asked me why Artspace couldn’t do it in Northfield, there’s no reason they couldn’t do it. In Duluth, the conversion of the Historic Middle School to an Arts Facility was a priority for the City, the EDA, the ISD, the Arts Community and for Artspace. The Arts Department at UMD was an early and energetic supporter. Different communities simply have different situations and therefore different priorities.