Works agreement for $31 million John Sevier Center housing replacement | WJHL
JOHNSON CITY, Tenn. (WJHL) – Replacement housing for the John Sevier Center took another step closer to fruition on Monday when the Johnson City Development Authority (JCDA) recommended a deal that would involve a city loan of nearly $6 million to the promoter of the new housing.
JADC commissioners unanimously approved a resolution on Monday that would largely remove the organization’s low-income housing element from the downtown revitalization effort centered on the sale and eventual reuse of the building. John Sevier, 98 years old. The JADC bought the old hotel in 2019 with an ambitious two-part plan: find new supported housing for the approximately 150 residents, then sell the building to a developer who will move the building to its “highest use and best” for downtown revitalization.
“This is an important decision that supports not only residents but also the future of downtown Johnson City, so we are very pleased to have this approved and transferred to the city,” the chairman of the board said. JCDA administration Hank Carr to News Channel 11 after the meeting.
LHP Development, LLC will borrow $5.94 million through Johnson City’s Industrial Development Board (IDB) to bridge the gap between LHP’s other sources of funding and the total estimated cost of $30.9 million dollars from the project. LHP has identified land on South Roan Street where it hopes to build two three-storey apartment buildings with 145 units. These will replace aging units at the 10-story John Sevier Center, which JADC purchased in 2019.
“It’s as good as it’s going to be in my opinion,” Carr told board members and city management staff after guiding them through the highlights of the road ahead. “It’s good business. That’s my opinion.
The next step for the proposal, and for an overall very complex project, is the Johnson City Commission, potentially as early as its meeting on Thursday. The proposed development agreement would then be forwarded to the IDB to approve both the loan and a payment in lieu of tax (PILOT) for the new property.
The repayment of the loan is based on the amount of net profit made by LHP each year. The company will refund 25% of any profit over $100,000 made in any given year. For example, if this amount was $500,000, LHP would reimburse $100,000, or 25% of $400,000. If the total is not paid by the fifteenth year, LHP is obligated to pay the remainder when it “recapitalizes”.
LHP CEO Alvin Nance said the developer was already doing core sampling and other preliminary work on the property near South Roan Street Food City. The expected date for completion of the new apartments is December 31, 2025.
Once the ink dries, the JADC can also begin a more realistic marketing process for the historic John Sevier Building, Carr said.
“You have meaningful conversations now because you have a timeline and a commitment that you couldn’t do before,” he said. “Before it was ‘maybe’ or ‘maybe’ or ‘what if’. Today it’s ‘here’s the schedule, here’s when it will be available, how would it work and are you interested”.
He said the JADC will use consultants in another step which will be “a long and complex process”.
Nance said LHP will continue with the project even as he and the JCDA work to get the U.S. Housing and Urban Development (HUD) “housing assistance payment” contract transferred from the JCDA to LHP and approved for the new location.
“We’re holding hands, man, and we’re standing on this branch and we’re gonna jump together, but we’re committed,” Nance said. “We’re doing the things we need to do right now, spending the money we need to make sure that this schedule that Hank is coming up with here, we can stick to this schedule. We must do what we are doing today to meet that deadline. We can’t wait.
Meanwhile, LHP is adding free cable and enhanced free laundry service for residents of the current building, which it began operating a year ago. One of the benefits of this will be the ability for JADC to negotiate a higher “fair rent” (FMR) with HUD. In turn, once this is transferred, it will be easier for LHP to repay the loan to the city and to make its financial figures work in general.
While just over half of the Sevier Center apartments are single rooms and the rest are smaller studios, all new apartments will be single rooms.
Carr said the JADC has done an abundance of due diligence on the LHP and the deal in general.
“We have a structure that not only protects the citizens of Johnson City, but also ensures the success of the project,” Carr said. “LHP is a proven company with a proven track record and we believe it will succeed.”
Ownership of JCDA by John Sevier began with great fanfare and high hopes for both ends of the project, the transition of current residents and the sale of the building. Since then, JADC leaders have encountered more problems than anticipated with the existing building, a longer delay than originally anticipated, and an acknowledgment that the new housing requires at least a temporary grant from the city.
“I decided early on that I wasn’t going to support this project unless it was the right thing for the residents of John Sevier,” Carr said at Monday’s meeting. “I believe that’s it.”
If the loan is approved and the transfer of Resident Housing Assistance is approved, LHP will use a $10.7 million HUD loan and a $14.3 million low-income tax credit. dollars as the remainder of its funding.
Carr said applications for additional city grants are a good possibility once suitors for the building itself begin to get serious.
“I think the best analogy I can give is when you think about what the city has invested in the Walnut Street expansion — maybe $30 million, somewhere in that range,” Carr said. “I think more investment will be needed in the John Sevier, but we don’t know what that is at this stage. But you have to look at it from the same perspective of developing infrastructure and improving your city and that is how the John Sevier, I believe, will be viewed over time.