Cooper School: Neighborhood Landmark and Eyesore

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Cooper School Neighborhood Landmark and Eyesore
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Cooper School Background

• The Cooper School, constructed in 1917 and
  expanded in 1929, is a landmark in the Delridge
  Neighborhood
• School was closed in 1989 when a new elementary
  school was constructed
• Building deteriorates
• In 1999, the community identified redevelopment
  and renovation of the school as a priority in the
  Neighborhood Plan

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Preservation Effort Beginswith Community
Involvement

• Delridge Neighborhoods Development Organization
  (DNDA), the CDC in the neighborhood, began a
  series of community meetings in 2000 to
  determine how to preserve the building
• In 2002 over 200 neighborhood residents and
  community stakeholders confirmed the arts and
  cultural center plan as the preferred use for the
  Cooper School over 16 presented options.

4
Planning Phase

• Focus groups with local arts organizations to
  assist in the initial planning and to create
  design guidelines for the units
• Highly experienced development team, including
  architectural firm that is well versed with
  historic renovations to assist with the planning
  process
• Community planning process provided 16 various
  distinct options for the redevelopment ranging
  from a B and B type development with theme
  restaurants, to its current arts oriented use
• Final program include the top two floors being
  converted to 36 artist live-work spaces and the
  ground floor developed as a community cultural
  arts center with 25,000 sf, including offices for
  arts organizations, a 150 seat theater, a
  recording studio, dance studio, kitchen, art
  fabrication workshop and classrooms

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Development Time Frame

• 2000 - Community planning process began.
• 2002 - DNDA began community capital campaign.
• 2002-04 DNDA applied for funding from city and
  state sources multiple times prior to award.

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Project Detail

• 36 studio apartment artist lofts created by
  dividing classrooms and converting unused attic
  space.
• The units range from 430 to 1440 square feet,
  averaging 650 square feet.
• All units targeted to artists at 30 to 50 of AMI
• Attractive units with 12 foot ceilings and large
  windows to allow for natural light.
• Retained many original elements including hall
  lockers, woodwork and wainscot built in cabinets
  and classroom chalkboards.
• On site parking for residents and commercial
  tenants
• Cultural arts center with 25,000 square feet of
  commercial space
• offices for arts organizations currently five
  tenants with five year leases
• 150 seat theatre, recording studio, dance studio,
  a kitchen, art fabrication workshop and
  classrooms for short term lease.

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Site Plan
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First Floor North / Commercial
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First Floor South / Commercial
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2nd Floor / Residential
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Attic Floor / Residential
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Project Structure and Financing

• Project is divided into two condominiums
  commercial unit on the ground floor commercial
  and residential unit on the upper floors
• Total Development Cost is 11.8M 38
  attributable to commercial 62 to residential
• Equity for project covered 32 of development
  costs 1.9M to the residential condominium and
  1.9M for the Cultural Arts Center

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Financing / Funding Structure ResidentialUses /
Sources

• 4 and tax exempt bond tax credit deal
• 7,430,000 - Total project cost residential
• 3,600,000 - Tax Exempt Bond issued by the
  Seattle Housing Authority divided into an A and
  B traunche, with B traunche providing
  construction financing, allowing the project to
  pass the 50 test and then taken out with LIHTC
  and HTC equity.
• 2,960,000 - 4 and Historic Tax Credit Equity
• 1,950,000 - City of Seattle Housing Levy
• 1,620,000 - State of Washington Housing Trust
  Fund
• 800,000 - A traunche permanent financing
• 100,000 - Deferred Developer Fee

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Financing/Funding Structure Commercial

• 4,500,000 - Total development cost
• 3,500,000 - Capital Campaign proceeds from large
  and small sources
• 800,000 - Historic Tax Credit Equity
• 100,000 - Deferred developer fee
• 1,100,000 - LISC construction financing to
  bridge HTC and capital campaign sources

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Underwriting ConsiderationsConstruction Risks

• Substantial rehabilitation on an existing old
  structure is always difficult with the potential
  for hidden conditions.
• Established a healthy construction contingency.

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Underwriting ConsiderationsMarket Risks
Residential

• There is relatively little artist loft housing
  outside of downtown Seattle for comparable rents
• Relatively large unit size relative to other
  studio apartments
• 25 of the units are at 30 of AMI
• High debt cover on the TE Bond debt
• State HTF must pay debt in second position
  considered a friendly lender
• Sponsor advertised on artist related websites and
  had a waiting list of over 150 residential tenants

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Underwriting ConsiderationsRisks Commercial
Difficulty to determine how well the short term
rental of the community arts space on the first
floor will lease

• Difficult to determine comparable arts spaces for
  operating costs
• No hard debt on the first floor commercial
  sources income need only cover operations.
• DNDA secured letter of intent to lease all the
  long term commercial space on the ground floor.

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Underwriting ConsiderationsManagement Risks

• Residential artists targeted for rental and
  chosen through a mutual model where existing
  tenants counsel interview potential residents.
  
• Artists targeted as renters but not mandated by
  any program.
• Commercial are the projected costs to operate
  the community arts space adequate.
• No hard debt on the first floor commercial income
  need only cover operations.

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Concluding Perspectives on Mixed Use
DevelopmentChallenges

• Lengthy process for funding was assisted by
  operating support from the LISC/Impact
  Capital/City of Seattle Operating Support
  Collaborative
• Shifting program for the first floor commercial
  up until the year prior to construction when
  solid arts originations were located as tenants
• Providing more access to the building for
  investigation may have prevented a few surprises
  during construction
• Operating costs, principally utilities, are a
  challenge in the large common spaces in the
  buidling
• Community development value drove a process which
  most non-profit developers would not endure
• Lack of other funding options for commercial
  portion of the project made the historic credits
  a more attractive option

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Concluding Perspectives on Mixed Use
DevelopmentResults

• High profile project that saved a valuable
  community landmark
• High profile real estate project for DNDA
• Wonderful example of adaptive reuse and
  sensitivity to neighborhood issues for the school
  district
• Shifting program allowed for a better building
  fit to the current commercial tenants and the
  construction of a recording studio not originally
  planned for on the first floor
• Both the commercial and residential spaces are
  fully occupied two months after opening
• Over 3,000 people attended the open house and the
  commercial space is off to a sound start

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Cooper School / Youngstown Cultural Arts Center
Project
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Cooper School / Youngstown Cultural Arts Center
Project
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Cooper School / Youngstown Cultural Arts Center
Project
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Cooper School / Youngstown Cultural Arts Center
Project
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Special Tax Valuation
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What is it?

• Special Valuation means the determination of
  the assessed value of the historic property
  subtracting, for up to ten years, such cost as is
  approved by the local review board.

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Who can participate?

• Local option program
• Each local legislative designates a local review
  board - in Seattle, that is the Landmarks
  Preservation Board
• 46 communities in Washington State are eligible
  to participate, including Seattle
• Eligible properties are either listed in the
  National Register of Historic Places or
• listed in a local register if the jurisdiction is
  a Certified Local Government
• Each jurisdiction defines eligible properties
  within those parameters. In Seattle, eligible
  properties are all Seattle landmarks subject to
  controls imposed by a designating ordinance and
  all contributing structures in National Register
  or local historic districts

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What are the criteria?

• Property must be a historic property
• Fall within a class of historic property
  determined eligible for special valuation by the
  local legislative authority
• Be rehabilitated at a cost which meets the
  definition set forth in RCW 84.26.020(2) within
  24 months prior to the application for special
  valuation
• Be protected by a local agreement between the
  owner and the local review board

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How are rehabilitation and cost defined?

• Rehabilitation is the process of returning a
  property to a state of utility through the repair
  or alteration, which makes possible an efficient
  contemporary use while preserving those portions
  and features of the property which are
  significant to its architectural and cultural
  values.
• Cost means the actual cost of the rehabilitation,
  which cost shall be at least twenty-five percent
  of the assessed value of the historic property,
  exclusive of the assessed value attributable to
  the land, prior to rehabilitation.

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What is the process?

• Apply to the Assessor before October 1 of the
  calendar year
• Assessor refers application to the appropriate
  jurisdiction
• Local Review Board (or staff) requests
  information from application
• Description of rehabilitation
• Time period of rehabilitation
• Photographs
• Financial documentation to substantiate costs
• Board approval (or denial)
• Agreement between owner and Board
• Letter to Assessor indicating owner has complied
  with requirements and Board has approved cost
• Document filed with County

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Cooper School

• City of Seattle Landmark, Ordinance No. 121866
• Rehabilitation Period July 1, 2005- February 28,
  2006
• Assessed Value
• Land 359,904
• Improvement 317,088
• Total 676,992
• 25 of Assessed Value of Improvement
  79,272
• Submitted Rehabilitation Costs
  3,744,303
• Percentage Value of Rehabilitation 1,181
  

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How does it really work?

• Beginning in January, 2007, 3,744,303 will be
  deducted from the total assessed value until
  December, 2016.
• With a rate of 13 per 1,000, that is a savings
  of 48,672 per year.