Developer wants to renovate troubled Iowa City condos

A developer wants to spend nearly $6 million to renovate a condominium complex that, for some people, has become virtually synonymous with crime.

Southgate Development in Iowa City wants to take over the ownership and management of Broadway Condominiums, 1956-60 Broadway St., to improve the property and, it hopes, benefit the surrounding neighborhood.

“We think we can give that place a significant facelift and essentially eliminate the problems that have been in the press the last two, three years,” said Glenn Siders, Southgate's vice president of property development.

The complex had 180 calls for service to police in the first six months of 2010, the most current figure the Police Department could produce Tuesday, and was the scene of the daytime shooting death of landlord John Versypt in October 2009. That has contributed to the southeast side's poor reputation, although many residents and police officials have said it's a small number of people causing problems.

Southgate wants to renovate the interior and exterior of the three-building, 108-unit complex, built more than 30 years ago, and require crime-free leases and conduct background checks on all tenants, Siders said. Most of the units are rentals that are essentially apartments for low-income tenants.

A homeowners association currently governs the complex. Last fall, Southgate owned 60 units, but in order to take control of the association and make the changes it wants, it needs to get 84, something Siders said they are close to doing. Eventually, the company wants to own all of the units.

The total project is estimated to cost $5.75 million, he said. But because of a high vacancy rate - currently about 25 percent and rising - and the reputation of the area, banks have been reluctant to provide financing, Siders said. Some banks have signaled financing would be available if the city shows a commitment to the project, he said.

The city's Housing and Community Development Commission has recommended the City Council award Southgate $900,000 in federal Community Development Block Grants, or CDBG.

The project's potential to provide a boost to southeast Iowa City helped commission Chairman Mike McKay overcome his initial reservations about giving funding to a private company.

“It looked like the city's best shot to do something really positive in that neighborhood,” he said.

The commission's recommendation will go before the council at an undetermined future meeting. The council this week informally agreed to close southeast Iowa City to CDBG funds for rental housing projects that include new construction or property acquisition.

Staff has recommended the new policy not apply to the rehabilitation of existing rental housing, like the Broadway Condominiums proposal. But some council members have questioned that.

Tracy Hightshoe, the city's community development planner, said Southgate's project wouldn't add any affordable housing to the area because most of the people who live there already are low-to-moderate income.

“We're just improving the unit, making a safer unit, a nicer unit for the community, stabilize the neighborhood,” she said.

Southgate did something similar a few years ago with a property south of Broadway Condominiums called Woodlands. It had problems with crime and high vacancy rates, and Southgate spent $3 million to acquire all of the units and renovate the property, Siders said.

Now, crime has plummeted and until a year and half ago all 64 units were rented, he said. The vacancy rate has jumped to 8 percent since then, in part because of the problems at nearby Broadway Condominiums, he said.

Siders acknowledged that Southgate's interest in the project stems from the large investment it has in the neighborhood, including the Pepperwood Plaza commercial area across the street. He said the company would hold onto Broadway Condominiums for the long term.

If Southgate gets the city-administered federal funding, at least half the tenants must make less than 80 percent of area's median income, which is $62,250 for a household of four, Hightshoe said. Negotiations are underway between the city and Southgate, including whether some or all of the $900,000 comes in the form of a loan that eventually is repaid, she said

Southgate would like to start renovations this spring and have the work finished 15 months later, Siders said.