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Triple win’ for Red Oak; housing project receives $397,495 in tax credits

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By Nick Johansen

 

Prairie Fire Development, which has plans to purchase the Red Oak Middle School building and renovate it into housing units, received a $397,495 in tax credits annually for the next 10 years. This announcement was made April 3 by the Iowa Finance Authority Board of Directors.

Red Oak Superintendent Tom Messinger said he spoke with Prairie Fire Development Director Jared Nook April 4.

“According to Jared, there is still work to be done on their end to finalize the funding and close on the tax credits. Typically, the process takes from four to six months to closing. They are starting their work immediately on the process and believe everything is well organized to complete the funding process in order to begin work immediately after the closing,” Messinger said. “The exact time line is not yet solidified, but there will be additional conversations in the next two weeks to lay out a time line which includes closing on the sale of the middle school building and closing on the tax credits.”

Montgomery County Economic Development Director Shawnna Silvius said obtaining the funding was vital for the project’s completion. She added that affordable housing was an issue she dealt with personally a few years ago.

“The first issue I identified when attempting to move to Red Oak and the first priority I identified was housing. Thus, I sought out to create another option for housing, as I struggled to find a house to buy or an apartment/duplex to rent,” Silvius recalled.

In August 2017, Silvius contacted Kelley Hrabe, Nick Jerkovich and Jared Nook with Prairie Fire Development Group in Kansas City, whom she’d worked with on a project in Nebraska.

“I’d identified several properties, one in particular, I felt were ideal for this type of project. Audie Rainey showed us several properties that had potential and we met with Brad Wright to get his feedback and to share the Low Income Housing Tax Credit program for this type of project. We worked on it for several months, then decided we just didn’t have time to put everything together, to make an offer, rezone and get an application in by the November deadline. We agreed to come back to this after the first of the year,” Silvius said.

The group returned to Red Oak in February and was considering making an offer on Oak Street property, which fell through. Vacant lots and land on the south side of town were then looked at. Driving past the middle school, Silvius said the group began to talk about the possibility of historic preservation and possible tax credits in addition to the LIHTC program.

“We approached Tom Messenger and he brought in Daric O’Neal. We had multiple conference calls and after several months, Prairie Fire agreed to move forward,” said Silvus.

Members of the Red Oak Zoning Commission approved the rezoning of the building and members of the school board agreed to a sale contingent on financing and the city council approved the rezoning.

“The pre-application was accepted and we submitted full application along with 31 other projects. We had a number of things we had to respond to and provide further to satisfy the requirements. This is a highly competitive program, yet I believed in the quality of work and research by Prairie Fire and their Red Oak Partners LLC for the Prairie Loft Apartments,” Silvius said. “Eight projects were awarded of which two awards were to Prairie Fire; these are their first two projects in the state of Iowa. The majority of their projects have been in Kansas, Missouri and recently Nebraska. Relationships matter in economic development; and, fortunately, they also saw the opportunities in Red Oak and enjoyed working with everyone involved as they saw a collaborative synergy surface.”

Silvius said Prairie Fire estimates this will be a $5.3 million investment. Additionally, the project will preserve a historic building downtown, provide a minimum of 22 loft style apartment units, andsaved the school district the $1 million budgeted for demolition of the property, which can now be reallocated toward renovations of another school property to be used for early child development/care center.

“This is a triple win for Red Oak, our school and our community. Prairie Fire will use local contractors and vendors where possible. One of the next steps is for Prairie Fire to sell the credits, which will provide the funds needed for the project,” said Silvus.

We will continue to pursue forward with more housing initiatives which we will share as they unfold. We recently formed a Red Oak housing committee. Anyone interested in being involved in our housing efforts, can attend our next meeting, Monday, April 15th immediately following City Council at the Red Oak Fire Station. Approximately 6:15 or contact Shawnna Silvius, Executive Director, Montgomery Co. Development Corp. at ssilvius@mcdevcorp.org or 712-370-6323 or Brian Carlson at DoItCenter@qwestoffice.net.

At the school board meeting in September of last year, board heard a presentation from Prairie Fire Development Group, which has partnered with Builder’s Development Corporation to form Red Oak Partners, LLC. The organization revealed a plan to purchase the middle school building and renovate it into affordable housing.

At the time of the September meeting, Prairie Fire Development Group co-owner Kelly Hrabe said the proposed project would include following a tax credit process for funding, and the Affordable Housing Tax Credit was being sought to assist in financing the project.

“The Affordable Housing Tax Credit is a federal tax credit that is awarded to state housing agencies. The Iowa Investment Authority allocates those tax credits out to communities across Iowa. It’s a credit that you get for a project to help raise funding to get your project developed. We then take those tax credits and sell them to the private sector. It gives us capitol to finance these types of projects. Not only would we propose to go after the housing tax credits, we would also go after federal and state historic tax credits. Our architectural team would come into play to help us achieve those,” said Hrabe.

Plans call for adaptive reuse of the building, with 20 to 24 residential units. The number of units would be dependent on input from the State Historic Preservation Office. The school’s existing gym would not be demolished.

Red Oak superintendent Tom Messinger said the district received word on April 3 that the Iowa Finance Authority Board of Directors awarded more than $8.6 million in federal housing tax credits to support the construction of 552 rental homes for families and seniors. As part of the $8.6 million, Prairie Fire Development was awarded $397,495 in tax credits annually for ten years to complete the project.

Messinger said on April 4, he spoke with Jared Nook from Prairie Fire about the award.

“According to Nook, there is still work to be done on their end to finalize the funding and close on the tax credits. Typically, the process takes from 4-6 months to closing. They are starting their work immediately on the process and believe everything is well organized to complete the funding process in order to begin work immediately after the closing,” said Messinger. “The exact timeline is not yet solidified, but there will be additional conversations in the next two weeks to lay out a timeline which includes closing on the sale of the middle school building and closing on the tax credits.”

The purchase price of the middle school building is $5,000. However, Messinger said this sale has a lot higher value to the Red Oak Community School District.

“The District is carrying $1 million in their project budget for demolition of the building if a sale did not occur. This money is now available for other improvement projects,” commented Messinger.

The Red Oak Community School District will continue using the middle school building through the remainder of the 2018-19 school year. Once the school year is over, the middle school 7th and 8th grade will be relocated to the high school campus where they will find a permanent home at the beginning of the 2019-20 school year and the 6th grade will become a part of the elementary.

Messinger said he and the staff of the Red Oak Community School District would like to express their appreciation to everyone who helped make this happen.

“First, we want to thank Prairie Fire Development for their interest in Red Oak and the middle school building. Shawnna Silvius helped initiate the original contact between the District and Prairie Fire. Brad Wright worked closely with the school and Prairie Fire as well as the Planning and Zoning Commission which approved the change of the zoning of the building in order to make the project possible. Daric O’Neal put forth much effort to help move the process along. And, we would like to express our appreciation to the public for supporting the process to preserve a historic building right here in our community,” said Messinger.