Iron Men Properties is taking a gamble on Lebanon.
The Lafayette-based multi-family unit developer plans to construct two new apartment buildings in downtown Lebanon, high-quality apartments that would capture premium rent elsewhere, like Zionsville or Carmel. But Lebanon’s rental market doesn’t justify premium rental rates.
“Here’s what we’re betting on,” Joe Blake of Iron Men told the Lebanon City Council at Monday’s meeting. “We’re betting on the idea that Lebanon continues to revitalize and more people will want to live here, and the rents will be pushed to cover the taxes that will be kicking in over the next 10 years.”
Blake spoke to the council Monday, sharing his rationale for a tax abatement for these two new apartment buildings. The presentation was for information only, so the council could consider the proposal before voting on it next month.
Iron Men Properties purchased the foreclosed Memory Hall in October of 2013. In addition to continuing to operate the senior housing, they also added eight new apartments to the basement of the gymnasium. The building is 100 percent occupied, and Blake said it has been a “delight” to own.
What Iron Men hopes to do next is construct two new identical apartment buildings, each three stories tall with 21 apartments, seven per floor. Blake said it would be 36,000 square feet in new development. The apartments would be high quality, similar to the quality of the new Memory Hall apartments, with stainless steel appliances, granite countertops, vinyl plank flooring, and fiber optic cable run to each unit. One building would be placed in front of Memory Hall right off Lebanon Street, and the other would be where the former Russell & Hitch Funeral Home is, at the corner of North and Meridian streets.
“We’re really trying to invest in the property and make it a high-quality property for downtown Lebanon,” Blake said. “We’re not an affordable housing developer, not low-income. The bottom line is I want to do this because I think it’s good for Lebanon.”
But the project isn’t a financial possibility without a tax abatement from
the city. Without a tax abatement, it’s not possible to do this kind of construction with the rental structure the way it is in Lebanon currently, Blake said. But he hopes this would continue to revitalize Lebanon, eventually pushing rental rates higher, so the rents could cover the cost of the buildings when the tax abatement would fall off.
Blake shared three reasons for why a tax abatement should be granted in this unique case — the increase in assessed value, that the quality of the building is not warranted based on the current rental rates, and for downtown revitalization. This case is unique, Blake said, and should be given a tax abatement because it is a revitalization effort today, but that may not be the case in the future. Later on, Blake hopes to see the city be able to refuse tax abatements because there are so many companies wanting to locate in Lebanon.
“I hope the tide continues to rise and you can say, ‘No, we’re not going to give you a tax abatement. In fact, we’re going to charge you a little bit if you want to be located in Lebanon,’” Blake said. “I just believe Lebanon is positioned well for the future, and I believe this is a great step in that direction.”
Blake said he wants downtown Lebanon to be an active place, and these apartments would bring more residents to downtown, allowing them a more active lifestyle. The apartments would also look nice, as they are being based on the look of a former school building on Lebanon Street that was torn down in 1976. They would also serve future generations and represent Lebanon well. The city would benefit from the apartments, Blake said, because it needs housing diversity. They will also draw people north from Indianapolis and provide a larger customer base for existing and new businesses.
“I want to keep drawing people north on 65,” Blake said. “The Zionsville exit is booming, and I want to keep drawing people up the road. But we need quality housing here first.”
This proposed project would increase the assessed value of the land by roughly $4 million. It would be an additional $78,000 a year in taxes, based on a 2 percent tax rate.
Council member Keith Campbell asked Blake what would happen if his plan doesn’t pan out, if rental rates in Lebanon don’t rise and they therefore can’t afford the apartment buildings once the tax abatement falls off.
“I don’t foresee that happening, to be honest with you,” Blake said. “But one thing to our advantage is Memory Hall is doing just fine. If we had to, Memory Hall itself could carry a lot of the new development costs. It wouldn’t be desirable of course. But I believe we can rent these units at attractive rates and that rents in Lebanon will continue to grow.”
Blake and his business partner Mike Sandry, who together make up Iron Men Properties, are not “buy and flip” kinds of guys, but that they plan to develop these buildings and own them for a long time.
“We really want to do this project,” Blake said. “But I just want you to understand that if the abatement is not granted, we can’t do the project.”