- Property: Gramax Tower Apartment Homes
- Developer: RST Development
- Location: Silver Spring, Md.
- Cost of Renovation: $25 million
- Length of Renovation: One year
- Scope of Project: Adaptive reuse of deteriorated office building
Never underestimate the power of a facelift. Just look at Gramax Towers Apartment Homes in Silver Spring, Md. The former office building sat vacant for 15 years, a blighted eyesore that cast a shadow on the entire neighborhood. But as soon as the building was refurbished, the entire landscape and character of the surrounding area dramatically improved.
"We really were the impetus for change," believes Scott Copeland, principal of Va. Beach, Va.-based RST Development, which acquired the vacant building in June 2003. "Now there are a lot of really upbeat, exciting things happening in south Silver Spring," he adds, noting that the area"s turnaround also is fueled by the ongoing revitalization of nearby downtown Silver Spring.
The once-downtrodden neighborhood in the inner-ring suburbs of Washington, D.C., now flourishes with activity. At least six new developments are underway near Gramax Towers, with nearly 1,000 rental and condo units planned to open by the end of the year. "There is a lot of pent-up demand [for housing] in this area," says Copeland. Gramax, which opened in June 2004, helps meet the housing crunch by offering 126 units of affordable housing for those earning up to 60 percent of the adjusted median income, 27 units for housing choice vouchers, and 27 market-rate rentals. The building is fully occupied.
The Gramax Building stood vacant for so long because its absentee owner turned down countless offers from developers. "The owner of the building was not motivated to do much," says Copeland. "He had a lot of other high-profile buildings, and I think these were more of a thorn than anything." When the owner died, RST Development was able to form a relationship with the family"s in-house counsel. After nearly a year of negotiations, RST struck a deal and purchased Gramax plus three other nearby buildings from the family.
Financing the project proved just as challenging as securing the deal. RST pieced together an elaborate mix of public and private financing, which included five simultaneous underwritings. "It"s complicated and it"s challenging, but that is what had to happen for this deal to happen," says Copeland.
The financing includes an $18 million tax-exempt bond underwritten by the Montgomery County Housing Opportunities Commission; $4 million in gap financing from Montgomery County"s Housing Initiative Fund; tax credits issued by Maryland"s Department of Housing and Community Development; and credit enhancement for the tax-exempt bond by HUD.