Spokane-area developers say the downtown-area housing market here is strong despite comments from a partner in a Los Angeles-based company that pulled out of a proposed mixed-use project in Spokanes city center recently.


Marshall Chesrown, the Coeur dAlene developer whos planning a major mixed-use project on the north bank of the Spokane River between Maple and Monroe streets, says recent feasibility work on that project has reconfirmed his view that the downtown housing market is potent.


Weve identified a huge pent-up demand for downtown residential, Chesrown says. Were talking about 1,000-plus units. We dont see an absorption problem.


While he doesnt have a cost estimate yet to release for his own mixed-use project, Chesrown, who developed the Black Rock luxury-home project on Lake Coeur dAlene, says the amount hell invest in the north bank project is going to be a huge number. Its going to be in excess of a half a billion, I would think.


Ron Wells, the Spokane architect who with his wife, Julie, has redeveloped several downtown properties, including five apartment buildings, also sees the downtown-area housing market as buoyant.


Our apartment buildings in Brownes Addition and close-in downtown are the fullest theyve ever been, Wells says.


When the Los Angeles company, Renaissance Community Fund LLC, dropped plans for its mixed-use downtown project, partner Craig Stevens said downtown Spokanes housing market was unproven, and banks were unwilling to lend money for a big city-center condominium project. The project, envisioned for the block bounded by Riverside, Stevens, Howard, and Sprague, would have included renovation of the Mohawk and Rookery buildings.


Reached by phone last week, Stevens said Renaissance had sought five things from the city of Spokaneand needed all of themto make its project pencil out, but didnt get them. Those requests included approval to develop a parking garage on Sprague Avenue without storefront retail; a waiver of permit fees and costs; an abatement of property taxes for 10 years on new residential construction and 20 years on historic rehabilitation work; reimbursement of the citys portion of project-generated sales and excise taxes; and for the city to lease for up to five years the 153 parking spaces in the proposed garage.


Tom Reese, the city of Spokanes economic development adviser, says the city agreed to the first two items, but was prohibited by state law from granting both the residential and historic-rehabilitation property-tax abatements and from reimbursing the company for the citys portion of sales and excise taxes. After years of legal wrangling over the River Park Square garage here, the political climate isnt right for the city to become involved with a developer in another garage project, Reese says.


The city still is working on the Mohawk-Rookery project and is staying in touch with Renaissance, he says. We really want to see a project there, but we have to do things within the law.


Bank financing availability


Wells says he can understand Renaissances complaint about not getting the tax breaks it wanted, but there have been several downtown condominium projects built and sold out. My experience with banks is that theyve been willing to fund downtown housing when theyve been asked to.


Ron and Julie Wells built Riverside Court, one of the condominium projects in downtown Spokane, and Wells says Farmers & Merchants Bank, of Spokane Valley, approved financing for that project in 26 days, which he called very fast. He adds, All it was conditioned on was a satisfactory appraisal.


Yet, Stevens says that none of the condominium projects built here in the last several years were over 11 units. All had quirks: You put in your own kitchen, some were more finished, some more deluxe. There were no consistent conversion projects with 50 or 55 units.


Lenders would approve financing for only part of Renaissance Community Funds proposed 100-condominium project, but the company still would have had to construct the 153-space parking garage in that initial phase of construction, Stevens says. If the city had agreed to lease the parking spaces in the garage, condominium buyers would have had a preferential right to sublease spaces when they bought their units, Stevens says. Yet, he says, in such a limited first phase of development, Renaissance would have built too few living units for buyers to sublease all of the parking spaces from the city. All of that put us upside down, he says.


Originally, the Los Angeles company had wanted to develop apartments, but because rents are so low in Spokane, we couldnt afford to do apartments, given landowner Wendell Reughs asking price for the property and the projects other costs, Stevens says.


Id like to see the buildings get saved, he says of the Mohawk and Rookery. Theyre at the other end of downtown from the Davenport, which is Spokanes heart, and at another key downtown development, River Park Square, sales have increased respectably, Stevens says.


A successful project would have pulled economic activity toward the Rookery and Mohawk while creating demand for more street retail development, Stevens says. Also, other developers would have bought and renovated small buildings in that area, and then you might have 50 projects going on, but not doing the project could delay additional downtown improvements, he contends.


While banks havent financed sizable condominium projects in downtown Spokane that included $200,000 to $300,000 units, the market has changed, Stevens says.


Rising condo demand


Longtime Spokane Realtor Kathy Bixler has lived through that change.


In 1995, Bixler began to market as condominiums the 63 units in an eight-story building at 700 W. Seventh near downtown that had been an apartment building.


In the 90s, it took six months to sell each unit, but sales picked up, the last of the units sold about a year and a half ago, and resales of condos in that building now are very hot, Bixler says. She asserts that Spokane has no other high-rise condos available and needs more downtown housing units to meet demand.


I talk to people every day who want to live downtown, Bixler says. There are people who would spend $350,000 to $600,000 to live downtown. I have clients in a rental waiting to move downtown. Im just waiting for Marshall Chesrown to get started.


Marty Hogberg, co-owner with his wife, Jennifer, of Luigis Italian Restaurant, calls the downtown-Spokane residential market outstanding.


In mid-2004, Hogberg told reporters he was looking at turning the upper floors of the three-story Luigis building, at 245 W. Main, into high-end condominiums. The response and interest from the community was very strong, Hogberg says. Yet, he determined that demand for a meeting and wedding facility also appeared to be strong, and he says he and his wife have decided to put such a facility on the second floor of the restaurant building. See story, page A7.


Still, Hogberg says, I had so many people coming to me wanting the condominiums. I truly believe I would have had those sold before I had them built. He says he and his wife still might put condos on the third floor of the building later and could add a fourth floor.


Wells says that all of the apartments in The Kempis, at 326 W. Sixth, are full, showing strong demand for downtown-area units. Also, he and his wife sold their own residence at Riverside Court for $775,000, which reflected strong price appreciation, Wells says.


Another indicator of the strength of the demand for downtown housing is the number of calls he still gets for units in Riverside Court, Wells says. I get an average of one call a week, and those units were sold out a long time ago.


A February 2003 study by Zimmerman/Volk Associates Inc., of Clinton, N.J., concluded that the downtown housing market could absorb 300 new units a year over the next five years. Wells says the study supports the notion that the market is strong, and he adds, Theres a latent demand for probably more than that. Reese says the study was conservative, and adds, there is robust market demand.


North bank cleanup assessment


On Monday, March 7, the city of Spokane announced that it had been engaged by River Front Properties LLC, the company through which Chesrown bought the 77-acre north bank site, to perform environmental testing and analysis at the site under its brownfields grant program. A recommended cleanup plan, which will draw on years of earlier assessment work, will be drafted and presented to the public for comment, comments will be integrated as theyre received, and cleanup work should begin in mid-May, says Robin Toth, a Spokane Area Economic Development Council staff member.


Marti Dickinson, a vice president with both the EDC and the Spokane Regional Chamber of Commerce whos acting as a spokeswoman for Chesrown, says, Theres probably six months worth of cleanup work before there will be any construction.


Chesrown says that in its residential component, the north bank project will include a mix of lofts, townhouses, and condominiums because you need a breadth of inventory to serve all parts of the market.


He says his research shows that demand for downtown housing is strong across the nation, with projects occurring in many cities.


You have to get people downtown to make the economy there viable; that is the missing link, he says.


Chesrown adds, This is the lifestyle baby boomers want. They dont want to mow the yard on Saturday at a suburban home, preferring instead to have free time to enjoy nearby downtown recreation and outdoor pursuits, he says.


For his part, Stevens says he was treated well by officials in Spokane, and Wells was helpful to him. Eventually, he says, I am going to do business in Spokane. I am going to buy apartments and do some development down the road.