Jonathan Holtzman sees the future. And it’s Louisville. Specifically, the corner of Fourth and York streets.
Holtzman is chairman and CEO of Village Green, the Michigan-based builder and developer of rental residential properties that bought Louisville’s iconic 800 Apartment Building this summer.
For those who wondered about the future of this historic but weathered 29-story high-rise from the ’60s, that was the welcome sound of the first shoe dropping. The building’s spiral down into disrepair had finally ended. It would remain in place, only better.
The other shoe will drop as the developer rolls out new floor plans and news of all the other amenities in store, like a rooftop swimming pool and lobby-level gourmet restaurant run by “a local restaurant owner/operator with great food and a great reputation.”
“You’ve eaten his food,” Holtzman tells IL. “We’re currently in negotiations and expect to make an announcement in the next 30 days. He wants to be open in the spring, before Derby.”
The plans for this property – now called 800 Tower City Apartments – are dazzling: a clubroom with a gourmet kitchen and movie theater, a business center, around-the-clock security with a 24/7 concierge in the lobby, private secured parking, room service for tenants.
“Not one apartment building in downtown Louisville has a rooftop swimming pool or a clubroom with a gourmet kitchen,” says Holtzman of the amenities that will be completed in late winter/early spring of 2016. “Not one.”
And that’s just the common area. He’s increasing the number of living units, from 264 to 286, but they’ll be smaller, in line with today’s trending needs.
“The building had a lot of three- and even four-bedroom apartments,” says Holtzman. “That’s not today’s urban market. Whether it’s young professionals or empty-nesters, people want more one-bedrooms or even studios.”
The new breakdown includes 45 studios, 166 one-bedroom/one-bath units and 75 two-bedrooms.
The apartments all will have updated open kitchens, with new appliances, countertops, cabinetry, and islands. There will be all new flooring material, wood vinyl planks in most of the rooms with carpeted bedrooms for sound and comfort, and the bathrooms will be upgraded with rain showerheads and hand massagers.
In some of the apartments, major architectural renovations have occurred, the existing walls torn out and rebuilt from scratch. In those, says Holtzman, there will be washers and dryers, walk-in closets, oversized tubs, showers for two, “what you’d expect to find in brand-new luxury high-rises.”
What you might not expect in an urban high-rise is the amount of outdoor space. Some of the units – especially the upper-floor penthouses – have terraces as large as 200 square feet, large enough for small gardens and plenty of seating and/or dining furniture.
More than Millennials and Boomers
After years of trending toward suburban home-buying, the Louisville rental market, especially downtown, is booming. It’s a national trend.
“Young professionals and retirees, alike, are moving downtown in every urban market in the U.S.,” says Holtzman. “Look, we have 76 million millennials and 75 million boomers. Louisville is not unique in this sense.”
But Holtzman says he sees more than millennials and baby boomers when he looks at the Louisville rental market. He sees nurses and interns working a variety of shifts at the nearby medical centers. He sees pilots and flight crews working out of Louisville International Airport and the UPS Worldport – people who don’t work 9-5, who need 24/7 access to the apartment building and its various facilities.
Plus, he sees business executives relocating to Louisville who want to be downtown. They want convenience, luxury, services and amenities. Or they need a furnished apartment for a finite period of time. The building will have a selection of those, too.
“Someone from upper management – Humana, say, or Kindred – is coming here from another city and wants an urban location,” he says. “A year ago, where in the downtown area would a Yum executive live? Someplace that was old and outdated.
“Today, they’ll have available to them one of best high-rises in the U.S. Not just in Louisville – in the U.S.”
The Return on his Investment
The availability of an existing 29-story building with some luxury bones was attractive to Holtzman. “This is a true high-rise,” he says. “There’s not another one in the city.”
If he were to build this building today, he says, it would cost about $70-$75 million, or $350,000 per apartment, “so my rents would have to be $2.50 to $3 per square foot. Those are Chicago-level rental rates.”
On the other hand, with what he was able to acquire it for ($20.65 million as part of a bankruptcy court-ordered auction) – even plus an estimated $10 million for the renovation, “we can charge rents of $1.25 to $1.50 per square foot. People can get an apartment for 50 percent less than what a brand new apartment would cost. And with all the improvements we’re putting in, this isn’t a 50-year-old property, it’s practically a brand new apartment.”
It’s a Process
Holtzman’s company has developed rental properties in more than 30 locations in the United States. He has seen how the garden grows. This is his prescription for Louisville:
1) “Louisville’s first step is to have all these existing downtown buildings, 20-30-40-50 years old, acquired and $5-$10-$15 million is spent to fix them up.”
2) “The next thing you see is new buildings, like 310 @ NuLu or the apartments on top of the new Omni Hotel. Then you see even more new apartments being built.”
3) “Then the retail will come back. Now you’ll have more people walking around, so that will lead to more retail, more restaurants. The city will begin momentum.”
“We believe that’s exactly what’s going to happen in Louisville, like it has in other cities. We believe in the city’s future and we are investing in it.”
A Perfect Location
Clearly, Holtzman was not put off by what some people here see as the building’s marginal neighborhood on an “island,” not quite downtown, not quite Old Louisville.
Quite the opposite, he says, it’s a spectacular location. “Across the street is a Cadillac dealership, the hallmark of luxury. Across the street is an incredibly gorgeous public library.
“To the north is the world-class Brown Hotel, and Kindred is building a brand-new 250,000-square-foot office building. Behind us is a historic neighborhood with historic homes. Around us is Spalding University and all the growth it’s experiencing.
“And we’re in the midst of a college campus, a medical center and Churchill Downs. You can walk to the hospitals, to Spalding, to Kindred, to downtown and the river.”
Holtzman says there have been some preliminary discussions with the city about extending some aspects of the South Fourth Street improvements to below Broadway.
“We think this is going to be the top Louisville street going north to south, and we sit on the corner of Fourth and York with the best apartment building in Louisville.”
The Water’s Edge
When he looks at Louisville, Holtzman sees a Shining City on the River. And he wonders why nobody else sees it.
“This is a city with a great lifestyle, restaurants and bars, a beautiful riverfront and park system, sports, a world-class sporting and entertainment venue and some great local companies,” he says.
The proof of that, he feels, is the activity of out-of-town investors like him who have seized on Louisville’s need for urban rental development.
“Outside people are saying, ‘You have a great city,’” says Holtzman. “I don’t know why more local developers aren’t seeing it. It seems obvious to me.”
Specifically he means investing in rental properties with 200 or 300 units, not just the boutique apartment developments that put 10 or 12 units on a floor or two of an old office building. It’s a huge investment, and he thinks maybe local developers aren’t yet convinced it’s a trend with legs. He believes it is, and that Louisville, in fact, has the perfect downtown for it.
“Waterfront, central location, logistics, lifestyle, weather, great business and political support, solid convention city, the universities and, of course, the Derby. These are all great urban elements.”
In fact, the waterfront was one of the major draws for Village Green.
“Village Green has been a big advocate for cities on the water,” Holtzman says. “Everything we build, as owners, is in cities like Chicago, Detroit, Pittsburgh, St. Louis, Kansas City, Minneapolis, Cincinnati, Cleveland, and now Louisville. Water is boating and recreation, water makes you feel good, makes you want to jog along the river or take a walk with your dog – water’s the best!”