- (female announcer) Production funding for Behind the Headlines is made possible in part by the WKNO Production Fund, the WKNO Endowment Fund, and by viewers like you, thank you.

- The Northside Redevelopment and what it means to Memphis, tonight on Behind the Headlines.

[intense orchestral music] I'm Eric Barnes with The Daily Memphian.

Thanks for joining us.

I am joined tonight by Roshun Austin, CEO, The Works Community Development Corporation.

Thanks for being here again.

- Thank you.

- Along with Archie Willis, CEO and founder of ComCap Partners, excuse me.

Thanks for being here again.

- Glad to be here.

- Along with Bill Dries, reporter with The Daily Memphian.

We had you all on, I thought it was a year ago, it was actually two years ago, we figured out, Archie figured out, to talk about the Northside Redevelopment, the Northside High School.

You all have lived and breathed this for a long time, but I don't know who wants to start.

For those who have not, or maybe have only heard a little bit about this, what is this Northside Redevelopment Project, and we'll walk through it.

- So I'll start as the owner and sponsoring, the one who will be responsible long term, but the Northside Square Redevelopment is the adaptive reuse of the old Northside High School, which was closed in 2016.

It was built in the mid-'60s in the Klondike neighborhood and I'll really let my development partner, Archie, talk more about the actual development of Northside Square.

- Yeah, Archie.

- So the overall goal is to revitalize the school and turn it into a community hub that will hopefully also stimulate additional economic development and housing development in the Klondike community.

So as Roshun said, it's an adaptive free use of a 270,000 square foot school that also has an auditorium and a gymnasium.

So the first three floors will be commercial office uses, and we're actually pretty much fully leased, which is a good thing.

And the third floor will be residential.

There'll be 42 affordable apartments, one and two-bedroom apartments.

The gymnasium will remain as a gymnasium.

We'll have a nonprofit group that will be programming the gym with after school programming and other athletic activities.

And then the auditorium we're still working on, it'll be a subsequent phase.

We're gonna shrink it, so to speak, to create a smaller community-based performing arts center for the neighborhood.

- People have said, and you can say it's not fair or it's an off comparison, compared it to Crosstown, right?

A redevelopment of a long-empty building.

Northside High was not empty as long as Crosstown was, but that sense of mixed use, residential and then hopefully radiant, positive effects on the neighborhood.

Is it a fair quick comparison?

- Yeah, it's a fair comparison.

We just are very intentional about what happens in the Northside High School, former Northside High School building, because this is located in a historically black neighborhood that's very low income and so the uses look similar to Crosstown.

It's actually one mile north of Crosstown exactly from the front door of Crosstown to the front door of the Northside Square Project and so yeah, it's similar.

- Yeah, let me bring in Bill.

- So can you talk about who's coming to the project at this point?

- Yes, we can, we actually, you were at the groundbreaking, we were able to announce our tenants.

So our major tenant, our largest tenant is Moore Tech.

They will occupy the entire basement.

They will have what they call a property maintenance program, which includes electrical, plumbing, HVAC, welding, refrigeration, great programming.

On the first floor, we'll have Lifedoc, we'll have a health clinic there.

We actually just got a letter of intent signed by CodeCrew.

They're gonna bring their coding program for adults and for youth.

We have a group Restore Corps that works with victims of sex trafficking that just signed an LOI.

On the second floor, the largest tenant there will be Goodwill-Excel.

They will have their adult educational program where folks that dropped out of high school can come back and get their high school diploma.

The Literacy Mid-South will move their offices there.

And then the one that everybody kind of gets puzzled about is the Memphis Symphony Orchestra.

They're gonna move their administrative offices there as well.

One of the things that, the primary reason, or one of the primary reasons for their interest is the auditorium.

So they will actually make the auditorium their permanent rehearsal space.

They'll continue to perform at their primary venues, GPAC, Cannon, et cetera, et cetera, but they didn't have a permanent place to rehearse, so we are expecting them to also have some community-based programming so they can expand their reach in terms of symphonic music to a community that historically has not really been involved with the symphony so that'll be great for them, but it will also give them a permanent place for their rehearsal.

- And the one he always forgets is the Community Law Offices.

[laughing] - Okay.

- Where we'll be doing some community-based law work with lawyers and with the law school.

- It's easy to go through the list, it's hard to put these projects together though, isn't it?

- It's extremely difficult to put them together.

I think I mentioned this maybe in one of the articles.

School buildings were built to be schools and when you start trying to turn them into something else, you encounter a lot of challenges.

So we worked through all those from a design standpoint, and then the financing is challenging, number one, because of what we're doing.

Number two, because of the market.

We're not in what real estate professionals would say is a true market for real estate development, so everything we are working on has to be subsidized at some level and that means bringing in folks that understand what we're trying to do, and then, of course, when you move into neighborhoods like this, even the tenants, there are certain concerns, and of course we're in Memphis, so crime is the number one item so that's something we gotta deal with as well in terms of making sure people are safe, making sure they feel safe when they do become a tenant or a resident in the project so it's a very challenging process that we've been working on, as you said, for quite some time, but we're making significant progress.

- The overall cost, I don't think we said that out loud, is estimated at?

- $78 million.

- $78 million.

And most of the financing is secure.

The last chunk you're hoping to get within the next month or so.

You talked about working in difficult neighborhoods and in neighborhoods where there isn't a lot of banks and other financing areas don't typically invest.

Both of you have done a lot of work beyond Northside in this in terms of affordable housing around Northside and other parts.

I mean, hundreds of units that you have built, Roshun, and The Works, and Archie, you among other things have been intimately involved with the rebuilding of all the public housing, what, nine major public housing projects over the last 20 something years now?

- It's probably been that long, yes.

- Talk about that.

I mean, what you've learned in your similar but different ways, and I'll start with you Roshun, in terms of getting that investment and convincing people, hey, this is something that needs to be invested in, and I don't know how many, I mean, is it 1,000, is it 2,000 homes and apartments that you, The Works, what's the number now?

- Not quite that many.

- Not quite that, okay.

- We're still working on that.

- You're still working on that, I'm sorry.

- And recently, well, not even recently, over the years, probably a few decades now, we've been working with ComCap Partners in different capacities, I guess, in the beginning with our multifamily developments as a finance consultant partner and now co-developer on many of our multifamily.

It's difficult.

I can't really compare it to Northside.

Now that comparison in financing I can't really make, but affordable deals are always upside down and so in the best real estate market, there is gonna be a gap in financing because the people we're trying to serve are very low income.

Then you have the conditions of the neighborhoods.

The way the rules are written, it just so happens that most affordable housing is gonna end up in very low income neighborhoods because of NIMBYism or whatever.

- Not in my backyard.

- Yeah, not in my backyard.

And so that means the banks, although they can't officially redline, they are gonna say this is a risky deal and so they're not always willing to go in and make a loan because we're gonna have debt and you're gonna have equity and we're gonna need some additional subsidy to fill that gap and that gap can be in the millions and so we have a deal that we're trying to do right now together, a development deal and it has a gap of $7.5 million, 79 units of senior affordable housing, and that gap grew over time over the last couple of years because of costs that are beyond our control, but we're always having to tackle that so it's a, you know, you could go after banks for CRA because they have to invest and they have these three tests they have to do, but they can invest in large multifamily in Nashville in a neighborhood that's on the edge that they feel is less risky.

And then it is also not just about the neighborhoods, I think often it's about who's at the head, the partners.

- That gap, is that where government subsidy comes in or is that just finding a private entity partner who says, "No, I'll take the risk"?

- It's really a combination of both.

It's government support, public sector subsidy, as well as just trying to get philanthropic support to go along with the government and the public support.

- In the end, before I go to Bill, in the end though, do the projects, I mean, I don't wanna say are they profitable, but are they financially viable?

- They cash flow, that's all we can say.

- Yeah, okay, fine, so making your bills.

- We can pay all of the bills, keep the rents low for the tenants, but I could tell you our agency doesn't benefit financially from the developments.

- Yeah, let me go to Bill.

- So if projects like this work, why doesn't it get easier to get financing for them?

- Well, Northside is really an anomaly in terms of the work we've done.

It's very, very large, as we just talked about, two hundred and seventy thousand square feet, seventy million dollars in one project.

That's unprecedented, at least in my experience.

Even the Hope VI work or the CNI work you referenced is typically affordable housing.

It's usually done in multiple phases over several years and it starts out with a large grant from HUD.

So the markets don't necessarily change and I think I mentioned, I talked about this the last time we were here when you asked about the successes and failures of a redevelopment of public housing and I said, "We've done a great job on the housing side."

We haven't really had great impact on the neighborhood.

So a project like this is really designed to help foster and stimulate economic revitalization throughout the neighborhood.

So you're kind of breaking new ground, although some of the things we've done before, and you run into a lot of the same issues and the same challenges on all these projects, but Northside is breaking new ground and it just doesn't get any easier as Rashan mentioned on the financing side, the most attractive financing we can find will be tax-incentivized financing, whether it's affordable housing tax credits or new markets tax credits, and then the banks come in with more traditional financing at a much, much, much smaller level relative to the overall project cost.

- So, if Klondike starts to come back, things actually get more complex because you now have the attention of the housing market and so you have other players who are in this to make a profit off of it and that means that a house might sell for a higher price, the rent for it, if it's a rental property, might go up as well and so you're already planning for that, for in essence Klondike meeting the market, right?

- Yeah, we planned for that four years ago.

I think maybe I say we're smart, we got ahead of the market because we had experienced that in other places.

We watched it and so our partnership, which is made up of four groups, it's the largest landowner of parcels in Klondike and so, and then on our, we also have a community land trust and so we can determine what units will be affordable long term for 89 years so we're not talking about 15 years and the subsidy goes away and it goes to market, we're talking about fixing it for 89 years, and hopefully someone younger than us will go in and re-up on that affordability.

- Which means that the residents who are there now get to stay there.

- They get to stay.

- They don't get displaced.

There's not a gentrification effect from this, right?

- That's right, it's no displacement and so we're hoping that we see improvements in values and educational attainment and income, which is the gentrification part.

We don't wanna see displacement with it and so we want the people who are there today, and our number one tenant is zero displacement, to be able to remain there, but that doesn't mean we don't want any other people who are working class or need affordable housing to move into the neighborhood, so it'll be a combo of affordable units beyond the ones that are there today and some market-rate units and so we can't also rebuild public housing.

People think a whole, to think a whole neighborhood should be affordable for people that are 80% and below the median doesn't make any sense.

We're just building affordable housing in a concentration of poverty.

We need mixed incomes in neighborhoods.

- All right, what's been the reaction in the neighborhood to the folks who are there now?

Because you did a lot of groundwork in Klondike prior to the groundbreaking, arranging the financing and all of that.

- So we have great attitudes about the work we're doing for people who live in Klondike.

We had a lot of talk in the media and on social media, particularly, from people who are outside and they have an opinion based on what they've seen other places and they just assume that we're gonna do that, but our tenants and homeowners who will purchase homes since we've been over there, have been very grateful for the work that we've done.

We know them, they know us.

We don't just build houses for them, we do social programs, so you see this change happening for people.

They're happier, so people don't even really think about in terms of quality of life happiness and so there's a happiness index that we need to consider.

And so they're happier, they're healthier, we hope we are getting them healthier because it has a low-life expectancy.

- And to be clear, you're not immune from market pressures.

- No.

- That they're, I think at the Renaissance development, which you've done in Frayser, you had to boost the rents a little bit, but you also compensated for that as well in some of the food programs.

- Yeah, so we've just recently had to boost the rents.

I have to say we have some of the lowest rents probably in the region.

I mean, the rents at Renaissance at Steele, the 1 bedrooms were 4500.

Our highest rent, 3 bedroom, 2 bath was $690.

And so with new tenant signups, we are moving the rent up to account for a $150,000 increase in our property insurance that we were not expecting, but insurance is really starting to kill us in our deals, but we can't pass those type of costs on to very low income tenants and so to boost the rent from $500 to $525, or $690 to $725, those are the type of changes we're making and not for tenants that are already signed on leases.

It's for the new signees.

- The skepticism you referenced that people have expressed, you talked about in social media and so on, where does that come from?

I mean, is there a part of it that you, although you all have this, really, I think everyone, most everyone would say, very successful track record in these spaces.

Where does that skepticism come from?

From sort of abusive and predatory landlords?

From developments, like you said, that displace people that price people out?

Is it either of those ends, the low-end abusive landlords and owners, and the high-end displacing entities?

- Yeah, I think it's a historical thing and so even beyond housing, you know.

I mean we could separate Memphis and there's this stigma that people that have lived in poverty or have family members who lived in poverty and have experienced racist policies, so they bring all of that with them so they have a lot of baggage.

That's what happened before and it's hard to believe that something different and good could happen now because that has never been their experience and so I understand where it's coming from.

I grew up in it, you know, I grew up in a very low-income neighborhood next door to Klondike.

I grew up with those same policies impacting my neighborhood, my family, the wealth of generations and so it's changing a mindset.

- Yeah, it's not your thought.

- Yeah, I totally agree and it is historical in terms of what people's expectations are in communities that have traditionally been disinvested.

When they see something positive, there's this presumption that the people that are there now will totally get displaced, get moved out and something new will come in to replace them and there's a total lack of trust.

We encountered that early on in terms of people not really trusting what we said.

And I think over time, I know over time, we've dispelled that distrust, at least for the people in the neighborhood, and you were at the groundbreaking, I mean, the energy there, the enthusiasm there for the residents was just off the charts in terms of, "Wow, we're really looking forward to seeing this."

So you've seen a dramatic shift in terms of at least the people that are directly involved with the neighborhood and the surrounding neighborhoods in terms of their perceptions of what the project will be and how it will impact them from the very beginning when we started several years ago to where we are now.

- Does this incite or encourage people to try this in other parts of the city?

- We are hopeful that it will encourage people to at least explore this.

One of my comments I made at the groundbreaking is that to me, this is really a significant economic development initiative.

It's not the typical economic development that you see the city involved with the Chamber of Commerce involved those kinds of things where we're bringing in corporations or keeping corporations here for job retention.

But this has the ability to really boost an entire community for folks that historically are at the bottom of the economic ladder.

So we are very, very encouraged that it will be something that can be replicated.

Obviously the key that we have is significant philanthropic support and that's not something that can just be replicated on a case-by-case basis, but the whole premise of what we're doing, why we're doing it, the impact we can have in the community, hopefully people will understand, see that and be able to bring, we can bring resources back to the other neighborhoods in the city where we can do something similar.

It may not be on this scale, but something similar to also really trigger some reinvestment and improvement in some of these communities - Right.

On scaling affordable housing in different ways, it might be a smaller project here and there and the City Council in going through some of the appointments this week talked about that and talked about some of the hoops that you have to jump through for affordable housing developments that are next to other kinds of housing, other levels of housing, a trip to the Board of Adjustment, for instance, because it's something new for a particular area and the Council's talking about changing that.

Roshun, I think you're a big fan of that.

- Yeah, I'm pushing it.

And people don't know if they're not into land use or development having to go before the Land Use Control Board to create a plan unit development and there are costs associated with that because the policy on the books, the zoning policy, doesn't allow me to build certain things in certain neighborhoods today.

I want the template to be, and I used the example, I had my staff go through Evergreen, get out of their cars and walk and talking about some development that predates our zoning policy and so you have all kind of uses.

You have a large house with eight units, you have a garden-style apartment, you have single family, you have a restaurant and so it looks like what a neighborhood should look like.

But when you go into other parts of the city, especially low income neighborhoods, they have very tiny lots that were subdivided 25 feet.

Well, I can't build on that per zoning code today unless I go get some variance to do it and so I'm trying to avoid those special entitlements and variances in these neighborhoods so we need to adjust the zoning code and have many uses on smaller lots, cottage style, and they've done it so we did make nine changes and so part of our work is looking for financing, but changing policy so that we can build, and I love saying these two words, by right, because right now a lot of intentional racist zoning policies from 50 years ago are impacting us negatively today and they're costing us.

- Right, and just to go through the jargon by right means that the developer can get the land and can do it, does not have to go to Land Use Control Board or the City Council for approval of that.

- They could just go pull a permit and they don't have to go and pay for a variance.

- What is the pushback on those changes?

'Cause as you described 'em, they seem very sensible.

You have a track record of doing good housing and having positive impacts on neighborhoods.

What's the pushback?

- So I don't know if it's a ton of pushback.

A lot of it is people just don't understand.

But you have to also undo some things that happened.

And so zoning just didn't happen.

Somebody planned for this, they planned for the interstate highway, they planned for urban renewal and so we have to undo some of the policies that did the things to neighborhoods that we see today.

That's not easy to do.

I mean, if you got a big interstate running through, splitting two neighborhoods that were formally joined, that's probably not gonna happen.

And also, you know, it's a balance between planning what needs to be there, what's the highest in best use.

- Yeah.

Just a couple minutes left.

I think there's variations on that theme, I would say, Archie, that you've talked about on the show before with the public housing project.

I mean, almost all of 'em are near a highway.

They were built originally, the old ones that you all have replaced were walled, I mean fenced.

Paul Young, now mayor, when he was with Housing and Community Development came on and talked about it.

I think it was either you or Paul talked about warehousing the poor.

That was the design, that was the whole zoning and like planning approach, whereas the new redevelopments you've done, you've put streets in, there are multiple openings are no, they aren't gated.

- That's correct.

- In that sense.

- That's correct, we're really trying to create neighborhoods where people are comfortable and have the access to the neighborhood goods and services and you have an environment for businesses to thrive in that so they can provide those goods and services.

One example, going back to your comment, Bill, that I like to use is you drive down Central Avenue, starting at Parkway and driving toward Lamar, you'll literally see all kinds of different housing types.

People don't really think about that.

You'll see huge mansions and you'll see duplexes and small apartment complexes, but you have to really look because it's such a nice streetscape, you just seem to think this is a great street and all these houses are great and wonderful, and they are good, but it's really a diverse mixture of houses on Central Avenue and people tend to wanna think homogeneously like, "My house looks like this.

I want my neighbor's house to look like that."

And then on and on and on.

And we really can have diversity in neighborhoods and that's some of the things that Roshun is working on to try to help facilitate.

- Just a minute left, we've mentioned Paul Young, you both have done a lot of work with Paul Young over the years when he was at Housing and Community Development, Downtown Memphis Commission and so on.

What would you like to see from the new administration?

Start with Archie.

- Well, I'd like to see them really try to be a bit more innovative and visionary in terms of the things that we need to do for our city.

Obviously crime is the hot topic and we have to get our arms around that.

That has to be addressed.

I think there's no question about that and it's gonna take time.

It's not going to happen overnight.

But I think there are a lot of things we can do, particularly in our space, in community development, affordable housing, that has not been tried.

We have a housing trust fund that needs to be fully funded with a dedicated funding source.

So a lot of things that we're hoping we can get done with the new administration.

- Ten seconds.

- The new administration, they don't have a lot of say, but I hope it's a housing trust fund that has a dedicated source.

And then the Council, I just need them to deal with policy.

- Yeah, okay, all right, thank you both.

Thank you for being here.

Thank you, Bill.

Thank you for joining us.

That is all the time we have this week.

Do join us again next week.

If you've been seeing the show today, you can get the full episode at WKNO.org or get as a podcast wherever you get your podcasts.

Thanks, we'll see you next week.

[intense orchestral music] [acoustic guitar chords]