As Pittsburgh developers restart projects, future worries loom

Projects across the city face ongoing hurdles from COVID-19.

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The Lemington Home for the Aged construction site, where earth-moving equipment has lately served only to deter trespassers. (Photo by Jay Manning/PublicSource)

The Lemington Home for the Aged construction site, where earth-moving equipment has lately served only to deter trespassers. (Photo by Jay Manning/PublicSource)

Banks are swamped, contractors are scrambling, and the Bloomfield-Garfield Corp.’s Executive Director Rick Swartz needs one of each, pronto, if he’s going to get the Montana Building renovations on track.

Like virtually every other development or construction project in the state, the planned $675,000 renovation of the 16-unit affordable apartment building in Friendship was floored by the novel coronavirus. As the state allows construction to resume Friday for the first time since the March 19 order closing most businesses, Swartz sees a narrow window to proceed — and hopes that window doesn’t slam shut.

The longtime nonprofit developer said Wednesday that he’s trying to get his bank loan closed by May 7 but has found that "it's hard to get the necessary attention" because bank staff are busy with small business applications for federal Paycheck Protection Program loans.

The urgency? The BGC’s contractor is hungry to start the job May 8, but may look elsewhere if the finances aren’t finalized, according to Swartz. Contractors "all have other jobs they're waiting to do, and now it comes down to: Who is organized and ready to pay them?"

The Montana Building, on Penn Avenue in Friendship, is slated for renovation, but hurdles remain. (Photo by Jay Manning/PublicSource)

Financing challenges and in-demand contractors are among the challenges facing Pittsburgh-area developers as construction resumes amid a historic economic downturn. PublicSource this week reached out to 16 development pros — both for-profit and nonprofit — with work in Pittsburgh supported by the Urban Redevelopment Authority [URA].

All said they were eager to start building again after six weeks of job-site silence, but many remained wary of the future.

"Another spike [in infections] that's significant would be tough," said Tony Knoble, CEO of Indianapolis-based TWG Development, which is restarting work on a 280-apartment complex at SouthSide Works that is supposed to open in spring 2021. He thinks he can make that timetable, but adds: "If there's a second round, and we have this again, and there's more uncertainty, it will really hammer construction and development in general."

For now, contractors can get back to work subject to state restrictions on the number of workers in given areas, and requirements to assign a "pandemic safety officer" to each site, maintain social distancing and provide hand-washing stations.

The building trades "historically set the standards for safety," noted developer Gene Boyer III, who is a partner in an effort to build 167 new apartments in the Hill District. But if some in society ignore the risks and a second wave hits, he said, "every project on the board is going to be at risk."

Here are status reports on a variety of development efforts in Pittsburgh.

Affordable apartments, Lawrenceville, Squirrel Hill, Hill District: Costs rising

ACTION-Housing was building 35 affordable apartments in Lower Lawrenceville and preparing to rehab the old Squirrel Hill Theater and the Hill’s Centre Avenue YMCA, when everything stopped, according to Lena Andrews, the nonprofit developer’s director of real estate. They’ll get rolling again in coming days, she said, but the crisis is likely to squeeze financial plans in several ways.

ACTION-Housing "will incur increased costs as this will lengthen our construction timeline — both because of the delay that we just experienced, and because we can’t work as quickly with fewer workers on site," she wrote. On the other side of the ledger, the pandemic "has slowed down lease-up for projects that are completed and have available units," thus reducing revenue.

Affordable housing projects depend on low-income housing tax credits, which are sold to financial institutions, and Andrews wrote that the economic downturn will likely decrease the amount of money developers can get through that financing mechanism. "On the positive side," she added, "it is possible that there will be more federal funding for affordable housing as a part of the recovery, which would allow us to take on more projects."

The Hunt Armory, Shadyside: Waiting on a sponsor

The effort to turn the long-vacant armory into a hockey complex was "still in search of a title sponsor" — likely the key remaining piece of its financing puzzle — when the pandemic hit, said developer Steve Mosites.

A naming rights deal "was the trigger to get us moving through design, predevelopment and schematic design, which would enable us to solicit bids" and deepen its communication with the neighborhood, he said. "The folks that we've been talking to, everything's on hold right now."

Produce Terminal, Strip District: Leasing suspended

The conversion of the iconic Produce Terminal into a mixed-use office, retail and food center is gearing up again, but the search for tenants may remain on pause, said developer Dan McCaffery, CEO of McCaffery Interests.

"We have, for all intents and purposes, put on suspension our leasing activities other than staying in very close contact with those people we know had expressed an interest," McCaffery said. He said he doesn’t currently feel comfortable reaching out to entrepreneurs and asking them, "Say, how'd you like to spend some money?"

McCaffery said he remains bullish about the Strip but doesn’t know how quickly it will recover its lively vibe. Even after businesses are allowed to reopen, he said, a big question will remain: "When will people feel like they're anxious to go Downtown and mix and mingle and go to bars and shopping centers and walk up and down a sidewalk?"

Affordable for-sale housing, Oakland: Buyer furloughed

When the economy shut down, Oakland Planning and Development Corporation was renovating a house on West Oakland’s Robinson Street, among several they’ve been looking to rehab and sell to low-and-moderate-income buyers. A crew was set to restart work Friday, according to the nonprofit development group’s Assistant Director Elly Fisher. But the sale may have to wait.

"We signed a sales agreement right at the beginning of the crisis," Fisher wrote. "The closing is slowed down because the buyer was furloughed.  We expect to be able to close as soon as their job is restored."

Construction technician Don Bivins hauls debris out of a house that's being remodeled on Robinson Street in Oakland. (Photo by Ryan Loew/PublicSource)

Construction technician Don Bivins, in a February photo, hauls debris out of a house that's being remodeled on Robinson Street in Oakland. (Photo by Ryan Loew/PublicSource)

Pro Bike + Run, Strip District: Awaiting meetings

A proposed high-end cycling and running center, plus a healthy cafe and a brew pub in the Strip District, is ready to advance through the city approval process, architect Rob Pfaffman said. He’s eager to present the plans for the 27,000-square-foot complex.

But the city's Planning Commission and Zoning Board of Adjustment — which usually meet two and three times a month, respectively — last convened in mid-March. As of Thursday, there was no restart scheduled.

The Pro Bike + Run proposal, led by developer Craig Cozza, "is dead in the water" because of the stalled city development processes, Pfaffman said.

Lemington Home for the Aged, Lincoln-Lemington-Belmar: Interest, but no progress

When Gov. Tom Wolf halted construction, the earth-moving equipment outside of the long-empty nursing home was arranged "kind of like barricades to kind of keep curious people off," said Michael Polite, CEO of Catalyst Communities, which is converting it to 54 affordable senior apartments in a campus-like setting.

Now Polite is trying to get as many as 42 construction workers back on to the site, subject to the new rules. That could bring new costs. He’s wondering "will our [subcontractors] come back to the general contractor and say they need more [money] because of any number of considerations?"

The Lemington Home for the Aged reconstruction project. (Photo by Jay Manning/PublicSource)

The Lemington Home for the Aged reconstruction project. (Photo by Jay Manning/PublicSource)

He’s also worried that the pause has meant "six weeks of interest [payments], but no progress" toward his planned early 2021 opening, and the corresponding revenue. He’s not ruling out a request for more funding from the project's various public and private funding sources but wants to "make some more progress" before taking that step.

St. Peter’s Residence, East Allegheny: Leasing late

Developer William G. West is converting a former church into 16 apartments, and he originally planned to start leasing units last fall. Overruns forced him to push that back until this spring. The coronavirus put the kibosh on that timetable.

"The direct cost of the COVID interruption is not significant other than we can't get tenants in there," said West. "It looks as though we will be finished some time in mid-to-late July and hopefully start leasing the project on Aug. 1." That’s worrisome, he said, because the region’s leasing season usually starts in April and May.

The URA, which loaned him $850,000, has "deferred our last three months of payments to allow us to get our leasing started," he said.

Cornerstone Village, Larimer and East Liberty: Deadline woes

St. Louis-based McCormack Baron Salazar has finished two of four phases of its massive, federally funded rebirth of parts of Larimer and East Liberty and has been completing financing packages for the remaining phases, including more housing and the redevelopment of the empty Larimer School.

The six-week pause means "further deterioration" of the 30-year-old school and thus "higher construction costs in the fall," according to Gary Buechler, the chief operating officer for the developer.

The Larimer School, closed for 30 years, is to be reborn under a Choice Neighborhoods Initiative grant that must be spent by September. (Photo by Jay Manning/PublicSource)

A bigger problem: The $30 million Housing and Urban Development Choice Neighborhoods Initiative grant, which covers much of the work, must be spent by September, and the delay complicates that effort. McCormack Baron Salazar is likely to ask for a deadline extension, while "working with HUD and federal legislators to ... find long-term responses for neighborhoods like Larimer and East Liberty," Buechler wrote.

After the restart

During the coming months, developers agreed, low-interest rates and stimulus funds should keep ongoing projects afloat and work-hungry contractors will find ways to progress while following the new rules.

And then?

"What happens two to three months from now, once our other [ongoing] projects are put to bed, that’s a good question," Pfaffman said.

The answer could depend on whether financing is available for a next wave of projects.

There’s no guarantee that the city will be able to replenish the URA, Swartz noted. And the Pennsylvania Housing Finance Agency — a key source for tax credits and other funds for low-income housing — hasn't yet decided whether to keep to its planned July release of allocations, or postpone, according to its spokesperson.

A delay in that program’s timetable "could present some serious risks for developers," Swartz said. "Everything gets pushed back to 2021."

Rich Lord is PublicSource’s economic development reporter. He can be reached at rich@publicsource.org or on Twitter @richelord.

Develop PGH has been made possible with funding from The Heinz Endowments.

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