Downcity property owners have a new place to turn for capital to assist in the revitalization of the emerging arts and entertainment neighborhood in Providence.
The Downcity Partnership, Inc., a nonprofit dedicated to the district’s growth, started offering low interest loans on Friday for development projects in Downcity. The loans, which could reach as much as $1 million per project, are part of a $9-million fund administered by the partnership.
The intent of the loans is for Downcity stakeholders to use the money to leverage further funding from more traditional lending sources.
"Many worthwhile projects can be very expensive. This gap financing is intended to get banks and other lenders to take a little more risk than they ordinarily would," said Peter Armato, president and CEO of The Downcity Partnership.
Armato was hired in July to lead the Downcity Partnership, which was formed by the Rhode Island Foundation. Over seven months, Armato surveyed stakeholders in the neighborhood to get a feel for what they envision Downcity’s future.
Along with the gap financing, the partnership eventually will offer two other loan programs targeting improvements to the façade of buildings and storefront design. Loan applications for those funds will likely be available before the end of the summer.
For now, loans from the organization will be concentrated on real estate lending, particularly for the rehabilitation and adaptive reuse of underutilized historic structures.
The amount of the loans typically will be 10 percent of the cost for the total development project, said Armato.
Armato said the priorities, generally, are for projects involving housing, artist live-work spaces and boutique hotels. He added, though, that projects targeting "strategic" office building rehabs and parking structures would be considered.
The specific terms and interest rates of each loan will vary based on a variety of factors, including the project’s rate of return, a reasonable investment of developer’s equity, the level of collateral coverage, etc. The term of amortization will vary depending on the project.
Armato said that although the partnership views the loans as long-term financing, there will be a "call" on loans at a reasonable period, generally five to eight years, in order to increase the revolving nature of the fund.
As an incentive to get projects started, the partnership is offering an 18-month stimulus period that includes interest rates as low as half the rate for conventional mortgage financing.
"Today, a credit worthy project can get mortgage-type financing at little over six percent – we would consider half of that," said Armato.
Another special incentive would be increasing the maximum loan amount, going from 10 percent of the project cost to as high as 12.5 percent – increasing the maximum loan amount to $1.2 million.
The developers of the projects must complete a loan application by April 1, 2003 and begin construction by Sept. 20, 2003 to qualify for the more attractive terms.
For more information about the loan program, contact Armato at 274-5972 or at peter@providencedowncity.org.
