Ibiza Update: An Interview with Rajesh Lahoti
The Ibiza condo development was first mentioned on Columbus Underground in October 2006, so it’s no surprise that some locals have grown frustrated with the fact that after two-and-a-half years of waiting, construction hasn’t started yet.
With a project of this size and significance in the neighborhood, the rumors are bound to fly. Over the past few months many on Columbus Underground have raised questions about the current status of the project. Instead of pondering though, we decided to go straight to the source and sit down with Rajesh Lahoti for an interview and an update on Ibiza.
Walker Evans: Hi Rajesh! Thanks for taking the time to answer a few questions for us.
Rajesh Lahoti: No problem!
WE: The first thing that everybody wants to know is what the current status of the Ibiza project actually is. There seems to have been some construction delays and it feels like a week doesn’t go by without someone on Columbus Underground asking what the holdup is all about. So… what’s been going on?
RL: There’s a public and a private component to this project, so we’re building not just the Ibiza private residences, but also the public 200-plus space parking garage. When you build a public parking garage, normally you can go out to the bond market and get the money to build it, which is a public mechanism. Then it’s reimbursed through a TIF, which our project has already been awarded. So the property taxes of the Short North/High Street District are going back into a TIF that the city established and the primary goal was to provide up to 500 parking spaces in the Short North. Everyone knows we need it.
WE: Oh yeah.
RL: The issue is that last year the bond market collapsed. It’s very expensive now. So you can’t get as much for your money because people don’t trust each other. You know with Lehman failing, a lot of banks have lost their AAA credit rating – even GE has dropped – so what happens is that the bond market isn’t trusting anything backed by residential real estate. This means that we couldn’t just go get the TIF money for the public parking garage as originally planned. In the interim though, the City of Columbus has been extremely supportive. We’ve been working on a tax abatement that will then be used the exact same way. Property tax dollars are already going to pay for the garage – it will just help get the money there faster.
The abatement is supposed to be on the March 30th agenda at City Council next week, which will be great. Again, it doesn’t change anything other than instead of the money going into the TIF and then to the garage, it just goes straight to the garage. The buyers get a special assessment. So that piece is very important, because you really have to have build both pieces at the same time. You also aren’t allowed to start a project until the abatement passes. You actually lose your CRA abatability if you begin construction. So it kind of puts us in this situation where we have to get it passed to begin construction. So that’s kind of where we are with the project right now.
We had a lot of buffer built in from the start though. Originally we wanted to be digging in the Fall of last year. So after we recognized that we were going to lose some time, we were actually able to re-engineer the garage. There was about three or four months on our timeline built in because we thought we were going to hit a water table with the garage. We actually had a different contractor selected and they said that’s the best way to do it. But then Corna-Kokosing put us in touch with a parking garage consulting company out of Indianapolis that only deals with building garages. They were actually able to re-engineer the garage so we don’t hit the water table. And that took anywhere from 90 to 120 days off our schedule which is why we are still going to be able to do our residences on top. The beauty is that all of our buyers are still going to get their units delivered on time.
Now, we wanted to have all units done by late-Spring of 2010. We will just have the sold units done. Unsold units will take a little bit longer to finish. So we’re still able to deliver on time to everyone in contract.
So lately we’ve been working on this re-engineering of the garage which is now complete and has already been submitted to the city. We also already have our foundation permit and if this abatement goes through next week we’ll be in a position where we can move forward. We do have a term sheet, we have our financing and we’re in a really good position on this project for several reasons. We have a strong demand for the project in this specific location, and we’re also in the empowerment zone, so we qualify for the market tax credit dollars. On the Italian Village side of the street there’s a lot of lower income housing and we have provided a lot of affordable units. While we do have a high-end penthouse unit that helps to pay for some of the building, you can get into a one bedroom for $129k or a two bedroom for $170k. If you look at condo and home prices in the Short North you’ll mostly find $200k up for one bedroom units. So there’s an affordable housing component to our project.
We want to try and keep some of the artistic/creative class here that don’t have expansive budgets, or just didn’t want to spend that much and previously couldn’t afford to be part of the Short North. So since we qualify, our project actually does a lot for Columbus. You know, there’s a lot of people that need to walk to work and a lot of those people live in Italian Village. So the commercial space in Ibiza will also create 200 more jobs. We’re providing employment opportunities at a time when people are losing jobs. In addition, this project sustains 500 jobs for the next 18 months during construction. At a time when we’re struggling to create jobs, or sustain jobs, we have a project that does just that.
So from a Columbus standpoint, this project is very important because it shows the country and the nation that you’d don’t have to put a moratorium on things. Housing is a matter of supply and demand like any other industry. If you build housing where there’s a demand, you can sell your supply. But that’s not always what was happening in the last four years. Eighty percent of all condos built in Columbus were catering to twenty percent of the market. Twenty percent of the market buys $240k and up. Eighty percent buy $240k and down. You can just look at MLS transactions and see where they go. We’re really addressing that, as 65% of our project is $240k and down. You know, we learned a lot on The Dakota. We sold it out in a year. We could have sold it out in four months if we’d have had more affordable units on the under $240,000 side. So we put that in our mix for Ibiza.
WE: Cool. Well I think you answered like three other questions that I was going to ask in there.
WE: As far as the legislation coming up on the 30th at City Council goes.. is this something that people should go attend if they want to support it? Or is it something that’s pretty much easily passing already?
RL: I think that City Council has already addressed the TIFs. The public had input in the past and they are for the TIF. Everyone agreed the Short North needs parking. And it’s a localized area, so any increase in property tax dollars for 2009 forward go into a TIF to pay for the garage, so I think everyone’s already on board for that. Council passed it unanimously and the public and neighborhood were supportive. This isn’t doing anything differently – just getting creative with how we take those same tax dollars and get it there faster. I guess it would help if people wanted to go, and say not only that we support the TIF, but that we support the creative measure to do what we’re doing now.
Again, City Council’s been great, Economic Development has been great, and I think the city has really been doing a lot to recognize that in this economic crisis we have to be creative. We can use legislative methods we have to help create projects and help create jobs. So if people want to go next week to attend the City Council meeting, that’d be great. We’ll definitely be there in attendance, and will help explain the situation; that everything is falling under the same legislation that passed for the TIF.
WE: Earlier you mentioned the retail and office component. Do you have any tenants lined up yet, or are there any specific tenants you’re looking to fill those spaces with?
RL: We do. I have to adhere to confidentiality agreements, but I can tell you a general idea of who they are. We have a great operator for the health club. It’s going to be a very zen, very progressive type of environment. You know, we’ll have weights and things, but it’s really based on personal diet and training. We’ll have a lot of yoga, pilates, and other great classes. It’s geared around more of a lifestyle of flexibility, stretching, and other types of preventative things. If you’re flexible, your body doesn’t break so much. It’s really based around a lot of Eastern concepts which are very prevalent in our country now. So we’ve got a great operator that’s moving in for that. We’re very excited and can’t wait for them to start.
We also have several restaurants that have been looking and we have two letters of intent. We’re going to make sure they are a great fit for the neighborhood. We want them to use the patio space, and want them to become a part of the streetscape. We have some great eclectic stores lined up, and we have some artistic people that have approached us about doing a small mini-gallery that rotates local art all of the time. That could become sort of a starting point for the Gallery Hop because there’s a nice courtyard… so I’m hoping that happens. We have some really nice salons that are looking, we have some jewelers that are looking. There’s a lot of businesses that are interested in the Short North and most of them are a part of the creative class, so the way that they design their stores and what they sell will be different than the norm. Everyone that we have in Ibiza will fit well in the Short North.
WE: That’s related to one of the other points that somebody raised on Columbus Underground the other day. With all of these condo developments, and store developments, there’s less and less room for art galleries and artists. Its far from being completely gone from the Short North, but the art scene is either being pushed into other neighborhoods, or people are being priced out. Do you feel like the neighborhood is changing?
RL: You know, that’s interesting. I have a very strong opinion on this so…
WE: Oh, and just for reference, you’ve been in the Short North for awhile now, right? How long have you lived in the Short North?
RL: Well, back in 1980 when I moved here, I used to walk the Short North. My dad worked at Battelle and since I wasn’t allowed to go in because it was classified, he would throw me and my sister on the street and we would walk around and I fell in love with the neighborhood. I didn’t quite realize that some of the people were gangs and selling services that probably shouldn’t have been sold. But I fell in love with it and when I moved back to Columbus after college in 1992, I moved into the Short North. I bought my first house here and so I’ve been here for a long time.
I think a certain part of the artist community has to move around, because as a neighborhood becomes gentrified, it looses some of that original appeal for them. I saw it happen with German Village… and I saw it come here to the Short North. I love German Village, but it’s very difficult to get in at a certain price-point. The charm of our neighborhood is that you could have a million dollar house next to a five-hundred dollar rental and both people are okay with that.
That’s why we’re doing Ibiza. Most buildings are homogenized, it’s either all luxury, or it’s all affordable. For the first time in Columbus you’re going to see a building that has a $1 Million penthouse, with a $120k one-bedroom unit and both are okay. Because both people can be members of the creative class.
I think that the Short North is going to continue to evolve. You know, Rosendales is art to me. Beautiful design. Gorgeous interior. Even the restaurants we did, such as Union Cafe, I’m very proud of. The Rigsby’s remodel… Marcella’s… art isn’t necessarily just about paint. There’s a lot of ways to express that. If you look at Salon Lofts – the way they are presenting their product is very artistic. There’s the candle shops, graphic designers, and everything else. So I think we have to have a broader vision of what art is about.
I think what we’re going to see happen is that really underground arts movement will want to move into more raw spaces. I think there’s a great opportunity to stay here in Columbus and branch out into areas like Weinland Park or Franklinton. I think there’s a misconception that the true underground arts movement wants to stay in a neighborhood once it’s gentrified. I have a lot of friends in the art community – both here and in New York – and there’s something attractive about being a part of creating something that’s exciting. Sometimes that thrill is lost once you’ve accomplished it, and you don’t necessarily want to stay with it anymore. It’s like once you open a successful business, sometimes you want to do something else.
WE: Like move on to the next challenge?
RL: Yeah, I think people have to recognize that you can’t hold on to that forever – we need to gentrify other neighborhoods too. The creative class and art community is what can make that happen. You know, a lot of people came through this neighborhood in the 80s and didn’t want to touch it. The arts community, which crosses over with the gay and lesbian community, will look at a run down building and say “Oh my god, that’s gorgeous! Why is it so cheap? I could do this, this and this, and make it wonderful.” And I think that we’re going to see that continue in other neighborhoods. It’s already happening. The Short North is kind of a spoke for that on the north end, German Village has been a spoke on the south end, and we’re just going to see those continue to grow.
WE: Speaking of other projects, did you want to talk about about the old Union (aka East Village) that recently closed? Any updates you can give us on that?
RL: Yes, we have someone looking to purchase it. We as a company have several divisions. We have the real estate, we have the restaurants, and we have a website project launching this spring. So we decided that we didn’t want to have so many physical venues. We ran East Village successfully for a few years and the heart and soul of East Village was one of our managers who decided to move. She was the energy behind it, so we decided to sell it and just focus on the three other venues – Havana, Axis and Union.
We just weren’t able to put in the time and energy – but that’s a very important corner for the neighborhood. When we were there as Union, it was an incredible source of energy. So the new owners coming in are expected to provide a lot of traffic. And I think that the merchants and retailers on the south end deserve that space to provide a lot of traffic because it brings in business.
WE: So, what’s next? Are you still focusing all of your energy on Ibiza right now, or are you looking down the road at more residential projects?
RL: You know, we view ourselves as part of the artistic/creative class. Anything we do, we don’t want it to be ordinary. We try to work with the best artists out there to come up with things that are different, and put a new twist on it. We only do one real estate project at a time so we can provide quality. We’ve had a lot of offers to do things after Ibiza… some apartments and other projects. But we’re not sure if we can put enough of a twist on it to not make it mundane for us.
There is a really small-space European concept that’s really high-stylized in design that we might do to provide European-style apartments in Columbus. Those are already happening in New York and LA.
We own some other land we can develop on, and apartments beyond this are where we think we would want to be. When Victorian Gate converted into condos, we lost all of those apartments in the neighborhood, and there is a need to have that in the Short North. But we wouldn’t want to do that until the parking garage gets built because we think that the neighborhood is really stifled for parking. There’s enough people that want to come to the Short North… there’s not enough parking.
WE: Do you think the development of rail transit could help with the need for parking?
RL: I’m a big supporter and big fan of rail transit. Someone should be able to fly into Columbus and then use rail transit to get from the airport to the Short North and Campus, and then down to German Village and then eventually all of the way up to the other neighborhoods, like Worthington.
I’ve been watching the events like the Arnold Classic for years, and they’ve become a huge national draw. I see a lot of people from out of town, and it’s embarrassing that when you get into the airport, you can’t take a rail line to get here. We’re a city of substantial size, we need to keep this great talent at businesses like Abercrombie, Nationwide, The Limited, Chase, Huntington, and Cardinal Health. You know these people are from places like San Francisco or Seattle or Portland, and that’s the number one thing I hear from them: “You know we love your condo project, and this feels like it could be in Manhattan, but at the end of the day, I still don’t feel like I have access to real public transportation.” We need to provide that to them. Someone should be able to go down to the Arena District, have a glass of wine, and get back home without having to worry about a DUI.
I think light rail would totally solve a lot of the issues that we have in Columbus and would actually increase the sales tax base for the region.
WE: Heh, this actually relates very closely to a blog post I read recently by Jeff Johnson. I think he’s going to enjoy hearing that a local developer really understands that rail transit is a very in-demand amenity for people who look at these types of residential projects.
Well, I think you covered questions most everybody had. Is there anything else you wanted to add or any other rumors you’ve read that you want to put to rest?
RL: I think in general we understand how the rumor mill works. People have questions and a few people are a little nervous because there have been other projects in and around the neighborhood that haven’t gotten off the ground, or got started and ran into issues. But we’re pushing forward. We’re going to make this happen and it’s going to be great for Columbus.
I’d like to say that we appreciate all of the support. There have been so many people that have helped us and have worked with us. The City, County and State have been amazing to work with, and they’ve been very supportive. For the most part, everyone’s been behind the project, and have been helping to push it – they’ve realized what a catalyst it can be. So – yes – we absolutely needed to address some of these questions today, and appreciate everyone’s concerns.
Our offices are right here on High Street, so anyone can pop in and say hi to us and talk to us directly.
I think everyone has the right to ask questions, and we’ve been communicating directly with our buyers. It’s exciting that there is also such a public interest in this with people who aren’t buying. We need to recognize a little more that Columbus is interested in the project and wants to see it happen, so we’ll start to do more with public updates.
WE: Cool, can’t wait to hear more. Feel free to provide us with updates on Columbus Underground any time! Thanks again for taking the time today, and we’ll talk with you more soon.