(Bloomberg) -- In the center of Fort Wayne, Indiana, sits an abandoned General Electric (NYSE:GE) Co. complex built more than a century ago, a space that once employed about 40 percent of the city’s workforce but now serves as a constant reminder that the downtown isn’t what it used to be.
That’s poised to change through a revitalization project, financed by $45 million of local-government bonds, that will turn the 39-acre site into apartments, shops and offices scattered among the 18 buildings occupied by GE during the town’s manufacturing heyday.
Renovations that transform old manufacturing centers into trendy apartments and shopping plazas are common in large cities with industrial pasts –- just look at Chelsea Market’s success in New York’s meatpacking district. But smaller Midwestern cities also are overhauling deserted factories into all-in-one office, apartment, retail and entertainment meccas –- and are tapping into the $3.8 trillion municipal-bond market to do it.
It’s undoubtedly a gamble to borrow long term for real-estate speculation, but for cities like Fort Wayne -- with a population of about 266,000 –- it may be their only chance to remain relevant in a national economy driven by a tech-centered workforce and young people interested in urban amenities.
“Many of these people are looking for an urban lifestyle, and it’s too expensive to move to San Francisco, Seattle,” said Ren Farley, professor of sociology at the University of Michigan. “It’s young college graduates who have got some creative skills or advance training in AI or computer science.”
Breathing Life
The $440 million development called Electric Works -- a nod to GE’s past -- is intended to breathe life into a hulking abandoned property that was at the heart of Forth Wayne’s bygone manufacturing era. When completed just southwest of downtown, it’s projected to generate more than $100 million in local tax revenue over the next 20 years. The development will include nearly 225,000 square feet of class-A office space, about 100 apartments and 83,000 square feet of retail space.
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“The emotional weight that the industrial complex has on this community can’t be overstated,” said Josh Parker, partner at RTM Ventures, the company behind the project. “It’s not just what we’re doing on our site, but what that brings to the larger area.”
Once-booming urban areas in the Northeast and Midwest have been hit hard by the decline of American manufacturing, losing population -- especially young educated workers -- while seeing poverty rates skyrocket. According to a recent study from the Manhattan Institute, three quarters of 96 Rust Belt cities surveyed have fewer residents than they once did. All of them have seen poverty rates increase since 1970.
However, ambitious developers have zeroed in on the bones of abandoned factories -- brick edifices, spacious rooms, wood-planked ceilings –- for new mixed-use districts.
Allentown, Pennsylvania – with a population of about 121,000 -- has used tax-exempt revenue bonds in part to finance a retail, dining and commercial office center, including a 10,000-square-foot arena, after the exodus of big employers like Bethlehem Steel and Mack Trucks from the city. The development has since attracted several big-name businesses to downtown Allentown, including Leigh Valley Health Network and Bank of America Corp (NYSE:BAC).
In Richmond, Virginia, an old American Tobacco Co. campus is being transformed into upscale apartments with $34 million in tax credits and $26 million in tax-exempt debt.
Indianapolis is also looking to its manufacturing past, with Wisconsin-based Hendricks Commercial Properties redeveloping an old Coca-Cola (NYSE:KO) bottling plant into a $300 million mixed-use project that will include a boutique hotel, office spaces and a food hall.
Historic Roots
“There’s a pattern and a really wonderful fabric of repurposing these type of facilities as the houses of revitalization,” said John Austin, director of the Michigan Economic Center and economic lecturer at the University of Michigan.
Fort Wayne and local governments will supply $65 million in public money for the project, including $45 million in tax-exempt bonds backed the county’s 1 percent food and beverage tax. Federal, state and private funding make up the remainder. The bonds could be sold in third quarter of the year.
So far, more than a dozen tenants have announced that they intend to lease space at Electric Works, including Parkview Health, Fort Wayne Metals, Medical Informatics Engineering Inc. and Indiana University. Construction is scheduled to begin this fall and be completed in late 2021.
Such projects are not without peril, said Stephen Eide, a senior fellow at the Manhattan Institute who specializes in state and local finance.
“Bonds can have a very long horizon, and we don’t know where these cities will be in 10 years, much less 20 or 30 years,” he said.
(Updates with details of project in sixth paragraph. A previous version of this story was corrected to restore dropped word in third paragraph.)