Sparkhaus, a development project that aims to build an entrepreneurial hub in Covington’s urban core, locked down a key loan.
Located at 727 Madison Ave. in Covington’s Central Business District, SparkHaus is transforming the vacant Simms Furniture building into a space where Northern Kentucky-based founders, investors and support organizations can collaborate in one central office hub.
On Jan. 29, the Kenton County Fiscal Court agreed to grant a bridge loan for the SparkHaus project. A bridge loan is a financial tool that provides immediate funds to cover gaps in cash flow until longer-term financing is secured. According to documents provided by Kenton County, the loan will finance construction and related transaction costs on the project.
Specifically, the bridge loan will cover a historic tax credit worth approximately $2 million. Kenton County Judge/Executive Kris Knochelmann said the loan would cover the contractor’s work. The county will then pay off the loan when it receives the money from the state tax credit.
“What this is a piece of the effort of those SparkHaus, which would be the $2 million of the already approved state tax credit dollars, which the making sure that the contractor does the work would allow those funds to be then transferred to pay this money back,” Knochelmann said.
SparkHaus is being funded through several sources, including $2 million in Kentucky Historic Rehabilitation Tax Credits, donations from private donors and organizations, $2.5 million from the Catalytic Fund and $6 million dole out by the Kentucky General Assembly, among others.
According to a Kenton County press release from September 2024, SparkHaus is expected to cost approximately $16.4 million.
Kentucky Historic Rehabilitation Tax Credits are administered by the Kentucky Heritage Council, a state agency that oversees and administers all historic preservation incentive programs. The specific tax credit is a voluntary, dollar-for-dollar credit toward a property owner’s income taxes based on the cost of restoring a historic property.
The Northern Kentucky Port Authority owns the property. In May 2023, the fiscal court activated $3 million in site development funds to help the Port Authority purchase it from local real estate developer Tony Milburn.
To qualify for a tax credit, a building must be listed on the National Register of Historic Places. 727 Madison Ave is part of the Covington Downtown Commercial Historic District, which is included in the registry. The building, constructed in 1929, was a Montgomery Ward department store until its closure in the early 1970s. Simms Furniture moved into the space in the mid-1970s until it closed in 2022.
Jeanne Schroer, president of The Catalytic Fund, said she wanted to ensure there was adequate cash flow for the project.
“I put everybody through the wringer, making sure that there was adequate cash flow to not only pay the operating expenses, but to pay that debt service so no one is scrambling, trying to come out of pocket,” Schroer said.
Furthermore, Schroer noted that the bridge loan will be repaid once the historic tax credits are sold.
“We are taking that risk, and we are bridging that via a loan, and so when those tax credits are sold, our loan will get mostly repaid, and then that money can go back into the project,” she said.
Construction on the property is already underway. Urban Sites, a Cincinnati-based developer, is the project’s contractor, while CityStudios Architecture is responsible for the design work.
Last September, several SparkHaus stakeholders celebrated the project’s start at an event where the floor plans were revealed. SparkHaus’ three-story floor plan includes 31 dedicated office spaces for teams of two to 12, over 170 individual desks, multiple meeting rooms, classrooms, presentation rooms, a fitness room, an indoor and outdoor lounge space and a cafe.
Once completed, SparkHaus will serve 200 to 300 people daily.
