Unease at Kentucky Project Mirrors Construction Industry’s Fears

LOUISVILLE, Ky. — Until the coronavirus pandemic, Gill Holland spent six years and $35 million constructing new residences and renovating 19th- and 20th-century warehouses in Portland, a historic neighborhood on the Ohio River that is Louisville’s oldest and one of its poorest.

Mr. Holland’s Portland Investment Initiative had bought more than 60 properties and filled them with businesses and residents new to the racially diverse neighborhood, where roughly 10,000 people live.

The project, the largest real estate investment in Portland in at least a century, is awakening civic energy that has been dormant for decades.

But its momentum is threatened by the coronavirus outbreak. Gov. Andy Beshear closed sit-down service in Kentucky restaurants and bars on March 16, and issued a separate closure order for other businesses nine days later.

Store and restaurant owners whom Mr. Holland attracted to Portland said they were nervous their businesses might not survive. As a fog of economic insecurity settles over the project, Mr. Holland is confronting the same financial impediments and social anxiety challenging real estate developers across the country.

Nearly 40 percent of construction projects have been suspended or canceled, according to a national survey by the Associated General Contractors of America, an industry trade group. Thousands of industry workers have been laid off.

In Louisville, Mr. Holland has renovated 241,000 square feet of empty brick warehouses, most built in the 19th century, for commercial space. Big tenants include the University of Louisville’s Archaeology Laboratory and master of fine arts program, and a Mercedes-Benz auto technician training center. More than a dozen smaller businesses have settled into renovated warehouses, including the headquarters for Heine Brothers’ Coffee, a locally owned chain.

Farm to Fork, a popular cafe and catering business, operates in a renovated firehouse built in 1903. Before the closure order, the company employed nine people; it now operates with two employees selling meals delivered directly to customers.

The favorable lease that Farm to Fork’s owner, Sherry Hurley, negotiated with Mr. Holland gives her the right to buy the building for $225,000, terms she is determined to meet. “I have personally and professionally made a big investment in Portland,” Ms. Hurley said. “I am committed to weathering the Covid-19 storm.”

New projects Mr. Holland planned for later this year are unsettled. One of them, the largest and most expensive he has undertaken, is a $17 million mixed-use renovation of three 19th-century wood and brick warehouses overlooking a riverfront park. The 126,000-square-foot project encompasses 60 market-rate apartments and 37,000 square feet of commercial space.

“This has always been challenging,” Mr. Holland said. “Nothing about what’s happening now makes it easier.”

One hopeful note is that construction on existing projects has not shut down. Mr. Holland is set to close the loan on a new $3 million mixed-use building on 17th and Bank Streets that will include 20 small market-rate apartments aimed at students and young professionals and 7,000 square feet of retail space.

Construction is set to start in April. But he’s nervous about the schedule. Pennsylvania became the first state to close construction projects on March 21. Boston, New York and San Francisco, among other cities, stopped “nonessential construction.”

The epidemic is professional and personal for Mr. Holland, who shut his Portland Avenue office, housed in a former Boys and Girls Club he renovated in 2014 for $250,000. His staff now works from home.

He was conducting dozens of tours every month for buyers, renters and investors, but traffic has come to a near standstill. City permitting, inspection and licensing offices are closed to walk-in traffic.

The pandemic has roiled his plans, but it is not likely to be fatal. Mr. Holland has a reputation for developing sound projects in tough neighborhoods in this Ohio River city of 630,000 residents, said Mayor Greg Fischer of Louisville.

In 2006, Mr. Holland and his wife, Augusta, started to invest in a block of similarly old and blighted buildings across town along East Market Street to create a $13 million nexus of new restaurants, businesses and residences. They named the area NuLu. More than a decade later, it has attracted $500 million in investments in new residences and business start-ups and has become one of Louisville’s most active dining and entertainment districts.

NuLu and the Portland project join a number of Louisville neighborhoods, including those in West Louisville, a predominantly African-American area, that are experiencing strong redevelopment activity.

“Gill knows what he’s doing,” Mr. Fischer said in an interview before the pandemic unfolded. “Portland is a much bigger project than NuLu. He knows it will take more time.”

Mr. Holland also bought and renovated 55,000 square feet of residential space in Portland, much of it in single-story shotgun-style and two-story Victorian homes along Portland Avenue, the spine of the redevelopment. He worked with the Housing Partnership, a nonprofit local housing developer, to build the $3 million Montgomery Apartments. The neighborhood’s first new multifamily residential building in a generation, it already has a waiting list for the 24 units of affordable housing.

“Just like he did in NuLu, Gill has been surgical in his development in Portland,” said Jason Ferris, a partner in the Louisville appraisal firm Bell Ferris. “His intention is to create micro-markets that over time will overlap and elevate the entire neighborhood.”

Portland has endured natural and economic disasters just as serious as the coronavirus pandemic. Established in 1811 as an Ohio River port, Portland was flooded twice in the 20th century, and made it through the Great Depression and a bank-fueled real estate boom and bust in the 2000s. Bankruptcies and joblessness in the last recession left hundreds of homes and buildings vacant.

Portland deteriorated, but the architectural character of its homes and the sturdiness of its old warehouses remained. The prices of Mr. Holland’s early acquisitions in the neighborhood were attractive. Empty shotgun houses sold for $5,000.

Sturdy old buildings were available at low prices, too. He paid $400,000 for the 17,000-square-foot Montgomery Street School, an 1853 building on the National Historic Register once used as a Civil War hospital. After a $250,000 renovation, the building includes a studio for the visual artist Richard Sullivan and offices for nonprofit organizations and businesses.

On nearby Rowan Street, Mr. Holland bought a 60,000-square-foot warehouse built in 1880 for $250,000 and persuaded the University of Louisville to lease most of the space. With lease in hand, he raised $5 million to renovate the interior. Instructors and students moved in last year.

As the neighborhood improved, concerns were voiced that rising home values and rents would push out longtime residents. But Mr. Holland responded that, with 1,400 abandoned properties, the neighborhood could accommodate decades of new construction and much higher population growth before it would reach prices that would force residents to move.

“Over all, people have welcomed and are excited to see business improvements on Portland Avenue,” said Judy Schroeder, a fifth-generation Portland resident active in Portland Now, a neighborhood association.

Mr. Holland has been recruiting “value-add” investors, business owners and residents who intend to stay and make a difference. One of those is Danny Seim, an artist who moved from Portland, Ore., in 2015 and bought a home in the Portland neighborhood. His wife is a resident psychiatrist at the University of Louisville.

Mr. Seim has painted colorful murals on neighborhood walls, and last summer, he became co-director of the Portland Museum. Next to the museum was a vacant 1870 Victorian home that Mr. Seim painted using excess materials from one of his murals. “I thought if something wasn’t done, if it wasn’t made more attractive, that beautiful house would be torn down,” he said.

The building turned out to be owned by Mr. Holland, who offered to sell it to Mr. Seim for $40,000. The two are now collaborating on a $1 million project to renovate the house, landscape the backyard and build a 2,000-square-foot events center for a children’s museum and play area.

“People want to stake their claim in the neighborhood,” said Mr. Seim, who has already raised $100,000 for the center. “Most of what we need to do with this project is right here.”