KALAMAZOO, Mich. (WOOD) — A Kalamazoo redevelopment project slowed by higher construction costs and supply chain issues is getting more financial support from the state.

Tuesday, the Michigan Economic Development Corporation’s Strategic Fund Board approved increasing its performance-based loan to 619, LLC by $1.2 million for a total 30-year loan of $3.4 million. That’s roughly 55% higher than the original $2.2 million loan approved by the board in October.

619, LLC plans to transform the former industrial site at 619 Porter St., between East North and East Ransom streets, into a five-story building containing 52 apartments and roughly 11,000 square feet of commercial space.

Those familiar with the project say higher construction costs have added just over $3 million to the project budget, which is a hike of more than 27%. The developer plans to cover the rest of the added cost with a $1.8 million equity contribution.

“We’ve had drastic increases in steel, concrete, gypsum, any petroleum-based products, so piping, flooring. And of course, probably the biggest one is labor,” said Andy Wenzel, executive vice president and director of development for PlazaCorp Realty Advisors. “We’re still bullish on moving forward.”

Michele Wildman with the MEDC said loan increases like this are not common, however other projects are also seeing the impact of higher construction costs tied to supply chain and labor issues, “and so we continue to address those situations for these critical projects statewide that were already underway.”

(A conceptual rendering provided by the Michigan Economic Development Corporation shows what the development at 619 Porter Street in Kalamazoo may look like.)

The plans by 619, LCC call for apartments that are “focused more toward affordable housing” with rates targeting households at 60 to 100% of the area median income, according to Wenzel.

“That’s definitely a price point where there’s a need for housing, residential housing,” he said.

His group also developed The Exchange in Kalamazoo, which is home to 132 housing units. Wenzel says it’s full with about 70 people on a waitlist, “so there’s definitely a need for more housing.”

The project’s commercial space would be “more community commercial,” according to Wenzel.

“We have a laundry, and a daycare and some other community service-type businesses that we’re working with to fill that space,” he said.

The new loan agreement allows the MEDC to forgive up to $1.2 million of the loan amount upon maturity, based on the outcome of a debt service coverage test.

Developers with 619 originally hoped to finish the project next spring. They now expect to start construction in about two months after finalizing its financing.

“There’s just a lot of good momentum that’s happening. There are some new projects that are happening in that community. We’re just thrilled to be part of it,” Wenzel said.

The entire project is expected to take 18 to 20 months to complete.