XENIA — The transformation of the upper floors of Xenia Shoe and Leather Repair has begun.

In 2016, the city was awarded $500,000 from the HOPE VI Main Street Grant Program which will be used to renovate the top two floors of the building at 21 E. Main Street, owned by Timothy and Lynn Sontag.

The project entails the construction of four walk-up residential units — one of which must be made available to low to moderate income families for the first leasing cycle pursuant to the grant guidelines. Although the grant was awarded to the city, the guidelines require the funds to be passed on to the property owners via a forgivable loan. The city is required to distribute the grant funds to the property owners on a reimbursement basis for costs incurred.

Currently, material is being removed from the second floor via tubes, vacuums, and other types of equipment. According to shop employees, demolition crews are removing old plaster, while an old safe was removed, along with a dumb waiter, and bats.

“It’s going great so far, we’ve been working on this project at least six or seven years,” Tim Sontag said. “I think we have a great construction crew in Max Construction. We’re getting rid of dropped ceiling material, old carpets, and old furniture from the 1800s. We’ve hauled away seven dumpsters full so far.”

City Manager Brent Merriman described the lengthy and complex history of the project during a recent city council meeting. He also described the struggles to identify and secure resource streams to fund it. A key component of council’s strategy involved a modification to the terms and conditions of a loan arrangement previously facilitated by and executed by the Sontags and city.

A previous loan for $115,200 to help facilitate the project is being combined with an additional loan of $84,800 to allow the project to move forward, according to city records.

The loan structure would be a 12-year term amortizing $100,000, with a deferment of payments in the first three years. There would be a balloon payment at the end of the loan for the remaining $100,000 balance. The loan would continue to accrue interest throughout the entire twelve-year period even as payment is deferred.

Reach Karen Rase at 937-502-4534.