Skip to Main Content

Request for Committee Action

2017 Pipeline Affordable Housing Trust Fund Project recommendation (RCA-2017-00851)

ORIGINATING DEPARTMENT
Community Planning & Economic Development
To Committee(s)
# Committee Name Meeting Date
1 Community Development & Regulatory Services Committee Aug 8, 2017
Lead Staff:
Carrie Goldberg, Multifamily Finance Specialist
Presented By:
Carrie Goldberg, Multifamily Finance Specialist
Action Item(s)
# File Type Subcategory Item Description
1 Action Loan

Approving a total of $2,475,000 from the Affordable Housing Trust (AHTF) subject to the availability of funding at project closing and authorizing the execution of necessary documents for an AHTF loan noted below:

  1. A loan of up to $1,250,000 from the AHTF for the Maya Commons project (fna Bunge Apartments) located at 937 13th Ave SE by Project for Pride in Living Inc., or an affiliated entity.
  2. A loan of up to $1,225,000 from the AHTF for the Green on Fourth Apartments project (fna Boeser) located at 2901 4th St SE by G4 Partners LLC, or an affiliated entity.
Previous Actions

On November 4, 2016, the City Council approved an AHTF award in the amount of $1,250,000 for the Bunge Apartments project now known as Maya Commons.
On October 31, 2014, the City Council approved an AHTF award in the amount of $1,025,000 for the Prospect North Gardens housing development (fna Boeser).

Ward / Neighborhood / Address
# Ward Neighborhood Address
1. Ward 2 937 13th Ave SE Minneapolis
2. Ward 2 2901 4th Street SE Minneapolis
Background Analysis

Affordable Housing Trust Fund (AHTF) Program Overview
In May 2003, the City Council combined previously separate multifamily affordable housing funding programs into the Affordable Housing Trust Fund (AHTF) to assist in the financing of the production and preservation/stabilization of affordable and mixed-income rental housing projects in Minneapolis. The AHTF Program assists with providing decent, safe and affordable housing opportunities, assists with community revitalization and blight removal, and supports tax base enhancement, job creation, and increasing density along critical corridors. The AHTF Program administration is guided by the Minneapolis Plan, the Unified Housing Policy, and the HUD Consolidated Plan for Housing and Community Development.
The AHTF awards are typically awarded pursuant to an annual Request for Proposals (“RFP”) and structured as a loan with a note and mortgage.

Funds not awarded through the RFP may be available in a pipeline round based on the following priority:

  1. An application scored well in the current round and met thresholds but didn’t receive funding or received a prior award but did not maximize the funding request.
  2. Projects that preserve Naturally Occurring Affordable Housing (NOAH): Rental housing projects provided by the private market without government subsidy that have at least 20% of the units with rents affordable to households with incomes at or below 50% of the area median income, and/or rental housing projects that previously received local subsidy or low income housing tax credits, and will no longer be subject to income and/or rent restrictions.
  3. Projects that are a priority in accordance with the Interagency Stabilization Group (ISG).
  4. Projects that further achieve the goal of the Senior Housing Policy of a minimum of 35 units in each Ward by 2025. The remaining eligible Wards are: 1, 4, 5, 7, 10, 11, 12, and 13. The Wards that have already achieved this goal are: Ward 2 Minnehaha Commons, 41 units; Ward 3 Mill City Quarter, 150 units; Ward 6 Snelling Apartments, 60 units; Ward 8 Sabathani Senior Housing, 50 units; and Ward 9 Hi Lake Triangle Apartments, 64 units.

The AHTF has three funding sources: Local funds (City General Fund and Tax Increment), federal Community Development Block Grant (CDBG) funds, and federal HOME Investment Partnership Program funds. CDBG and HOME have differing policy objectives and differing restrictions on where and how those funds can be used in housing projects.

The AHTF Program has established selection criteria used to review and score the proposals. There are two thresholds that a project must meet to be evaluated for funding. First, a project must meet the Minimum Point Threshold of at least 20 points combined in four selection criteria: 1. Financial Soundness and Management; 2. Capacity of Property Manager and Quality of Property Management Plan; 3. Capacity of Owner and Developer’s Comparable Project Experience; and 4. Economic Integration. A project must also meet the Total Point Threshold, which means a project must receive a minimum of 86 points in all selection criteria. In addition, a project must have complete site control.

On July 18, 2017, the Development Finance Committee (DFC) reviewed the AHTF funding recommendation for both the Maya Commons and Green on Fourth Apartment project’s proposed financing structure and the overall capacity of the developer and recommended approval. See attached action.

AHTF Funding Recommendations
Below is a summary of the projects:

1. Maya Commons – Ward 2 – Como – Score 126
937 13th Ave SE

  • 50 units (42 @ 50% AMI or lower) of new construction
  • Financing structure: 9% LIHTC, grants, and public deferred loans
  • Policy alignment and public benefit summary: workforce housing; LTH
  • The Total Development Cost of the project is $14,328,758 which is a TDC/unit of $243,435

2. Green on Fourth Apartments – Ward 2 – Prospect Park – Score 112
2901 4th Street SE

  • 243 units (49 @ 50% AMI or lower) of new construction
  • Financing structure: HRB 4%, grants, TIF, and public deferred loans
  • Policy alignment and public benefit summary: affordable housing; family and mixed income
  • The Total Development Cost of the project is $56,048,406 which is a TDC/unit of $230,652

Timely Completion Conditions and Rescission of Awards
The AHTF policies in the RFP require timely completion of projects within the context of the established funding cycles of the other funders such as Minnesota Housing. The AHTF project awards are reserved for 15 months from the City Council approval date. The developer must submit monthly progress reports describing incremental project financing and development achievements. At the end of 15 months, if the developer can demonstrate that at least one-third of the total development funds have been raised; and can provide evidence that the balance of the development money is likely to be raised; and can provide evidence that a closing will occur within the next twelve months, the funding reservation may be administratively extended for an additional 12 month period. Projects unable to meet the timelines may have their awards rescinded. Projects receiving a supplemental AHTF award are held to the timely completion conditions from the year of the first AHTF award for that project, which means that receiving a supplemental AHTF award does not extend the 27 month timeframe in which the project should be fully financed.

These projects had both received prior awards. Those funds are being relinquished and recommitted to these projects which will establish a timeframe that begins upon Council approval on August 18, 2017.

Maya Commons is seeking the same AHTF award as was originally applied for in 2016, $1,250,000. This award is being renewed due to the structure of the project changing. This project originally consisted of two buildings with a total of 150 units being developed simultaneously. The project has since been broken out into two phases with two separate developers. The end project will remain largely the same; two buildings with a total of 145 units. This AHTF award is for the first phase consisting of one building with 50 units. No AHTF award is being sought for the second phase which consists of 95 units.

Green on Fourth Apartments original AHTF award was in 2014 in the amount of $1,025,000. The project is seeking an additional $200,000 in trust funds as the number of units for this project increased allowing it to qualify for additional funds. This project will thus have a total AHTF award of $1,225,000.

AHTF Repayment and Recapture Terms
The AHTF funds are typically provided as a deferred payment loan with a 30 to 40 year term with 0% to 1% simple interest. Additionally, the City seeks to recapture a percentage of net cash flow in mixed income projects, where possible, pursuant to CPED’s approved policy guidelines. In this round, there are no mixed income projects subject to this requirement.

AHTF Application and Loan Origination Fees
In May 2011, the City Council approved the collection of a $1,000 application fee for each AHTF proposal and a one percent (1%) loan origination fee for each AHTF project. The loan origination fee for the recommended projects will be collected at project closing, except for projects with HOME funding because HUD prohibits collecting an origination fee with HOME funds.

FISCAL IMPACT STATEMENT
  • No fiscal impact anticipated
  • Meets Small and Underutilized Business Program goals.