ORIGINATING DEPARTMENT
To Committee(s)
| # | Committee Name | Meeting Date |
|---|---|---|
| 1 | Business, Inspections, Housing & Zoning Committee | Nov 7, 2022 |
Action Item(s)
| # | File Type | Subcategory | Item Description |
|---|---|---|---|
| 1 | Action | Loan | Authorizing a $2 million loan from the Department of Community Planning & Economic Development's 2022 General Fund Budget to North Group LLC or its assigns to finance the Building, Technology and Innovation Center (BTIC), located at 415 Royalston Ave N for a modular housing manufacturing facility. |
Ward / Neighborhood / Address
| # | Ward | Neighborhood | Address |
|---|---|---|---|
| 1. | Ward 5 | North Loop | 415 Royalston Ave N, Minneapolis, MN |
Background Analysis
The City of Minneapolis can provide important funding to support the creation of a new modular housing manufacturing facility, the Building, Technology and Innovation Center (BTIC), at 415 Royalston Ave. N. It is being developed by North Group LLC, led by Devean George, and is close to finalizing a lease at the existing approximately 200,000 square foot industrial building just east of Heritage Park.
The proposed $19 million development investment would lead to 315 jobs by 2025 all with wages above $31 per hour. This facility addresses multiple 2040 strategies and would increase innovations to accelerate housing production and support in the city and across the state. The developer has asked the City to provide funding to fill a gap between $8 million and $10 million and to use its influence to gain financial support from Hennepin County and Minnesota DEED.
Staff recommend re-allocating $2 million from CPED’s General Fund budget, previously allocated to the Commercial Property Development Fund (CPDF) towards this gap. CPED staff intend to work with the Financial and Budget team, the Mayor and City Council to identify additional funds in 2023 to re-instate the full allocation for the CPDF prior to the need to allocate those dollars.
Project Details
The project would raise $19 million through various sources including privately placed revenue bonds as the main financing. The staff proposal would fund a $2 million loan that would be used to pursue a match from Hennepin County and DEED. Developer equity will be $2 million, and staff is working to secure revenue bonding for an additional $10 million, leaving a gap of $5 million if the City supports the proposed $2 million loan. The developer is making progress with philanthropy for additional support.
The proposed loan terms will be presented at the time the developer applies for revenue bond authorization and could include forgiveness clauses based on job creation and realizing other benefits such as:
- Strategic Training and Development: creating a training program by hiring skilled trades to provide in-plant training to people entering the construction field.
- Automation and Technology: Focuses on steel modular construction that will produce higher quality products, increased speed to the products to market, and the ability to build taller, denser buildings.
- Quality Control: Assembly line process increases quality control and reduces product deficiencies.
- Market, Training, and Environmental Opportunities: The development team has identified two initial project sites for the products of facilities – Village Creek in Brooklyn Park (200 units) and the Upper Harbor (up to 700 units). There are also natural training partners to assist with a pipeline of talent, including Summit OIC and Dunwoody Institute. And the facility has a commitment to attain energy efficiency toward a net-zero district.
Project Team
The project team has experience in all aspects needed to successfully complete the project and operate the facility. These members include experienced developer, architects, plant designers and operators of modular housing manufacturing facilities.
Timeline
With support, the facility could begin production by early 2024. Hiring, in phases, could start as early as Spring of 2023.
Source of Funds
The funding to support this request is currently appropriated to CPED and was originally budgeted for the Commercial Property Development Fund (CPDF), in 2022, but not obligated at this time. The project is not intended to be a CPDF award, as it meets other important goals than those of the CPDF program. Rather it is a source of funding that can address a time sensitive opportunity to fund the BTIC. CPED will work with Finance and the Budget Office to identify a potential replacement source into the CPDF fund during the roll over process in early 2023.
Opportunities
The BTIC could transform the way housing is constructed in Minneapolis as it provides 315 living wage, family supporting jobs to the Northside. This facility also directly addresses the Inclusive Economic Recovery Work Group’s goal to rebuild the Black middle class, support the City’s SREAP goals, and more than a dozen Minneapolis 2040 goals. Other benefits include:
- Plant operations is accessible – walkability and LRT Royalston Station
- Operations and production staff will receive an aggregate in $5.8M annual salaries with local buying multiplier impacts on Minneapolis’ economy.
- Creates 177 jobs in 2023, and 315 jobs by 2025.
- Modular construction reduces costs, increases quality, and increase speed to market.
- Modular construction provided full-time, year-round, climate-controlled employment compared to conventional construction.
- Creates strategic training, development and innovation headquarters in north Minneapolis.
- Facility uses innovative automation, quality control, and sustainability