February 24, 2016
By Twin Cities LISC and Gayle Thorsen Communications
Original article posted at TC LISC.
The two worlds of affordable and market-rate housing development often don't meld easily. Each has different expectations, policies, and regulations…not to mention different players.
But at 2700 University Avenue–on the seam between Minneapolis and St. Paul adjacent to the Westgate light rail station–ground is being broken for a mixed income housing development that brings those two worlds into beautiful harmony. And not a moment too soon.
The area is crying out for more multifamily housing, a fact that was reinforced by the Big Picture Project that gathered and analyzed housing data along the corridor. Over the past several years, the rising demand for multifamily housing has led to a rental occupancy rate of nearly 100% and a long wait list. Easy access to the new Green Line light rail has made the area even more attractive to individuals and families, for whom the University of Minnesota, both city centers, and two hospitals would be only a short train ride away.
This new transit-oriented development will add 248 apartments with modern amenities to the Central Corridor. Twenty percent of those will be affordable, and 80% will be market-rate units. In addition to interior community space and fitness rooms, there'll be a large outdoor pool area with grills, seating, and pergolas; an entry plaza with a public art installation; and a half-acre internal courtyard that provides light and air to both residents and neighbors. The ground floor will also feature 3,000 square feet of commercial space.
The site design–two story townhomes with porches and front doors on the public sidewalk on Emerald Street, and balconies overlooking University Avenue with large plate glass windows on the ground floor—uses Crime Prevention through Environmental Design (CPTED) strategies. These strategies help create more of a "Main Street" feel, with human-scaled activities that create a sense of place and increased safety.
Bringing this marriage about has been a long complicated haul on the part of several committed partners—Flaherty & Collins Properties, a large Midwest housing developer; Twin Cities LISC; its affiliate the
National Equity Fund (NEF); LISC's co-funder BMO Harris Community Investments; the City of St. Paul; and the Metro Transit Authority.
LISC launches new loan product
To help fund this project, Twin Cities LISC added an innovative new mezzanine loan product to its financial toolkit for housing developers. Because of the large size of the loan, it made sense to partner with BMO Harris Community Investments, which put up 40% of the total $6.2 million loan. In addition, LISC made a $1 million pre-development loan to the project, and its affiliate NEF provided $5 million in equity for the affordable housing units.
"There's a traditional divide between the funding systems for affordable housing and for market-rate housing," says Amy McCulloch, Twin Cities LISC's deputy director. "But LISC is familiar with both systems, so we're in a perfect position to organize this kind of loan. Big transactions like this are one way we can advance mixed-income housing and invest in hotter market areas. The results more than make up for the complexity of the loan process. In the future, we hope to be making a few of these kinds of loans
According to Carl Jenkins, managing director of community investments at BMO Harris Bank, the bank has been looking for select opportunities to make direct, cash-yielding investments in affordable housing. “2700 University provided us with the perfect scenario for that kind of customized product. When LISC told us about the opportunity, we saw it as a natural extension of the long, rich partnership between the two organizations. We place a high value on our community development partners and their ability to facilitate housing solutions for low and moderate income families.”
Scheduled to be completed in summer 2016, 2700 University is the last component in St. Paul's 10-year effort to transition 14 urban infill acres along that that avenue from industrial use to a new neighborhood of attractive residential dwellings and lively commercial space.
LISC, along with its affiliate NEF, has invested over $521 million in grants, loans and equity in the Twin Cities, and leveraged more than $2 billion in support of local community development. These investments have resulted in more than affordable 12,600 homes and apartments, and 1.6 million square feet of commercial and community space.