Construction has begun on the largest public housing rehabilitation in Minneapolis.
The effort will result in the preservation of 174 units and the addition of 10 accessible units at Elliot Twins, two adjacent 12-story buildings. The project is the first within the Minneapolis Public Housing Authority (MPHA) portfolio to utilize the federal Rental Assistance Demonstration (RAD) program, according to officials.
To help facilitate the RAD conversion and $25 million renovation, Hunt Real Estate Capital has provided an $11.8 million Freddie Mac Tax Exempt Loan.
“We are thrilled to partner with the MPHA and the other parties involved to finance this important renovation project and RAD conversion,” said Joshua Reiss, director with Hunt Real Estate Capital, a division of ORIX Real Estate Capital. “The Elliot Twins are one of the oldest high-rise properties in the MPHA portfolio, and this modernization will help ensure that current and future residents have access to quality, safe, and sustainable housing.”
The project will also result in a new community building as well as significant sustainability upgrades that will reduce energy usage by as much as 35%.
“With the Elliot Twins, we set off to fulfill our essential vision to preserve public housing across Minneapolis,” said MPHA executive director and CEO Abdi Warsame. “This extensive and attractive renovation will transform the lives of the people who live there. It will also embody our joint commitment with the city to invest in high-quality, long-lasting, appealing homes for our lowest-income citizens.”
The developments were built in 1961, and nearly 80% of residents are seniors or have a disability. The average annual household income of residents is $10,200. Once the RAD conversion is complete, all residential units will be subsidized under 20-year Section 8 contracts, which will be in place at the closing of the equity partnership and construction loan.
Upon stabilization, the Freddie Mac permanent TEL loan arranged by Hunt and low-income housing tax credit (LIHTC) equity will pay off the construction period bonds.
“Our experience with both the RAD program and with Freddie Mac allowed us to structure the loan in a manner most beneficial to the MPHA,” Reiss said. “The Freddie Mac loan is a 24-month unfunded forward commitment with a low, fixed-interest rate, 18-year term, and a 40-year amortization schedule. With permanent financing in place, the MPHA can focus on continuing to provide high-quality affordable housing for low-income households.”
Additional funding sources included construction financing from Bremer Bank, LIHTC equity provided by RBC Community Investments, an energy-efficiency funds loan from the city of Minneapolis' Community Development Block Grant program, and an MPHA capital fund loan. Development and financial consulting was provided by Eliza Datta of E3 Development and Tanya Dempsey of CSG Advisors.
Residents are able to remain on-site throughout construction. The renovation includes the replacement and upgrade of building systems, such as plumbing and electrical, the installation of a central chiller unit to provide air conditioning to residential units and common areas, the installation of a fire suppression sprinkler system, and exterior upgrades, such as new roofing. In-unit enhancements include new appliances, fixtures, doors, flooring, kitchen cabinets, and countertops. Construction is expected to last through late 2021.