Hunt Real Estate Capital, a division of ORIX Real Estate Capital, has provided an $11.8 million Freddie Mac Tax Exempt Loan (TEL) to help facilitate the Rental Assistance Demonstration (RAD) conversion and $25 million renovation of Elliot Twins, two adjacent 12-story high-rise buildings within the Minneapolis Public Housing Authority (MPHA) portfolio.
The renovation of the two towers is the largest rehabilitation transaction that MPHA has undergone and the first within MPHA’s portfolio to utilize the RAD program.
“We are thrilled to partner with the Minneapolis Public Housing Authority and the other parties involved to finance this important renovation project and RAD conversion,” said Joshua Reiss, director with Hunt 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.”
Construction has recently begun on the project, which will result in the preservation of 174 units, the addition of 10 disability-accessible units and a new community building, as well as significant sustainability upgrades that will reduce energy usage by as much as 35 percent.
“With the Elliot Twins, we set off to fulfill our essential vision to preserve public housing across Minneapolis,” said MPHA Executive Director/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 Elliot Twins were built in 1961, and nearly 80 percent 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, tax credit equity and the Hunt arranged Freddie Mac permanent TEL loan 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,” added Reiss. “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.”
Residents are able to remain on-site throughout construction. The scope of the renovation project includes the replacement and upgrades 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 counter-tops, among other improvements.
In addition to the Freddie Mac loan, funding sources included construction financing by Bremer Bank, tax credit equity provided by RBC, and development and financial consulting by Eliza Datta of E3 Development and Tanya Dempsey of CSG Advisors. Other funding sources included an energy efficiency funds loan from the City of Minneapolis’s Community Development Block Grant (CDBG) program and an MPHA Capital Fund loan.
Construction is expected to last through late 2021.