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City Council Regular
Consider Resolution 17-78 Granting Preliminary Approval to Drake MDG Limited Partnership Seeking State Funds to Purchase & Rehab the Drake Apartments
Grant Fernelius, Community Development Director
The City Council is requested to adopt Resolution 17-78 which grants preliminary approval to the Drake MDG Limited Partnership to apply for state funds to purchase and rehab the Drake Apartments.
The owners of the Drake Apartments have approached City staff with a request to submit an application for bond financing and tax credits to acquire and rehab the apartment building at 10011-10015 Egret Boulevard and 10019-10021 Drake Street. The Drake Apartments consist of 48 affordable units that are covered by the Section 8 rental assistance program. The property consists of 18 two-bedroom units and 30 three-bedroom units. The property has historically maintained occupancy between 95% and 100%.
The property was originally constructed in 1977 and underwent a renovation in 2001 by the current owner. The purpose of the new transaction would be to upgrade building amenities and all units to ensure the property is competitive in the market for years to come. As part of the overall transaction, the borrower will complete renovations totaling roughly $25,000 per unit. The permanent financing will include the issuance of tax-exempt revenue bonds by the City of Coon Rapids and the sale of 4% Low Income Housing Tax Credit Equity (LIHTC’s). It should be worth noting that the City is not obligated for debt repayment of the project. The City will be acting in a "conduit" capacity and issuing the bonds on the developer's behalf. The borrower would be responsible for bond repayment. In addition, the borrower will be preserving the affordability of the project by executing a new 15-year Land Use Restriction Agreement (LURA) and extending the Section 8 contract, as needed. Loan proceeds will be used to acquire the project, complete renovations and pay closing costs. As part of the state program, rent and income restrictions will be extended to ensure the project will continue to operate as an affordable property.
The attached resolution does a number of things, including making the necessary findings of project need; authorizing a public hearing (date to be determined); authorizing a maximum bond amount of $8.0 million, along with the associated application; and authorizing reimbursement of the City's bond issuance and administrative costs. The ownership group plans to submit an application to the State of Minnesota later this month. The mortgage bonds will be tied to an allocation of tax credits, which the group plans to use as equity. If the group is successful in securing an allocation of bonds and tax credits, the City would then need to conduct a public hearing and provide final approval, which would likely occur in September. The bond closing would happen in October. Additional information from the project developer is attached.
Staff recommends that the City Council adopt Resolution 17-78 which grants preliminary approval to the Drake MDG Limited Partnership to apply for state funds to purchase and rehab the Drake Apartments.
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