After City Rejects It, State Authority Endorses Affordable Housing Conversion

7976-7992 N. 107th St. Photo by Jeramey Jannene.

An unusual affordable housing proposal overwhelmingly rejected by the Milwaukee Common Council in May is moving forward anyway.

California-based Post Real Estate Group and Bedford Affordable Housing Foundation are preparing to acquire two northwest side apartment complexes and convert their 374 apartments into income-restricted, affordable housing, this time using the Wisconsin Health and Educational Facilities Authority (WHEFA) to issue tax-exempt bonds.

The Common Council voted 14-1 on May 12 against allowing a different state-created entity, the Public Finance Authority, to issue up to $86.5 million in bonds for the acquisition of the 236-unit St. James Place, 10300 W. Fountain Ave., and 138-unit Arbor Ridge, 7960 N. 107th St.

But the vote did not kill the underlying deal.

WHEFA held a public hearing on the proposal June 25 and is now preparing to issue $88 million in bonds for the acquisition. Executive Director Larry Wiemer said Thursday that the authority was not aware the city had rejected the deal.

“WHEFA was not aware or made aware of any actions undertaken by the City of Milwaukee before WHEFA was contacted to be the proposed issuer of tax-exempt bonds,” Wiemer told Urban Milwaukee via email.

The Public Finance Authority requires local approval, but WHEFA has no such requirement.

No one testified at WHEFA’s June 25 hearing, and the authority received no written comments, he said.

“The bonds are currently being publicly offered by the underwriter engaged by the borrower,” said Wiemer. “The bonds have not yet been issued, but the expected issue date is later this month.”

WHEFA is a state-created financing authority that provides tax-exempt financing for eligible nonprofit organizations. Its role is limited to determining whether an eligible nonprofit borrower and project meet statutory and legal requirements, Wiemer said.

That provided Bedford with another route after the city blocked the Public Finance Authority financing.

The council’s May rejection came at the request of area Alderwoman Larresa Taylor, who argued that the well-maintained, highly occupied complexes provide a type of market-rate housing that should be preserved in her district.

“Having these two luxury apartments, when we’re struggling for luxury apartments, we certainly don’t want to lose the two that we have,” Taylor said in May.

Council members also criticized the developers for appearing virtually before the Zoning, Neighborhoods & Development Committee and doing little outreach in Milwaukee before seeking the city’s endorsement.

“We have no idea what this buyer was planning to do with these properties,” said committee chair Ald. Robert Bauman during the subsequent council debate. “They never came to Milwaukee. They appeared virtually. They never met with the local alderman. There was never a town hall meeting. There was never any community input.”

Ald. Alex Brower cast the council’s lone vote in favor of the financing, arguing that the city should take opportunities to increase its supply of income-restricted housing.

Now at least one Arbor Ridge resident says tenants remain largely unaware that the acquisition is apparently nearing completion.

The longtime building resident, who spoke on the condition of anonymity, is concerned about being forced out of their home.

“The peace and stability of our homes has been replaced by a corporate countdown clock,” said the resident.

The resident said they were told the transaction was not to be disclosed to residents.

They said they fear that tenants whose incomes exceed the limits ultimately established for the affordable units will be displaced and argued that the conversion would eliminate hundreds of apartments serving middle-income households.

“This is not a routine property transfer,” the resident wrote. “These are two massive complexes that have a combined 374 units, primarily occupied by middle-class tenants and families.”

But that concern conflicts with what the development team told city officials in May.

Post’s presentation to the city said existing residents would not be displaced as a result of the conversion. The company said apartments would ultimately be restricted to households at different income levels, including households earning up to 60% and 80% of the area median income.

But the development team did not explain how it intends to implement those restrictions while allowing any existing residents who exceed the income limits to remain. That was not detailed during the May council hearings.

Post and Bedford did not respond to a request for comment Friday. Taylor also did not respond.

The proposed transaction calls for Post and Bedford to acquire both complexes from affiliates of Washington-based Weidner Investment Services, which owns several properties in the Milwaukee area. Post representative Troy Thomas previously said the company intended to invest approximately $2.25 million in renovations.

Bond counsel Roy Jones said in May that lower-cost, tax-exempt financing would reduce the project’s borrowing costs and allow additional investment in the properties. Fannie Mae was expected to provide credit enhancement and monitor compliance with the affordable housing requirements.

The council was not being asked to guarantee the original $86.5 million bond issue, and the city would not have been financially liable if the project failed. Its approval was necessary, however, for the Public Finance Authority financing structure the developers originally pursued.

WHEFA operates under separate statutory authority. The organization says its conduit bonds are repaid by the nonprofit borrower and do not constitute debt of the State of Wisconsin.

Arbor Ridge was constructed in 1999 and includes a number of separately owned condominiums that are not part of the transaction. St. James Place was constructed in 1990.

The neighboring complexes sit just south of W. Bradley Road on the east side of N. 107th Street.

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