City Subsidy Will Fund Affordable Apartment Renovation

Northwood Apartments. Photo by Jeramey Jannene.

The City of Milwaukee is proposing to dedicate future property tax revenue from an aging apartment complex to partially fund its renovation.

A proposed tax incremental financing district would provide up to 17 years of future tax revenue, up to $1.27 million, to renovate the 72-unit apartment complex at 2520 N. Martin Luther King Jr. Dr.

Known as the Northwood Apartments, the two-building complex would see every apartment overhauled as well as new roofs and windows installed and plumbing and electrical repairs and upgrades. A gazebo and playground would be constructed and the parking lot repaired.

The $14.5 million project, backed primarily by state and federal low-income housing tax credits, would be required to set all of its units aside at below-market rates for qualifying households. Rents are to be capped at a level targeted at 30% of a household’s income and expected to range from $622 to $1,445 depending on unit size and household income.

The three-story buildings include a mix of one and two-bedroom units.

The City of Milwaukee, through a tax incremental financing (TIF) district, would contribute $1.27 million via a developer-financed TIF district. Developer KCG Development would provide the capital upfront and be repaid by incremental property tax revenue generated by the single-property TIF district. The structure, effectively a property tax rebate, is the city’s go-to tool to close financing gaps in affordable housing projects. KCG could earn the funding, plus 5.75% interest, over no more than 17 years.

“It will be a quick turnaround because it is a rehab,” said Department of City Development project manager Lori Lutzka to the board of the Redevelopment Authority of the City of Milwaukee (RACM) Thursday. “It will start midsummer and be completed by the end of the year.”

KCG development analyst Brodie Wiener said his firm is based in Indianapolis, but has completed 24 projects in eight states, including prior projects in Fond du Lac, Sheboygan and Madison.

“We’re excited about the opportunity to break into the Milwaukee market with this Northwoods transaction,” he said.

Unlike many development deals, there are existing tenants that need to be accommodated. “There is minimal vacancy with this being a Section 8 project,” said Wiener, referencing the federal voucher program which provides cash payments for low-income individuals to live in private housing. The tax credits are known as Section 42, where the credits are provided to the development team in exchange for renting the units for lower amounts.

The existing tenants will stay said Wiener. “We have a fairly sizable relocation budget,” he said. Tenants are to be relocated to an extended stay hotel for up to 10 days while their specific unit is overhauled.

Commissioner Kathryn West asked if the building has sprinklers. “Obviously that’s an issue that’s particularly concerning given what’s happened in Milwaukee in the past couple of weeks,” she said. Five individuals died in an apartment fire, with officials stating that a sprinkler system would have saved lives.

But Wiener said he wasn’t sure and would need to follow up.

The complex was built in 1972. The city requires buildings constructed after 1973 and more than 60 feet tall to have sprinklers. Substantial alterations to structures also trigger a retroactive sprinkler requirement.

West cast the lone dissenting vote against the subsidy proposal. The Common Council also needs to review the proposal.

According to city assessment records, the property is currently owned by an affiliate of Crown Court Properties. Last year, KCG applied for competitively-awarded 9% federal low income housing tax credits, but the Wisconsin Housing and Economic Development Authority (WHEDA) put the request “on hold.” The TIF documents indicate the firm has now secured non-competitive 4% state and 4% federal tax credits.

According to the TIF documents, WHEDA is providing a $5.4 million mortgage, $5.3 million in tax credits and a $785,000 subordinated loan for the development. KCG is deferring a $1.27 million developer fee.

The property is one of many already in the larger Bronzeville TIF district. That district, said Lutzka, is performing according to expectations and would be amended to add new public projects later this year.

The Northwood property is currently assessed for $233,900.

Newspaper classified advertisements from the early 1970s refer to the complex as the Wrightown Apartments. Signage at the site and other, more recent advertisements refer to the complex as the Northwood Apartments. The TIF documents and Crown Court Properties refer to the building as the Northwoods Apartments. A new monument sign is referenced in the TIF documents and hopefully settles the discrepancy on what the actual name is.

The Northwood name emerged after the complex went through a U.S. Department of Housing and Urban Development foreclosure in 1991 against owner, architect and developer Jordan Miller. An affiliate of American Apartment Management Co. acquired the property and another, Lisbon Square at 2101 W. Galena St., and was required to fund repairs. In 1990, the city issued 36 building code violations against the property.

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