At University and Fairview Avenues in St. Paul, the developers behind Morrow Apartments – a two-building, 243-unit affordable housing complex – were able to get construction from the ground up at the height of the pandemic by borrowing about $80 million from a public office. The pension fund that has favored Minnesota for decades.
The same applies to the Wilder Square Apartments on Milton Street, also in St. Paul, where a single fund financed a third of the $33 million top-to-bottom rehab of a 136-unit affordable housing complex built in the 1970s. Has been doing.
For more than 35 years, a labor-backed mutual fund has pooled union pension dollars, institutional investments, and other assets to fund new real estate construction across the country, with a general focus on housing—about half of it affordable. Accommodation. Headed by former St. Paul Mayor Chris Coleman, the AFL-CIO Housing Investment Trust, or HIT, is fueling new development by financing construction and purchasing mortgage-backed securities in 21 cities, including Boston, Chicago, Detroit, San Francisco, and Boston. Milwaukee, but it holds a special place in its heart for Minnesota, where more than a quarter of its active projects have taken up residence during the pandemic.
small print? One of the requirements for HIT-financed projects is that they employ building trades, which is not always the preferred option for cost-conscious developers. But neither the pandemic nor the recession has prevented union-funded, union-built apartments from taking root in urban corners, where everyday workers work hard to find quality housing they can afford. The loans are paid back into a $7 billion fund, allowing it to grow.
“For me, it’s a double-bottom line,” Coleman said in an interview. “You are investing the Union Pension Fund in creating union jobs and affordable housing across the country.”
10 Minnesota Projects Under Construction
In Boston, where heavy investments in life-sciences companies have attracted high-paying jobs, but in low-income neighborhoods, HIT has focused on adding “workforce housing” for middle-income workers. In Milwaukee, the Trust is supporting Couture, a 44-story skyscraper set to become Wisconsin’s tallest residential building. In West Virginia, the fund has supported teacher housing.
The fund has now supported more than 100 projects in Minnesota, with 10 currently under construction: Morrow Apartments, Wilder Square, Sundance in the Settler’s Ridge townhome community in Woodbury, the Zvago Cooperative at Stillwater Senior Living and the 128-unit Gateway in Minneapolis. Northeast Multifamily Development. Four Minnesota projects received funding from HIT this year: Amber Union Affordable Apartments in Wilder Square, Falcon Heights, the 68-unit Old Cedar Apartments in Bloomington and the 87-unit senior housing cooperative, Anoka’s American Cooperative.
In Morrow, HIT and Bridgewater Bank took over all construction financing – a $50 million commitment – at a lower interest rate. “Tomorrow is an affordable housing project with a 16-month construction schedule, and we did not want to take interest rate risk during that time period, given all the uncertainty from the pandemic,” said Paul Keenan, vice president at Reuters Walton. , a St. Louis Park-based developer that expects residents to start moving into the first building by the end of the year.
In Wilder Square, CommonBond Communities is reconfiguring the building interior, building systems, office space, community space and entrance with a view to safety.
“They provide consistent-value capital, and they do it with simpler, faster terms than some of our other options,” said Deidre Schmidt, CommonBond’s chief executive officer, who joined the trust’s board three years ago. “We were able to increase the number of units receiving rental assistance, and this is really important at a time when so many people are burdened with rents.”
So why has the Trust taken such a keen interest in Minnesota?
“It’s a great federation,” said Chang Suh, who is the trust’s chief executive officer and chief investment officer. “The building trades are very strong, very active, and they are really proud of their market share for affordable housing. (d) The state has the best affordable housing lenders in the entire country. It just attracts a lot of talent. The strength of the economy and job growth across the state is part of it. Trades have a presence not only in St. Paul’s and downtown Minneapolis, but across the state.”
“We have a national affordable housing crisis,” Suh said. “The bottom line is, we need all the solutions we can find. HIT is not a subsidy. The money comes from union pension funds. We are contributing more to these pension funds. We are building career paths It really goes down to the definition of sustainable investment. It includes economic opportunities for all.”
Penfield’s endorsement – and a union grocer
Coleman, former president of the National League of Cities, who this year became chairman of HIT’s board of trustees, appears prominently in a new promotional video celebrating the trust’s 102 Minnesota investments, which have financed nearly 13,000 housing units since 1984. have been nurtured. He recalled that the long financial drought halted housing construction during the Great Recession of 2007 to 2009.
Even in 2010, when the recession was officially over a year later, investors remained stingy. At the time, Suh says in the video, about 30 percent of the workers working in the construction industry were unemployed.
“There was a long stretch where it was really difficult to find financing for the projects,” Coleman said in the video.
Nevertheless, the trust pulled through and supported Penfield Apartments, a 254-unit, luxury mixed-use building attached to a new Lunds & Byerlys grocery store in downtown St. Paul. After pulling out of the $62 million project entirely following a private development partnership, the city announced in 2012 that it had taken it upon itself to complete Penfield, which would receive $41 million in federal pension capital from HIT. was supported. Grocery open with 75 permanent union jobs.
Four years later, the city was able to sell the occupied six-story property back to the private sector for approximately $66 million.
The video also featured union leaders from past and present, such as Don Mullin, executive secretary of the St. Paul Building and Construction Trades Council, and Harry Melander, former chairman of the trade council.
Nationally, the trust has supported the construction of some 122,675 housing units since 1984, of which about 10 percent are located in Minnesota.
Kevin Filter, a longtime Minnesota housing lender who has worked with HIT since its inception in the 1980s, joined the board of trustees in 2019. He said the trust often finances projects in the development process, purchasing both construction securities and mortgage-backed securities to add to its portfolio. In the ’80s and early ’90s, few investors were ready to take on both types of investments at once.
“We worked closely with him and the developers to make tough deals. Most of the deals were affordable housing and it’s very difficult to get them to the finish line,” Filter said in an interview. “They had the timing flexibility. They had the term flexibility. They had the structure flexibility. … The effect just got incredible. Is. “
More information about Morrow Apartments is online at aflcio-hit.com/project/morrow.