Funding crisis moves Tacoma Cornus House at all market rates

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A Tacoma apartment project that was approved in May for 12-year tax relief in exchange for a percentage of rent-restricted units moved to full-market rate development with only an 8-year break .

The decision, which was voted on, was not universally approved at Tuesday’s city council meeting. Sarah Rumbaugh, Board Member, voted against.

Cornus House LLC, representing Great Expectations of Seattle, plans to build an 8-story, 199-unit building at 2502 Pacific Ave. The developers have applied to upgrade their approved 12-year multi-family property tax exemption to the 8-year MFTE version.

The 12-year MFTE requires 20% of units to be reserved as “affordable” at 70% of the Pierce County AMI for 12 years, although this project’s 12-year program falls under the previous 80-year AMI qualification. % from the city.

Projects submitted from March 14 adopt the 70% model approved by the council at the end of last year.

The 8-year MFTE has no affordability requirements.

The town’s community and economic development action memo accompanying the council’s agenda noted: “Unfortunately, given what is happening in the debt markets (and) the rapidly rising costs of construction, to make this project financially feasible, (the developers) had to go back. to a project entirely at market price.

He added that the project “will be able to begin construction as early as November, if this resolution is passed.”

The project as it currently stands would consist of the following projected rental units/rates, per the note:

92 studios, 257 square feet, $1,550.

94 one bedroom/one bath, 358 square feet, $2,000.

13 two-bedroom/one-bathroom, 546 square feet, $2,300.

The site will feature 1,776 square feet of retail space and six parking spaces, being developed as a transit-oriented development.

Under the previous proposal, 40 units would have been reserved at a lower cost, with projected rents ranging from $1,425 to $1,832, including utilities.

Ben Maritz, founder of Great Expectations, told The News Tribune in a phone interview on Wednesday that his company is in the business of developing affordable housing for the workforce and that his projects typically use the 12-year MFTE. .

“I’m sure you’ve seen that interest rates are rising at a very rapid rate,” he said. “And as interest rates go up, debt repayments go up, and banks demand a certain ratio of debt repayment to expected revenue…the debt service coverage ratio. Every time as those interest rates go up, we just need to have more revenue to show,” he said.

He added: “We really had no choice. If we hadn’t gotten that, we wouldn’t have been able to build this product with that financial package. And we should have put (the project) on hold until the economic cycle turns,” he said.

The project’s budget, he said, has grown from $35 million from initial plans two years ago to $54 million today.

“At this particular time, when it’s very difficult to build things, we have to do whatever it takes to deliver the housing,” he added.

Cornus House is the first development to gain preliminary approval under Pierce County’s C-PACER program, which stands for Commercial Property Assessed Clean Energy + Resiliency.

The program, approved by Pierce County Council in March, “allows owners and developers of eligible properties in Pierce County to obtain long-term financing, at a lower interest rate, for development projects. production of eligible energy, efficiency, water conservation or resilience,” according to a county news release announcing the program’s launch in August.

“More efficient and cleaner buildings will help the county meet greenhouse gas reduction goals as required by the 2030 Sustainability Plan,” the statement said.

According to the C-PACER website, projects can be financed through an agreement between the owner and a registered C-PACER lender. The Pierce County Sustainable Resources Division oversees the approval of applications.

In the case of Cornus House, “the project qualifies based on improvements in energy efficiency and seismic resistance,” according to Erin Babbo, communications manager for county planning and public works.

Babbo, responding by email, added that the project “has been conditionally approved, pending receipt of additional documentation at closing.”

It’s already arrived

At Tuesday’s council meeting, several residents who spoke during public comments objected to the MFTE’s amended request, and council member Rumbaugh wondered if such a change would set a precedent.

“How many times can someone come back and change what they originally said they were going to do to what we’re doing now, which sort of sets a kind of precedent for me, n ‘is this not?” She added that she was “a little uncomfortable” with the action.

Such a change happened in 2019.

Council members had to vote twice at that time to finally pass a 12-8 year MFTE change for an apartment project next to the downtown library. The project had stalled due to funding issues and the change was deemed necessary for the site to qualify for a new construction loan.

Adding to council members’ angst at the time, the apartments were part of a development deal with the city involving public land, initially promoted as a project that would bring affordable units.

After recruiting new developers, this site is now home to the Hailey, 1210 Tacoma Ave. S. Rents range from $1,584 for a 462-square-foot studio to $2,555 for a 1,010-square-foot two-bedroom, one-bath unit, according to listings posted for units available this week on its website.

Such tax relief action has also gone the other way, with projects expanding from MFTE from 8 to 12 years, noted Debbie Bingham, project manager with the city’s Department of Economic Development Services.

In January, Ethos Development received board approval to upgrade its MFTE from an 8-year to 12-year version for its 160-unit project at 1402 Tacoma Ave. S., the former site of Go Philly Cheesesteaks & Wings. This site will include 32 low-rent housing units.

“There was a couple who went from 8 to 12,” Bingham told the council on Tuesday. “I’m going to come up with one in about a month, it’s… change that way.”

Maritz also has plans for a second Tacoma development, across from Cornus House, to bring in hundreds of units, with development launching in a few years.

“I wish this one was affordable,” he said. “If we can find a way to get public funding and be competitive with the state tax credit program, we’d like to make it affordable.”

Other action

A second MFTE project, although much smaller, was approved at Tuesday’s board meeting.

GPNW Investments Inc. is set to develop eight units, along with eight parking spaces, at 2533 Tacoma Ave. S.

Under its 12-year MFTE, it is planning two rent-limited, two-bedroom/two-bath, 1,060 square-foot units with a projected rent of $1,602, including utility allowance; and six market-rate two-bedroom/two-bathroom apartments, also 1,060 square feet, with an expected rent of $1,800.

Debbie Cockrell has worked for The News Tribune since 2009. She reports on business and development, local and regional issues.

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