BOULDER – Developers announced on Wednesday that Google has invested $41.7 million in bonds that will help finance not only the conversion of 238 apartments in Boulder to permanently affordable units but also extensive renovations to each one.
New Jersey-based affordable-housing developer The Michaels Organization has been teaming with local partners Element Properties and Allison Management over the past year-plus – along with financial backing from the city – on the $63 million effort to add the Osage Apartments and Thunderbird Apartments in south Boulder and The Nest in central Boulder to the city’s affordable housing program.
Google’s purchase of the state-issued tax-exempt bonds through Red Stone Tax Exempt Funding provides construction and permanent mortgage capital for the project that will be paid back over 40 years from rental revenues generated by the sites. Google, which has 300 employees in Boulder, is in the process of building a 300,000-square-foot campus at the corner of 30th and Pearl streets that will house up to 1,500 employees over time.
“As a company, Google has invested in the creation or rehabilitation of thousands of affordable housing units across the country,” Google’s Angie Welling said in a prepared statement. “And as a proud member of the Boulder community for the past decade, we got really excited about the opportunity to partner on this project to make sure that Boulder residents have access to high-quality, safe, affordable homes.”
The $63 million overall project cost includes acquisition of the properties, renovation and soft costs such as design and development fees.
The development group of Michaels, Element and Allison purchased the 36-unit The Nest property at 2995 Eagle Way in December 2014 and the 150-unit Osage (4990 Osage Drive) and 52-unit Thunderbird (4917 Thunderbird Drive) properties in July 2015 for a combined $39.3 million. The city of Boulder kicked in $10.75 million toward the purchases, while the development group attained a bridge loan for the rest.
The group plans to make “at least $44,000 of improvements” to each unit this year, starting with The Nest. Those improvements include updated kitchens and bathrooms, upgraded electrical systems, new boilers and other energy efficiency upgrades.
In addition to the contributions from the city and Google, Riverside Capital will raise $19.3 million in tax-credit equity from an investor or investors through the Low Income Housing Tax Credit Program. The federal program allows state agencies like the Colorado Housing Finance Authority to award projects tax credits that are then sold to investors. The investors will essentially own the project for a period of 15 years and benefit from the tax credits and any losses such as depreciation that may come from the properties. Michaels, Element and Allison’s group will remain a general partner with a minor equity stake during that time before ownership reverts back to them 15 years from now.
“It’s an amazing program that allows for projects like these around the country,” Element principal Chris Jacobs said Wednesday.
Because the equity investment comes in installments, the Google investment helps cover construction costs in addition to long-term mortgage funds. Once the full equity investment comes in, the bond amount will be reduced by roughly $9 million.
All of the moving pieces to the financing make for a complex deal, but Jacobs said, “I really think the story here is preservation and creating affordable housing from stock that’s existing. We’re big believers in affordable housing.”
While Boulder’s economy booms, so do housing costs. The median price for a detached single-family home hit $890,000 in December. The median monthly rent for a two-bedroom apartment, meanwhile, was $2,010.
As part of Boulder’s affordable housing program, The Nest, Osage and Thunderbird apartments – which include one-, two- and three-bedroom units – will be reserved for those making less than 60 percent of area median income. Monthly rates, depending on the number of bedrooms, will vary from roughly $1,000 to $1,500 per month.
The Michaels Organization’s Interstate Realty Management Company will manage the three apartment complexes. Denver-based Pinkard Construction, meanwhile, is serving as general contractor and Boulder-based Coburn Architects providing design services.
“With limited opportunity for new affordable housing development in the city, this public-private partnership ensures that three important housing resources will not only be modernized, but also maintained as permanent affordable housing,” Element principal Scott Holton said in a release. “One of the city’s goals is to maintain at least 10 percent of Boulder’s housing as affordable, and we are proud to be the city’s partner in this important effort.”