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Wheat Ridge Housing Authority
SPECIAL MEETING
AGENDA
January 12, 2016
SECOND FLOOR CONFERENCE ROOM
4:00 P.M.
A. Call Meeting to Order
B. Roll Call
C. Approval of Minutes:
1. November 24, 2015
D. Officers Reports
E. Public Forum
F. New Business
G. Old Business
1. Fruitdale School — Update and Neat Steps
H. Other
I. Adjournment
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WRUA
Wheat Ridge Housing Authority
Minutes of Meeting
November 24, 2015
A. CALL THE MEETING TO ORDER
Themeeting was called to order at 3:10 p.m. by Chair Thomson in the Second Floor
Conference Room of the Municipal Building, 7500 West 29 Avenue, Wheat Ridge,
Colorado.
B. ROLL CALL OF MEMBERS
Authority Members Present: Thomas Abbott
Tim Fitzgerald
Chad Harr
Janice Thompson
Jennifer Walter
Authority Members Absent None
Also Present: Kenneth Johnstone, Community Development
Director
Jim Hartman, Hartman Ely Investments TIER
Susan Ely, Hartman Ely Investments (HEI)
Eric Clayman, Rocky Mountain Charcuterie
Tammy Odean, Recording Secretary
C. APPROVAL OF MINUTES:
1. September 22, 2015
It was moved by Mr. Abbott and seconded by Mr. Harr to approve the minutes of
September 22, 2015 as amended.
Motion approved 441, Tun Fitzgerald abstained.
D. OFFICERS REPORTS
There were no officers' reports.
Housing Authority Minutes
November 24, 2015
E. PUBLIC FORUM
There was nobody present from the public to speak.
F. NEW BUSINESS
G. OLD BUSINESS
1. Fruitdale School - Update and Next Steps
Mr. Johnstone gave a brief introduction into what has happened in the past with the
Fruitdale School project. Wheat Ridge Housing Authority (WRHA) has entered into
an agreement with Hartman Ely Investments (HEI). We have initiated a quite title and
initiated a subdivision Plat, but we have not yet initiated rezoning. We have a good
Pro Forma analysis, it just needs more information. There will be a $640,000 long
term gap to fill and WRHA agreed in September 2015 to put $170,000 on the table.
The real estate and business deal are getting firmed up. The fundamentals have not
changed, just been refined; the plan still includes affordable housing and an artisanal
meat business. There is a larger short term funding gap and will require a bridge loan.
The meat business needs to be built up over a period of six months; the processing of
the meat takes at least that long and needs to be paid upfront. The Project Team is
asking for $3.3 million for a bridge loan which they are proposing to pay back with
$2.1 million being paid back in years two and three. The City payback will go more
quickly from tax credits and home funds which some of those funds can only be paid
back once the project is completed. Housing Authority has $645,000 in reserves and
is being asked to execute a Development Agreement with Fruitdale School Partners to
authorize a cash loan for $400,000, on top of the $170,000 asked for in September
which will leave $75,000 in reserves to cover staff and other costs. Some of this
payback will come from a profit sharing with the meat company beginning in 2021. It
is not only the decision of WRHA, but also that of City Council which will have a
Study Session on December 7, 2015 and meeting to follow on December 14, 2015.
Mr. Hartman, with HEI, added a brief description of his own. He stated along with
himself, Ms. Ely, Mr. Clayman and their team they have been working intensively
over the past few months on a couple of items and one has been number crunching.
We still need to ink a deal with a tax credit buyer and guarantor. Mr. Hartman also
stated that HEI has made a few minor refinements to the development program. The
number of residential units has decreased to 8 affordable and market rate housing units
to save money and we still plan on a live/work program for an apprentice. The
numbers crunched also include an emergency generator so there is no gap in
temperatures for the meat refrigerators. Also, there is a need for more automated
equipment in the meat business and this adds $350,000 more to the financial plan.
Housing Authority Minutes
November 24, 2015
Mr. Clayman reiterated that for the first 6 months the meat company will have meats
in different stages of curing before it can go to market; this is the hardest part of the
business before we can start selling.
Mr. Abbott asked about the new plan for the apartments and wondered if the number
of affordable units changed.
Mr. Hartman said they stayed the same, now there will be 6 affordable units out of 8
total units. Previously there were going to be 6 affordable units out of 13 total units.
There will ultimately be 3 types of units: affordable, market rate and one will be for
the onsite manager of the meat business.
Mr. Thompson asked what the rate is for affordable rent.
Mr. Hartman said that depending on income the high end of an affordable 2 -bedroom
is $955, and affordable 1 -bedroom is $725 and a very affordable 1 -bedroom is $580.
Mr. Fitzgerald asked if there is going to be any retail with the meat business.
Mr. Hartman stated that it is a possibility, but mostly will be wholesale and will cater
to local restaurants and butcher shops.
Mr. Clayman stated there is not a population yet for this type of retail. He also said
that charcuterie is a dying art and a better use for the space is to have a classroom. It
will be good to have an apprenticeship at Fruitdale because it can be hard to teach in a
USDA facility.
Ms. Thompson asked if there will be a kitchen in the classroom.
Both Mr. Hartman and Mr. Clayman replied yes there will be a kitchen and it will
function like a catering kitchen.
Ms. Thompson asked about the shared parking with the school and is concerned the
school may take over the parking spaces.
Mr. Hartman stated that with new site plan a few more parking spaces were added for
a total of 55. The apartments will have probably 12 (1 '/2 per unit, dedicated) and the
meat business only needs 5-10 spaces so we have at least 30 to share with the school.
Mr. Harr asked for a breakdown of the construction timeline.
Mr. Hartman said that once the financial plan is agreed upon then construction can
start in July 2016 and would take 7-8 months to complete.
Mr. Fitzgerald stated he really likes the vision of Fruitdale, but is very concerned
about the money side of everything. He feels the loan is not a bridge loan but an
Housing Authority Minutes
November 24, 2015
unsecured loan and the interest rate has yet to be negotiated. He would like to know
what security the city has.
Mr. Hartman stated that right now he does not have that answer. He said it is an
important question and we need to get an answer to that as part of the development
agreement. Mr. Hartman stated that the likelihood to have a personally guaranteed
secured loan is very low, so the loan will be unsecured.
Mr. Johnstone added that the deal is not done yet and we don't grant this money up
front. We have to wait until the home funds and tax credits are committed.
Mr. Hartman said there is no risk to the Housing Authority or the City until HEI
purchases the property and that is when the funds need to be paid.
Mr. Harr asked if HEI needs a commitment from the City and Housing Authority.
Mr. Hartman said yes; this project is not close to being financially feasible without
Housing Authority and the City. HEI is already into the project for $150,000 which is
high risk equity for us also.
Mr. Johnstone pointed out an important factor that the 1" payment is not due until July
2016 when construction begins; the 2nd payment will be due upon performance and the
3`d payment upon completion.
Mr. Hartman stated that one of the things they have to plan for is if the meat company
fails. The good thing is, if it does fail, than we have a great property with a USDA
approved refrigerated warehouse facility which is hard to find.
Ms. Thompson asked Mr. Fitzgerald how he felt about there being no property taxes,
long term.
Mr. Fitzgerald stated that he and City Council love the vision as much as Mr.
Hartman. We want to renew the building and develop it. Council is willing to make
investments that will jump start the city. What worries me is the risk that the city will
be taking and second, we have to find the money. But Council has already indicated a
willingness to forego some taxes.
Mr. Hartman stated there will be full revenue a couple of years after completion.
There is also a local company showing interest in 5,000 sq. ft. in the back of the
property for a fish farm as well as garden growing facility. This will be an indoor
facility.
Ms. Thompson asked if anybody in the community would be able to use the free
electrical car charging station.
Housing Authority Minutes
November 24, 2015
Mr. Hartman said yes, anyone could use it, but hopefully it will be used only by the
residents in one of the apartments or somebody who works at the facility. It will be
solar charged.
Mr. Abbott wanted to make sure he understood things by restating that the WRHA and
the City are getting value out of this project to offset the loss of property taxes and the
money being loaned. An important item is the building will be saved, especially since
it is a historic building. The building is also an investment and is an economically
viable enterprise and helps protect the building from demolition.
Ms. Thompson asked about the original reverter clause and its progress.
Mr. Johnstone said the attorney has been given authorization and the paperwork has
been initiated. It is realistic that by March 16 the reverter clause can be removed.
Ms. Walter asked if the grant is still $640,000.
Mr. Hartman confirmed this.
Ms. Thompson asked Mr. Fitzgerald, from a City Council point of view, is there
anything to help HEI with their presentation to City Council.
Mr. Fitzgerald said there are three new members on City Council and he doesn't have
experience on how they would feel, but his guess is he thinks one of them may not be
inclined to take the risk He does not believe the city will want to break into their
reserves.
Mr. Harr stated that he has always been on the fence about the WRHA's funds being
depleted. He thinks this is a great project, just doesn't want to see the WRHA out of
money. He also wants to know how we will obtain future funding.
Mr. Johnstone stated that the County has been a great partner and WRHA can apply
for CDBG funds. The County is excited about this project because it is a partnership
which will definitely help.
Mr. Abbott likes the perspective of CDBG Funds. He doesn't feel there is any good
answer right now on how to fill the gap and he is not on the fence and thinks this is
good use for WRHA money. He doesn't want to leave the money sitting in a bank
account earning very little money.
Ms. Walter stated is does make her nervous to deplete the WRHA bank account, but at
the same time she doesn't want to miss out. She loves this project for Fruitdale and is
willing to take the risk Ms. Walter stated that if the building sits, it is also going to
cost the HA money also.
Housing Authority Minutes
November 24, 2015
Ms. Thompson stated that the city is going to gain 14,000 sq. ft. that will not be sitting
dormant and she likes the partnership with Jefferson County Public Schools. Ms.
Thompson also likes the prospect of events being held at Fruitdale. She believes the
events will bring people to the area, people that have not previously been to the City of
Wheat Ridge. She definitely wants enough money left in the account to pay staff, and
feels this project will pay WRHA and the City back. Ms. Thompson says the risk
needs to be taken to make the money, especially if there is an opportunity.
Mr. Fitzgerald wanted to confirm that we aren't going to risk any money until the
point that all the contracts are signed.
Mr. Johnstone stated that we haven't developed all the deal points yet. There is no
deal until things are firmed up and the Pro Forma works.
Both Mr. Hartman and Mr. Johnstone agreed, that with each step and agreement that is
achieved, the risk for all drops.
Ms. Thompson asked how desirable this location is for a live/work property and will
people want to rent here at Fruitdale.
Mr. Hartman said absolutely, this is the easy part. The hard part will be getting the
meat co. established.
Craig Horlacher — Fruitdale Roof Maintenance Assoc. Inc. (HOA)
Mr. Horlacher was asked by Ms. Thompson if he had any questions. She said it is
extremely important to have the neighbors' opinions.
Mr. Horlacher stated he has kept his membership appraised about the ongoing
discussions about the Fruitdale project and have had little feedback from the owners.
The only concerns seem to be the line of sight from the second story apartments and
being able to do maintenance on the fence; depending on the closeness of the
buildings.
It was moved by Mr. Abbott and seconded by Mr. Harr to authorize staff to
negotiate and execute a Development Agreement between Fruitdale School
Partners and the WRHA which authorizes a WRHA contribution of $170, 000 in
cash grant funds and $400,000 in cash loan funds for the purpose of
redevelopment of the Fruitdale School property at 10803 W. 44x' Avenue for an
artisanal meat company, affordable housing and public and education space. I
further move to authorize the Board Chair to execute said Development
Agreement on behalf of the full board.
Motion carried 4-1 with Mr. Fitzgerald opposed.
H. OTHER
Housing Authority Minutes
November 24, 2015
I. ADJOURNMENT
It was moved by Mr. Fitzgerald and seconded by Ms. Walter to adjourn the meeting
at 4:58 p.m.
Motion carried 5-0
Janice Thompson, Chair Tammy Odean, Recording Secretary
Housing Authority Minutes
November 24, 2015
'J&�
WRIIA
Wheat Hedge Housing Authority
7500 W. 29" Ave.
Wheat Ridge, CO
303-235-2846
To: Chair and Members of the Wheat Ridge Housing Authority (WRHA)
From: Kenneth Johnstone, Community Development Director/WRHA Executive
Director
Subject: Fruitdale School — Update on HEI Redevelopment Proposal and funding request
Date: January 7, 2016 (for January 12, 2016 WRHA meeting)
Background
The WRHA last discussed the Fruitdale redevelopment proposal at a November 24, 2015
meeting. At that time, the redevelopment proposal included the following:
• artisanal meat processing f4cility in the 1950s portion of the building
• 8 rental housing units
• classroom/community room space
• ground mounted solar panels on the rear portion on the property
At that meeting, the WRHA passed the following motion:
"To authorize staff to negotiate and execute a Development Agreement between WRHA
and Fruitdale School Partners (FSP) which authorizes a WRHA contribution of $170, 000
in cash grant funds and $400, 000 in cash loan funds for the purpose of redevelopment of
the Fruitdale School property at 10803 W. 44'x' Avenue for an artisanal meat company,
affordable housing and public and education space. l further move to authorize the
Board Chair to execute said Development Agreement on behalf of the full board. "
The motion passed by a vote of 4-1, with Mr. Fitzgerald opposed.
Project Update
Since the November meeting, discussions and negotiations between Hartman Ely Investments
and City staff have been ongoing and the redevelopment program has had some changes.
Notably, the artisanal meat company is no longer a part of the proposal. While they were an
exciting component of the previous proposal, it was determined that the overall project carried
too much risk if it were to substantially rely on the rent from an unproven new business.
The development program is now 100% residential, with 16 units of affordable and market rate
2- and 3 -bedroom apartments. Both the 1950s and 1920s building are being converted to loft
style apartments. The carriage house will also be renovated as a housing unit. Approximately 5
of the units will be designated affordable and the provision of some 3 -bedroom affordable units
is very unique as there is high demand and limited supply for those units. Solar arrays also
continue to be a part of development program, both on the roof and with ground mounted units at
the rear of the property.
The framework of the project pro forma remains substantially the same. Project financing relies
on the following sources:
• developer equity of $300,000
• bank loan of approximately $1.6M
• HOME funds in the amount of $640,000
• Tax credit proceeds of approximately $1.7M
• City/WRHA grants of $640,000 - $170,000 from WRHA (unchanged from previous
proposal)
• City/WRHA patient capital of $2.3M (reduced from $3.3M) - $400,000 from WRHA
(unchanged from previous proposal)
The proposal for repayment of the City/WRHA loans has changed slightly. The City, for reasons
previously stated would be repaid first in years 2 and 3 of the project, using HOME funds and
tax credit proceeds. The WRHA would be paid $20,000 in year 2 and the balance of $380,000
would be repaid, with interest, no later than year 15. The goal would be to pay back the WRHA
much sooner; if the project is successful a refinance would likely be attractive to the developer
well before year 15, at which time the WRHA would then be repaid the balance of the loan
amount.
Because of the change in the proposed development program, we are requesting WRHA consider
this updated request and consider taking action to reaffirm your commitment for previously
stated grant and loan funds.
We have attached the staff report being presented for City Council consideration on January 11,
which contains a higher level of detail on the current proposal and past history on this project.
Conclusions
HEI remain very committed to the project and have continued to expend significant time and
money to that end. While the elimination of the meat company is a significant change in the
work program, the proposal to develop entirely for housing is still a very worthwhile public
purpose, particularly given the mission of the WRHA. The proposal also has a much lower
degree of risk based on the relative stability of the multi -family rental housing market in the
metro Denver area. The desire remains to maintain an expedited review process with the
City/WRHA. FSP/HEI needs to begin construction on solar panels in order to have those
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completed in the fall of 2016 and realize approximately $340,000 in reduced utility costs and
utility company REC payments, which are critical components of the pro forma in addition to the
solar tax credits. In addition, Jefferson County has increased its total HOME funding from
$600,000 to $640,000, and the initial year HOME funding has increased from $200,000 of the
total to $420,000 of the total, primarily due to the project's ability to implement quickly.
Recommended Motion
Based on the due diligence that has been completed and the project timeline associated with
executing necessary development agreements, staff is recommending the following motion:
"I move to authorize staff to negotiate and execute a Development Agreement between
Fruitdale School Partners and the WRHA which authorizes a WRHA contribution of
$170,000 in cash grant funds and $400,000 in cash loan funds for the purpose of
redevelopment of the Fruitdale School property at 10803 W. 44th Avenue for a mix of
affordable and market rate housing. I further move to authorize the Board Chair to
execute said Development Agreement on behalf of the full board."
Attachments:
HEI Fruitdale Redevelopment Summary
City Council staff report for January 11, 2016 meeting
3
City of
64 Wheat�idge
COMMUNITY DEVELOPMENT
Memorandum
TO:
Mayor and City Council
FROM:
Kenneth Johnstone, Community Development Director
THROUGH:
Patrick Goff, City Manager
DATE:
January 6, 2016 (for January 11 Study Session)
SUBJECT:
Fruitdale School Redevelopment — Public Private Partnership funding
request
ISSUE:
The Wheat Ridge Housing Authority (HA) acquired the historic Fruitdale School at
10803 W. 44`h Avenue in early 2011. The school was built in the 1920 and is one of the
last remaining school buildings designed by noted Colorado architect and developer
Temple Buell. The HA has gone through several marketing and design studies to
determine the feasibility of redeveloping the building/property on their own for
affordable or market rate housing. Based on construction cost estimates and projected
sales prices or rents for the units, no housing options were ever determined to be
financially feasible for the HA to act as the developer on their own.
In 2014, the HA released a Request for Interest (RFI) soliciting developer interest in
acquiring and redeveloping the property. The RFI was written in such a way that any and
all potential reuses could be considered. The HA received 2 qualified responses and
proceeded to initially award the project to an offshoot of the Mountain Phoenix Charter
School. That group was proposing to reuse the building as a new charter high school.
Those negotiations ultimately were unsuccessful and in early 2015, the HA authorized
negotiations with Hartman Ely Investments (HEI), who had also submitted a proposal in
response to the 2014 RFI. Also, HEI is a uniquely qualified local developer/operator of
historic properties with a strong track record of similar projects, as well as in-house
design skills. This has allowed them to go through multiple iterations of potential
development programs and associated pro formas without incurring direct hard costs for
that extensive work.
Significant effort has been invested by HEI and staff over the past 10+ months to develop
a market feasible redevelopment scenario. It has been generally understood that no
redevelopment/reuse of the property would be feasible without some form of public
participation. An HEI affiliated entity, Fruitdale School Partners LLC (FSP) is now under
contract to purchase the property, with a Purchase and Sale Agreement (PSA) having
been executed in early November, 2015.
In order for the project to move forward toward the execution of a master developer
agreement, the next crucial step is to begin to "firm up" the various sources of public and
private financing that the project requires. The development program for the
building/property, along with the accompanying financial pro forma have been
sufficiently developed to now be able to have a good sense of the magnitude of the local
public subsidy that is needed for the project to move forward. The purpose of this study
session is to outline the proposed development program to preserve and restore the
Fruitdale School and to consider the developer's proposed/requested local subsidy to the
project in the form of both a grant and a loan.
PRIOR ACTIONS
The City Council was briefed on the HEI proposal and the need for some level of public
participation at the October 5, 2015 study session. The HA was further briefed on
November 24, 2015 and passed a motion authorizing their Chair to negotiate a
development agreement with Fruitdale School Partners to include a $170,000 grant to the
project along with a $400,000 loan.
At the time of these two most recent meetings, the proposed reuse of the building
included an artisanal meat processing operation in the 1950s portion of the building; up to
13 apartments in the Temple Buell 1920s building as well as a Charcuterie classroom /
community room. In the intervening time, for various reasons, the development program
for the site/building has changed somewhat. The new proposal is 100% housing, a mix of
approximately 5 affordable units and 11 market rate units. The units are a mix of 2 and 3
bedrooms. The 3 bedroom units in particular would meet a need that has very limited
supply in the Wheat Ridge market, particularly as it pertains to affordable housing.
BACKGROUND:
Following is a brief update on the tasks that the WRHA directed staff to achieve.
• Negotiate a Purchase and Sale Agreement with HSA The PSA has been executed and
was recorded at the Jefferson County Clerk's office on November 6.
• Negotiate and execute a land swab with the Jefferson County School District School
District staff have received their board's approval to execute such a land swap and terms
of the swap have been negotiated at a staff level. The City's Attorney has drafted a land
swap agreement, which is under staff review.
• Authorize staff to initiate quiet title action to eliminate reverter clause on the property and
clean up title. Quiet title action has been initiated by the City Attorney's office with the
District Court.
• Authorize staff to initiate all necessary land use entitlements and engage professional
services in the amount not to exceed $15,000.
o Subdivision Plat. A title commitment has been received for both the Fruitdale
property and the adjacent school property. A surveyor has been hired and is
nearing completion of an improvement survey plat, required to initiate a
2
subdivision plat application. A subdivision plat should be ready for submittal
within 30 days
o Rezoning. HEI has requested the rezoning process be deferred until such time as a
development agreement is executed, which is anticipated in early February.
Authorize staff to hire Economic and Planning Systems as a third party reviewer of the
development pro forma and deal points between HEI the WRHA and the City. We have
been actively engaged in meetings with all development partners, including HEI's
financial representative. More discussion of that topic occurs later in this memo.
Updated Development Proposal
The basic aspects of the re -development proposal are as follows:
• Sixteen (16) units of 2 and 3 -bedroom, affordable and market rate rental housing
• Fruit orchard, Temple -Buell memorial garden, parking and potential public event space
in the front of the building
• In phase I, the rear of the site, as well as the roof will be used for an on-site solar power
system
• A phase II potentially involving food production at the rear of the property
Page 5 of the Redevelopment Summary (attached) also provides a good list of major changes in
the development program and pro forma since October 5, 2015.
Updated Project Pro Forma
At the time of the September WRHA meeting and the October 5 City Council study session, we
had sufficient information on project financing to understand that the project had a funding "gap"
that would need to be filled from a variety of sources, including City and WRHA funds, federal
and state tax credits, potential federal Department of Housing and Urban Development (HUD)
HOME funds, state historical fund grants, etc. The sale of various tax credits is estimated to
generate approximately $1.7M toward project costs. HOME funds have been preliminarily
committed by Jefferson County in the amount of $640,000 to cover additional redevelopment
costs. Developer equity is anticipated to represent approximately $300,000. A bank loan is
estimate to cover between $1.5M and $2.OM in projects costs. However, there remains a gap in
covering total redevelopment project costs, which are estimated at $5.35M.
It has been the understanding that the minimum amount of local subsidy that would be needed to
keep the project moving forward was $640,000 in grant funding. At the October 5 study session,
City Council discussed the potential to fill a portion of the project funding gap with a grant in the
amount of $470,000 as well as potentially being a minority owner of the property in order to
defer property taxes At their November 24 meeting, the WRHA committed to a grant of
$170,000 and a loan of $400,000. At that time, the total estimated "bridge loan" being requested
by HEI was $3.3M; so the HA loan was only meeting a portion of that gap. A January 12, 2016
meeting of the WRHA has been scheduled to present the new development scheme and to
reconfirm WRHAs commitment to the grant and loan amounts.
The current request from the City is for a $1.925M bridge loan, proposed to be repaid in years 2
and 3 of the project through HOME funds and tax credit proceeds. The requested loan from the
WRHA remains the same - $400,000. The total estimated "bridge loan" is now approximately
3
$2.325M (approximately $1 M less than estimated in late November). It is still being determined
the details of when and how the WRHA loan would get repaid; however, the pro forma does
assume full repayment of both loans.
Since the October 5 CC meeting, a significant amount of work has been completed by HEI and
by staff to better understand the financial feasibility of repurposing the Fruitdale School building.
Most of this work has involved review of the development pro forma, project cost estimates,
preliminary market feasibility analyses and other deal points that will eventually be included in a
development agreement among Fruitdale School Partners (FSP), the City and the WRHA. The
review process has included Patrick Goff, Ken Johnstone, Lauren Mikulak and Steve Art from
the City, along with our third party representative, Economic and Planning Systems. From the
developer side, these negotiations have included HEI, their financial consultant, Grant Bennett
with Proximity Green consulting and their property manager, Chris Maley of Pinnacle Real
Estate Management (PREM).
Additional Background
Following is a summary of the property's history as a school and while under the ownership of
the Wheat Ridge Housing Authority. This background information was also included in the
October 5 study session memo, so is provided primarily for the benefit of the new City Council
members.
The Fruitdale School building is located at 10803 W. 441h Avenue and is currently owned by the
Wheat Ridge Housing Authority (WHRA). The property was deeded to the Jefferson County
School District in 1883 and the first school was built on the site in 1884. This original building
was destroyed by fire in the 1920s, after which noted Denver architect and developer Temple
Buell designed the existing red brick school building in 1927. Additions on both sides of the
building were constructed in the 1950s and the facility served as a public school until 2007.
Listed below is a timeline of events that have occurred since 2007 including the purchase of the
school by WRHA and the many attempts to identify a viable end use.
• Fall 2007 — Fruitdale is decommissioned as a school in 2007 when the new Norma
Anderson Preschool opens on the adjacent property. The east addition of Fruitdale is
demolished to accommodate the preschool. Utilities to Fruitdale are disconnected and
transferred to the new preschool, and the historic building becomes vacant.
• Spring 2008 — Jeffco Schools issues an RFP to solicit proposals for the possible sale of
the building. WRHA decides to submit a proposal for renovation of the school into
residential units.
• April 2008 — WRHA retains Entasis Group to complete a cost estimate for a possible
residential reuse of Fruitdale. WRHA pays Entasis $22,000 to develop conceptual plans
and work specifications. Entasis completes a proposal to renovate the building into
residential lofts; the cost for renovation is estimated at nearly $1.7 million for an average
cost of $188,000 per unit for nine units.
• Fall 2008 — After exploring financing options, WRHA decides a residential reuse of
Fruitdale is not feasible because of the financing requirements associated with
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multifamily development. The WRHA notifies Jeffco Schools that the project is no
longer considered feasible and the proposal is withdrawn.
• Summer 2010 – The Fruitdale building has remained vacant for three years, and Jeffco
Schools contacts Wheat Ridge to see if the City or Housing Authority would like to
reconsider purchasing the property before demolition plans are finalized.
• July 2010 – WRHA decides to commission a more detailed market analysis to assess the
viability of converting the Fruitdale School into residential units.
• October 2010 – A market analysis is completed by The Genesis Group for a fee of
$4,000. The analysis considers for -sale and for -lease residential units. The results of the
analysis again indicate that a residential reuse is not financially viable, particularly given
the economic and multifamily housing market conditions at that time. The Housing
Authority decides again not to pursue acquisition of Fruitdale.
• November 2010 – WRHA sends a letter to Jeffco Schools indicating they are not
interested in purchasing the building.
• February 2011 – The school district prepares the building for demolition. The Mayor,
with support from Colorado Preservation Inc. (CPI) staff, approaches Jeffco Schools
about the possibility of WRHA purchasing the building to save it from demolition.
• April 2011 – After several months of negotiation, the Housing Authority ultimately
purchases Fruitdale School for $112,000—the same price which Jeffco Schools had
already paid for environmental remediation in preparation for demolition. A portion of
the new preschool's playground remains on the land deeded to WRHA.
• Fall 2011 – The interior of the school has deteriorated because of a lack of climate
control and a leaking roof during the four years of sitting vacant. WRHA decides to
install a new roof, and the building is weatherized for a cost of $110,000.
• Spring 2012 – Based on an application submitted by CPI, a $15,000 non-matching grant
is received from the State Historic Fund (SHF) for completion of a Historic Structure
Assessment (HSA). Slaterpaull Architects is hired to prepare the HSA.
• December 2012 – The HSA is completed and identifies $2.2 million in deficiencies; these
would need to be addressed simply to make the building habitable, without any major
interior changes to the building configuration or tenant finish work.
• Spring 2013 – WRHA applies for and receives a second SHF grant in the amount of
$43,000. This includes a required 25% match of $11,000 from WRHA, and allows for
the preparation of construction documents as identified in the HSA.
• March 2013 – After applying for historical landmark designation, Fruitdale School is
approved to be included on the National Register of Historic Places and the Colorado
State Register of Historic Properties.
• December 2013 – WRHA retains Butler Burgher Group to complete a valuation and
market analysis that explores possible reuse options (condos, apartments, office, retail,
industrial, etc.) and quantifies the feasibility of each. The market study assumes that
deferred maintenance ($2.2 million) has already been addressed and considers the
5
renovation costs and stabilized values for each type of land use. The market study
concludes that no specific land use is considered a "highest and best use," and any
potential reuse would likely have a funding gap of $1.5 to $1.75 million dollars. If
redevelopment is desired, the study recommends a partnership with the City.
Alternatively, it recommends demolition as the most objective, financially feasible
option, although this too would be at a loss given the land value is less than the combined
costs of demolition and the Authority's investment to date.
• March 2014 — WRHA publishes a Request for Interest (RFI) to solicit reuse proposals
from the development community.
• July 2014 — Three proposals are received in response to the RFI, and the Housing
Authority selects a proposal from Mountain Phoenix Charter School for an expansion of
their charter school into Fruitdale. A purchase and sale agreement is executed in
October.
• January 2015 — After several months of due diligence, the charter school terminates the
purchase and sale agreement.
• February 2015 — The Housing Authority offers another RFI respondent, Hartman Ely
Investments (HEI), an opportunity to present their redevelopment proposal.
• April 2015 — HEI presents a preliminary reuse proposal to WRHA and is granted an
exclusive four-month period to conduct due diligence.
• September 22, 2015 — HEI presents an updated $6 million redevelopment proposal to
WRHA. The Authority approves a motion directing staff to negotiate a purchase and sale
agreement with HEI.
• October 5, 2015 — HEI presents the development proposal to City Council at a study
session and discussed the need for a $470,000 grant from the City.
• November 6, 2015 — Recording of PSA between WRHA and FSP.
• November 24, 2015 — WRHA passes a motion authorizing their financial participation in
the amount of a $170,000 grant and a $400,000 loan.
FINANCIAL IMPACT:
Updated Project Pro Forma (refer to p. 10 of the Redevelopment Summary for a pro forma
summary)
Over the past 3 months, the project pro forma has been substantially expanded in detail and most
importantly has been projected out in time over a period of 15 years, as is typical in analyzing a
real estate investment project. Project costs have also been further developed with the use of an
architect and general contractor. Apartment rents and property operating expenses have been
researched and provided by HEI's property manager (PREM).
Further work has also occurred in regards to securing additional sources of gap funding sources.
• Jefferson County Community Development has provided a preliminary commitment
letter for $640,000 in HOME funds over the course of 2015, 2016 and 2017. The 2015
HOME commitment has increased from $200,000 to $420,000, primarily due to this
project's ability to implement quickly.
2
• Preliminary commitment letters have been provided to sell the Historic Preservation and
Solar Power tax credits to investors.
• A solar power subsidy has been awarded by Xcel Energy (in addition to the solar tax
credits).
• Talks are ongoing with banks that would provide a bank loan for a portion of project
costs.
• Additional grants will be pursued, but will be undetermined until after a development
agreement is proposed to be executed. However, the first of those is a detailed application
to the State Historical Fund, which is due on April 1, 2016 and will take substantial time
to prepare after the development agreement is executed. Additional HOME funds on top
of the $640,000 already committed are also possible after the development agreement is
executed.
The long term "gap" in the project pro forma continues to be $640,000. Additionally, based on
the timing of various aspects of the project pro forma, there is a significant short term need for a
bridge loan, which is being asked to be filled by the City and WRHA. The total bridge loan need
is approximately $2,300,000 ($1,925,000 of which is requested from the City and would need to
be taken from the City's restricted reserves).
The developer and project team have proposed that bridge loan could be funded with $400,000 in
WRHA reserves and $1,925,000 from the City. All of these amounts would be paid back to the
City and WRHA over time, leaving the out of pocket public contribution to the project at
$640,000, as follows:
• City's loan will be paid back initially in 2017 and 2018 in the amount of approximately
$1,925,000 as the developer (FSP) receives $200,000 in HOME funds and approximately
$1,725,000 in tax credits sale proceeds.
• The terms under which WRHA would be repaid are still being negotiated. However, the
goal is to have them repaid no later than year 15, including interest at a reasonable rate
beginning in year 7, and preferably, pay back would be much sooner.
The rationale for the timing of these repayments is as follows:
• City has a need to be re -paid more quickly due to significant costs for the local match
portion of the Wadsworth reconstruction project, beginning in 2018/1019.
• WRHA during a study session in 2015 came to a general consensus that for the time
being, they were not in a position to convert SF homes into owner -occupied affordable
housing due the very tight and expensive housing market. As a result, there is no short
term identified use for the approximately $645,000 the WRHA currently has in their bank
accounts.
RECOMMENDATIONS:
Public Benefits
HEI has provided a general description of the diverse public benefits to be derived through this
public/private redevelopment (p. 5 of the Redevelopment Summary). From a HA perspective,
these benefits importantly include the provision of affordable housing, which is at the core of the
HA's mission. That said, the more general public benefits include: preservation of a significant
historic structure and the development of unique market rate housing in an area of the City that
7
would benefit from additional real estate investment.
Conclusions
HEI remains very committed to the redevelopment of the Fruitdale school property and have
continued to expend significant time and money to that end. Their stated desire is to negotiate
necessary Development Agreements with the City and WRHA between now and the end of
January or early February in order to keep moving forward on this redevelopment effort. HEI
needs to begin construction on solar panels in order to have those completed in the fall of 2016
and realize approximately $340,000 in reduced utility costs and utility company REC payments,
which are critical components of the pro forma in addition to the solar tax credits.
Based on preliminary direction from City Council that will be provided at the study
session, staff has tentatively scheduled the February 8 regular business meeting to take
action on a more formal commitment to public financial participation on the project.
It is important to note that any action taken by City Council to commit to public financial
participation in this project is but a first step in a series of steps that would occur over the
next 6 months, when a closing on the project is anticipated. A series of milestones would
need to be achieved prior to any public money actually being spent on the project. These
milestones would include:
• Execution of a development agreement defining obligations of the City, the
WRHA and the Developer
• Preliminary approval by state and federal agencies to validate the eligibility for
historic preservation tax credits
• Finalization of commitment from tax credit investors
• Finalization of a private bank loan
• Finalization of commitment of HOME funds
• Finalization of construction drawings and approval of a building permit, reducing
risk associated which project construction costs
Each of these milestones, when achieved, has the result of reducing the risk of the project
defaulting on paying its loan from the City. It is also important to note that no public
moneys will be spent until FSP closes on the acquisition of the property; and then
incremental payments will be made upon actual progress on construction. The final
payment will not occur until the project has achieved substantial completion, at which
point the building and site will have been transformed into a unique, mixed income, loft
style housing project that would be the first of its kind in Wheat Ridge.
ATTACHMENTS:
HEI Redevelopment Summary
Fruitdale Lofts
Redevelopment Summary
Hartman Ely Investments, Creating Sustainable Communities
January 6, 2016
Hartman Elv Investments:
• Adaptive re -use and historic building specialists for 35 years
• 100% involvement of our business owners with each project
• Limited number of hand-crafted projects each year
Is Our process: A patient search for the best solution (lots of analysis/test fits)
Odd Fellows Hall (before)
Odd Fellows Office/Retail (after)
Jim Hartman, Project Architect , previous firm
Courtyard Hotel (before, as Joslin's Dept Store) Courtyard Marriott Hotel Downtown Denver (after)
Jim Hartman. Project Architect & Development Manager, previous firms
Fruitdale Lofts, z
Hartman Ely Investments LLC
Hartman Elv Investments:
Lowry Steam Plant (before)
Revitalized 1939 historic building
Five new neighborhood restaurants
Hangar 2, Aerial Photo of Site (before)
Steam Plant Lofts (after)
HEI, in partnership with Harvard Communities
Hangar 2 (after)
Gougle earth '-
Hanqar 2 Lowry, Aerial Photo of Site (after)
HEI, in partnership with Larimer Associates and City Street Investors
Fruitdale Lofts,
Hartman Ely Investments LLC 3
Hartman Elv Investments:
• Similar rental apartment projects in Denver involving affordable units,
historic tax credits and State Historic Fund grants (with previous firm):
• Bank Lofts, 126 units, completed in 1996, $13,000,000 total cost
• Boston Lofts, 158 units, completed in 1998, $24,000,000 total cost
• Grand Lowry Lofts, 261 units, completed in 2000, $27,000,000 total cost
Bank Lofts (Downtown) Boston Lofts (Downtown) Grand Lowry Lofts (Lowry)
• Similar size rental apartment project developed and owned by HEI in
Denver, managed for HEI by Pinnacle Real Estate Management:
Park Hill Place (East Colfax), 17 units, completed in 2014, $2,000,000 total cost
(C
Exterior
Apartment interior (before)
Fruitdale Lofts,
Hartman Ely Investments LLC
Apartment interior (after)
Key Issues, Fruitdale Lofts:
• Public Benefits From Redevelopment:
J
Revitalize vacant National Register historic property with $5,350,000 project.
Increase the supply of affordable, family and work force housing with the first
historic loft -style residential development in Wheat Ridge.
Provide solar power economic benefits to apartments as well as edible
landscaping and sustainable education benefits to community.
Create a mutually beneficial partnership with Jefferson County School District,
providing shared parking to adjacent Preschool and potential future site plan
improvements to benefit Preschool.
Implement a successful public/private partnership to serve as th
development catalyst for 44th Avenue and this area of Wheat Ridge.
ummary of Significant Revisions (10-5-15 to 1-11-16)
Meat Company too much risk at this site. Redevelopment plan is now 16
apartments for families, low-income individuals and the Wheat Ridge workforce.
Extensive financial and market research for current plan with consultants:
EPS and Proximity Green (financial)
• Pinnacle Real Estate Management and Jefferson County (property management & apartment market)
• The Abo Group and Growling Bear Co (design and construction costs)
— $420,000 of Jefferson County HOME funds now available instead of $200,000. An
additional $220,000 committed in 2017 (total of $640,000 over 2 years instead of
$600,000 over 3 years). Additional HOME funds potentially available.
— $570,000 of WRHA funds potentially available instead of $170,000 ($170,000
grant and $400,000 bridge loan). Re -confirm January 12th.
— Solar power award received from Xcel Energy (approximately $340,000 of
revenue and utility bill savings over 20 years).
— Tax equity partner and redevelopment lender interest/proposals.
— Environmental Phase I report received (no impacts).
— Land swap and school deed restriction removal underway.
— Total City/WRHA subsidy amount of $640,000 unchanged but bridge loan of
approximately $2,325,000 necessary. Loan amount to be confirmed prior to
property purchase.
Fruitdale Lofts,
Hartman Ely Investments LLC
Redevelopment Features:
1. Revitalize a key historic landmark and site (including house at SW site corner).
2. Create up to 16 well-designed apartments for families, low-income individuals and
the Wheat Ridge workforce.
5. Implement innovative energy and sustainable solutions in all parts of the property
(solar power, energy efficiency, daylighting, electric vehicle charging,
Fruitdale Orchard and edible landscaping).
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Proposed Site Plan
Artist's Rendering of Proposed Redevelopment
Fruitdale Lofts, 6
Hartman Ely Investments LLC
Well-designed single level apartments:
txample: Single level residential space
at HEI's award-winning Steam Plant Lofts property, Lowry
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1 Garden Level Plan
A2 Sce1e 1/16' -1
Apartment Sizes and Rents:
• 2 -Bedroom Affordable Apartments (2):
625-700 SF, $700-$955/month
• 3 -Bedroom Affordable Apartments (3):
1,000-1,035 SF, $1,100/month
• 2 -Bedroom Workforce Apartments (7):
650-845 SF, $1,250-$1,350/month
3 -Bedroom Workforce Apartments (4):
950-1,160 SF, $1,550-$1,600/month
Ground -level apartments at Fruitdale
Fruitdale Lofts,
Hartman Ely Investments LLC
Creative, multi-level apartments:
Example: Multi-level residential space,
at HEI's award-winning Steam Plant Lofts property, Lowry
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Second Floor and multi-level, loft -style apartments at Fruitdale
Fruitdale Lofts,
Hartman Ely Investments LLC
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Second Floor and multi-level, loft -style apartments at Fruitdale
Fruitdale Lofts,
Hartman Ely Investments LLC
Innovative Energy Solutions:
Largest building -Integrated solar power array in the nation
on an historic landmark (over 2,100 solar panels)
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Examples: Solar power and electric vehicle charging at HEI's award-winning Hangar 2 property'
2015 Urban Land Institute's Innovative Prosect of the Year (and other awards)
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Hartman Ely Investments LLC
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Pro Forma Summary:
Confidential Commercial and Financial Information -Exempt From Public Disclosure in Accordance with the Colorado Public Records Act
Fruitdale Lofts - Hartman Ely Investments
Sources and Uses, Income Tax Credit Calculations
Gross Building 17,000 sf
Net Rentable 13,740 sf
Uses
Item
Qualifying Costs Tax Credits Notes
Budget
%Total
Qualifying Costs
Cos GSF
Cos NSF
Amount
$
10
0.0%
$
0.00
$ 0.00
Site acquisition & closing costs
$
342,500
6.4%
$
20.15
$ 24.93
Design & support professionals
$
407,100
7.6%
$
23.95
$ 29.63
Permits & Fees
$
225 500
4.2%
$
13.26
$ 16.41
Developer expenses & fee
$
117,012
2.2%
S
6.88
$ 8.52
Soft cast contingency
$
3,759,732
70.5%
$
221.16
$ 273.63
Hard costs
$
366,973
6.9%
$
21.59
$ 26.71
Hard cost contingency
$
116 676
2.2%
$
6.86
$ 8.49
Financing Costs
$
5,335,503
100.0%
$
313.8S
S 388.32
Total Development Budget
$ 3,384570
Sources - initial sources used to fund construction & development
Debt & Equity
Commercial Loan (75% Loan to Stabilized Value) $ 1,648,847 30.9%
Equity - Fruitdale School Partners _ $ 302,087 5.7%
Total Funding Sources $ 5,335,503 100.0%
Income Tax Credits - Historic (HITC), Solar (SITC), and Enterprise Zone (EZEITC)
Qualifying Costs Tax Credits Notes
Initial Funding
Qualifying Costs
Item
Future amounts
Amount
%Total
Nott"
Grants
City of Wheat Ridge
$ 4,660.402
S 470,000
8.8%
State Historic income Tax Credit (cap of $1,000,000 applies)
Wheat Ridge Housing Authority
$ 220,430
$ 170,000
$ 419,570
3.2%
7.9%
future funds benefit operational cashflow
HOME Funds - Jefferson County
$ 9,999
S -
0.0%
benefits operational cashflow
Enterprise Zone Equipment Tax Credit - Jefferson County
Qualifying Costs - apt. cabinets & appliances and solar system
$ 333,303 reduced by SITC amounts above
E2FITC value (3%of qualifying costs)
State Historical Fund grant
$ 2,039,495
$ -
0.0%
Temple Buell grant
$ -
0.0%
Tox Credit Amounts
85% benefit
Federal HITC funds may not be available
Tax Credit Investor funding - Historic
$ 1,642,268
(pending further, detailed review)
Tax Credit Investor fundi - Solar
85% o Historic and Solar Tax Credit amounts
$ 82.803
$ 1,725,071
HITC and SITC funds benefit project after construction
Patent Capital
City of Wheat Ridge - patient capital
$ 1,925,000
36.1%
Wheat Ridge Housing Authority - patient capital
$ 400,000
7.5%
Subtotal Subsidies & Patient Capitol
$ 3,384570
Debt & Equity
Commercial Loan (75% Loan to Stabilized Value) $ 1,648,847 30.9%
Equity - Fruitdale School Partners _ $ 302,087 5.7%
Total Funding Sources $ 5,335,503 100.0%
Income Tax Credits - Historic (HITC), Solar (SITC), and Enterprise Zone (EZEITC)
Qualifying Costs Tax Credits Notes
Federal Solar Income Tax Credit
Qualifying Costs
$ 324,718
SITC value (30% of qualifying costs)
$ 97,415
Federal Historic Income Tax Credit
Qualifying Costs
$ 4,660.402
HITC value (20% of qualifying costs)
$ 932,080
State Historic income Tax Credit (cap of $1,000,000 applies)
Qualifying Costs
$ 4,660,402
HITC value (30% of qualifying costs with $2M cap)
S 600,000
Qualifying Costs
$ 2,660,402
HITC value (20% of remaining qualifying costs with $2M cap)
$ 400.E
Subtotal Federal Solar & Historic and State Historic Income Tax Credits $ 2,029,496
State Enterprise Zone Equipment Income Tax Credit via Jefferson County
Qualifying Costs - apt. cabinets & appliances and solar system
$ 333,303 reduced by SITC amounts above
E2FITC value (3%of qualifying costs)
Total Federal and State Income Tax Credit Benefits
$ 2,039,495
Fruitdale Lofts,
Hartman Ely Investments LLC
Schedule:
Fruitdale Lofts,
Hartman Ely Investments LLC 11
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Fruitdale Lofts,
Hartman Ely Investments LLC 11
Next Steps:
1. City approves $470,000 subsidy, economic development bridge loan of approximately
$1,925,000 and overall public/private partnership details as described by the Development
Agreement.
Wheat Ridge Housing Authority (WRHA) re -confirms its $170,000 subsidy and economic
development loan of approximately $400,000.
2. Submit historic tax credit applications in early February.
3. Select tax equity partner(s) and redevelopment lender.
4. Execute City/WRHA-HEI Development Agreements and begin public outreach program in
early February.
5. Finalize historic tax credit preliminary approval with State/Federal agencies, refine
City/WRHA bridge loan amounts and execute tax equity Partnership Agreements in Spring
2016.
6. Begin detailed design in Spring 2016.
7. Confirm City/WRHA final bridge loan amounts in late Summer 2016, prior to HEI's
property purchase and any expenditure of City/WRHA funds.
8. Complete project in mid 2017 (completion of solar power system in late 2016).
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