ANN ARBOR, MI - Avalon Housing hopes to rehabilitate its new Ann Arbor apartment building and fill it with low-income residents by the end of 2009. Because it pulls together funding and tax credits from several government sources, Avalon typically takes six months or more to move from a sales agreement to closing. In the case of the building on Pear Street, between Traver and Pontiac Trail, the process took more than eight months.
The slow real estate market helped clear the way for the nonprofit to acquire a 20-unit apartment building on Pear Street on Ann Arbor's north side. But the relative lack of activity in the housing market rendered the seller, an LLC that included Wilson White Management president Francis Clark, more patient. "In the Ann Arbor market of six or seven years ago, I don't think we'd be competitive with a six-month closing period," said Michael Appel, Avalon executive director.
Doug Smith of Swisher Commercial, Avalon's broker, agreed. "It's easier for (Avalon) now than it was, when people were banging on doors to buy apartments," he said. The building has been for sale on and off over the years. It was taken off the market last year as membership of the ownership group was shuffled. Soon after, however, Smith contacted Clark. "(Avalon) had asked me to keep an eye out for a building that had smaller units in it," Smith said. "I had shown it to Avalon three or four years earlier."
The building is unusual because all units are one-bedroom. Appel said there are relatively few such apartments available for low-income tenants, and that one-bedroom units are more helpful for single people, rather than families, facing homelessness. Clark, a former member of the board of the Washtenaw Affordable Housing Corp., said he was sympathetic to Avalon's goals. But the profit motive was not necessarily purged from the transaction. "It was my belief that they're doing is a good thing, and the property was paying us to own it, so there was no hurry," Clark said.
The 11,200-square-foot, three-story building sold for $1.3 million, and the sale closed in June. That comes to $116 per square foot. Other apartment buildings, closer to the University of Michigan campus, are listed for up to $200 per square foot. But Clark said the Avalon offer was slightly more than he expected the market would provide. "It was as much as anyone was going to give," he said.
Avalon will spend an additional $650,000 to rehabilitate the apartments in stages as current leases expire. The work will include electrical, plumbing, new windows, new cabinets and upgrades to the flooring. Six of the units will be set aside for homeless people, and support services will be provided, Appel said. The Northside Neighbors neighborhood association has been notified of the purchase, Appel said, but has had no questions about it so far. On Aug. 7, the City Council unanimously approved $850,000 in federal HOME funding, the final piece of the financing puzzle.
Including the Pear Street building, Avalon owns and operates 210 units across the city and has a net annual budget of about $900,000. It is in the process of taking over the operations of WAHC, which has 127 units, although 11 are being sold. "It's exciting for us to be able to bring new units online," Appel said. "It's a slow, methodical process." Aside from the HOME funds, Avalon is using $500,000 from the Michigan State Housing Development Authority, $200,000 from the Federal Home Loan Bank, about $866,000 in Low Income Housing Tax Credit, and a $282,500 loan from Great Lakes Capital Fund, according to a city staff report.
The total budget is $2.7 million, and the rehabilitation should be completed and units occupied by low-income tenants by the end of 2009, Appel said. Because it pulls together funding and tax credits from several government sources, Avalon typically takes six months or more to move from a sales agreement to closing. In the case of the building on Pear Street, between Traver and Pontiac Trail, the process took more than eight months.
But the relative lack of activity in the housing market rendered the seller, an LLC that included Wilson White Management president Francis Clark, more patient. "In the Ann Arbor market of six or seven years ago, I don't think we'd be competitive with a six-month closing period," said Michael Appel, Avalon executive director.
Doug Smith of Swisher Commercial, Avalon's broker, agreed. "It's easier for (Avalon) now than it was, when people were banging on doors to buy apartments," he said. The building has been for sale on and off over the years. It was taken off the market last year as membership of the ownership group was shuffled. Soon after, however, Smith contacted Clark. "(Avalon) had asked me to keep an eye out for a building that had smaller units in it," Smith said. "I had shown it to Avalon three or four years earlier."
The building is unusual because all units are one-bedroom. Appel said there are relatively few such apartments available for low-income tenants, and that one-bedroom units are more helpful for single people, rather than families, facing homelessness. Clark, a former member of the board of the Washtenaw Affordable Housing Corp., said he was sympathetic to Avalon's goals. But the profit motive was not necessarily purged from the transaction. "It was my belief that they're doing is a good thing, and the property was paying us to own it, so there was no hurry," Clark said.
The 11,200-square-foot, three-story building sold for $1.3 million, and the sale closed in June. That comes to $116 per square foot. Other apartment buildings, closer to the University of Michigan campus, are listed for up to $200 per square foot. But Clark said the Avalon offer was slightly more than he expected the market would provide. "It was as much as anyone was going to give," he said.
Avalon will spend an additional $650,000 to rehabilitate the apartments in stages as current leases expire. The work will include electrical, plumbing, new windows, new cabinets and upgrades to the flooring. Six of the units will be set aside for homeless people, and support services will be provided, Appel said.
The Northside Neighbors neighborhood association has been notified of the purchase, Appel said, but has had no questions about it so far. On Aug. 7, the City Council unanimously approved $850,000 in federal HOME funding, the final piece of the financing puzzle. Including the Pear Street building, Avalon owns and operates 210 units across the city and has a net annual budget of about $900,000. It is in the process of taking over the operations of WAHC, which has 127 units, although 11 are being sold. "It's exciting for us to be able to bring new units online," Appel said. "It's a slow, methodical process."
Aside from the HOME funds, Avalon is using $500,000 from the Michigan State Housing Development Authority, $200,000 from the Federal Home Loan Bank, about $866,000 in Low Income Housing Tax Credit, and a $282,500 loan from Great Lakes Capital Fund, according to a city staff report. The total budget is $2.7 million, and the rehabilitation should be completed and units occupied by low-income tenants by the end of 2009, Appel said.
Source: Ann Arbor Business Review