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Aeon plans to buy 220 NOAH apartments.

Byline: Matt M. Johnson

Minneapolis-based affordable housing developer Aeon plans to close on 16 apartment properties in Minneapolis and Edina with some financial assistance from the two cities.

Aeon is set to purchase 220 apartments classified as naturally occurring affordable housing in a $28 million deal, according to the city of Edina's website and Stephanie Hawkinson, the city's affordable housing development manager. Edina will provide a $350,000 grant to Aeon to go toward the purchase, which includes an 11-unit apartment building at 7008 Sandell Ave. The source of the grant is an existing tax increment financing district in the city.

Minneapolis is committing $4.5 million toward the purchase when and if the deal closes, said Dean Porter-Nelson, a housing stability specialist with the city. The apartment portfolio includes 209 Minneapolis apartments. The transaction is expected to close this month, Porter-Nelson and Hawkinson said.

The seller of the Edina property is an entity that shares an address with Redondo Beach, California-based Just Home Property. Jeff Wachner, a Just Home co-founder, declined Wednesday to comment on the deal. The seller purchased the Edina apartments in 2017 for $1.7 million. The apartments are kitty-corner across France Avenue South from the Galleria Edina shopping mall.

Porter-Nelson declined to identify the portfolio's seller.

Aeon executives were unable to respond on Wednesday to requests for comment on the pending transaction. One of Aeon's largest NOAH purchases to date came in late 2017 when the company paid $36 million for the 422-unit Seasons Park complex at 951 77th St. E. in Richfield.

The money Minneapolis is putting toward the upcoming purchase comes out of the city's NOAH Preservation Fund, Porter-Nelson said in a Wednesday interview. The money in the fund is intended to help affordable housing investors buy apartments market-rate investors are also competing for, he said.

"We do have this NOAH fund available because it helps buyers like Aeon purchase properties at their market value while keeping their rents more affordable," he said.

The fund's total budget for 2019 is $4.5 million.

Porter-Nelson did not supply the addresses of the Minneapolis properties Aeon plans to buy, saying only that they are in south and northeast Minneapolis.

The funding Edina has approved for the purchase would require Aeon to designate 40 percent of the units it buys in the city as affordable to people earning 60 percent or less of the area median income, which is $94,300 for a family of four and $63,300 for a single person, according to the Metropolitan Council. The remaining units must lease at levels affordable to tenants earning 80 percent or less of AMI.

Those income limits would apply for 30 years. The city of Minneapolis has similar rent requirements, Porter-Nelson said.

Edina is encouraging investment in and the preservation of NOAH properties to prevent current city residents from being displaced by increasing rents, Hawkinson said in an interview.

"It has happened in neighboring communities where NOAH properties have been acquired and repositioned," she said. "Our goal is, when it's feasible to be able to partner with developers and owners, to preserve the properties at the affordable rent levels."

Edina is on track to make progress in 2019 toward a goal of adding 1,000 units of affordable housing to the city's housing inventory by 2030. Four development projects approved or currently in the approval process in the city would put about 200 affordable apartments on the market, Hawkinson said. One of those projects is an 80-unit apartment building Aeon and Minneapolis-based Ryan Cos. US Inc. plan to build at 4100 76th St. W.

Minneapolis is seeking to build its affordable housing inventory along several fronts. In addition to the NOAH Preservation Fund, the city is offering property tax reductions to rental property owners that keep rents at their buildings affordable, according to the city's website. The 4d Affordable Housing Incentive Program is expected to preserve about 700 units of NOAH housing in the city this year.

Related:

Aeon buys site for Edina apartments

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Publication:Finance and Commerce
Geographic Code:1U4MN
Date:May 1, 2019
Words:677
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