$20M plan aims to preserve Walnut Towers for low

Interior and exterior renovations totaling $7 million would include a mural on the eastern side of the Walnut Towers Apartments. The birds shown in this rendering are just a placeholder example, according to the prospective buyer of the property, who pledges to work with the city and local arts groups on the final design of the mural.

MANKATO — A proposed $20 million acquisition and renovation of Walnut Towers, the deteriorating downtown Mankato apartment building for low-income residents, would dramatically modernize the 86-unit structure as soon as 2023 if it receives city, county and federal financial assistance.

The plan from Trellis Co., the prospective buyer, would end concerns that Mankato's biggest downtown apartment building might be transformed from subsidized housing into upscale high-rise apartments targeted toward more affluent residents.

The Minneapolis-based nonprofit is promising a $7 million remodel that will touch almost every element of the 52-year-old building's exterior and interior, offering everything from new toilets to a fitness room to a mural covering the east side of the eight-story structure. And the modernized and improved apartments would continue to be home to some of the city's poorest residents.

Saving Walnut Towers would be a welcome outcome for city leaders, who have been striving for years to increase the amount of affordable housing in Mankato. Multiple projects are bringing new rent-controlled apartment buildings to various parts of town, including one that just broke ground near Cub Foods west of downtown.

"But it's also the preservation of affordable housing," said Mankato Community Development Director Paul Vogel. "With this proposal, it appears they’re going to preserve the affordability and address some of the building issues."

Trellis is prepared to enter a 20-year commitment to keep Walnut Towers, which serves people with incomes of no more than half the median income in the area, as Section 8 housing. The federal tax credits, along with Trellis's past practices, mean the building would likely continue serving low-income residents much further into the future.

"Trellis never sells its properties and is working to be your neighbor for decades to come," wrote Dan Walsh, vice president of housing development for Trellis in a June letter to city officials. "The Section 8 rent assistance will remain indefinitely."

Along with multiple assurances that the building would be the enduring home to its current tenants and to future tenants with similar needs, the nonprofit emphasized the enhancements it is planning for the interior, exterior and tenant services provided at Walnut Towers.

"Trellis's design team has been through Walnut Towers multiple times," Walsh wrote in his letter. "The property has a number of critical physical needs and worthwhile improvements."

Just over a third of the $20 million financing package would be directed at building rehabilitation and would transform both the outer appearance of the 1970 structure, the 86 apartments spread over seven stories and the shared space such as the lobby, the nonprofit organization promised.

On the outside, the parking lot and patio area would be renovated and landscaping added. The roof would be replaced, as would the windows, metal panel siding, front sidewalks and entrances, exterior lighting and signage. The concrete walls would be cleaned. The east and west walls would be painted, and a mural would cover much or all of the east wall.

The project will "reconfigure and improve" interior common areas such as the lobby, community room, mail area and laundry and add a fitness room, computer lab and small meeting room, according to Walsh. All finishes will be replaced, along with lighting, boilers, water heaters and the fire alarm system.

In the apartments, the renovations would add built-in microwaves and ceiling fans and replace flooring, lighting, appliances, bathroom fixtures, base trim, cabinets and window treatments.

"In addition to the physical needs, Trellis intends to improve community life and resident supports at the property," Walsh wrote. "One of the ways it will accomplish this is to add a half-time services and activities coordinator to work with all the residents and connect them with community resources and activities."

More than six years ago, the current owner attempted to put together a funding package to accomplish a similar renovation, warning that the building's future as a home for some of Mankato's neediest residents was in doubt. That was even more of a threat because of a growing interest in city-center living among the area's wealthier citizens, according to documents sent to city officials in April 2016 by Jack Spitzack, CEO of Owatonna-based Lasson Management Inc.

"Walnut Towers is ... at high risk of market conversion due to the strength of the market and its prime location," the project summary stated.

"The project is tired and needs substantial rehabilitation to residential, common and exterior spaces of the building. ... The loss of this project would constitute a significant loss of affordable housing within the Mankato market."

That has been a major concern for city leaders, enough that the City Council included preservation of Walnut Towers among the priorities in its five-year strategic plan.

"If a project like that would be converted to market rate, the question is what would you do with the residents who are there?" Vogel said.

Even if there was a new affordable housing complex for them elsewhere in Mankato, Walnut Towers tenants — including many who are elderly or have disabilities and don't drive — often depend on the services within walking distance of a downtown apartment.

"Many of the residents rely on the proximity it gives to other social services and support infrastructure found in the city center," Vogel said, mentioning the nearby supermarket and pharmacies. "It's walkable. It's accessible."

Although Lasson Management's effort to put together a financial package to modernize the building didn't succeed, Trellis is ready to give it a try. The 31-year-old organization plans to complete its purchase of the property this month, apparently confident it will ultimately be a winner in the intense statewide competition for a limited number of federal affordable-housing tax credits awarded by the Minnesota Housing Finance Authority each year.

"Trellis will purchase the property with interim acquisition financing with the goal of securing permanent funding in the next couple of years for a substantial renovation," according to Walsh's letter.

A financial summary of the proposal from Trellis shows equity from the tax credits supplying $12.7 million of the $20 million in needed financing for the purchase and renovation. A private mortgage would supply most of the rest. But the financing plan has a $650,000 gap that the city and Blue Earth County are being asked to fill — $275,000 from each local government, most likely from federal pandemic recovery funds, and $100,000 more from the city, tapping into its federal Housing and Urban Development allocation.

As a strong demonstration of local support, those contributions also will generate points for the project in the formula used by Minnesota Housing in picking winners in the tax credit competition.

The City Council on Monday night will be asked to pass resolutions authorizing its local contributions and supporting Trellis’ tax credit application, which must be submitted by July 14. An announcement of winning applicants is traditionally made by Minnesota Housing in November.

Trellis, previously known as Community Housing Development Corporation, manages more than 40 affordable-housing properties in Minnesota totaling nearly 4,000 units, including several properties acquired to prevent a conversion to market-rate housing.

While most its properties are in the Twin Cities, Trellis has a few in outstate Minnesota. One nearby example is Emerson Union, the 49 units of affordable workforce housing created in a portion of the former New Ulm Middle School, a historic building that is also home to the State Street Theater.

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