Brooklyn Park forgives $3.8M, allowing for giant affordable housing complex to be sold

Brooklyn Park will forgive a $3.8 million loan allowing for the long-struggling apartment complex Huntington Place to be sold with affordable housing restrictions intact.

The decision spares Minnesota's second largest apartment complex from possible foreclosure, which would have put housing for 2,500 low-income residents at risk. But tenants remain worried about potential displacement under new ownership.

On Monday, the city's Economic Development Authority, made up of City Council members, voted 6-0 to approve property owner Aeon's request to forgive a $5 million loan, of which $3.8 million was due.

That clears the way for nonprofit housing provider Aeon to likely sell the property to New Jersey-based investment firm MAS Capital, which plans to raise rents and re-screen tenants, but has vowed to keep the complex affordable.

The decision came after Aeon's primary lender National Equity Fund offered the city $450,000 to go toward forgiving the loan. Officials also made the deal contingent on a $4 million federal grant, previously allocated for Huntington Place, being redirected to help fund the city's Zanewood Teen Center expansion.

Council Member Christian Eriksen said it was the best choice out of a "slurry of terrible options."

"I think we'll be right back here again in a couple years," Eriksen said, but added that forgiving the loan "gives the city the greatest amount of control" and stability for residents.

Aeon bought the property for nearly $77 million in 2020. It plans to sell to MAS Capital for about $40 million.

Aeon defaulted on the city's loan after missing a January payment. The nonprofit hasn't paid its primary lenders since 2021, putting the property at risk of foreclosure.

If the complex were sold at auction, affordable housing covenants would likely disappear, and it is uncertain who would buy the aging property with millions in deferred maintenance.

The city wouldn't receive proceeds from such a sale to pay back its loan, staff said, because the primary lender would take priority.

"The most important thing is we've gotten the property to a point where it is moving in a stable direction," Eric Anthony Johnson, chief executive of Aeon, said in an interview. "And for someone to step in and continue that work is what the property needs."

Huntington Place resident Ta-Metta Gaines has been collecting signatures on a petition demanding representation in decisions, no renter displacement and the establishment of a tenant-led association to work with the buyer on unresolved issues in the building.

Gaines, who works at a health care facility, said she won't be able to afford an increase in rent.

"Everybody is trying to figure out what's going on," she said. "What's going to happen to me? Where am I going to live? Am I going to be able to afford another apartment? This has thrown us for a loop. I'm frustrated and upset."

Brooklyn Park Mayor Hollies Winston told residents: "There is a fight ahead."

He called on tenants to continue to organize and urge the state and county to help address concerns with Huntington's living conditions, which he said include mold, pests and asbestos.

"I'm willing to get in that fight with you. I think it's necessary," Winston said. "It's critical to the long-term viability of our city that you all have livable conditions."

Aeon's plan to sell

Johnson said since Aeon purchased the complex in 2020, it has invested and helped secure millions in grant funding to stabilize the property, a total far beyond the $5 million city loan.

The nonprofit, he said, also worked to "move lenders to walk away from millions of dollars" to get the deal through. The National Equity Fund is expected to lose $50 million in the sale.

"Most organizations would have walked away from this property a long time ago, but Aeon has worked hard to not just turn it around but try to maintain affordability covenants at the property," Johnson said.

Aeon bought the 834-unit Huntington Place right before the COVID-19 pandemic started. The nonprofit has made improvements and invested $5 million to improve security as criminal activity surged. Calls to police have since plummeted.

Aeon also helped raise more than $4 million in rental assistance for tenants. The average Huntington Place tenant's annual income is $29,000, Johnson said.

But the nonprofit, he said, has been unable to cash flow the property due to ongoing financial issues, unpaid rent, empty units and rising costs.

The future of Huntington

MAS Capital would raise rents after the sale, but maintain the property's affordable housing covenants for 30 years.

Current rents range from $900 to $950, according to city documents, but they could be raised to as much as $1,165 to $1,398 under the agreement, based on area median income limits.

The firm is expected to increase monthly rents to about $1,100.

MAS Capital would not extend leases when they expire but rather allow tenants to apply for new leases for renovated units.

City officials expect that process to displace some residents, but say they are focused on offering resources and ensuring tenants don't lose housing.

The firm plans to make $18 million in renovations to the six-building complex, to update apartments, fix the pool and make other repairs.

Some council members questioned that level of investment, since Aeon previously said a top-to-bottom renovation of the complex would cost $200 million.

Aeon plans to temporarily maintain a small stake in the property, to help the new owners use the remaining half of a $10 million state grant. Huntington Place also has received $3.5 million from Hennepin County.

Johnson said Aeon has held five meetings with tenants since October and worked to reach a deal that maintains residents' housing.

But tenants are concerned.

"They are the ones who are going to have to live with it," said Nelima Sitati Munene, executive director of African Career Education and Resource Inc. in Brooklyn Park, which is advocating for tenants.

"Every decision is about money, but we're talking about people's lives that could be upended. That is really what's at issue here."