Rare ‘difficult-to-develop’ apartment project advances in Woodbury

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Two affordable apartment developments with nearly 500 units in total are advancing in Woodbury, including one project that failed to move forward in a previous iteration as a market-rate building and another with a rare “difficult-to-develop” designation.

The Woodbury Planning Commission recommended a series of approvals for both projects Monday night.

Real Estate Equities is planning a 252-unit, two-building project on a 29-acre site south of Hudson Road and Settlers Ridge Parkway, and LS Black Development wants to develop a 237-unit building on 13.65 acres just south of the Hudson Road-Manning Avenue intersection.

Last July, Oppidan won City Council approval for a 237-unit market-rate building at the Hudson-Manning site, but the project failed to move forward for lack of financing, according to a city staff report.

LS Black Development subsequently picked it up and reworked it as an affordable project, Mike Hudson, developer and president at LS Black Development, said in an interview Tuesday. The affordable designation makes it eligible for alternative funding sources.

“We are proposing affordable, so we will utilize Low Income Housing Tax Credits and tax-exempt bonds,” Hudson said. “We are in a good position. There’s a bit of a wait for those resources, but we have several other projects under construction with the same financing structure.”

Monday night, the Planning Commission recommended approval of a planned unit development, preliminary plat, and site and building plan for the $93 million Manning Avenue Apartments project, which is up for City Council approval on April 10.

The goal is to start construction in spring 2025.

Hudson said the units will be affordable at 60% of area median income. With predominantly two- and three-bedroom apartments, the building will be suitable for families, Hudson said.

The Woodbury location is appealing in part because it’s adjacent to jobs and amenities, Hudson said, adding that an Amazon fulfillment center is just north of the site and a city park is on the south.

“We love the location,” he said.

Also on Monday, the commission recommended approval of rezoning and other requests for Real Estate Equities’ Karen Drive Multi-Family project, which includes two 126-unit buildings with apartments ranging in size from one to three bedrooms.

The developers are seeking Low Income Housing Tax Credits as a founding source. In an unusual twist, the project is eligible for about $7 million of additional credits because the U.S. Housing and Urban Development department has designated the site as “difficult-to-develop (DDA).”

Blaine Barker, a senior development associate at Real Estate Equities, told the Planning Commission the project will be eligible for the additional tax credits as long as the development team closes on financing by December 2025.

“We expect to close on the first phase hopefully at the end of this year — potentially both phases, Barker said. “But certainly both by the end of ’25.”

HUD puts the DDA tag on areas with “high land and construction costs compared to the area’s median gross income and fair market rents,” according to a city staff report. The designation encourages developers to build needed affordable housing in areas where such projects might not be “financially feasible.”

Woodbury officials said in the report that DDA designations are rare in the Upper Midwest. Only three ZIP codes in Minnesota had the designation in 2023. In addition to Woodbury, the other ZIP codes are in the North Loop of Minneapolis and the Cambridge-Princeston area, the city said.

The Karen Drive site is problematic in part because it includes two large wetlands with buffer requirements that would create a “challenging shape and size for commercial development,” a city staffer said at Monday’s Planning Commission meeting.

To allow for the proposed apartment construction, the commission recommended approval of the developer’s request to rezone the property from “Gateway District” and “Business Campus District” to “Mixed Use.”

RELATED: Oppidan clears hurdle for 237-unit apartment project