Case Study

The Upper Post Flats of Minneapolis, MN

6 min read

Veterans Given Housing Preference at Historic Minnesota Fort

It would make a good story if someone who moves into the renovated Upper Post Flats at historic Fort Snelling in Minneapolis had lived in those barracks on active-duty decades ago. Though the Dominium repurposing of the site has moved veterans to the top of the preferred list, the complex hasn’t been used as a military post for a long time, so it isn’t likely the post will see any former alumni coming back. But it is almost as good a story that a visitor came, looked around and announced she had been born there.

“I think she was the last person born at the Upper Post,” says Dominium project partner Owen Metz. The woman had memories from when she was a child, “and just wanted to see it again.”

Upper Post Flats is a huge project, rehabbing some two dozen buildings with Low Income Housing Tax Credits and Historic Tax Credits. Some of the buildings are a century old, and it is clearly a labor of love for Minneapolis-based Dominium and Metz.

“It’s been in the hopper awhile,” says Metz, remembering Dominium responded to a Request for Proposals (RFP) from the Minnesota Department of Natural Resources in 2015 for the Upper Post, which dates to 1878 (a Lower Post was built earlier). The term sheet was inked about a year later.

“It took a while to get to the ultimate closing, but we did,” he says.

The Veterans Administration, working with a nonprofit called Common Bond, refurbished a few of the buildings before Dominium got there. “Our rehabilitation will more or less take care of the remaining historical buildings,” Metz says. “There might be a handful left to be put back in service, but the majority will be finished off with this.”

“It’s in a unique little pocket of the metro,” Metz says, adjacent to the Minneapolis-St. Paul Airport but on a secluded, park-like 40-acre site near the confluence of the Mississippi and Minnesota Rivers in an unincorporated area of Hennepin County. Despite the seclusion, residents are within half a mile of light transit and have access to a golf course, the Minnesota River and “hundreds of miles” of bike paths.

“It’s a really interesting place,” says Metz. “We don’t have a mayor; we don’t have a City Council.”

“It’s a little bit of a mixed bag,” Metz says. “The Boy Scouts have a little bit of an area back there and we’re going to have some ballfields in the area.”

A Remarkable Turnaround
The ongoing rehab has created “a remarkable turnaround reversing 40 years of overgrowth,” Metz says. The buildings were in disrepair and at least one had collapsed.

“Quite honestly it was now or never,” he says.

The rehab and adaptive reuse are a little more than halfway done, says the official, with residents having started to move in late last year. Twenty-one buildings will be renovated for affordable housing by the end of construction, with an additional five retained for storage or maintenance. Construction should be done by late summer/early fall of this year.

“It’s really nice to see them come back to what they would have looked like,” says Metz of the buildings. With the project’s low density, “it doesn’t feel like you’re in a metro. It almost feels like you’re in a park.”

To date, 19 units have been occupied, and 32 more leased, with a total anticipated unit count of 192. Metz expects lease-up will be completed by the end of this year and eventually he thinks there will be more than 400 people living in the complex.

“There’s no segregation,” Metz says, so veterans, families and individuals will be living side to side. Unit sizes are studios through one five-bedroom home, with 75 percent of the units at two bedrooms or greater.

“We had to abide by all the historic requirements,” he notes. “You can’t just put up walls wherever you want. This was the very first historic landmark in Minnesota.”

Total development cost will be north of $150 million, Metz says, with U.S. Bank stepping up with construction financing and more than $100 million in tax credit equity (four and nine percent LIHTCs and State and Federal Historic Tax Credits). U.S. Bank is the sole tax credit investor.

Approved Just in Time
Minnesota no longer offers state historic credits, so the project got approved just in time, he says.

“U.S. Bank stepped up huge,” he notes.

Dominium deferred many of its developer fees. Hennepin County issued $88 million in private activity bonds leveraging the four percent credits and provided some cleanup funds. The state Department of Natural Resources is leasing the property to Dominium for a 99-year term, and mortgage agency Freddie Mac has taken out a leasehold interest since the status of the land does not allow a permanent mortgage.

The post was the first historic landmark in the state of Minnesota. Involvement of the federal and state historic groups (including the Minnesota Historical Society) required “an extra level of review and oversight,” Metz says.

There was a fairly stringent overview from the state historic preservation office and the National Park Service, he notes.

Federal surplus land status triggered another review, he says. “This has set a new high-water mark.”

The historic nature of the buildings dictated careful handling both with the Park Service on the federal level and several state agencies. Veterans’ preference was logical, considering the historic use of the barracks to house soldiers during both World Wars.

The veterans’ preference is much needed. Dominium notes, “Out of Minnesota’s 300,000 veterans, nearly 50,000 experience issues with housing affordability, quality or crowding, and over 660,000 low-income veterans spend more than half of their income on rent nationwide.”

The Upper Post project has long been a special one for Dominium. Metz says that with the company’s extensive history in Minnesota, “We were the group to do it. It needed to be saved. We’re excited to bring this back into service.”

Mark Fogarty has covered housing and mortgages for more than 30 years. A former editor at National Mortgage News, he has written extensively about tax credits.