A massive remodel totaling $19.8 million in improvements is underway at the Heatherstone Apartments in Kennewick, where work will continue through late spring 2020.
All 38 residential buildings will receive interior and exterior renovations, including new roofs, siding, parking lots, garage space and landscaping. For the individual units, tenants will benefit from an overhaul to kitchens, bathrooms and lighting, increasing energy efficiency and improved overall aesthetics.
“The purpose of this was to acquire and substantially rehab the property and preserve it for the long term, extending the affordability restriction for the next 30 years,” said Bryon Gongaware, managing director of affordable housing for Security Properties Inc., a Seattle-based owner, operator and developer that controls the tax credit partnership, which now owns the property. Gongaware sees the work as a necessary improvement since the 22-year-old complex is starting to show its age. “The property is really starting to wear out,” he said.
Walker Construction of Spokane is the general contractor on the project.
There is an income restriction for tenants who live at Heatherstone, located at 1114, 1138 and 1212 W. 10th Ave., near Park Middle School in Kennewick.
“This property was built in 1996 as an affordable housing complex and tax credit housing,” Gongaware said. “We came in with the concept and idea that we wanted to preserve affordable housing for the long term. We developed a game plan to set it up for the next useful life of the asset.”
The property has changed hands several times over the years, most recently purchased for $41.6 million on Nov. 21, under the limited partnership known as Heatherstone Preservation.
“Heatherstone Preservation is the ownership entity that acquired it as a general partner and ownership entity as a whole. We bought it as an institutional investor to deliver the tax credit,” Gongaware said.
The new buyers receive those tax credits through the Washington State Housing Finance Commission, or WSHFC, which describes itself as a “publicly accountable, self-supporting team, dedicated to increasing housing access and affordability and to expanding the availability of quality community services for the people of Washington.”
The WSHFC said it has created and preserved affordable homes for more than 334,000 people across the state in the past 32 years. It distributes federal housing tax credits, which allow developers to raise capital by selling the credits to investors.
For this project, the estimated tax-credit equity totals $23.2 million, with a tax-exempt bond worth $43 million and a taxable bond of $6.6 million.
“Every part of our state is experiencing a crisis in housing affordability, and the Tri-Cities is no exception,” said Karen Miller, chair of the Housing Finance Commission. “We’re very pleased to be able to finance not only new construction of affordable apartments, but also the preservation of existing ones like Heatherstone, which will now remain affordable for at least 34 years, thanks to the low income housing tax credit.”
Since the WSHFC formed in 1987, this tax credit has financed more than 30 properties in Benton and Franklin counties, creating or preserving 2,840 rental units and another 427 through the nonprofit bond program. The 455 units at Heatherstone include 95 apartments for people with disabilities.
“The city of Kennewick commends this non-taxpayer, private investment in our community,” said Kennewick Mayor Don Britain. “Quality of life is a top priority and strategic focus area for the city council. A necessary component for quality of life is affordable and stable housing options that support our growing city.”
Through a series of community meetings, residents of Heatherstone were made aware of the plans to remodel the complex, which will affect all the units, ranging from studios to three-bedroom apartments.
“Interior rehab for each individual unit will be sequenced on a building-by-building basis,” Gongaware said. “Simultaneously, the exterior rehab will go through in sequence and may or may not be simultaneous.”
Tenants will be moved to a “hospitality unit” on site for about a week while improvements are made to their unit.
Heatherstone Preservation will provide moving boxes and assistance with removing personal items from kitchens and bathrooms so work may be done, and the items eventually returned to newly-rehabbed cabinets and cupboards.
“We will do large investments in energy-efficiency to improve the overall environmental impact of the property,” Gongaware said.
Since the renovation process will take more than a year from beginning to end, residents will go through a formal communication process as their home is scheduled for improvements. This may include a 60-day, 30-day and one-week notice before a tenant is relocated to a hospitality unit.
“We are in no way kicking them out. There will be some inconvenience and we will do our best to minimize that. But this is a substantial improvement in their overall living space and community as a whole,” Gongaware said.
Exterior work will take place as the weather cooperates. Improvements include removing some of the extra garage structures to reduce the density of the complex, which spreads across nearly 25 acres.
“We think this will create a better resident experience,” Gongaware said.
Owners do not have an exact figure on the number of residents who live at the site, but most units are occupied. The complex includes 103 three-bedroom apartments, 200 two-bedroom apartments, 140 one-bedroom apartments and 12 studios. Units range from 502 square feet to 1,244 square feet.
Heatherstone is considered a “rent-restricted” complex. Gongaware said these restrictions are typically in place for 30 years, and since 22 years have lapsed since its original construction, there are a limited number of years remaining on the original regulatory agreements.
“We’re going to put it back through the tax credit system and put new 30-year affordability restrictions in place,” he said.
To live at the site, residents must go through an income certification process with a restriction that they may not make more than 50 percent or 60 percent of the area median income, as published by the U.S. Department of Housing and Urban Development guidelines. Rent is restricted based on income and the unit the tenant is living in, as the amount may be adjusted depending on how many qualified residents are in each unit.
On its website, Heatherstone Apartments lists typical rent costs at $562 for a studio and $597 for a one-bedroom. Residents can expect to pay between $718 and $876 for a two-bedroom and between $822 and $1,007 for the largest units on the property.
There are 10 employees at Heatherstone, with half of the workers in the office and the other half working as maintenance staff. The team manages and maintains the 38 residential buildings, as well as three community buildings and two pools. The community buildings also will be part of the multi-million dollar remodel.
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