Walnut Towers on verge of major renovation

Dec. 11—MANKATO — Mankato's largest downtown apartment building is poised to be one of the winners in the annual competition for state and federal funding to build and preserve affordable housing in Minnesota.

Walnut Towers Apartments is set for approval of about $20 million in loans, grants and other financial support targeted toward the preservation of housing for lower-income tenants, according to documents prepared for a Minnesota Housing Finance Agency meeting later this week. The proposed project by the nonprofit Trellis Co., totaling more than $22 million overall, would renovate the 86 apartments and the commons areas of the 52-year-old building and guarantee that Walnut Towers continues to be reserved for Mankato's less-affluent residents.

City leaders have worried for years that the aging building on Walnut Street, just steps from the civic center arena, would be sold to a private developer intent on converting it to market-rate apartments for higher-income residents interested in downtown living.

Instead, the Minneapolis-based Trellis Company — supported by the Mankato City Council and Blue Earth County — entered the highly competitive annual statewide contest for funding from the Minnesota Housing Finance Agency. If the list of recommended projects is formally approved by the Minnesota Housing Board of Trustees on Thursday, Walnut Towers could be getting a thorough modernization as soon as next summer and would continue to be dedicated to serving people earning 50% or less of the area median income for decades to come.

"Trellis acquired the building in July 2022 from the long‐time owner. Its 86 units serve seniors and disabled persons of any age," according to a description of the application in the set of recommended projects prepared for the Board of Trustees meeting. "The one‐bedroom units are in critical need of rehab. The city of Mankato is in support of the proposed rehab and have committed a $275,000 city deferred loan, and a $100,000 Community Development Block Grant (CDBG loan). The county of Blue Earth is also in support, committing a $275,000 deferred loan."

The state agency is set to support the project with a variety of funding sources, including $5.9 million from Minnesota's state-financed Preservation Affordable Rental Investment Fund, which was specifically created by the Legislature to prevent the loss of facilities like Walnut Towers due to deterioration or the threat of conversion to market-rate housing.

Another $1.8 million is to come from Minnesota's Housing Infrastructure Bonds, which are another form of state-funded financing targeted at creation or preservation of affordable housing. Finally, nearly $5 million in mortgage assistance and a $9.3 million bridge loan is recommended for approval.

Minnesota Housing typically requires recipients of its assistance to enter into binding agreements to dedicate the property to low-income housing for 30 years. Trellis Co., when first discussing its plans for Walnut Towers last summer, said its mission is to serve that population at its properties in perpetuity.

The affordable-housing provider plans $7 million in wholesale renovations of the eight-story building, according to Dan Walsh, project developer for Trellis.

"We hope to secure that funding in the winter, then we would really kick off the formal design process, close on the financing and we would be working toward beginning construction this time next year," Walsh said in July.

City Manager Susan Arntz compared the scope of the remodel — which includes both the interior and exterior of the building — to the $9.8 million remodel a decade ago of the 101-unit Orness Plaza, which is Mankato's largest low-income apartment building and is located just north of Franklin Rogers Park near the Madison East Center.

"So it's a major renovation of this facility," Arntz said.

The desperately needed work includes replacement of cast-iron sewage collection pipes, which date to the building's 1970 construction and have deteriorated to the point that they're leaking wastewater, Walsh said. But it's far from just the guts of the building that will be replaced. Tenants will see new appliances, flooring, lighting, bathroom fixtures, base trim, cabinets and window treatments under the renovation plan. New built-in microwaves and ceiling fans are also planned.

Walsh said Trellis was motivated to purchase Walnut Towers and tackle the renovations because of the building's size, the downtown location, the growth in Mankato, the presence of community services for low-income tenants, and the willingness of local governments to support affordable housing.