Housing Kitsap has agreed to sell the 550 Madison Apartments to Madison Avenue Development for $1.75 million.
Madison Avenue Development will partner with Housing Resources Bainbridge to preserve affordable housing on the property, and the Bainbridge nonprofit will manage the apartment complex after the purchase is complete.
Commissioners for the Silverdale-based housing authority voted 7-1 at their Tuesday meeting in Poulsbo to approve the sale.
The sole “no” vote came from Housing Kitsap Commissioner Rob Putaansuu, who is also the mayor of Port Orchard.
Housing Kitsap, the current owner of the property, has been looking to sell the 13-unit apartment complex on Madison Avenue, as well as other property it owns, due to the agency’s continuing financial crisis.
Housing Resources Bainbridge said the cooperative purchase of the building would help retain low-cost housing on Bainbridge Island, where affordable rental properties are in short supply. But the potential sale of the 13-unit complex prompted public outcry on Bainbridge, from advocates for affordable housing, elected officials and the public.
At the board’s previous meeting in June, tenants of the 550 Madison Apartments and others criticized Housing Kitsap officials for considering a sale of the building to Bainbridge businessman Mike Burns and his development company, Madison Avenue Development, for more than $2 million.
Housing Resources Bainbridge, a nonprofit that assists families with affordable homes on the island, had offered $1.5 million for the property.
After much community criticism, housing officials decided to give Housing Resources Bainbridge (HRB) an additional 30 days to match the $3 million offer made by Burns, but Burns subsequently withdrew his offer, saying he did not want to compete against HRB for the property.
Switch in plans
Earlier this week, HRB announced a partnership plan with Madison Avenue Development to buy the property, which will be redeveloped along with adjacent parcels owned by Burns’ company, and will include at least 13 affordable housing units.
Housing Resources Bainbridge said the purchase of the building would help retain low-cost housing on Bainbridge Island, where affordable rental properties are rare.
“The partnership between our organizations will protect the current residents in the short-term by maintaining the existing housing and rents during any redevelopment planned for the overall site,” officials with Housing Resources Bainbridge said in Monday’s announcement.
The nonprofit has been working with Madison Avenue Development, a development company owned by Burns, to form a partnership to purchase the 550 Madison Apartments “and ultimately redevelop the site into a mixed-income, multifamily community,” according to Housing Resources Bainbridge.
Housing Resources Bainbridge said it hopes the partnership will lead to a redevelopment of the property and adjacent parcels “into a mixed-income community that would contain market rate units and retain at least 13 permanently affordable units for households at or below 50 percent of area media income ($29,950 for a single individual).”
Current tenants will be relocated as the property is redeveloped, however. They will receive temporary relocation assistance, the nonprofit added, and eligible residents will be able to return to the property after new multi-family housing is built.
Burns has had in previous discussions on a potential purchase and redevelopment of the 550 Madison Apartments, as Madison Avenue Development owns parcels next the apartment complex and has explored potential development scenarios for its parcels in recent years. The developers have said the current zoning on the 550 Madison Apartments property would allow twice the number of housing units that are currently on the land.
Housing Resources Bainbridge also said it has reached an agreement with Madison Avenue Development to take over property management responsibilities for the 550 Madison Apartments once the sale is closed.
Current tenants have been notified of the new agreement and partnership by Phedra Elliott, executive director of Housing Resources Bainbridge.
At Tuesday’s meeting, most commissioners said they supported the sale to HRB and Madison Avenue Development, and Commissioner Robert Gelder called it “a great compromise.”
Putaansuu, however, recalled that Housing Kitsap officials had talked about bankruptcy for the agency just a year ago, and said he had hoped the community of Bainbridge Island would help “close the gap” from the $2 million previously offered by Madison Avenue Development and HRB’s prior offer of $1.5 million.
“We’re taking about a $250,000 haircut,” Putaansuu said.
Commissioner Kol Medina, also a Bainbridge councilman and mayor, said the $1.75 million purchase of the property was only a part of what the developer would spend to redevelop the property.
“This is only a piece of it,” Medina said.
Tom Daniels, a representative for Madison Avenue Development, agreed and noted that the 550 Madison Apartments had an appraised value of $670,000.
Medina added that in a previous Housing Kitsap finance committee meeting, HRB and Madison Avenue Development had offered $1.5 million, but the committee thought the board would not approve that offer, so it was increased.
“It was a tough, tough meeting,” recalled Housing Kitsap Commissioner Becky Erickson, who is also the mayor of Poulsbo.
Gelder agreed that the $1.75 million for the property was just the start of what it would cost to preserve those units of affordable housing.
There would be other expenses, he added, such as maintenance and repairs that Housing Kitsap had not done due to a lack of funding.
Housing Kitsap expects the sale to close by Aug. 31.
On a subsequent vote, commissioners of the housing authority voted 7-0 to keep rents at the 550 Madison Apartments at their current rate.
“Your rents aren’t going to be increased,” Erickson told the handful of 550 residents in the crowd of roughly two dozen at the meeting.
The audience responded with hearty applause after both votes.
“Sometimes crisis makes wonderful intervention,” she added.
HRB and Madison Avenue Development provide an outline on the emerging partnership between the two in a letter sent to Housing Kitsap Monday.
HRB noted that all of the details of the partnership had been worked out, and added, “The exact structure of this has not yet been defined and will require professional legal assistance.”
After closing completes on the property, HRB will take over management responsibilities at the 550 Madison Apartments.
In the letter, HRB officials also noted that the affordable housing units would have lower rents than the original “work force” apartment units that would have been provided had Madison Avenue Development purchased the property earlier and developed it outside the new partnership.
The development company had planned to make units available at 80 to 100 percent of area median income (AMI), rather than the 50 percent AMI rental units now being pursued.
HRB also noted that a new site plan for development of the 550 Madison Apartments parcel and Burns’ adjoining properties would now have to be designed.
HRB added that the partnership would preserve units for “very low-income residents.”
“These units will coexist with market-rate units, creating an integrated community in the core of Winslow,” HRB said in its letter to Housing Kitsap. “With a larger overall development, economies of scale will be realized for both the market and affordable units.”
“Housing Kitsap will be able to meet its short-term budgetary needs and uphold its larger mission on behalf of the community,” the letter said.