Request for Committee Action
A briefing memo explaining the purpose, background, and impact of the requested action.
Registered Apprenticeship Policy Waiver for the Blue Horn Properties LLC project: 1201 Lake St E (RCA-2022-00409)
ORIGINATING DEPARTMENT
To Committee(s)
| # | Committee Name | Meeting Date |
|---|---|---|
| 1 | Business, Inspections, Housing & Zoning Committee | April 19, 2022 |
Action Item(s)
| # | File Type | Subcategory | Item Description |
|---|---|---|---|
| 1 | Action | Contract/Agreement | Waiving the City Registered Apprenticeship Policy for the Commercial Property Development Fund Loan to Blue Horn Properties LLC or its assigns for the project at 1201 Lake St E. |
Ward / Neighborhood / Address
| # | Ward | Neighborhood | Address |
|---|---|---|---|
| 1. | Ward 9 | Powderhorn Park | 1201 Lake St E |
Background Analysis
This report seeks to waive the City’s Registered Apprenticeship Policy for the renovation of a commercial building on East Lake St so that construction can begin shortly allowing the property to retain its expected tenants. Reactivating this multi-tenant building will contribute to the recovery of this corridor.
In June 2021, the City approved a $600,000 Commercial Property Development Fund (CPDF) loan to Blue Horn Properties, LLC to assist in the rehabilitation of the commercial property at 1201 Lake St E. Blue Horn Properties is owned by Abdirahman Abdi, a Somali-American real estate developer who has been in the real estate industry for the past 15 years developing both residential and commercial properties in the Twin Cities and surrounding areas. Mr. Abdi is passionate about supporting residents and entrepreneurs to transform their lives and revitalizing their neighborhoods one building at a time. He has completed the City's Small Real Estate Developers Training Program (D-TAP).
Blue Horn Properties purchased 1201 Lake St E in 2020 and will renovate the 35,000 square foot, multi-tenant commercial building. The project aims to create an affordable and welcoming space for diverse entrepreneurs to start and grow their businesses. The redevelopment of this property supports the reopening and rebuilding of small businesses within the Lake Street corridor and the availability of key products and services to the community.
When the CPDF loan was approved, the total project costs were estimated to be approximately $5 million. The project uses included about $1.55 million for the hard construction costs to fully renovate the existing building. In the last nine months, Mr. Abdi has engaged with several different general contractors who were unable to meet the City's Registered Apprenticeship Policy, a requirement triggered by the receipt of the CPDF loan. The Registered Apprenticeship Policy applies to development projects receiving assistance of $100,000 or more and requires that the developer and its contractors belong to a Registered Apprenticeship Program approved by the Minnesota Department of Labor and Industry.
Staff is requesting that the Registered Apprenticeship Policy be waived in this case to allow Mr. Abdi to sign a construction contract with Aequo Builders and commence the construction project. Waving the Apprenticeship program requirements will allow for the developer to select an emerging contractor. The selected general contractor, Aequo Builders, is a small, three-person business that concentrates on construction management verses performing construction duties. Aequo Builders will meet the City’s Small and Underutilized Business Program (SUBP) and Prevailing Wage requirements under the loan agreement. Staff are meeting with the building trades representatives to identify improved supports to engage emerging contractors in the Apprenticeship Program.
The developer’s construction costs have increased by $800,000 during that time period, which he is able to cover by injecting additional equity and requesting additional financing from the lending partner. The current group of sub-contractors are ready to start construction but if the project is delayed, Aequo Builders will need to try to find other sub-contractors that are available. This is likely to increase the cost and will not guaranty that all the City Civil Rights requirements would be met. If Blue Horn Properties, LLC must search for a new general contractor who can meet the Registered Apprenticeship Policy along with the other City requirements, the developer is unlikely to have adequate funds to complete the project. Each month of delay has increased the construction costs and Blue Horn Properties, LLC is currently receiving the maximum funding from its bank lender based on the appraised value of the property. Blue Horn Properties, LLC is at risk of losing its proposed tenants with further delays in construction.