Work is underway on groundbreaking Kansas City River Market apartments

Heavy equipment began rumbling this week on Second and Delaware, an apartment complex in Kansas City’s River Market that will use “greener than green” building techniques.

Amid an explosion of downtown area residential construction, the $62 million Second and Delaware project is unique in its Passive House Institute-certified construction, a building method that is more energy efficient than the highest LEED-certified standards.

The buildings, now slated for opening in May 2017, will have 16-inch-thick concrete walls, a “green” roof and other features that are expected to create a 90 percent reduction in energy consumption compared with structures of comparable size and use. The buildings will use an energy recovery ventilation system that reduces heating and cooling demands.

The project will consist of two buildings and provide 276 apartment units, a mix of market-rate and “workforce housing” units designed to be affordable for low-wage workers. One-fifth of the apartments will be allocated for qualified low-income tenants.

Ground work is beginning about three months later than originally expected. Blight abatement and excavation are expected to take about three months before work begins to construct the project’s parking garage.

“We have about 53,000 yards of soil to be moved,” said developer Jonathan Arnold.

The city of Kansas City has committed $2.9 million in street and green space improvements to the site. The two-building apartment project calls for eliminating the vestige of Delaware between Second Street and railroad tracks that run along the south bank of the Missouri River.

Arnold, who has redeveloped other River Market properties, said Monday that the project this month closed on crucial financing through the U.S. Department of Housing and Urban Development, obtaining a $49 million fixed-rate, government-insured mortgage loan.

That financing is coupled with issuance of $30 million in tax-exempt Multifamily Housing Revenue Bonds authorized by the Planned Industrial Expansion Authority and sold by Ameritas.

“There was ample demand for the bonds, which was great,” Arnold said.

The project also received federal and state low-income tax credits plus a 10-year, 100 percent property tax abatement followed by a 15-year, 50 percent abatement on the project’s added value. Because of the abatements, the developers agreed to pay $20,000 a year in payments in lieu of taxes to the taxing jurisdictions, such as Jackson County, Kansas City Public Schools and the Kansas City Public Library.

“We also closed on our partnership agreement with Berkshire Hathaway’s Affordable Housing Partners, which invested tax credit equity in the project,” Arnold said. “Being that it’s equity, which brings with it a higher level of risk than debt, it’s a significant investment in Kansas City.”

Billionaire investor Warren Buffett launched Affordable Housing Partners about four years ago to help finance low-income housing projects. That kind of venture invests in projects by buying up federal tax credits, which are then sold to big banks or corporations that use the credits to lower their taxes. Proceeds from the sales are used to provide equity financing.

Arnold said the partnership is “looking forward to replicating this model in other areas” elsewhere in Kansas City and in Dallas.

He said he plans to have a website up to be able to begin preleasing the Second and Delaware apartment units in about 45 days. He expects market-rate rentals to range from $1,000 to $2,400 a month and the qualified low-income units to range from about $550 to $750.

“We’re not going to have a formal groundbreaking,” Arnold said. “There’s no point because of the winter weather. We’re planning to have a block party in June to introduce it to the neighborhood.”

This story was originally published January 26, 2016 at 10:01 AM with the headline "Work is underway on groundbreaking Kansas City River Market apartments."