Nonprofit developers to convert HK Tower into affordable housing
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The HK Tower at 100 South and 500 East is one of the city’s most aesthetically robust modern office structures. A planned office to residential conversion will make it the state’s first affordable housing that includes profit-sharing with renters and shared-equity ownership units.
When Salt Lake City Hall announced its “Tenant Wealth-Building Initiative” led by a local developer’s new non-profit in February, the location of the 38 condo units to be purchased for $10 million of public money was unknown.
We now know where.
Currently leased by University of Utah Health and Reaveley Engineers, the HK tower at 515 East 100 South is under contract for purchase next week by Chris Parker’s Perpetual Housing Fund and the Rocky Mountain Homes Fund.
When it gets underway, it will be the fifth office to residential conversion in Downtown and East Central in the works, and the second on its block.
Phase two of the project looks to construct a 12-story tower to the north, on the site of the current parking structure.
Parker says he is a “mass timber aspirant” for the second phase, which will offer around 200 units in an equity-sharing ownership product.
Instead of providing amenities like a bowling alley (teaser for upcoming story), the HK office conversion will be making an unprecedented deal with tenants and buyers.
The deal with the city—which obligates the developer to build 1000 more affordable units in the city at 25-65% AMI—was sealed last night at the Redevelopment Agency Board meeting. The city council voted 6-0 to commit $10 million from the American Rescue Plan Act (ARPA) to the project.
The building’s conversion
The HK Tower was opened in 1982, offering 171,193 SF of office space on 1.97 acres with an attached 637-stall parking garage. Its namesake and anchor tenant was purchased by the global conglomerate KION Group and moved from the building approximately 10 years ago.
Renovated in 1996, the building is 14 floors, with 4 elevators. At 180 ft tall, it’s currently the 34th tallest building in the state.
Floorplates are small enough to divide into apartments that will all have window access. In a memo to Salt Lake County, which is contributing $600,000 of ARPA funds toward the project, Parker described the transformation:
“The new units will offer 12-foot, exposed concrete ceilings with expansive views of the Salt Lake Valley and the nearby foothills. The interior of the floors will be gutted except for portions of mechanical, electrical, and plumbing systems that can be reused. The existing concrete columns, floors, and ceilings will be refinished and accented with modern interior finishes.”
Developers have designed 60 apartments into the building. The 38 units being bought with ARPA funds cover floors 9-11. Floorplans from 6-8 months ago show 14 units per floor. Parker told us this week that developers are currently looking at 12 units per floor.
New wealth-building model comes to Utah
In the condominiumized units that will be owned by the Perpetual Housing Fund, renters will get cash back from profit sharing, with the ability to borrow small amounts as well as save for a down payment on a for-sale unit.
The model promises to return 75% of all cashflow, refinance, and sales proceeds to the tenant. Parker notes that “the 1000 units we’re committing to are projected to return more than 5 times the city’s investment in direct cash to low income families while providing affordable rent in the meantime.”
For those qualified to buy, a shared-equity, no-down payment, low interest rate arrangement will greet them through the Rocky Mountain Homes Fund. The program is offered to public service professionals—teachers, healthcare professionals, public sector employees, and veterans.
Phase two of the project will bring around 200 for-sale units for income-qualifying people. Parker is hoping for a 12-story mass timber structure, insisting that the price of timber this fall will determine his choice of construction technology. “Our first priority is affordability, since that tower will be primarily missing middle, for-sale product.”
Plans for the tower include a mixed-income day care at street level. A new parking structure will be included in the building’s footprint.
Rocky Mountain Homes Fund will control 144 condo units, and Parker is planning to build at least 60 for-sale units in the new tower through his Perpetual Housing Fund.
He hopes both federal and state LIHTC credits are part of the capital stack, although this cycle’s awardees haven’t been named yet.
But Parker claims that even without this year’s LIHTC credits, the developers are committed to the project and would make adjustments like self-financing until the next round of LIHTC awards are made.
Editor’s note: This post has been updated and several corrections made.
Interested in seeing where developers are proposing and building new apartments in Salt Lake, or just want to support a local source of news on what’s happening in your neighborhood? Subscribe to Building Salt Lake.
