Redevelopment Authority approves $720,000 loan for 36‑unit Meadow Lane mixed‑income development

The Waukesha City Redevelopment Authority approved a $720,000 loan from its Affordable Housing Development Fund to support DuFec Construction’s proposed 36‑unit development on Meadow Lane in the Silverneal area.

The loan, approved by a 5–0 vote with two abstentions, carries a 1 percent interest rate, a 30‑year repayment term and allows interest‑only payments during the construction period. The authority directed staff to record a deed restriction to preserve the project’s affordable units for the term of the loan.

The vote followed a presentation by developer Mike Dufek of DuFec Construction. Dufek said the project would include a mix of incomes and unit types and that the financing package remains tight: “Even with $720,000 at 1 percent and $1,100,000 from HUD at 1 percent, it’s still barely cash flows,” he said. Dufek said the site is under contract for roughly $440,000, or about $13,000 of land cost per unit, and that the full project budget is roughly $8.4 million.

City staff and the developer described the capital stack for the project as layered. Staff said the developer expects to use a construction loan from the Waukesha County Center for Growth (the Grow Fund) plus HOME funds, with the city loan making up a portion of the financing gap. On lien priority, staff said the Grow Fund would likely be a construction lender, the bank would be first in line, the Grow Fund second, the city third and HUD HOME funds last, although exact lien positions will depend on final lender agreements.

Staff noted how the loan supports the authority’s goal of producing housing affordable to households at or below county median income. Dufek said 11 of the 36 units would be targeted at 60–80 percent of Washington County median household income, with the remaining units at up to 100 percent of median household income. “There is a huge demand for it,” Dufek said of the affordable units. He told the authority he is planning for initial vacancy and pro forma assumptions that include a 25 percent vacancy rate in the first year and a 5 percent ongoing vacancy assumption thereafter.

Members discussed project risks and protections. Staff said the authority will require the affordable‑unit conditions as a loan condition and advised a deed restriction that runs with the loan term; staff said it could call the loan if affordability requirements are violated. On refinancing, staff said the authority has in past cases subordinated in good faith where projects were current borrowers and goals were being met, but that subordination is considered case‑by‑case.

Authority members also discussed the project’s public finance implications. Staff estimated an assessed value of roughly $7 million at completion and said that would generate about $70,000 a year in city property tax revenue under current assessments. Members noted the Affordable Housing Development Fund was originally seeded with TIF proceeds but that no TIF is being used for this particular loan.

The authority recorded the motion as approved with five affirmative votes and two abstentions; individual vote names were not specified in the meeting record. The loan terms adopted include the 1 percent rate, 30‑year repayment, interest‑only during construction and a deed restriction to preserve the affordable units for the life of the loan.

If the project proceeds, staff said the loan will be disbursed in phases tied to permits and construction milestones and that other financing conditions (construction loan closing, final lien positions, and standard due diligence) must be satisfied before first disbursement.

Community context: the authority and developer described the site as adjacent to commercial properties including Good Harvest Market, CVS and nearby hotel uses; the site has wetland constraints in part of the parcel and will require an expensive public water main extension. The developer and staff said those site costs, along with tight rental rates targeted to affordable households, are the primary reasons city assistance is needed.

The authority’s action allows the developer to proceed with final underwriting and to return with any contract documents required to complete the loan closing.