A revised development agreement approved by the Des Moines City Council last week is paving the way for Sherman and Associates Inc. to move forward on its proposed Metro Lofts project.

Metro Lofts, a Sherman and Associates Inc. development located north of Vine Street between Second and Third streets, backed off its plan to construct 70 to 80 condominium units on the site after that proposal “became economically infeasible due to escalating construction costs,” city documents show.

The new Urban Renewal Development Agreement and Conceptual Development Plan, approved by the City Council on Jan. 25, outlines the Minneapolis-based developer’s alternative plan to construct 111 mixed-income apartment units on the site.

The resolution also spells out a revised disbursement schedule for the remaining $1 million of a $1.5 million Economic Development Grant originally awarded the project.

The initial disbursement of $500,000 was used toward the purchase of the parcel at Second and Vine streets, for which Metro Lofts LLC paid $660,000 in May 2005.

Sherman’s vice president of development, Jackie Nickolaus, said Sherman now plans to break ground in March.

The estimated $20 million project cost is being funded through various sources, Nickolaus said, including Enterprise Zone tax credits, tax-increment financing and an unsubsidized guaranteed loan from the U.S. Department of Housing and Urban Development.

Nickolaus said Sherman also has secured WNC & Associates, an Irvine, Calif.-based tax credit syndicator, to purchase the low-income housing tax credits awarded the project in 2009.

“The bottom line is that all the structuring is done,” Nickolaus said, adding that in order to comply with the rules governing the allocation of the tax credits, the project must be completed no later than Dec. 31, 2010.

“That’s why the early start is so important to us,” she said. “We hope to start construction as close to March 1 as we can.”