The Kansas-based developer seeking to rehabilitate the Freeborn National Bank and Jacobson Apartments will submit another application for state housing tax credits in January.

Cohen-Esrey is preparing the application for $438,000 through the Minnesota Housing Finance Agency, said Albert Lea City Manager Chad Adams.

The firm hopes to turn the buildings — on the corner of Broadway and William Street — into 21 apartments on the upper floors, with the Albert Lea Art Center and Prairie Wind Coffee on the ground level. The community will also be able to rent out space for events.

Adams said the application is part of a supplemental round of funding through the agency. The project was not awarded during the fall grant round.

The city manager said the January round is different from the fall round in that approved projects will be put on a waiting list. They will get the chance for funding from projects previously awarded funding in the fall that are not moving forward.

“There’s still some optimism, but we recognize it’s competitive,” Adams said. “It’s based on the number of applications they get now.”

He said more applications were submitted in the last grant round then ever before because of additional bonding dollars given.

If the local project is not given funding from this January grant round, the developer will reapply in June. The funding represents 9 percent of the total project cost.

Forty percent is coming from state and federal historic tax credits.

The city manager said city officials are working with Cohen-Esrey to extend its predevelopment agreement. Presently, it ends mid-January.

Built in 1922, the Freeborn National Bank was originally constructed as a bank on the first floor and medical and professional offices in the upper floors. The Jacobson’s first two floors were constructed in 1888, and the two upper floors were added in 1923. The buildings share a staircase and elevator.

In 2006, the city spent about $2 million to restore the exterior of the bank building, including tuckpointing, a new roof, a skylight and new water, sewer and electrical service to the buildings, among other improvements.

Under the preliminary agreement, a developer will need to replace electrical, plumbing and heating and air conditioning, among other improvements. Previously, construction estimates were at about $5 million.

The city will be responsible for paving the parking lot to the east of the buildings, though Cohen-Esrey could apply for grants to cost-share the project. The city will also be able to review and approve tenants of the main floor of the bank building for the first five years.