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Resolution Approving Loan Modifications for the Model Cities BROWNstone Commercial Project, Located at 837 University Avenue West, Including a Loan Amendment with the Saint Paul and Minnesota Foundation, District 7, Ward 1
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WHEREAS, the Housing and Redevelopment Authority of the City of Saint Paul, Minnesota (the "HRA") is a public body corporate and politic established pursuant to the provisions of Minnesota Statutes, Section 469.001, et seq. (the “Act”); and
WHEREAS, the HRA has the power to engage in development or redevelopment activities under Minnesota law and the HRA is authorized to engage in activities relating to (a) housing projects and development, (b) removal and prevention of the spread of conditions of blight or deterioration, (c) bringing substandard buildings and improvements into compliance with public standards, (d) disposition of land for private redevelopment, and (e) improving the tax base and the financial stability of the community, and to engage in the aforementioned activities when these needs cannot be met through reliance solely upon private initiative and which can also be undertaken in targeted neighborhoods; and is authorized to create redevelopment projects as defined in Minn Stat Section 469.002, Subd. 14; and
WHEREAS, in 2016 the City of Saint Paul and the HRA provided acquisition and construction financing for the Model Cities BROWNstone building (the “BROWNstone”) at 837 / 839 University Avenue West, a four-story mixed-use building with 35 units of affordable rental housing units affordable to households earning 50% to 60% Area Median Income (AMI) and with 20,580 square feet of commercial/retail space;
WHEREAS, on April 13, 2016, the HRA Board adopted RES 16-652 authorizing an overall financing plan for the BROWNstone, including the execution of a Development Agreement and Loan Documents to advance the commercial portion of the BROWNstone (the “Commercial Project”); and
WHEREAS, in 2003, the HRA Board authorized a resolution accepting $2,500,000 from the Saint Paul and Minnesota Foundation, a Minnesota non-profit corporation (the “Foundation”) and the HRA executed a Loan Agreement (the “Foundation Loan”), requiring the HRA to provide a $500,000 security pledge in favor of the Foundation (the “Recourse Obligation”); and
WHEREAS, the BROWNstone project is subdivided into two CIC condominium units, where Unit 2 is comprised of the Commercial Project and is owned by Model Cities BROWNstone Commercial, LLC (the “Borrower”), whose sole member is Model Cities Properties, a Minnesota non-profit corporation, an entity that is, in turn, owned by Model Cities of St. Paul, Inc., a Minnesota non-profit corporation (“Model Cities”); and
WHEREAS, in 2016 the HRA loaned $2,300,000 to the Borrower from the Foundation funds to finance the Commercial Project (the “HRA Loan”), which HRA Loan had a maturity date of June 5, 2026 and has an outstanding principal balance of $1,553,688.28; and
WHEREAS, the Commercial Project is comprised of five commercial/retail suites on the first floor and Model Cities offices (11,620 square feet) on the second floor, and is an accessible, culturally relevant hub for minority-owned businesses that contribute to the vibrancy and economic health of the University Avenue corridor, but the Borrower has indicated increasing difficulty to maintain positive cash flow with individual commercial businesses struggling to keep up with rents in a challenging economy, coupled with large loan payments and increased operating expenses, including the doubling of their property taxes; and
WHEREAS, the HRA Loan as well as a City of Saint Paul STAR Loan in the amount of $120,000 are in delinquent status resulting in the Borrower and Model Cities being placed on the City and the HRA’s Adverse Lending List (the “Adverse List”); and
WHEREAS, the Borrower submitted a loan proposal (the “Loan Amendment Proposal”) to the City and the HRA to restructure and extend the HRA Loan and the new City STAR Loan of $120,000 and to forgive the existing City STAR Loan and City CDBG Loan in order to strengthen long‑term financial stability, preserve affordability, and sustain a mission‑critical community asset, all as more fully described in the staff report accompanying this resolution, which proposal was reviewed and approved by the PED Credit Committee on October 20, 2026; and
WHEREAS, the Foundation, HRA and Borrower desire to amend loan documents for the Foundation Loan and HRA Loan by extending the term for 10 years and potential forgiveness of principal throughout operations, to support continued operation of the Commercial Project (the “Foundation Amendments”), which includes the Recourse Obligation as a continuing obligation of the HRA, in substantially final form on file with the HRA Executive Director; and
WHEREAS, PED staff has negotiated the terms of an amendment to the STAR Loan to defer payments until the HRA Loan, as amended, has matured (the “STAR Amendment”); and
WHEREAS, the Borrower has requested a waiver of the loan modification application fee equal to one-half of 1% of the outstanding principal balance (approximately $11,650) (the “Fee Waiver”); and
WHEREAS, the City Council will be presented with a companion resolution on this same date to consider the Loan Forgiveness and STAR Amendment.
NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Housing and Redevelopment Authority of the City of Saint Paul, Minnesota (the “HRA Board”), the following:
The HRA Board hereby finds a public purpose in authorizing the Loan Amendment Proposal from the Borrower on the Adverse List, including the Fee Waiver.
The HRA Board hereby authorizes and approves the Foundation Amendments and the Fee Waiver.
The Executive Director of the HRA is hereby authorized and directed to negotiate the terms and conditions of the Foundation Amendments, consistent with the terms of these resolutions and the accompanying Board Report, and the appropriate HRA and City officials are empowered and directed to execute Foundation Amendments on behalf of the HRA.
The HRA Executive Director, staff, and legal counsel for the HRA are directed and authorized to take all actions necessary to implement the actions authorized by this resolution, and all acts taken by staff that are consistent with these resolution are hereby ratified.
The authority to approve, execute and deliver future amendments to the Foundation Amendments after their execution is hereby delegated to the HRA Executive Director, subject to the following conditions: (a) such amendments do not materially adversely affect the interests of the HRA; (b) such amendments do not contravene or violate any policy of the HRA; and (c) such amendments are acceptable in form and substance to the Saint Paul City Attorney or other counsel retained by the HRA to review such amendments.
This Resolution does not constitute a binding legal agreement; rather, the action taken herein shall not be effective until said documents are executed by the appropriate official(s) of the HRA.