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Approving Loan Modifications for the Model Cities BROWNstone Commercial Project, located at 837 University Avenue West, including Payment Forgiveness on a STAR Loan and a CDBG Loan (District 7, Ward 1).
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WHEREAS, the City of Saint Paul (the “City”) is a home rule charter city established and existing under the laws of the State of Minnesota; and
WHEREAS, in 2016 the City and the Housing and Redevelopment Authority of the City of Saint Paul, Minnesota (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, the City Council adopted RES PH 16-126 authorizing the execution of a Development Agreement and loan documents to advance the development of the commercial portion of the BROWNstone, CIC Unit 2 (the “Commercial Project”) (the HRA Board adopted RES 16-652 authorizing an overall financing plan); 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 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 executed a Loan Agreement (the “Foundation Loan”), requiring the HRA to provide a $500,000 security pledge obligation, which obligation is on-going; and
WHEREAS, in 2016 the HRA loaned to the Borrower $2,300,000.00 of the Foundation funds to finance the Commercial Project (the “HRA Loan”), which had a maturity of June 5, 2026 and has a recent outstanding principal balance of $1,553,688.28; and
WHEREAS, in 2016, to finance the Commercial Project, the City loaned the following to the Borrower: (1) $356,000.00 in CDBG funds, under which no payments have been due (the “CDBG Loan”); (2) $300,000.00 in STAR funds (the “Existing STAR Loan”), under which no payments have been due; (3) $120,000.00 in STAR funds (the “New STAR Loan”), under which principal and interest payments were to commence in November 2025, but no payments have been made; 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 Borrower submitted a loan proposal (the “Loan Amendment and Forgiveness Proposal”) to the City and HRA to restructure and extend the HRA Loan and New STAR Loan and to forgive the Existing STAR Loan and 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 proposed amendments to the Foundation Loan and HRA Loan include a 10-year term extension, potential forgiveness of principal throughout operations, and waiver of modification fees, all to support continued operation of the Commercial Project (the “Foundation Amendments”), in substantially final form on file with the PED Director; and
WHEREAS, the proposed amendment to the New STAR Loan defers payments until the HRA Loan, as amended, has matured and waives modification fees (the “STAR Amendment”); and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Saint Paul, Minnesota that:
1. There is a finding of a public purpose in authorizing the Borrower’s Loan Amendment and Forgiveness Proposal, including the fee waivers and the forgiveness of the Existing STAR Loan and CDBG Loan.
2. Borrower’s Loan Amendment and Forgiveness Proposal, including the STAR Amendment, the fee waivers and the forgiveness of the Existing STAR Loan and CDBG Loan, are hereby authorized and approved.
3. The Planning and Economic Development (PED) Director, staff, and City Attorney’s Office are directed and authorized to take all actions necessary to implement this Resolution, including finalizing and executing all documents and agreements for the STAR Amendment and loan forgiveness, consistent with the terms of these resolutions and the accompanying staff report, subject to approval by the City Attorney’s Office.
4. The City Council authorizes and directs the appropriate City officials, including the Mayor or her designee, the PED Director, the Director of Human Rights and Equal Economic Opportunity, and the Director of the Office of Financial Services, to execute all agreements, documents, and consents related to all of the matters authorized herein, each of whom are individually authorized to bind the City.
5. City staff are authorized to take all actions necessary to carry out the activities authorized by this Resolution, including finalizing all documents and agreements necessary to effectuate the activities to be undertaken by this Resolution, subject to approval by the City Attorney’s Office, and actions taken by City staff consistent with these resolutions are hereby ratified.
6. 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 City.