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Saint Paul HRA briefed on Commerce Building sale and request for up to $1.23 million in loan forgiveness
Summary
HRA staff and CommonBond outlined a planned sale of the historic Commerce Building to PAC Properties and requested partial forgiveness of HRA loans so the sale can close while preserving most tax-credit affordability and minimizing resident disruption. Commissioners heard details about unit protections, repayment priorities and expected proceeds.
The Saint Paul Housing and Redevelopment Authority on a staff presentation was briefed on a planned sale of the historic Commerce Building at Fourth and Wabasha and a request that the HRA authorize partial forgiveness of subordinate loans to avoid foreclosure and preserve most tax-credit affordability.
The Commerce Building, built in 1912 and converted to housing in phases between 2007 and 2011, contains about 100 tax-credit-restricted apartments at 60 percent of area median income, staff said. Laura Hainesen, principal project manager, told commissioners CommonBond Communities — the current owner and borrower — marketed the property in February 2024, selected PAC Properties’ $3.2 million offer and is pursuing the sale to avoid foreclosure and keep affordability restrictions in place that would otherwise be at risk.
Hainesen said proceeds from the sale are expected to be just under $3.3 million. The property carries roughly $3.1 million in outstanding subordinate HRA and related loans: a CDBG loan to Phase 1 with a current balance of about $1.6 million; a Met Council loan to Phase 1 with a current balance of about $563,000; and a HOME loan to Phase 2 with a current balance of about $895,000. Hainesen said CommonBond anticipates sale proceeds first will repay a first-position U.S. Bank loan and then repay principal on a Minnesota Housing Finance Agency (MHFA) Phase 1 loan; MHFA recently approved forgiveness of interest on that loan. After those steps, she said, about $1.9 million would remain to repay HRA loans and the staff proposal that will come back for action requests approximately $1,225,384 in combined principal-and-interest forgiveness across the three HRA loans, with available repayments split proportionally by original investment.
Hainesen and other staff described unit-level outcomes. The building has 11 long-term-homeless (LTH) units tied to MHFA loans; when the Phase 1 MHFA loan is repaid as part of the transaction, restrictions on six of those LTH units would be released. Four of the six are currently occupied; staff said CommonBond is working with those residents to transition them to other properties that provide comparable services and rents. Five LTH units will remain restricted. Staff said four supportive units (described in the presentation as “section 8 11” units) will remain in place with the same services and rents. PAC Properties has identified Simpson Housing as the services provider for the remaining restricted LTH units, and Ramsey County has committed funding to support those services, staff said.
CommonBond staff in the meeting said tenants already have been notified about the planned sale and that CommonBond has offered one-year lease extensions to residents to maintain continuity; moving expenses will be covered for up to six months post-closing for those who must relocate. Hainesen said all resident outcomes will be reported to HRA staff after closing.
Commissioners asked about program-income restrictions on repayment dollars and the timing of funds. Staff said repayments received by the HRA would be treated as program income and redeployed to affordable-housing projects; they will be subject to the originating grant or program rules (CDBG, HOME, etc.), and staff committed to providing a definitive written answer on any nuances in reuse restrictions. Commissioners also requested clarity about the loan-modification process; staff summarized that CommonBond submitted a formal modification request, that staff negotiated terms with CommonBond and the prospective buyer, and that the HRA and MHFA discussed changes to loan restrictions over several months.
No formal HRA action on the Commerce Building loan-forgiveness request occurred at this meeting; staff said the item will return to the HRA for action next week with detailed loan-forgiveness figures and a recommended resolution. Staff emphasized the sale is intended to avoid foreclosure, limit disruption for residents and preserve as much affordability and service continuity as feasible.
Commissioners and staff present included Chair Johnson, Director Newton, Principal Project Manager Laura Hainesen, Commissioner Naker, Commissioner Yang and Commissioner Joost. CommonBond representatives Heidi Rathman Smith (executive vice president for real estate) and Henry Parker (director of asset management) attended and were available to answer questions.
Looking ahead, staff said the HRA will receive formal loan-modification documents and a resolution for consideration at the next HRA meeting; the proposed forgiveness amount and exact repayment split will be in that packet.
