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HRA briefed on requested loan subordination, renovations at 1068 Raymond Avenue; formal vote deferred
Summary
Staff presented a proposal to subordinate approximately $220,000 in new renovation financing at 1068 Raymond Ave so the first mortgage lender would hold first position; the HRA did not vote but staff recommended approval at a future meeting and said the subordination would not change affordability covenants.
Principal project manager Angela Reif of the Department of Planning and Economic Development briefed the Saint Paul Housing and Redevelopment Authority on a request by the owners of 1068 Raymond Avenue for a subordination and additional debt ahead of the HRA loan.
“I’m here today to discuss 1068 Raymond Avenue, and to request a subordination and additional debt to the first mortgage lender for apartment renovations. And to extend the loan maturity date to October 7 to be coterminous with the first mortgage loan,” Reif said.
What staff said: Reif summarized the property history. The building contains 19 apartments and was owned by PPL for more than 30 years before being sold in October 2024 to Joe Hughes and Judd Finlon, who were present for the briefing, according to the staff presentation. The HRA previously provided a $525,000 loan when the building was constructed in 1991; staff reported the current HRA loan balance is approximately $882,000 and that the current HRA note accrues interest at 2% per annum.
Why owners want subordination: staff said the new owners accelerated renovations because the building had a high vacancy rate at acquisition: nine units were vacant and of the ten occupied units five tenants chose to stay. That vacancy enabled earlier renovation work but created cash-flow pressure; the owners took an additional roughly $220,000 in financing for renovations. Reif said the owners asked the HRA to subordinate that additional debt so the first-lien mortgage balance in first position would total approximately $1,200,000. Reif told commissioners the requested subordination would not affect existing affordability requirements on the property.
Renovation scope and timing: Reif said unit work includes new flooring, kitchen appliance and cabinet upgrades, bathroom refinishing and repainting; common-area work includes painting corridors and stairwells, upgraded lighting, and new entry heaters. Staff estimated building improvements at about $200,000 with contingency and financing/closing costs and said renovations are expected to be completed in April 2025.
Staff recommendation and next steps: Reif said staff will present the formal action at an upcoming HRA meeting and recommended approval of the subordination and an extension of the HRA note maturity to be coterminous with the first mortgage loan dated 10/07/2024. Commissioners asked clarifying questions; Commissioner Burley sought confirmation that the HRA would not be extending new credit and that sources of funding remain the same. Reif confirmed the HRA is not providing additional credit and that sources remain the same. No formal vote was taken.
What commissioners said: Commissioner Yang said she was generally supportive and noted she was glad the subordination would not affect existing affordability requirements. Chair Johnson and others said they had been briefed in advance.
What remains unresolved: the HRA must consider a formal resolution at a future meeting to allow the additional debt ahead of the HRA loan and to amend the maturity dates. Any subordination will be contingent on lender documentation and final terms returned for HRA action.
