02-1148Council File # CZ.—\1y�
Resolution #
Green Sheet ,� �,.�'1�(�.1,,,
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Presented By
RESOLUTION
CITY OF SAINT PAUL, MINNESOTA
��,
Referred To Committee: Date
RESOLUTION AUTHORIZING THE RESTRUCTURING
OF A STAR LOAN FOR THE STRAUS BUILDING
WHEREAS in December of 2001 Sherman Associates, Inc purchased for $13 million the Straus
Building-located at 350 Sibley Street with the assistance of a$678,672 STAR loan; and
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8 WHEREAS the Straus Apartsnents Limited Partnership with Sherman and Associates, Inc., as general
9 partner, or its successors and assigns (hereinafter refened to as the "Developer"), intend to renovate the
10 vacant, unsafe, historic Straus Building into 49 units of rental housing and 8,575 squaze feet of first floor
11 commercial space; (the "ProjecY') and
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13 WHEREAS the Developer agrees to provide 10 rental units affordable to households at or below 30%
14 of the area median income (the "AMI") and 11 rental units affordable to househoids at or below 50% of the
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WHEREAS the $11 million project cost will not be complete without the STAR loan; and
WHEREAS the existing $678,672 STAR loan has a first mortgage position, 20 year maturity, 6%
interest rate and is additionally secured by a personal guarantee of George Sherman; and
WHEREAS the City Council is being asked to act on the financial restructuring of the STAR loan
because its "risk rating" will be down graded from "substandard" to "doubtfui" because the City is being
requested to assume a second mortgage position behind a$4,250,000 HiJD insured first mortgage.
NOW THEREFORE BE TT RESOLVED by the City Council of the City of Saint Paul, Minnesota
that the new terms and conditions of the $678,672 STAR loan will be reshuctured as follows to allow the
financing of the Straus Building project:
1. At closing, the Developer shall pay the STAR loan's principal balance down to $400,000.00; and
2. During the first year of the amended STAR loan only, the Developer make interest only payments; and
3. After the first year of the amended STAR loan, the Developer shall make monthly principal and interest
payments, for each month thereafter for 10 years, in accordance with a 10 year amortization schedule
based upon monthly payments; and
4. The interest rate of STAR loan will remain at 6% per annum.
5. The personal guarantee of George Sherman to repay the STAR loan will remain in place until said loan
is paid in full.
FURTHER BE IT RESOLVED that the Executive Director of the Deparhnent of Planning and
CARI.SOAP\STRAUS\Ciry Co�nal Res STAR
39 Economic Development by and through her designee, and the Office of the City Attorney aze hereby 0���t�
40 authorized to negotiate and agree to any documents necessary to effectuate the above-described loan
41 restructuring on terms and conditions which do not substantially differ from the foregoing.
CARI.SOP.P\STRAUS\CiTy Council Kes STAR
07.- \\�\$'
Requested by Department o£:
Adopted by Council: Date U�_ �� ��0�--
c
Adoption Certi£ e by Council Secretary
�— �
By:
Approved by f7a��r: Da,te
By:
CARLSOAP\SIRAUS1C�ty Council Res STAR
Plannin & Econo ' evelo ment
By: � ' ��
Approved by
By:
Form Approve
� B Y'
Approved by
By:
DEPARTh1ENT/OFFICE/COUNCII.: DATE INITIATED GREEN SHEET NO.: ZO�LIE)Z
PED November 25, p7.-\\�1.y
2002
CONTACT PERSOAi & PHONE: . 'rs inlTTnLruA'rE
Allen Carlson, 266-6616 � s nsrna��n�nrr Duz crrY cL�uc
MIIST BE ON COUNCII. AGENDA BY (DATE) �IGN
December 11 � 20�2 E�1MBER 4 CITY ATTORNEY McCall _ COTJNCIL Bostrom
ROi7TING 5 FINANCIAL SERV DIIL 2 FINANCIAL SERV/ACCTG
ORDER
6 MAYOR (OR ASST.) 1 TEAM LEADER }
TOTAL # OF SIGNATiRtE PAGES 1_(CLIP ALL LOCATIONS FOR STGNATiJRE)
AC'I'ION REQUESTED:Sign the attached resolution approving the restructuring of a Star loan for the Straus
Building located at 350 Sibley Street.
RECOIvAg,NDA1TONS: Approve (A) or Reject (A) PERSONAL SERVICE CON'1'RACTS M[JST ANSWER 7'HE FOLLOWING
QUESTIONS:
PLANNING COMbIISSION 1. Has this person/fum ever worked under a coniract for th�s depaztment?
CIB COMIvIITTEE Yes No
CIVIL SERVICE COMNIISSION 2. Has this pecson/ficm ever been a city employee?
' Yes No
3. Does this person/firm possess a skil] not noxmalty possessed by any cuaent city employee?
Yes No
Explain alI yes answers on separate sheet and attach to green sheet
IMTIATING PROBLEM, ISSUE, OPPORTONITY (Whq What, When, Where, Why)
See attached memorandum
nuvarv�rac�s iF errxovEn: Pernuts the complete project fmancing to renovate the vacant, unsafe, historic Straus
Building into 49 units of rental housing and 8,575 squaze feet of commercial space.
nisnnvnNZasES u�' nrrxovEn: The risk rating of the loan will be downgraded from "substandard" to "doubtful".
nisanvntvracES � No1' nerxovEn: The STAR loan principal balance will not be reduced from $678,672 to $400,000 and it
will take 10 years longer for the loan to be repaid.
TOTAL AMOIINT OF'i'RANSACTION: COST/REVENIJE BUDGETED:
F[JNDING SOURCE: ACTIVITY NOMBEIi: Q EC E I V E�
rnvnivc�v. mn+o�rioN: ��i.nm> 1 �
NOV � h �Qt�2
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Interdepartmental Memorandum
CITI' OF SAINT PAUL
TO: Council President Bostrom
Councilmember Benanav
Councilmember Blakey
Councilmember Coleman
Councilmember Harris
Councilmember Lantry
Councilmember Reiter
FROM: Martha Fu11er
Allen Carlson�
SUBJECT: Approval to Restructure the Financing of a STAR Loan for the Straus Building
Purpose
Staff is requesting authorization to reshucture an existing $678,672 STAR loan on the Straus
Building, in order, to finalize the fmancing package for the renovation of the vacant, historic
Straus Building located at 350 Sibley Street into 49 units of rental housing and 8,575 square feet
of first floor commercial space.
Background
Sherman Associates, Inc. (Developer) purchased the Straus Building in December of 2001, in
part, with the use of a$678,672 STAR loan. Total project cost to renovate the building will be
$11 million. Tax exempt conduit multifamily housing revenue bonds will finance $4.25 million
of the project. The Minnesota Housing Finance Agency, Family Housing Fund, Ramsey County,
Metropolitan Council and District Energy are providing $3.209 miilion of the financing. The
Limited Partnership is contributing $2.993 million of equity. The only contribution the City is
making to the project is the STAR loan and issuance of the bonds.
Financing Structuring
The current $678,672 STAR loan has a 20 term, 6% interest rate and is collateralized by a first
mortgage on the vacant building and personal guarantee by the Developer. The Developer has
agreed to pay down the STAR loan to $400,000 at closing on the fmancing. In addition, the term
of the loan would be shortened from 20 years to 10 yeazs. The first year of the loan would be
interest only payxnents. The personal guarantee to repay the loan would remain. The interest
rate will stay the same at 6%. The loan will be subordinate to a HiID insured first mortgage of
$4.25 million.
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Staff is requesting the City Council to act on this item because the "risk rating" of the STAR loan
will be downgraded from a"substandard loan" to a"doubtful loan" for the following reasons:
• The security on the loan will change from a first mortgage position to a subordinate d�" ���
position. The after construction value of the project will not be sufficient to cover the HUD
first mortgage loan amount and STAR loan; and
• In order to foreclose on the STAR mortgage the City must obtain I�[.JD's consent; and
• Repayment on the loan from project revenues can only come from "surplus cash" as defined
by I�CTD.
PED Credit Committee
The PED Credit Committee recommended to the D'uector the restruchiring of the STAR loan as
stated above.
PnblicPnrpose
Restructuring the STAR loan will complete the financing of the project and fulfill the £ollowing
public purposes:
• Redevelopment of a vacant, unsafe , blighted historic building.
• Add 49 units of new rental housing to the City's housing stock.
• Add 10 units of housing affordable at or below 30% of the AMI and 11 units affordable at
or below 50% of the AML
Other Actions
The HRA Board of Commissioners will be acting on the issuance of multifamily revenue bonds
for the project at its December 11�' meeting.
Recommendation
The Director recommends the attached resolution be approved with the terms and conditions as
stated above.
Attachments
Resolution Authorizing Financial Restructuring of STAR Loan for the Straus Building
K.\Sharedu'ed\CARLSOAP\STRAUSS\City Council STAR 121102.Aq�dADA-EEO Employer Page 2 of 2