05-27-1987 Council Agenda - Laserfiche WebLink

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U Obituaries /5C, 6C t Classified ads /6C fflt ST. PAUL PIONEER PRESS DISPATCH Market TUESDAY, MAY 19, 1987 ouse demand falls short By Thomas B. Koetting, - Staff Writer MarketHouse, the 4- year -old development that sits in the shadow of Lowertown's Gallia Plaza, is experi- encing financial problems reminiscent of its neighbor. The project is in default and owes more than $216,000, the equivalent of six months' rent. • As a result, its owners have reached a $300,000 set- tlement with the St. Paul Port Authority, which origi- nalIy financed the project. The Port Authority board of directors today will consider refinancing the project for new owners in an attempt to give it new life. The Port Authority's involvement covers only the commercial, retail and office aspects of the six -story building. Four floors of housing were financed sepa. rately: Port Authority officials remain optimistic about the future of MarketHouse and the overal Lowertown re- juvenation effort, however. Globe Col ege of Business recently signed as a new tenant, leaving only 24 per- cent of the building's space vacant. . Despite that, MarketHouse is another case of de- mand falling short of projections, said Perry Feders, Port Authority director of finance. "Maybe Lowertown needs more time to develop," he said. "They didn't factor in a sufficient amount of time to get this up and running. It's going to take more time to mature." The Port Authority's involvement in the project be- gan in 1982, when it issued $1.9 million in bonds for Broadway Square General Partnership, which consist- ed of Phil Roy, Roger Swardson and Leonard and Please see MarketHouse /4C arliet Continued from Page 1C Carol Lilyholm. The partnership was liable for up to In 1985, the Port Authority issued atj additional $1 , million tax exempt mortgage to help the project, and developer Brian Nelson was brought In for his man- agement expertise. Ile assumed $100,000 of the part- nership's liability. However, leasing continued to lag far behind projec- tions, and Swardson and the Lilyholms have left town and are essentially partners in name only, Feders said. Nelson is also on shaky ground because of severe fi- nancial problems with another Lowertown project, Union Depot Place. Under the settlement proposed to the Port Authority board today, Roy would pay $250,000 of the liability, with Nelson paying another $50,000. The rernaining $300,000 of potential liability would be dropped, Feders said, "because there's a question of what you could collect." Then the project would undergo a financial reshuf- fling typical of many Port Authority projects started when interest rates were above 11 percent. The agency They didn't factor in a sufficient amount of time to get this up and running. 5 7 ' r; Perry Fedora, Port Authority finance directorst tvitssanzzsior would refund its original $1.9 million bond issue, then turn around and issue just under $1.9 million In new bonds at about 8.5 percent interest. , The bonds would be issued for a new ownership team made up of MHL Corp. and 21 limited partners. Only Nelson would retain any stake under the new • ownership; all the original partners would be evicted, said Eugene Kraut, Port Authority executive vice president. A $150,000 loan to cover the expenses of the bond refunding and the ownership change would also be in- cluded. The new ownership would then be responsible for paying off the new bond issue, the mortgage and the loan. Page 93