Saint Paul is in the midst of its most significant construction and development cycle in decades. The Highland Bridge redevelopment of the former Ford plant, the Midway district transformation around Allianz Field, ongoing Lowertown warehouse conversions, and West Side Flats riverfront development are collectively reshaping the city's built environment. For developers and investors seeking construction financing, Saint Paul offers a combination of strong development fundamentals, supportive city policies, and multiple incentive programs that can improve project economics.
This guide covers everything you need to know about construction loans in Saint Paul, from loan programs and interest rates to development costs, seasonal considerations, and the city's most active building corridors.
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Why Is Saint Paul Attracting Significant Development Activity?
Several converging factors have created a favorable development environment in Saint Paul that is drawing both local and national development capital.
The Highland Bridge redevelopment represents the single largest urban development project in Minnesota history. Ryan Companies is transforming the 122-acre former Ford Motor Company assembly plant site into a mixed-use community with approximately 3,800 housing units, a walkable town center, office space, parks, and trails. The project represents more than $1 billion in total investment and will unfold over 10 to 15 years, creating sustained demand for construction financing and supporting trades throughout the period.
The Midway district surrounding Allianz Field has attracted more than $150 million in development investment, transforming the former Midway Shopping Center site and surrounding blocks into a transit-oriented mixed-use district. The Green Line LRT station adjacent to the stadium provides excellent connectivity, and the combination of sports, entertainment, and transit creates a development framework that has proven successful in cities across the country.
Lowertown's ongoing renaissance includes continued warehouse-to-residential conversions, new restaurant and retail buildouts, and public realm improvements. The district's historic building stock provides raw material for adaptive reuse projects that benefit from federal and state historic tax credits.
Saint Paul's supportive policy environment includes multiple incentive programs. Tax increment financing (TIF) districts are available in several development corridors. Opportunity Zone designations cover parts of the East Side and Midway, offering capital gains tax benefits. Low Income Housing Tax Credits (LIHTC) support affordable and mixed-income housing development. Historic tax credits benefit adaptive reuse projects in Lowertown and Downtown.
The Green Line LRT, completed in 2014, has catalyzed transit-oriented development along University Avenue, creating new opportunities for mixed-use construction that the corridor's pre-transit zoning did not support.
What Types of Construction Loans Are Available in Saint Paul?
Saint Paul developers have access to several construction financing programs, each suited to different project types, developer profiles, and risk levels.
Bank construction loans represent the primary financing vehicle for commercial development in Saint Paul. Regional and community banks offer construction-to-permanent and stand-alone construction facilities with rates between 7.0% and 8.5%, loan-to-cost (LTC) ratios of 65% to 75%, and terms of 18 to 36 months. These loans are structured as revolving credit facilities that fund through monthly draws as construction progresses. Lenders require detailed budgets, guaranteed maximum price (GMP) contracts from qualified general contractors, and borrower equity contributions funded before the first draw. Minnesota banks including U.S. Bank, Bremer Bank, and Bridgewater Bank are active construction lenders in the Twin Cities.
SBA 504 construction loans serve owner-occupants building or significantly renovating commercial properties they will occupy. The SBA 504 program can be structured as a construction-to-permanent loan, eliminating the need for a separate permanent refinance after construction completion. Down payments as low as 10%, rates between 5.50% and 7.00%, and terms up to 25 years make SBA 504 the most attractive option for businesses building their own facilities in Saint Paul.
Hard money construction loans provide faster and more flexible construction financing for borrowers who need speed or cannot qualify for bank financing. Rates range from 9.0% to 12.0% with LTC up to 70% and terms of 12 to 24 months. These loans work for smaller renovation projects, fix-and-flip developments, and situations where traditional bank timelines are too slow.
Mezzanine financing and preferred equity fill the gap between senior construction debt and developer equity, allowing higher leverage (80% to 90% combined LTC). Rates range from 12% to 16%, reflecting the subordinate position. These structures are more common for larger projects in the $5 million or more range.
Speculative construction loans finance projects without pre-committed tenants or buyers. Rates range from 8.0% to 10.0% with LTC limited to 60% to 65%. Lenders require strong developer track records, robust market demand studies, and significant borrower liquidity. Speculative construction lending is available in Saint Paul for proven developers in strong submarkets like Highland Park and the Midway district.
Where Is Construction Activity Most Concentrated in Saint Paul?
Saint Paul's construction activity clusters in several distinct corridors, each offering different development opportunities and financing dynamics.
Highland Bridge is by far the most active construction zone in Saint Paul. The phased development of the 122-acre former Ford site includes wood-frame and podium multifamily buildings, townhomes, mixed-use retail, office space, and extensive park and trail infrastructure. Early phases have delivered hundreds of residential units and new commercial space, with additional phases under construction and in planning. Construction lenders view Highland Bridge very favorably due to the master developer's (Ryan Companies) reputation, the site's infrastructure investments, and the strong demographics of the surrounding Highland Park neighborhood.
Midway/Allianz Field is the second most active construction area. Mixed-use buildings combining residential, retail, and office uses are rising on parcels adjacent to the stadium and along University Avenue. The Green Line LRT station provides transit access that supports higher-density development. Construction lenders evaluate Midway projects based on the market's track record of absorbing new space, the proximity to the stadium, and the overall momentum of the district's transformation.
Lowertown sees steady adaptive reuse and renovation activity. Historic warehouse buildings provide the raw material for residential conversions, creative office, and mixed-use developments. These projects often qualify for federal and state historic tax credits that can contribute 30% to 40% of the rehabilitation cost basis, significantly improving project economics. Construction lenders for Lowertown projects evaluate the structural condition of the existing buildings, the developer's adaptive reuse experience, and the historic tax credit allocation.
West Side Flats along the Mississippi River has delivered new multifamily phases and continues to expand. The riverfront location, proximity to Downtown, and city support through tax increment financing create favorable development economics. Opportunity Zone designations in parts of the West Side provide additional incentive.
University Avenue sees moderate construction activity, primarily affordable housing and mixed-use projects serving the corridor's diverse communities. LIHTC-financed affordable housing developments are common, and the Green Line LRT supports higher-density transit-oriented development.
What Does It Cost to Build in Saint Paul?
Construction costs in Saint Paul reflect Minnesota's competitive labor market, seasonal considerations, and material costs that are broadly in line with Upper Midwest averages.
Wood-frame multifamily construction, the most common building type for projects under six stories, costs approximately $175 to $250 per square foot. Podium construction (concrete first floor with wood-frame upper stories) ranges from $250 to $350 per square foot. These costs include hard construction but exclude land, soft costs (architecture, engineering, permits, legal), and financing costs.
Industrial and warehouse construction costs approximately $80 to $140 per square foot, depending on clear height, dock configuration, and building systems. Retail buildout ranges from $100 to $200 per square foot. Office renovation costs $75 to $175 per square foot depending on scope. Adaptive reuse projects, which vary dramatically in scope, range from $150 to $300 per square foot.
Minnesota's winter climate adds approximately 3% to 8% to total construction costs compared to temperate climates. Winter protection measures, including heated enclosures for concrete work, ground thawing, temporary heating, and extended timelines, contribute to this premium. Developers should include winter contingency in their budgets, and construction lenders familiar with the Twin Cities already factor this into their underwriting.
Labor costs in the Twin Cities metro are competitive. Minnesota has a strong union construction labor market, and prevailing wage requirements may apply to projects receiving public subsidies. Skilled labor availability has improved from the tightest conditions of 2022 and 2023, though specialized trades remain in demand.
Saint Paul's development fees and impact charges are modest compared to many peer cities. Building permit fees, utility connection charges, and park dedication fees add to project costs but are generally predictable and well-documented by the city's planning department.
How Do Construction Lenders Evaluate Saint Paul Projects?
Construction lenders apply rigorous underwriting standards that differ significantly from the analysis used for stabilized property loans. Understanding these criteria helps developers prepare stronger applications.
Developer experience is the single most important factor. Construction lenders want to see a track record of successfully completing similar projects on time and on budget. A developer who has completed three multifamily projects in the Twin Cities will receive significantly better terms than a first-time developer attempting the same project. Lenders evaluate the developer's portfolio, financial statements, and references from prior lender relationships.
Project budget and contingency receive intensive scrutiny. Lenders review every line item in the construction budget, comparing costs to market benchmarks for Saint Paul. A hard cost contingency of 5% to 10% is typically required, with additional soft cost contingency of 10% to 15%. Guaranteed maximum price (GMP) contracts from reputable general contractors provide cost certainty that lenders value.
General contractor qualifications are independently evaluated. Lenders review the GC's financial statements, bonding capacity, insurance coverage, and track record with comparable projects. For Saint Paul projects, lenders prefer GCs with a demonstrated track record in the Twin Cities market and experience managing winter construction.
Market demand analysis validates the project's absorption assumptions. Lenders review market studies, comparable project performance, and demographic trends to assess whether the completed project will lease up or sell within projected timelines. Saint Paul's diverse demand drivers, including government employment, corporate anchors, and university populations, generally support positive market analysis.
Pre-leasing or pre-sales reduce lender risk. Build-to-suit industrial projects with signed tenant commitments receive the best terms. For-sale residential projects with pre-sales covering 30% to 50% of units also strengthen the application. Speculative projects without pre-commitments face more conservative terms.
Borrower liquidity provides a financial cushion against cost overruns and lease-up delays. Lenders typically require borrowers to maintain liquid assets equal to 10% to 20% of the project cost after funding their equity contribution.
What Interest Rates and Fees Apply to Saint Paul Construction Loans?
Construction loan pricing in Saint Paul includes the interest rate, origination fees, and various closing and monitoring costs that developers must factor into their project budgets.
Bank construction loan rates range from 7.0% to 8.5% as of early 2026, typically structured as variable rates tied to the prime rate (currently 6.75%) plus a spread of 0.25% to 1.75%. Interest is charged only on funds drawn, so the effective cost is lower during early construction phases when the outstanding balance is small. Some lenders offer a lock option to convert to a fixed rate upon project completion and transition to permanent financing.
SBA 504 construction rates range from 5.50% to 7.00% on the CDC portion, with the blended rate across the full capital stack typically between 6.00% and 7.50%. The ability to combine construction and permanent financing in a single closing eliminates refinance risk and reduces total transaction costs.
Hard money construction rates range from 9.0% to 12.0%, reflecting the higher risk profile and faster processing. These loans are most common for smaller projects and situations requiring speed.
Origination fees for construction loans typically range from 1.0% to 2.0% of the total commitment. Monthly inspection fees of $300 to $500 cover the cost of third-party inspectors who verify construction progress before each draw. Appraisal costs range from $3,000 to $10,000 depending on project complexity. Legal fees for construction loan documentation typically range from $5,000 to $15,000.
Interest reserves are typically required to cover interest payments during the construction period. Lenders build these reserves into the loan, so the total commitment includes the construction budget plus interest reserve, closing costs, and other soft costs.
Use the commercial mortgage calculator to model construction loan interest costs for your Saint Paul project.
What Development Incentives Are Available in Saint Paul?
Saint Paul offers multiple incentive programs that can significantly improve construction project economics for qualifying developments.
Tax increment financing (TIF) is available in designated districts across Saint Paul. TIF captures the incremental property tax revenue generated by new development and redirects it to support project costs, typically infrastructure, site preparation, and affordable housing components. TIF has been instrumental in enabling projects at Highland Bridge, the Midway district, and other development areas.
Opportunity Zones in parts of the East Side, Midway, and other qualifying census tracts offer significant capital gains tax benefits for investors who commit capital for periods of 5, 7, or 10 years. These incentives can reduce the effective cost of equity for construction projects in designated areas.
Low Income Housing Tax Credits (LIHTC) support the construction of affordable and mixed-income housing. Minnesota Housing Finance Agency allocates 9% and 4% tax credits to qualifying projects. LIHTC projects are common along University Avenue and in other corridors where affordable housing demand is strong. The tax credit equity, typically covering 30% to 50% of eligible project costs, significantly reduces the developer's equity requirement.
Historic tax credits benefit adaptive reuse projects in historically designated buildings or districts. Federal credits of 20% of qualified rehabilitation costs and state credits of up to 20% (combined up to 40%) make warehouse conversions in Lowertown and Downtown economically compelling. These credits have been essential to the Lowertown renaissance and continue to support new adaptive reuse projects.
Green building and sustainability incentives are growing in Saint Paul. Xcel Energy offers rebates and incentives for energy-efficient construction. The city's climate action plan supports sustainable development, and some financing programs offer preferential terms for green-certified buildings.
Contact Clear House Lending to discuss construction financing and incentive program navigation for your Saint Paul development project.
Frequently Asked Questions About Construction Loans in Saint Paul
What is the minimum equity required for a Saint Paul construction loan?
Minimum equity requirements depend on the loan program and project type. Bank construction loans typically require 25% to 35% equity (65% to 75% LTC). SBA 504 construction loans require as little as 10% equity for owner-occupied projects. Hard money construction loans require 30% to 40% equity. Speculative development projects generally require 35% to 40% equity. Equity must be funded before the first draw in most cases, and lenders verify that the equity has been injected through independent cost certification.
How do construction loan draws work?
Construction loan draws are released monthly based on verified work completion. The developer submits a draw request with documentation of completed work, the lender's inspector verifies the work on site, and the lender releases funds to the developer or directly to the general contractor. Retainage of 5% to 10% is typically held back from each draw until project completion. Draw processing typically takes 3 to 7 business days after the inspection. Budget line items are tracked individually, and funds cannot be reallocated between categories without lender approval.
Can I get a construction-to-permanent loan in Saint Paul?
Yes. Several loan programs offer construction-to-permanent structures that combine the construction phase and permanent financing into a single closing. SBA 504 loans naturally lend themselves to this structure. Some bank construction loans include an automatic conversion to a permanent mortgage upon project completion and stabilization. Construction-to-permanent loans eliminate the refinance risk and cost of arranging separate permanent financing, which can save 1% to 2% of the loan amount in closing costs.
What happens if my Saint Paul construction project goes over budget?
Cost overruns are managed through the contingency reserves built into the approved budget. The hard cost contingency (typically 5% to 10%) absorbs unexpected construction costs, while the soft cost contingency covers overruns in permits, legal, and other non-construction costs. If overruns exceed the contingency, the developer must contribute additional equity, as lenders will not increase the loan commitment above the original LTC ratio. This is why adequate contingency and borrower liquidity are critical lender requirements.
How does Minnesota's winter affect construction loan terms?
Minnesota's winter adds 2 to 4 months to typical construction timelines and 3% to 8% to construction budgets. Construction lenders familiar with the Twin Cities market account for these factors in their underwriting. Loan terms are set based on realistic Minnesota construction timelines rather than national averages. Interest reserves are sized to cover the full projected timeline including winter delays. Lenders may require that certain exterior milestones (foundation, exterior envelope) be completed before the first winter to minimize weather exposure.
Are there special programs for affordable housing construction in Saint Paul?
Yes. Minnesota Housing Finance Agency offers several programs supporting affordable housing development, including 4% and 9% Low Income Housing Tax Credits, tax-exempt bond financing, deferred loans, and challenge fund grants. Saint Paul's Housing and Redevelopment Authority (HRA) provides gap financing, land write-downs, and TIF support for affordable housing projects. The combination of LIHTC equity, city gap financing, and traditional construction debt can significantly reduce developer equity requirements for qualifying projects.
Contact Clear House Lending today to discuss construction financing for your Saint Paul development project. Our network of over 6,000 commercial lenders includes construction lending specialists with experience in Twin Cities ground-up development, adaptive reuse, and renovation projects.