Mixed-use properties represent the fastest-growing segment of Saint Paul's commercial real estate market. The convergence of the Green Line light rail, walkable neighborhood corridors, and transformative development projects has created a city where mixed-use buildings combining residential, retail, office, and entertainment uses are the natural building block of the evolving urban landscape. For investors and developers seeking financing for mixed-use properties, Saint Paul offers strong fundamentals, supportive zoning, and multiple corridors with proven demand.
This guide covers everything you need to know about mixed-use property financing in Saint Paul, from loan programs and interest rates to corridor-specific analysis and the unique underwriting considerations that apply to properties with multiple income streams.
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Why Is Mixed-Use Development Thriving in Saint Paul?
Mixed-use development has become the dominant new construction format in Saint Paul for several interconnected reasons.
The Green Line LRT, connecting Downtown Saint Paul to Downtown Minneapolis along University Avenue, has fundamentally changed the development calculus along its corridor. Transit-oriented development principles favor mixed-use buildings that place residential, retail, and office uses within walking distance of transit stations. The Green Line has catalyzed billions of dollars in development along University Avenue, with mixed-use buildings replacing auto-oriented commercial strip uses. Properties within a quarter mile of Green Line stations command rent premiums of approximately 5% to 15% over comparable properties without transit access.
Saint Paul's neighborhood retail corridors have traditionally combined ground-floor commercial with upper-floor residential, creating a built-in demand for mixed-use buildings. Grand Avenue, Selby Avenue, West 7th Street, and Highland Village all feature classic mixed-use buildings that have operated successfully for decades. New development along these corridors naturally follows this pattern.
The Highland Bridge redevelopment is being built as a mixed-use community from the ground up, with approximately 3,800 housing units, a town center with retail and restaurants, office space, and parks. This master-planned development demonstrates the market's appetite for mixed-use environments and creates a template for future Saint Paul development.
The Midway district surrounding Allianz Field is similarly being developed as a mixed-use neighborhood, with new buildings combining residential apartments, ground-floor retail, restaurants, and entertainment venues. The stadium's event calendar drives foot traffic that benefits ground-floor commercial tenants.
Saint Paul's zoning has evolved to support mixed-use development. The city's comprehensive plan and zoning code encourage mixed-use buildings in designated corridors, and density bonuses may be available for projects that include affordable housing or meet sustainability targets.
What Types of Mixed-Use Loans Are Available in Saint Paul?
Mixed-use property financing in Saint Paul depends heavily on the ratio of residential to commercial space within the building. This classification determines which loan programs are available and how underwriting is approached.
Agency loans (Fannie Mae/Freddie Mac) are available for mixed-use properties where residential use comprises the majority (typically 51% or more) of the building's income or square footage. Agency loans offer the most competitive rates in the market, starting around 5.30% with up to 75% to 80% LTV and 25 to 30 year amortization. The commercial component (typically ground-floor retail) must be compatible with the residential use and cannot exceed the residential portion. For Saint Paul's many apartment-over-retail buildings on Grand Avenue, Selby Avenue, and University Avenue, agency financing can deliver the lowest cost of capital.
Conventional commercial mortgages serve mixed-use properties across all use ratios. Banks offer rates between 5.50% and 7.50%, LTV up to 75%, and 5 to 10 year terms with 20 to 25 year amortization. Minnesota community banks including Bremer Bank, Bridgewater Bank, and U.S. Bank are active mixed-use lenders, and they often have more flexibility than national lenders for unique properties. Conventional loans work well for commercial-majority mixed-use buildings and properties where the use mix does not fit agency parameters.
SBA 504 loans serve owner-occupants in mixed-use buildings. If you operate a business from the ground floor and the building includes residential units above, SBA financing provides down payments as low as 10%, rates between 5.50% and 7.00%, and terms up to 25 years. The borrower must occupy at least 51% of the building. SBA loans are popular among Saint Paul business owners who operate restaurants, professional offices, and retail shops with apartments above.
Bridge loans provide short-term capital for mixed-use properties with vacancy, renovation needs, or lease-up situations. Rates range from 8.00% to 11.00% with 12 to 36 month terms. Bridge financing is active along University Avenue and in the Midway district, where investors acquire older mixed-use buildings and reposition them with renovated residential units and upgraded commercial spaces.
DSCR loans serve investors purchasing mixed-use properties without income documentation. Rates range from 7.00% to 9.50%. DSCR lenders evaluate the combined income from residential and commercial components, applying appropriate vacancy and expense assumptions for each use type. Use the DSCR calculator to model cash flow coverage for your mixed-use property.
Construction loans finance new mixed-use development. Rates range from 7.00% to 9.00% with LTC up to 75%. New mixed-use construction is concentrated at Highland Bridge, the Midway district, and along University Avenue. Construction lenders evaluate the market demand for both residential and commercial components independently.
Which Saint Paul Corridors Are Best for Mixed-Use Investment?
Saint Paul's mixed-use investment opportunities are concentrated along the city's established commercial corridors and emerging development districts.
Grand Avenue features Saint Paul's most established mixed-use format: classic two and three-story buildings with ground-floor retail and upper-floor apartments. Vacancy at approximately 3.5% and cap rates of 5.5% to 6.5% reflect the corridor's premier positioning. Properties on Grand Avenue rarely become available, and when they do, they attract strong investor interest. Lenders view Grand Avenue mixed-use very favorably, and both agency and conventional financing are readily available for stabilized properties.
Midway/Allianz Field represents the most active new mixed-use development corridor. New buildings combining ground-floor retail with upper-floor apartments are rising on parcels around the stadium and along University Avenue. Green Line LRT access and event-driven foot traffic support both residential and commercial tenancy. Cap rates of 5.5% to 6.5% for new construction reflect investor confidence in the area's trajectory. Construction and bridge lenders are active here, and permanent financing is available for stabilized projects.
Selby Avenue offers a similar mixed-use dynamic to Grand Avenue, with restaurants and boutiques on the ground floor and apartments above. The neighborhood's walkability, proximity to Summit Avenue, and young professional demographic create strong demand for mixed-use buildings. Cap rates of 5.5% to 6.5% and low vacancy make Selby a reliable investment corridor.
University Avenue provides the broadest range of mixed-use opportunities in Saint Paul. The Green Line LRT has catalyzed development along the entire corridor, but the market varies significantly block by block. New construction near Green Line stations performs well, while older buildings in transitional sections offer value-add opportunities. Cap rates of 6.0% to 7.5% reflect the corridor's diversity. Lender appetite varies by specific location, with properties near stations and established business clusters receiving better terms.
Lowertown offers mixed-use opportunities in historic warehouse buildings converted to residential, retail, restaurant, and creative office uses. The district's unique character and growing residential population support ground-floor commercial tenancy. Cap rates of 5.5% to 7.0% reflect the range from newer adaptive reuse projects to older conversions.
Highland Bridge is creating Saint Paul's newest mixed-use investment corridor. The town center component includes mixed-use buildings with retail, restaurants, and residential uses in a walkable format. As a master-planned development, Highland Bridge provides a more predictable investment environment than organic mixed-use corridors.
West 7th Street offers more affordable mixed-use opportunities with cap rates of 6.5% to 7.5%. The corridor's mix of bars, restaurants, and neighborhood retail on the ground floor with apartments above creates a traditional mixed-use format. Proximity to the Xcel Energy Center generates event-driven commercial traffic.
How Do Lenders Underwrite Mixed-Use Properties in Saint Paul?
Mixed-use property underwriting requires separate analysis of each income component, combined into a unified financial picture that determines loan eligibility and terms.
Residential component analysis follows apartment underwriting conventions. Lenders evaluate the rent roll unit by unit, comparing in-place rents to market comparables in the specific Saint Paul neighborhood. Vacancy assumptions of 5% to 7% are typical for stabilized properties. Operating expenses include property management (6% to 10%), utilities (if landlord-paid), maintenance, and the residential portion of property taxes and insurance. Saint Paul's 3% rent stabilization ordinance applies to the residential component, which lenders factor into their income growth assumptions.
Commercial component analysis follows retail or office underwriting conventions depending on the use. Lenders evaluate each commercial tenant's lease terms, creditworthiness, and renewal probability. NNN lease structures are preferred because they shift operating costs to the tenant. Commercial vacancy assumptions may be higher (5% to 10%) than residential, and tenant improvement reserves are factored into the analysis.
Combined DSCR calculation aggregates the NOI from both components and divides by the total debt service. Most lenders require a combined DSCR of 1.20x to 1.30x. If the residential component is strong but the commercial component is weaker, the blended metric determines qualification. Some lenders analyze each component separately and apply different stress tests to commercial versus residential income.
Expense allocation between residential and commercial uses requires careful modeling. Property taxes, insurance, utilities, and maintenance may be allocated based on square footage, income contribution, or other reasonable methods. Lenders review the allocation methodology to ensure operating expenses are not understated for either component.
Use the commercial mortgage calculator to estimate payments for your Saint Paul mixed-use property.
What Are the Advantages of Mixed-Use Investment in Saint Paul?
Mixed-use properties offer several structural advantages that make them attractive to both investors and lenders in the Saint Paul market.
Income diversification reduces risk by providing multiple revenue streams from different tenant types and market segments. If the retail market softens, residential income continues to support the property. If apartment vacancy rises, commercial leases provide stability. This diversification typically results in more stable cash flow compared to single-use properties.
Higher per-square-foot revenue is common in mixed-use buildings because ground-floor commercial space typically generates higher rent per square foot than residential space. A building with ground-floor retail at $25 per square foot and upper-floor apartments at $20 per square foot equivalent produces blended revenue that exceeds what either use would achieve alone.
Tenant synergy benefits both residential and commercial occupants. Residents value the convenience of ground-floor retail and restaurant options, while commercial tenants benefit from the built-in customer base of residential tenants living above. This synergy supports occupancy and rent growth for both components.
Zoning and density advantages in Saint Paul favor mixed-use development. The city's comprehensive plan designates numerous corridors for mixed-use zoning, and density bonuses may be available for projects that include affordable housing. This zoning support reduces entitlement risk for developers.
Transit premium applies to mixed-use properties along the Green Line LRT corridor. Properties near transit stations attract both residential tenants who value car-free commuting and commercial tenants who benefit from foot traffic. This premium supports higher values and more competitive financing.
Frequently Asked Questions About Mixed-Use Loans in Saint Paul
What ratio of residential to commercial determines the loan program?
The threshold varies by lender, but the general rule is that properties with 51% or more of income or square footage from residential uses qualify for agency (Fannie Mae/Freddie Mac) financing, which offers the lowest rates. Properties with 51% or more commercial use are classified as commercial and underwritten using commercial lending standards. Some lenders use income as the determining factor, while others use square footage. The distinction matters because agency rates can be 50 to 150 basis points lower than commercial rates. Review your property's income breakdown with your lender to determine the optimal classification.
Can I get an SBA loan for a mixed-use building in Saint Paul?
Yes. SBA loans are available for mixed-use buildings where the borrower occupies at least 51% of the building for their business. For example, if you operate a restaurant on the ground floor of a building with apartments above, and your restaurant occupies at least 51% of the total space, SBA 504 financing with as little as 10% down is available. If the commercial space is less than 51%, the SBA borrower may need to include the residential units in the occupancy calculation (for example, living in one of the apartments).
How does Saint Paul's rent stabilization affect mixed-use property values?
The 3% annual rent cap applies to the residential component of mixed-use buildings but does not affect commercial lease terms. Lenders and appraisers apply the cap only to the residential income stream when projecting revenue growth. For buildings where residential income represents the majority of revenue, the cap can meaningfully constrain overall income growth. Buildings with a larger commercial component are less affected because commercial rents are not subject to the ordinance. Value-add investors should model the impact of the cap carefully when projecting returns.
What cap rates should I expect for mixed-use properties in Saint Paul?
Mixed-use cap rates in Saint Paul range from 5.5% for prime locations (Grand Avenue, Highland Bridge, Midway new construction) to 7.5% for secondary corridors (West 7th, transitional University Avenue sections). The cap rate reflects the quality of both the residential and commercial components. Buildings with strong retail tenants and high residential occupancy command tighter cap rates. Properties with commercial vacancy or weaker tenant quality trade at wider spreads.
How long does it take to close a mixed-use loan in Saint Paul?
Closing timelines depend on the loan program. Agency loans for residential-majority buildings typically close in 45 to 60 days. Conventional commercial mortgages close in 45 to 75 days. SBA loans take 60 to 90 days. Bridge loans can close in 10 to 21 days. Mixed-use loans may take slightly longer than single-use property loans because lenders must evaluate both the residential and commercial components separately. Having complete documentation for both components prepared in advance accelerates the process.
Are there special incentives for mixed-use development in Saint Paul?
Yes. Saint Paul offers several incentives that benefit mixed-use development. Tax increment financing (TIF) is available in the Midway district, Highland Bridge area, and other designated corridors. Opportunity Zone designations provide capital gains tax benefits in qualifying census tracts. Affordable housing density bonuses allow increased building size for projects that include affordable units. The Green Line corridor has been designated for transit-oriented development zoning that supports higher-density mixed-use construction. Historic tax credits benefit adaptive reuse of mixed-use buildings in Lowertown and Downtown.
Contact Clear House Lending today to discuss mixed-use property financing in Saint Paul. Our network of over 6,000 commercial lenders includes specialists in mixed-use financing who understand the unique underwriting requirements of properties with multiple income streams.