HTCs, NMTCs Create Permanent Home for Art Museum in St. Paul, Minn.

Published by Mark O’Meara on Thursday, March 8, 2018
Journal cover thumb March 2018

A 125-year-old institution in St. Paul, Minn., almost went extinct. That is until historic tax credits (HTCs) and new markets tax credits (NMTCs) helped to bring life back to the Minnesota Museum of American Art (the M). 
“In 2009 we had a brink-of-our-death type of moment,” said Jennifer Hensley, director of operations at the M. “The museum was nothing but a board of directors with no staff or location. At that point, we hired our current executive director (Kristin Makholm),” who was brought in to decide whether to end the museum or inject new life into it. 

Not only did Makholm keep the museum up and running, but she gave the M its first permanent home in recent history. “We haven’t had a permanent home for many years,” said Hensley. “We had been renting different spots, mostly small galleries that were not large enough to show off our collection.” 

Founded in 1894 as the St. Paul School of Fine Arts, the M was incorporated in 1927, when it began collecting artwork for instructional purposes. It has been an arts and education staple in the community since. “There is no other art museum in St. Paul,” said Hensley. 

Journal March 2018 HTC Museum photo

Image: Courtesy of VJAA
The M Museum’s new home will feature the Center for Creativity, a 3,000-square-foot space for art classes, community education, business meetings and more.

The M will stay at its current location, but reside in a much larger space (16,000 square feet). The museum will be on the first floor of the Pioneer Endicott building, which features the museum on the first floor, retail on the second and apartments in the remaining 14 floors. The M will open this fall and will include a storefront lobby area, a renovated contemporary gallery, an education wing, community gathering spaces and a two-story-tall sculpture court, where Hensley said the art installations will use the height of the space. Above the sculpture court, there will be access to the museum via the skyway system. 

This will be the perfect setting to show off the M’s vast collection. “We have over 4,500 pieces of American art. These works have been in storage for a long time,” said Hensley. “This is an opportunity to bring pieces out, which we are very excited about.” 

Hensley is also pleased to be able to better educate today’s youth. “We are returning to our roots,” said Hensley. “Our institution began as a school.” Phase one of the development will include the Center for Creativity, a 3,000-square-foot space for art classes, community education, business meetings and more. Hensley said members of the community will be able to come here to use a free materials lab to create their own art. 

“We are hyperfocused on public schools,” said Hensley. “There is a diverse cultural community in the Twin Cities. We want that richness of creative expression to be accessible to schools.” In view of that, the M plans to offer school buses to transport students to and from the museum, when necessary. In addition to special offerings for families and schools, the M also plans to run programs for the senior community. 

In order to ensure all community members have access to the museum, Hensley said there will be free admission to the museum when the first phase opens to the public. “We don’t want admission costs to be a barrier,” Hensley said. 

The development will be complete in late 2018. Hensley said it will then take a few months to furnish the space, unload and set up all the exhibits, and get the museum ready for visitors. There are already plans for a second phase of development to create 20,000 square feet of additional gallery space to open in late 2019.
Historic Rehabilitation
This was a unique historic preservation project because the majority of the building received HTCs when it was rehabilitated in 2012. However, the M’s portion of the building didn’t receive HTCs at that time.

“This is a complicated financing structure. It is a tenant space within a historic building that was previously rehabilitated,” said Ashley Gebhard, project manager at U.S. Bancorp Community Development Corporation (USBCDC), which provided the NMTC and HTC equity. “This development brings a sense of synergy with the existing uses in the building.” Hensley added that it took a while to find a bank to work with on the HTC side. 

Financing

Sunrise Banks provided a $7 million NMTC allocation and a $3 million source loan. “The Center for Creativity is very attractive. They are creating space with the purpose of educating kids,” said Michael Morrell, senior vice president, NMTC group at Sunrise Banks. Morrell said the Center for Creativity will serve upward of 700 children each year, 70-plus percent of whom qualify for free or reduced lunch. He also liked the development because it is part of the renovation of one of the oldest buildings in downtown St. Paul and because of the job creation, a percentage of which will be reserved for low-income residents in the area. 

USBCDC provided $2.3 million in NMTC equity and $1.5 million in federal HTC equity. “We have other major investments in downtown St. Paul,” said Steve Kramer, senior vice president at USBCDC. These investments include upgrading Twin Cities Public Television’s headquarters with NMTC financing in 2015. “This is another way of bringing continued economic activity and revitalization to the area,” Kramer said. While twinning tax credits is always difficult, Dan Blocher, assistant vice president at USBCDC, said, “twinned tax credit transactions are our bread and butter.” 

Other financing for this development included a $900,000 tax increment financing loan and a $100,000 Cultural STAR Program grant from the city of St. Paul and $1.7 million in sponsor equity, which comes from the M’s donors. 

“By using NMTCs and HTCs, the museum was able to preserve a historic structure and create an economic driver for the community, while also putting on display art significant to the Twin Cities region and the rest of the country,” said Annette Stevenson, partner in the Cleveland office of Novogradac & Company LLP, which assisted in the overall structuring and financial modeling of the highly-complex NMTC and HTC financing package. “Without the NMTCs and HTCs, this development would not have been possible.” 

Journal March 2018 HTC Museum finance