$2.2 million loan for Redwood Falls hospital converted into apartment complex

REDWOOD FALLS, Minn. — A southwest Minnesota project that converted a hospital into housing will receive a $2.2 million refinancing.

Red Skye Lofts, a former hospital in Redwood Falls that has been vacant for three years, has received a loan from PACE Equity, the Milwaukee-based company announced last week.

The Clean Energy Refinance Loan with Commercial Property Appraisal provides budget financing for the project, which for Red Skye Lofts included lighting and HVAC equipment upgrades, the announcement said.

Converting a hospital into apartments is not unprecedented as communities in southwest Minnesota struggle with housing shortages, said Emily Hentges of Plaid Hat Management, which manages Red Skye Lofts.

The Mankato-based company operates other Minnesota properties that have recently been converted into residential buildings, including a grocery store in Albert Lea that was converted into an apartment building and a former shopping center in Le Sueur that is now a mixed-use apartment building .

The City of Redwood Falls sold its community hospital in 2019 to CentraCare Health System, Inc., which moved to the new location in February 2021.

Redwood Property Holdings bought the building in July 2021 and after about $6 million in renovations, converted most of the hospital into apartments, City Administrator Keith Mutzel said Thursday.

The project received a 15-year tax abatement agreement with the city of Redwood Falls, allowing developers to avoid 100% of annual property taxes during that period.