One of the largest real estate projects in Minneapolis history, announced Tuesday, would transform a largely barren stretch of downtown that has long struggled to attract investment.
The $400 million proposal would target a five-block area near the new Vikings stadium, adding offices, residential housing, retail and an 9-acre park, according to developer Ryan Cos. City officials hope the proposed project will generate even more development in the years ahead.
“Dog days are over for east downtown,” exclaimed Mayor R.T. Rybak, at a news conference on one of the vacant lots Ryan will purchase.
The property, which the Star Tribune is selling to Ryan, would become home to two 20-story office towers for up 6,000 workers. The city would then borrow $65 million to fund a parking facility and a park that would hug the light-rail line, leading to the Vikings stadium.
Yet several hurdles must be cleared before the ambitious plan moves from renderings to reality.
Although Ryan and the city envision Wells Fargo & Co. as the sole occupant and owner of the office towers, no formal agreement has been reached with the financial services giant. The deal also hinges on Ryan winning a parking contract from the Minnesota Sports Facilities Authority, which oversees nearby stadium development.
Council praise and questions
The city bond deal also raises its own questions, such as whether the finer points would pass muster with the City Council. However, some of the most vocal critics of the Vikings stadium bill, which divided the council, said they were open to the Ryan plan.
Council President Barb Johnson credited the stadium, designs of which were unveiled Monday night, for helping to attract the development.
“I just think that it’s so important that we answer the critics who said this was the wrong place for the stadium, [that] nothing has happened around the Metrodome,” she said. “Well, it took a day. So I’m really pleased about this.”
While proximity to the new stadium played a part, access to the Downtown East/Metrodome light-rail station was even more critical, said Rick Collins, vice president of development for Minneapolis-based Ryan.
“We think it’s one of the most transit-friendly and transit-oriented development sites in the Twin Cities right now,” he said. “So we believe that corporate uses are attracted to this location in part because of its strong connection to the labor pool everywhere in the Twin Cities.”
The entire development is expected to be completed by July 2016, in time for the stadium’s opening.
The city’s end of the bargain involves issuing bonds to fund a parking ramp and a park, the largest in the heart of downtown. The bonds would be tied to the full faith and credit of the city, but Ryan would guarantee payments for the first 10 years — providing some haven for taxpayers.
After that, the city says the money would be repaid by revenue from three parking ramps and potential dollars from the Stadium Authority. Repaying the park debt, however, may require “other general city financial resources,” according to an outline of the deal. That, along with the fact that the bonds won’t cover the development of the park land, may raise concerns at City Hall.
“I’m open to the discussion about whether or not this makes sense,” said Council Member Lisa Goodman, who chairs the city’s development committee and represents eastern downtown. She said she could support it if property taxes generated by the development make the city’s tax base grow — rather than subsidize the project — and if the deal doesn’t expose the city to financial risk.
“I think they might be able to do this,” she added. “This was a very creative way to leverage the city’s authority to do something really great for the east side of downtown.”
Council Member Gary Schiff said he was “very glad” the initial plan does not call for a tax subsidy, known as tax increment financing. But he still has questions about who would own the park, how it would be developed and how the debt would be paid.
The project would also bring 300 rental or owner-occupied residential units in downtown east, although a study would determine the exact mix, Collins said. Currently, several hundred apartments are being built or renovated downtown, including nearly 800 luxury units along the light-rail line, just blocks from the Ryan site.
Retail is expected to be service-oriented to support residents and office workers, as well as restaurants, Collins said.
Wells working on concerns
Several contingencies also need to be worked out with Wells Fargo before it commits to the site, spokeswoman Peggy Gunn said. “These could include things like cost issues, market conditions, environmental factors, city and county approvals and design challenges,” she said. “We intend to work through any challenges that arise to determine if this is the right project for Wells Fargo.
“At the same time,” she added, “we are excited about the potential opportunity to participate in this project that will transform the east side of downtown Minneapolis.”
Ryan has a purchase agreement to buy the land from the Star Tribune by year’s end. Terms were not disclosed. The company would relocate to leased space downtown, and its Depression-era headquarters would be torn down.
“The Star Tribune has aspired to move our headquarters to a new space in Minneapolis that more properly reflects the mission and capabilities of a 21st-century news organization,” Star Tribune CEO Mike Klingensmith said. “But it has also been of paramount importance to us that we do so in a way that confirms our commitment to the future of this city.”
In 2012, the Star Tribune editorial page strongly advocated building on the Metrodome site during the contentious Vikings stadium debate. Klingensmith said Tuesday that “our commercial development did not drive the editorial page’s view on the stadium. But I think that the subsequent stadium plan and development plan basically reinforced why we thought this would be such a good idea.”
He added: “It’s possible for something to be good for us and also good for the city.”
The Ryan proposal isn’t the first pitched for the Star Tribune property by developers. A previous deal calling for the Vikings to buy four of the blocks for $45 million fell apart in 2007 due to uncertainty in the credit markets.