The biggest downtown commercial development in a generation cleared a crucial step Friday when the Minneapolis City Council unanimously approved a plan to bring offices, housing and retail to the barren eastern edge of downtown.
“We now for the first time have an official vote of the City Council saying, unanimously, ‘Keep going. We like this idea. Come back to us with details,’ ” Mayor R.T. Rybak said after Friday’s vote. Further votes are expected this fall, when the council must give final approval to the specifics of the public-private land deal.
The $400 million development will materialize in the shadow of the $975 million Vikings stadium slated for the site of the Metrodome. All five blocks in question are owned by the Star Tribune, which new estimates show could make upward of $38 million from the sale.
The unanimous City Council vote approving the concept comes about two months after city leaders unveiled the proposal to build a massive mixed-use project, parking facilities and a large public park on land adjacent to the new stadium.
The deal is one of the largest office developments in Minneapolis since First Bank Place — now Capella Tower — opened downtown in the early 1990s, according to city officials.
The latest action authorized city staff to develop a term sheet with developer Ryan Cos., which hopes to build a million square feet of office space, more than 300 housing units and retail space on two blocks.
The city would be responsible for, among other things, borrowing $65 million to help build a 1,300-stall parking ramp and a two-block park. The ramp is required by the Vikings stadium legislation, which passed the Legislature last year.
The terms of the Star Tribune’s agreement with Ryan have not been disclosed. But a city development official, Chuck Lutz, said Friday that the average price per square foot is about $71. That would make the 12.5-acre plot of land worth about $38.6 million. Star Tribune management and Ryan, which has not yet bought the land, declined to comment on the estimate.
The owner and tenant of the development’s office space is expected to be Wells Fargo. The company still has not made a firm public commitment, however. “We are just pleased with the continued progress of the project and we’re continuing to do our part, which is evaluating our participation in it,” Wells Fargo spokeswoman Peggy Gunn said Friday.
Several questions remain unanswered, including what to do with two major streets, Park and Portland avenues, which would bisect the park.
City finance officials must also find cash, possibly through development and naming rights, to pay for $10 million to $15 million in park amenities beyond grass and streetlights.
Council President Barb Johnson said Friday that building out the park would be “the big challenge.” “I think we’re going to have to look at private dollars,” Johnson said, adding that the Vikings and the Minnesota Sports Facilities Authority (MSFA) also should pay for their use of the land.
The MSFA is overseeing construction of the stadium.
The city and the Minneapolis Park and Recreation Board are contemplating a special concessions arrangement to pay for operating the park, which may include what Rybak dubbed a “destination restaurant” on its westerly portion.
Park Board President John Erwin said that his agency would like to own and operate the park but that it will need a non-property-tax revenue source.
Parking revenues key
The total health of the deal relies heavily on the performance of parking in the Downtown East area. Parking revenues will pay down the city’s 30-year debt for the project, and Ryan has agreed to guarantee against any shortfalls for at least 10 years — or when the ramps turn a consistent profit.
The MSFA has agreed to cover long-term shortfalls repaying the parking ramp bonds. But city coffers may have to be tapped to pay for the park bonds, if parking revenues falter.
Cam Winton, running for mayor as an independent, held a news conference Thursday demanding, among other things, to know more about that potential draw on the general fund.
On top of the financial considerations, the design of Park and Portland avenues will have a big impact on the look and feel of the park.
Hennepin County, which owns the roads, has little interest in closing them altogether.
Rybak said they will not look like they do today, however.
“It would be ideally dramatically smaller and much more park-friendly than it is today,” he said. “And potentially only open during rush hour.”
As part of the deal, Ryan would retain the right to buy and develop one-sixth of the two-block park. That would also place a buffer between the green space and Hennepin County jail, which abuts the westerly end. One amendment to the plan Friday requires Ryan to pay a fair market value for the land at the time of sale, rather than $71 per square foot.
The city would issue general obligations bonds for about $65 million, but that does not include interest. City documents obtained via an open records request show that the principal and interest could be closer to $125 million, based on one calculation of future interest rates.
Other public costs include the MSFA paying for skyways from the office buildings to nearby parking structures.