Retail mix is key to redux at State Farm site

  • Article by: DON JACOBSON , Special to the Star Tribune
  • Updated: August 14, 2014 - 7:46 PM

Plan to bring in new hotel and retailers is key to luring corporate tenants to the now-vacant office building in Woodbury.

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Matt Alexander of Kraus-Anderson Realty Co., left, and Mike Salmen of Transwestern Commercial Real Estate at the site of future development.

Photo: ELIZABETH FLORES • eflores@startribune.com,

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The Woodbury City Council last week issued official approvals for the landmark project by a Florida-based developer to transform the long-vacant State Farm headquarters building along Interstate 94 into City Place, a mixed-use planned unit development including 178,000 square feet of new retail space.

While obtaining the necessary rezonings and conditional-use permits was crucial, the hard part comes now for Matt Alexander of Kraus-Anderson Realty Co., and commercial real estate broker Mike Salmen of Transwestern. The pair are leading an audacious plan to turn a chronic sore spot in the otherwise dynamic St. Paul suburb into a gleaming asset.

Woodbury officials such as Mayor Mary Giuliani Stephens last week expressed delight with Florida-based Elion Partners’ proposal to construct new retail, hotel and possibly medical office uses on the campus property surrounding the 430,000-square-foot former insurance company headquarters that sat vacant for eight years. For the city, it’s a chance to tap the “tremendous potential” of the site, which has been the subject of a series of unsuccessful attempts by others to come up with a re-use plan that would make financial sense.

Alexander, Kraus-Anderson Realty Company’s director of real estate development, and Salmen, a partner at Transwestern’s Twin Cities office, are betting that K-A’s shiny new mix of new amenities on the site, such as a 116-room Residence Inn hotel and a grocery-anchored retail complex, will lure corporate users to the ex-State Farm building despite a tough office market environment.

As they talked about their approach during a Monday meeting of the Building Owners and Managers Association’s (BOMA) St. Paul chapter, the enormity of the task quickly became evident. Alexander said that while State Farm has meticulously maintained the 18-year-old building since its departure, its massive size and current empty state are a bit eerie.

“Walking through there is almost like a scene from ‘The Shining,’ ” he said. “You’ve got 430,000 square feet, absolutely vacant, but looking great. It’s kind of like the apocalypse had come and all the people had just disappeared.’’

Added Salmen: “It looks like whoever moved out of there moved out yesterday.”

Salmen will be in charge of lining up what will likely be multiple office tenants for the building. “Despite its complicated history, the building can work,’’ Salmen said. “There have been seven or eight potential tenants over the years who have seriously considered it. The problem has always been that State Farm wanted to sell the building and didn’t want to cut it up for multiple users.”

The key to its success as an office property this time is the plan by Kraus-Anderson for the surrounding 96-acre site, Salmen said.

The development team decided to shoot for a Gateway District zoning, which allows for up to 30 percent of retail use in a planned development such as City Place. Out of the 742,000 square feet of existing or planned commercial uses there, K-A’s plan calls for 178,000 square feet of retail, or about 24 percent.

The site plan that was ultimately adopted puts most of the new retail in a series of new structures just south of the big building where parking lots once were. The retail portion of the project will be anchored by a grocery store. Although Alexander and Salmen said no deals have been struck, some BOMA members said the likeliest taker is thought to be Whole Foods.

“This design process was lengthy and collaborative with partners such as RSP Architects,” Alexander said. “The question was, ‘How do we come up with something that makes people feel like they’re in an urban environment to draw office users out to the suburbs?’

“We needed to provide enough amenities to make them want to stay while at the same time finding the right kind of retail tenant mix that will make this massive amount of site work financially doable.”

The first earth-moving at the site is expected to begin shortly after Labor Day, the pair said.

 

Don Jacobson is a freelance writer in St. Paul and former editor of the Minnesota Real Estate Journal.

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