$100 million in flour power to transform Pillsbury A-Mill

  • Article by: JIM BUCHTA , Star Tribune
  • Updated: March 23, 2012 - 11:11 PM

The transformation of a historic Minneapolis mill into low-income housing for artists is the city's biggest residential construction project.

More than 130 years after the Mississippi River was diverted to power the Pillsbury A-Mill, it continues to flow beneath the building -- its dull roar a constant reminder that this landmark helped make Minneapolis the flour capital of the world.

The mill stopped operating a decade ago, but the building is largely unchanged. Gaping holes in the floors mark where there were once grain chutes. Broken window panes reveal stunning views of downtown Minneapolis and St. Anthony Falls. In the disheveled offices, there's unopened mail and a pair of reading glasses on a desk, as though the people who once worked at the mill are just away on break.

Now, a robust rental market and an ambitious plan from a local developer could mean new life for the site. Dominium Co. plans to convert the complex into 255 rental apartments for low-income artists, including studios and performance spaces. The project will cost more than $100 million, making it one of the most expensive residential construction projects on the books in the Twin Cities.

"This is a once-in-a-lifetime opportunity to save this place," said Owen Metz, senior development associate for Dominium. "It's going to be an amazing project."

The project won't be easy. The building is one of only three in the city on the National Register of Historic Places and the National Trust for Historic Preservation called it one of the 11 most endangered historic places in the country last year.

While the project got a nod this week from the Minneapolis Historic Preservation Commission, the developer must seek approval from the city planning commission in April. The deal is expected to close this summer, but not without resistance. Opponents, including some who live in luxury condos next door, say low-income apartments might not be the best use for the complex.

A development challenge

When the mill operations moved out of the city more than two decades ago, the riverfront was largely a wild, untended stretch of abandoned industrial wasteland. Over the years, development has reclaimed most of that land and the A-Mill site remains one of the last -- and most coveted -- development opportunities along the river. It's also been one of the most challenging.

Schafer Richardson, a well-known Twin Cities real estate development and management company, worked for nearly a decade on a massive undertaking that included renovating the historic buildings into high-end condos and to build several high-rise towers on adjacent land.

But the housing market soured, causing property values to sink. Schafer Richardson lost the buildings to foreclosure.

Dominium, which owns and manages 23,000 rental units across the country, was the only bidder for the buildings. Doran Companies, another local developer, bought the vacant land adjacent to the mill complex and plans to build several hundred market-rate luxury rentals.

Metz said that because of the age of the building and the restrictions that come with the historic designation, low-income housing was the only economically feasible option. About 65 percent of the project is being financed with affordable housing and state and federal historic tax credits, Metz said. About 1 percent of the project is being paid for with a public subsidy to clean up the site, and the financing package will also include housing revenue bonds.

Bonds fill the gap

Metz said that without the housing revenue bonds, a finance tool that requires the units to have income restrictions, the project would be about 20 percent short of what it will cost do the redevelopment.

Wendy Holmes, vice president of consulting for Artspace, a locally based nonprofit that develops affordable housing for artists across the country, said artists are often priced out of neighborhoods that they've helped stabilize. She said Artspace considered acquiring the A-Mill site, but the economics just weren't feasible for her organization.

Not everyone is in favor of Dominium's plan, nor the way it's being financed. Paul Snyder, who lives in the luxury high-rise condo building next door, said that his primary concern is that the city hasn't considered enough options -- not that he'll have low-income renters next door. "We only get one shot at this and once this is done, it's done," he said.

Holmes said creating artist housing and a place for them to do their craft can make low-income housing more palatable to the neighborhood.

"It's harder to put low-income housing next to high-end unless it's focuses on the creative market," she said.

Snyder is an advocate of taking more time to exhaust all options, including retail and office uses, and he's worried that such a valuable public resource isn't being used for maximum public benefit.

Metz said that all of the outdoor spaces surrounding the buildings, including a sunken garden and a former railroad corridor that crosses the site, will be open to the public. And he said that there are plans to create a 5,000-square-foot museum/interpretive space that will let visitors into the basement to see the river as it flows into the building and out again. There will also be studio spaces and a performing art space that faces Main Street.

Artists' value

Holmes said that while the redevelopment costs of such a project are high, studies show that having artists in a community can help spur other economic development.

"Artists will continue to give back to the community in a way that the community can't even imagine," she said. "We've seen that played out over and over and over again."

Doug Carlson, president of the Marcy-Holmes Neighborhood Association, said the group supports the project.

"If there's one building that deserves it, it's this building," he said. "It's probably one of the most historic industrial buildings in the United States."

Brian Schaffer, a senior planner for the Minneapolis Planning and Economic Development Department, said the site is exactly the kind of project that the state and federal tax credits are intended to help. Dominium is still in the process of getting its plans approved by the state and national historic preservation offices.

"Without those tax credits, the building couldn't be saved."

Jim Buchta • 612-673-7376

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