Last phase of Heart of the City project stalls after developer cancels deal

In a major setback for Burnsville's much-heralded Heart of the City redevelopment, the developer of the last parcel is backing out of a deal to build a $20 million office complex and parking deck.

The developer's decision disappoints city officials, casts into uncertainty parking for the new Burnsville Performing Arts Center, and halts the last phase of a $150 million redevelopment on 54 acres in downtown Burnsville.

Greg Anderson, president of Anderson Builders of St. Louis Park, said Thursday they wanted to cancel the deal because of survey and title issues. The 4.75-acre parcel was to provide parking for the Arts Center now under construction.

In a letter in December, the developer raised 27 objections with the city, including the presence of stop signs and dirt piles on the site, which the developer wanted the city to remove.

The city agreed to remedy all of those issues, said city spokesman Jim Skelly. But Anderson said both sides had time constraints on the project.

"I had to make a business decision and move on," he said Thursday.

Today, the City Council will hold a special meeting to decide whether to officially terminate the agreement with Anderson.

They'll also consider whether to keep the developer's $50,000 earnest money and whether to sue the firm for backing out of the deal, Skelly confirmed.

If the council terminates the agreement, council members must decide what to do with the land -- near 126th Street W. and Pillsbury and Nicollet Avenues -- and how to build a parking deck with an upper level by the time the Arts Center opens next fall.

"There was a parking requirement that was part of that development that's necessary for the Performing Arts Center to go forward," Skelly said.

Anderson said under the agreement, he would have owned the parking ramp and the city would have had use of it after business hours.

Skelly said Anderson Builders notified the city last Friday that they wanted to cancel the development agreement that was finalized Dec. 3. Anderson was going to pay $1.4 million for the parcel as part of the $20 million-plus Travelers Park office and parking complex.

In 1999, the council had adopted a design for the overall Heart of the City project, which includes housing, retail, restaurants and office space. Agreements have been reached with other developers on the other nine parcels, and those developments are either completed or in planning stages, Skelly said.

Anderson's proposal would have provided offices to accommodate 400 jobs, he said.

Last September, the city had passed over two other proposals for the now-disputed parcel, including one from Ruhr Development that would have built a Hilton franchise hotel on the site. But the city went with Anderson, which at the last minute also said it would build a hotel. In November, when the city learned Anderson would not build a hotel as promised, the City Council voted to move ahead with the office and parking ramp anyway.

Jeff Ruhr, vice president of the Plymouth-based developer, said he would be interested in talking with Burnsville officials about the project if they contact him. Still, he added, it would take effort to once again excite investors.

"We had a lot of enthusiasm, and we were very excited about it, and when we didn't get it, it took some of the wind out of our sails," he said.

Mike Whalen, president of EFH Co., a Burnsville developer that had lost a bid for the project in September, said that it's possible his company might step in but that he needs to know more about why Anderson pulled out. Whalen said his company had proposed two office buildings of 48,000 square feet apiece, and would include parking for the Burnsville Performing Arts Center.

But Gene Happe, chairman of the board of EFH, had handled his firm's bid, and he called the September proposal from Ruhr "beautiful." Once he saw it, Happe said, he knew his firm could not compete. So he urged the city to go with Ruhr's plan because it included a hotel that would have complemented the Performing Arts Center, which included a large convention center and two theaters.

Happe said that there's 25 percent vacancy in office buildings in Burnsville, and he figures that left Anderson unable to get financing.

"This other opportunity would be unbelievable," Happe said. "And I'm just stymied why they didn't go back to the Hilton people."

Joy Powell • 952-882-9017.