Development plans for space above a parking ramp in the $400 million Downtown East project have changed again — and now call for about 360 apartments.
Along with that plan, the original amount that Ryan Cos. was slated to pay the city of Minneapolis for the “air rights” to build above the ramp has declined from $5.6 million to $3 million, according to a new term sheet the firm crafted with city officials. Details were revealed Friday.
The drop in the prospective payment is “frustrating” to City Council Member Jacob Frey, who represents the eastern swath of downtown, because the money was expected to help pay for amenities at a public park that’s also part of the project.
Even so, Frey said, “We still have all the tools right now to make [Downtown East] a success.” However, he added, “we’re not shutting the door to other alternatives, either.”
Along with the parking ramp, Downtown East includes two office towers for Wells Fargo & Co., a 400-unit apartment building, the park and restaurant and retail space. The development is located on five blocks near the new $1 billion Vikings stadium.
The 1,610-space parking ramp is key to the project because it will serve office workers, residents and stadium-goers alike.
Ryan will build the ramp, and it will be owned by the Minnesota Sports Facilities Authority, the public body overseeing stadium construction. The city has issued close to $62 million in bonds to help partly pay for the ramp, as well as other costs related to the development.
Earlier this year, the city solicited proposals to develop the space above the six-story ramp. Ryan responded with a $104 million proposal that called for a 160-room Radisson Red luxury hotel and apartments, while Mortenson Development of Golden Valley pitched a $63 million, 300-room hotel.
Officials opted for the Ryan proposal, which was expected to generate $5.6 million for city coffers.
But since then, Ryan said the hotel portion of the project is “economically unfeasible,” and the firm has altered its proposal to include just apartments, as well as an undetermined use for a small strip of land on the block. Frey said a police substation may be located there.
In addition to the $3 million for the air rights, Ryan said it will pay $1.6 million for the design and construction of the parking ramp so it could “optimize future development possibilities for the site,” said Tony Barranco, vice president of development.
He noted that the apartment tower will generate 450 construction jobs over a 20-month period and generate significant property tax revenue for the city.
“This project has evolved since our initial response to the city [request for proposals] and we feel we have a great project to offer to the city,” Barranco said. “Our upfront investment of nearly $2 million in the design and construction of additional ramp features and structure is further proof of that commitment.”
Design changes and increased subcontractor costs were part of the reason the air-rights payment declined, Ryan said. In addition, Ryan was not able to realize construction efficiencies by building the ramp and the tower at the same time.
The new term sheet crafted by Ryan and city staff will ultimately be reviewed by City Council, probably later in September. Frey said the city could also decide to solicit new proposals entirely.
Lester Bagley, spokesman for the Vikings, expressed concern Friday that the parking ramp may not be completed in time for the Vikings’ 2016 opening day. He also said the diminished air rights revenue could affect the quality of the nearby park, which the Vikings will use for gameday events and at other times.
“We continue to have conversations with the city,” about the issue, he said. When asked whether the Vikings, which are owned by a New Jersey real estate developer, would push to develop the ramp’s air rights, Bagley declined to comment.
Barranco said Ryan is “incredibly motivated” to complete the ramp, especially since Wells Fargo employees are expected to move into their new quarters on Feb. 1, 2016.
Meanwhile, the future ownership and financing of the park remains a work in progress. Ryan is slated to turn over a grassy plot to the city in the summer of 2016, about the time the Vikings stadium will be completed.
The Minneapolis Park Board recently voted to not get involved in the park, also known as “the Yard,” leaving City Hall to figure out the ownership question. Frey said he supports a conservancy model to manage the park and a nonprofit organization to oversee fundraising efforts. Ryan has agreed to help with the fundraising aspect, he added.
“There has been a lot of focus on the importance of the green space amenity in Downtown East,” said Collin Barr, Ryan’s North Region president, in a statement. “Ryan’s commitment to delivering the basic green space remains unchanged and Ryan will provide a leadership role in making the Yard the best it can be.”