Apartment developers eye Eagan

The apartment building boom has gained a solid foothold in Eagan, where projects under construction or in the works will add several hundred upscale units to the city's stock of rental housing.

The latest proposal would transform a 10-story office building vacated by Blue Cross and Blue Shield of Minnesota in 2011 into a 112-unit, market-rate apartment building. The developers also would build a separate, 90-unit apartment building and about 30,000 square feet of retail space on the site west of Lexington Avenue on Yankee Doodle Road.

The City Council last week unanimously voted to request a land use change from the Metropolitan Council, a first step in moving the proposed project forward.

Called City Vue Commons, it joins three other upscale apartment developments to have surfaced in Eagan in the last year:

• The Flats at Cedar Grove, a 190-unit apartment building, is under construction in the Cedar Grove redevelopment area next to the outlet mall being built by Paragon Outlet Partners.

• A 250-unit apartment building has been proposed as part of a mixed-use project on a piece of farmland north of Yankee Doodle Road and west of Central Parkway. The Metropolitan Council recently approved the city's request for a land use change.

• A luxury senior rental project with 34 units has been proposed for a vacant site at 4135 Old Sibley Hwy. and a request for a land use change is in the works.

The decision to convert the former Blue Cross building into apartments was fueled largely by the lack of demand for office space in the south metro area. Blue Cross sold the tower at a considerable discount after moving out of it, and the new owners were unsuccessful at marketing it as a multi-tenant office property.

"You have a building that's been sitting vacant for a reason," Greg Miller, president of Interstate Partners, told the City Council. Interstate has the building under contract and will develop the project with St. Paul-based At Home Apartments.

CSM Corp., which owns and plans to redevelop the former Lockheed site, also has cited the weak office market as a factor in the heavily retail-­oriented project it has proposed. In a report last year, CSM said the south metro area has more than a 10-year supply of available office space on the market.

In addition to the former Blue Cross building, the vacant corporate campus of Delta Air Lines has weighed on Eagan's office market. Miller told the council that Interstate has enough vacant land in Eagan to build 650,000 square feet of office space. He also said that even if the office market were stronger, the layout of the 29-year-old former Blue Cross building is outdated and would need "monumental investment" to make it attractive to an office user.

The building was once the tallest office property in Dakota County, and with 10 stories, would also be unique in the area as an apartment complex. "You couldn't build this type of product from the ground up and make it work economically," said Lonnie Provencher, a representative of Interstate. "We're lucky to have this structure to work with."

Mike Cashill, president of At Home, said he expects the office tower to be converted into one- and two-bedroom units ranging in size from 560 to 1,154 square feet. Ground-floor units will have terraces, and amenities for the complex are likely to include a community room, a fitness center and an exterior roof deck.

"Today's renter doesn't fall into just one or two rental demographics like they did a few years ago," Cashill said. He said the project is likely to draw a wide variety of renters, from young professionals to empty nesters.

Provencher said Interstate is not worried about securing retail tenants, given the project's proximity to the CSM development on the site bounded by Central Parkway and Yankee Doodle and Pilot Knob roads. He said he expects Interstate to fill its retail space with smaller shops and restaurants.