Less than a year after reaching a purchase agreement with Ramsey County, the developer hoping to put a $200 million office, hotel and housing project on prime riverfront property in downtown St. Paul is giving up its exclusive rights to do so.
Opus Northwest, in Minnetonka, sent a memo to county officials last week saying it was canceling the $10 million deal for a six-acre site along Kellogg Boulevard that consists of the old West Publishing complex and adjacent vacant county jail. It forfeits a $125,000 deposit and allows the county to put the land back on the market.
The developer could not find a company to anchor a planned office tower -- an Opus requirement to start the project. It had been given a six-month extension last May to keep looking for a tenant. Although it no longer has exclusive rights, Opus intends to continue to market the property, said senior vice president Tim Murnane.
"I think it's a phenomenal redevelopment site. Unfortunately, the major driver of our plan is office space and right now there are no anchor tenants ready to step up to the plate," Murnane said. "That fact, along with the credit freeze-up in our industry, makes it impossible for us to move ahead."
Part of Opus' challenge in landing an office tenant is because St. Paul typically has had one of the Twin Cities' softest markets. A report released this week by Bloomington-based NorthMarq put St. Paul's midyear vacancy rate at 25.7 percent, compared with 15.4 percent for the Twin Cities overall.
The project above the Mississippi River would have given St. Paul its first new office tower in about nine years and significantly increased what is now a dearth of Class A office space.
Opus had proposed a 22-story office tower with up to 500,000 square feet of space and a 30-story tower with room for a 250-room hotel and 100 condos.
Figures compiled by Colliers Turley Martin Tucker show downtown St. Paul with only 1.6 million square feet of Class A space, compared with 13.2 million square in downtown Minneapolis. A recent report by St. Paul's Building Owners and Managers Association said that for the past two years the amount of office space downtown has declined, largely because of conversions of older office buildings to other uses, such as housing.
Ramsey County Board chairwoman Jan Parker said she was pleased with the work Opus has done so far and lamented the economic atmosphere. "We're still very hopeful we'll be able to follow through on our original plan," she said. That plan is a years-old one to shed the property and get it back on the tax rolls.
Meantime, the county has been working to relocate about 600 workers in the old West building in case there is a successful sale.
Cecile Bedor, St. Paul Planning and Economic Development director, said she's pleased the county is continuing to vacate the buildings because it will make them more attractive once financial conditions improve. She said the property is a high-priority site for the city.
Opus has spent about $500,000 in architectural design, engineering and forfeited earnest money on the project, Murnane said.
"When the market gets better, I do believe you'll see it redeveloped into one of best sites in downtown. And I hope to be doing that," he said.
Chris Havens • 651-298-1542 Susan Feyder • 612-673-1723