Penfield development in St. Paul to have a Lunds

Lund Food Holdings said Monday it plans to open a supermarket in downtown St. Paul as part of revised plans for the Penfield, an $88 million mixed-use project that also will include a 170-room hotel and 208 upscale apartments.

The new plans, which have preliminary approval from the city, replace a condominium project proposed for the block bounded by 10th, Robert, Minnesota and 11th Streets. The Penfield's developers withdrew those plans five months ago because of the weak condo market.

Construction of the 30,000-square-foot store, the only full-service supermarket in downtown St. Paul, is scheduled to begin in fall 2009 along with the rest of the project, according to Bob Lux, a partner in Penfield Development. Lux said the store should be completed by late 2010, and that the hotel and apartments should be finished late in 2011.

Lux said design details still are being worked out, and that the developers plan to get input from neighborhood groups. But he said the hotel and apartments likely will be in two separate structures. The one- and two- bedroom apartments will range from 694 square feet to more than 1,148 square feet. The Hyatt Place Select Service hotel will be the first full-service hotel to be built in downtown St. Paul in about 20 years, he said.

Lux said the developers expect the project to tap the growing population that uses or works at medical facilities, including some that have expanded in downtown St. Paul in the last couple of years. The expansions include Regions, United and St. Joseph's hospitals.

St. Paul's planning and economic development department estimates the number of downtown residents at 14,000, less than half the population of downtown Minneapolis. But that compares with only about 9,700 residents in 2000, St. Paul planners say.

"We think it's underserved as a market," said Aaron Sorenson, a spokesman for the Edina-based supermarket chain.

Financing for the Penfield still has not been secured, Lux said. "While we know the financial market is uncertain ... we are confident in this mixed-use solution for downtown St. Paul," he said.

He said the developers hope to use a U.S. Housing and Urban Development program that secures private financing for urban residential projects. "We think our site, just a block from the future light-rail line, will help qualify it as transit-oriented development."

The development team includes Lux's firm, Minneapolis-based Alatus Partners, and St. Paul-based Rutzick & Associates. They got rights to the site, owned by the St. Paul Housing and Redevelopment Authority, about three years ago.

The city originally had planned to provide about $9.6 million in tax-increment financing. Lux said they developers will renew their request for tax-increment financing as the revised project works its way through the city approval process.

The original plans were for a $131 million project to include 313 condominium units. The developers canceled those plans in July, saying that only about 80 units were presold. Lenders typically have required presales of at least half of planned condo units before construction can proceed.