Nearly a decade after a developer announced plans to transform the historic Pillsbury A Mill in Minneapolis into multimillion-dollar condominiums, another Twin Cities-based developer has completed acquisition of the buildings and has launched a $150 million effort to convert them into affordable housing for artists.

"We are extremely excited about bringing the landmark Pillsbury A Mill back to life," said Owen Metz, developer and project lead for Dominium. "This is an iconic redevelopment for not only Dominium, but for the Twin Cities. This will help make the east bank of the Mississippi River shine even more."

Dominium, which owns and manages more than 23,000 apartments nationwide, has already tackled several complex historic rehab projects, including the recent conversion of the Schmidt brewery in St. Paul. The company bought the A Mill complex and an adjacent warehouse for $3.6 million from BNC Bank, which took control of the property from another developer.

The old limestone mill is one of 21 National Historic Landmarks in Minnesota and comprises several buildings, including an 1881 building that for nearly 40 years was the world's largest flour mill. The plant was shuttered in 2003 and its windows and doors boarded. Huge grinders and conveyors are still in place, and the offices are littered with file cabinets and desks.

Crews have already secured the site with tall chain-link fences and begun clearing out equipment and doing environmental remediation. There are still many decisions to be made, Metz said. A headrace, which diverts water from the Mississippi River via a canal, still flows under the building. And Dominium is planning to harness the power of that headrace for hydrothermal energy to heat and cool the buildings. The group is also exploring ways to produce hydroelectric power, but that's more challenging because it would likely require modifications of the headrace.

The project is one of several in the Twin Cities and the country designed to build a community around those engaged in a variety of creative pursuits, ranging from dance to visual arts. The A-Mill Artists Lofts, which will offer 251 units, will have community spaces where residents can both create and display their work, including a dance studio and multiple gallery spaces. Occupancy is expected sometime in late 2015.

Disagreement over use

The concept hasn't been without challenge. The project received the support of the neighborhood group, but some protested, saying that affordable housing financed with tax credits wasn't the highest and best use for the site. And the project's financials are complicated.

To bridge the gap between the high cost of renovating the historic building and the below-market rate rents Dominium will charge, the group is partnering with several organizations, including U.S. Bank, which is providing $118 million in financing. Affordable Housing Partners Inc. (a Berkshire Hathaway company) is committing nearly $75 million to the project.

"The redevelopment of the Pillsbury A Mill building has been a highly anticipated project in the Twin Cities," said Kyle Hansen, executive vice president for U.S. Bank Commercial Real Estate. "By preserving a landmark in this historic part of Minneapolis and meeting the market's demand for affordable housing, A-Mill Artist Lofts is a win for all involved parties."

Dominium has also landed nearly $26 million in permanent financing from Cornerstone Real Estate Advisers, and will get financial support from the city, the Minnesota Historical Society, the Met Council and others.

"Not only will an iconic building be put back to life, but 251 households will have an opportunity to enjoy the striking views of the Mississippi River and the downtown Minneapolis skyline," said Mike Fowler, president of Affordable Housing Partners.

Other plans came to naught

The buildings, which are perched along the banks of the Mississippi River with views of downtown Minneapolis, were once part of a $400 million redevelopment project that would have been the most ambitious in the city's history. Schafer Richardson, a Minneapolis-based development and management company, had planned to build several apartment and condo towers with more than 1,000 housing units in new and existing buildings.

After a lengthy planning process, the 2 ½-block project got the green light, but was stalled by the Great Recession and subsequent housing crash. A South Dakota-based lender eventually took control of the site, part of which was sold to Kelly Doran, who is working on the second phase of a luxury rental apartment building.

Because the site has long been a symbol of the city's milling history, there's been considerable interest in making those resources available to the public. Metz said that he's still working with various agencies, including the Minnesota Historical Society and the St. Anthony Falls Heritage Board, on how to incorporate interpretive elements and make the most of the water infrastructure.