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Downtown East plan surges toward Dec. 13 deadline

Adam Voge//December 5, 2013//

Downtown East plan surges toward Dec. 13 deadline

Adam Voge//December 5, 2013//

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City of Minneapolis general obligation bonds would cover the costs related to site acquisition and development for a public park and parking ramp. (Submitted rendering)
City of Minneapolis general obligation bonds would cover the costs related to site acquisition and development for a public park and parking ramp. (Submitted rendering)

The city of Minneapolis’ deal to help finance a portion of Ryan Cos. US Inc.’s Downtown East mixed-use project includes up to $65 million in general obligation bonds and gives the city rights to develop air space over a proposed “Block 1” parking ramp at the northeast corner of Park Avenue and Fourth Street South.

Under terms of a development deal unveiled Thursday, the city would use the bonds to cover costs related to site acquisition and development for a downtown park and parking ramp. Minneapolis-based Ryan is responsible for more than $350 million of the estimated $400 million project, planned for five blocks currently owned by the Star Tribune.

The Minnesota Sports Facilities Authority, which is overseeing construction of the nearby Vikings football stadium, would also pay $28.9 million for construction of skyways and the Block 1 ramp.

But the overall Downtown East project still hangs in the balance as city leaders and Ryan representatives push for the City Council to approve terms by Dec. 13. They say that deadline is critical because they need to lock in San Francisco-based Wells Fargo & Co. for the office portion of the project. It’s also important because the pending turnover of the council in January would require getting new members up to speed and further delay the project.

One sticking point remains the signage Wells Fargo wants at the top of its two office towers planned in the project. City ordinance doesn’t allow it, and the Minnesota Vikings team is opposed to it.

Outgoing Mayor R.T. Rybak, city staff and Ryan representatives released details of the terms to the City Council’s Committee of the Whole on Thursday. The project, approved in concept by the city this summer, includes more than 1 million square feet of office space for Wells Fargo, up to 400 apartment units, several thousand feet of retail space, and a public park that would take up nearly two city blocks.

Rybak said that approving the project at a planned council meeting Dec. 13 would help secure Wells Fargo’s commitment. The bank is expected to own the two buildings, which would comprise more than 1 million square feet on blocks bound by Third and Fourth streets and Chicago and Fifth avenues.

“You cannot keep a 1-million-square-foot office tenant for six months or more while we figure it out,” Rybak said, referring to the turnover of the City Council. “The time to move is now.”

Rick Collins, vice president of development for Ryan, said that Wells Fargo still hasn’t formally committed to the project, but a deal could be reached “within 10 days or so.”

Collins declined to say how much the Star Tribune land would cost to acquire or when the deal might close, adding that city approvals are important to determining that timeline.

Changes to the plan released Thursday include giving Ryan the option to replace a 200-unit apartment complex fronting Third Street South with new commercial space, depending on market conditions.

Ryan isn’t ready to commit to those 200 apartments on top of its 200 other units planned nearby, Collins said, adding that the developer prefers to let the market dictate demand.

The terms released Thursday include several other new perks for the city and Ryan, including:

  • The developer has agreed to cover $3.7 million in fees to help navigate the deal through the process.
  • The Minnesota Vikings have committed to donate $1 million for the city’s park, which Rybak said will help take it from “good” to “great.”
  • The city will retain air rights above the Block 1 parking ramp, which Rybak called “one of the best development sites we’ll ever have.”
  • Ryan will maintain ownership of about a third of a block inside the park, which means Ryan would improve the land before selling it to the city.

Rybak said he was pleased with the terms of the deal. Under it, Ryan would pay a predetermined annual fee to the city for at least 10 years to cover its bond debt. If parking revenue consistently reaches a certain profit level, it would be used to cover the remainder of the city’s debt for the life of the bond. If parking revenue falls short, Ryan would be on the line for the deficit.

Selling development rights above the Block 1 ramp could return “several millions of dollars” to the city, Rybak said, adding that the City Council’s approval of the entire Downtown East project could help spur the development there.

Ryan had previously indicated interest in developing above the ramp, but Collins said he didn’t know yet whether the company would still be interested.

The Committee of the Whole reviewed the financing package for the first time Thursday, a little more than a week before a scheduled vote by the entire council. Several members expressed support.

“I find this a really exciting opportunity for all of us,” council member Diane Hofstede said.

Council member Cam Gordon said he thinks the terms with Ryan have improved over time, and council member Meg Tuthill called the public park a “beautiful, great addition” to downtown.

Council member and mayor-elect Betsy Hodges didn’t comment on the deal Thursday, other than to jokingly ask Rybak how excited he is about the project.

The city, Ryan and Wells Fargo also have yet to come to an agreement over signage on the office towers’ rooftops. The bank wants to put its logo on the roof of the towers, but city ordinance doesn’t allow it and the Minnesota Vikings team is among those opposed to the plan. Rybak said he supported Wells Fargo’s request, which Collins said may factor into the bank’s decision-making to commit to the project.

Terms of the deal will be heard by the Community Development Committee on Tuesday and the Ways and Means/Budget Committee on Wednesday, among others, before heading to the City Council next Friday.

If the plan is approved, Ryan could break ground on the project in spring.

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