Hennepin County moving forward on L&H site

Finance&Commerce

By: Cali Owings

Date: October 30, 2014

Hennepin County hopes to break ground this spring on a new regional office complex and social services hub on one of the largest transit-oriented development sites in Minneapolis near the Blue Line.

The county is preparing to purchase a 6.3-acre site at 2225 E. Lake St., adjacent to a station at the southwest quadrant of Lake and Hiawatha Avenue, from the Minneapolis School Board for $8 million, according to county documents. The county will also transfer $46.4 million to the Housing and Redevelopment Authority to pay for its new service center and parking facility.

The 100,000-square-foot county office building is part of a first phase of the L&H Station project, which also includes structured parking, 125 units of market-rate housing and about 8,000 square feet of street-level retail. The school district’s Adult Education Center and several surface parking lots are currently on the site. The new county building would rise in the southeast quadrant of East Lake Street and 22nd Avenue South.

Minneapolis-based BKV Group and Roseville-based Launch Properties have worked with the county and neighborhood to develop a larger concept plan for the site that includes another 400 units of market-rate and affordable housing, 10,000 square feet of retail space and a permanent home for the Midtown Farmers Market.

Next Tuesday, the county board’s Public Works committee will be asked to authorize the transfer of funds for the site acquisition and funding to purchase the finished product, according to Michael Noonan, real estate manager for the county. The HRA will consider approving the property acquisition at its Nov. 18 meeting.

“We will have a green light in terms of moving toward dotting of the ‘i’s’ and crossing of the ‘t’s’ and heading toward a closing,” he said.

Though BKV Group and Launch Properties developed the concept plan and have a “long colorful history” with the property, Noonan said, the county will hold a public hearing to determine if the team will develop the first phase.

When the county makes subsequent pads available for residential development in the later phases, decisions will be “subject to performance evaluation and market conditions,” he said.

A representative from BKV Group declined to comment on the project and Launch Properties didn’t return calls seeking comment.

The county’s action will bring transit-oriented development to one of the largest redevelopment sites owned by a single party that’s available on the Blue Line in Minneapolis, according to David Frank, transit development manager for the city.

“You don’t get six acres at a transit stop almost anywhere else,” Frank said.

While the county isn’t “typically in the business” of acquiring large sites for redevelopment, Frank said, locating the service center at the Lake Street site will advance a larger scale project at the station with many public benefits.

The public amenities included in plans for the site – like structured parking and plazas for the bus stop and farmer’s market – will require some form of subsidy, Frank said.

The Corcoran Neighborhood Association has worked for 15 years to plan the site, said executive director Eric Gustafson. TheMidtown Farmers Market, which the neighborhood founded in 2003, is set up in a surface parking lot at 2225 E. Lake St.

“We did a lot of heavy lifting to sell the neighborhood on dense” transit-oriented development, Gustafson said. The neighborhood would like to see vibrant retail frontage on Lake Street and a more pedestrian-friendly experience at the intersection of Lake and Hiawatha, he said. Their primary concern going forward is to make sure that the project is done right, despite the county’s timeline.

Noonan is hopeful the closing for the property acquisition will occur in March and that construction of the office building will begin in the second quarter of 2015. Construction is expected to take a year to 16 months, and the housing development would follow shortly after. The construction timeline would allow the school board to retain use of its building on the site until it finds a new location.

Though the county is buying the site from a public entity, the $8 million purchase price is a negotiated market value, Noonan said.

In comparison, a 6.7-acre parcel at the northwest corner of East Lake Street and Hiawatha Avenue is currently valued at $9.4 million, according to Hennepin County property records. St. Paul-based Wellington Management LLC is building a six-story affordable housing complex for seniors on the site.