Should the city take a developer up on an offer to swap Downtown blocks?
A proposed land swap between the city and developer Opus Corp. could jumpstart development of two prime Downtown blocks.
Opus Corp. has owned the southern half of the Powers block — between South 4th and 5th streets and Nicollet Mall and Marquette Avenue — since 1985. However, the developer has dragged its feet on developing what is now a parking lot. The site — not quite half the block — is approximately 50,000 square feet, according to Downtown appraiser Pete Pelletier.
Meanwhile, the city of Minneapolis has had trouble luring developers for the old Nicollet Hotel block — 74,382 square feet of city-owned parking lot just north of the new Central Library between Nicollet Mall and Hennepin Avenue.
In 2003, the city sought developer proposals to build 300 Nicollet block condos or apartments above a 24-hour underground transit terminal. Nobody bit. In July, the city extended the deadline to Sept. 15.
Opus, an experienced Downtown developer, replied on the final day — but not quite with the proposal the city expected.
Do condos and buses mix?
In a letter, Opus offered to trade the Powers Block for the Nicollet Hotel block, which the city bought in 1994 with a Federal Transportation Administration (FTA) grant.
A remaining $10 million in FTA money mandates that a transit terminal be part of any development, the city says. The developer must give Metro Transit a 99-year, no-cost lease to operate the terminal, through which 1,000 buses would pass daily.
Mike Christenson, the city’s director of economic development, said several unnamed developers “took a hard look at” the Nicollet Hotel site, but none was eager to market condos above 1,000 idling buses per day.
“That’s the question that most developers start with,” Christenson said.
Opus stated plainly in its Sept. 15 letter that “the combination of a metropolitan transit terminal located below housing on the Nicollet Hotel Block site is incompatible.”
Opus asserted that structural columns supporting condos would not leave enough space for buses to maneuver.
Opus then presented a different idea: give us the Nicollet Hotel block for our housing development — sans buses — and we’ll give you the Powers site for your transit terminal. Opus cited its experience building Downtown’s Grant Park and Carlyle condo towers.
It’s a fair trade in terms of land values. Downtown appraiser Pelletier said the Powers block was assessed at $130 per square foot in January 2005; the smaller Nicollet Hotel block is worth $85 per square foot, making the land values almost even ($6,500,000 for half of the Powers block vs. $6,322,470 for the Nicollet hotel site.)
Money is not the only consideration. Opus prefers the Nicollet Hotel block for housing because it is closer to the river, the Central Business District, Hennepin Avenue, Nicollet Mall and the new library than the Powers block. Currently, there is no link to the wider skyway system.
Opus says the Powers block’s proximity to the Nicollet Mall light-rail station and skyway system makes it a natural for the transit terminal.
Bob Gibbons, communications director for Metro Transit, said the agency is just beginning to study how the swap would affect bus service and the workings of the transit center.
The proximity to the light rail is good, Gibbons said, but the Powers block is not near the end of Nicollet Mall, as the Nicollet Hotel block is. Buses would have to get to the Powers block from where Nicollet ends at Washington Avenue — where many now lay over at the Nicollet Hotel surface lot. That might mean using Marquette Avenue, which the Opus letter states would “take numerous buses off the Nicollet Mall.”
An Opus coup?
Opus states in its letter that “development air rights… would be preserved above the underground Transit Terminal for future development” — perhaps a hint that Opus is looking to score both properties. The developer suggests a commercial building on the Powers block, above the terminal.
Opus Vice President Dave Menke would not comment on the possibility of developing both sites if the land swap happens. Menke referred to the language in the letter. Christenson said the letter reveals that “Opus believes a transit center is more likely under offices.”
The Opus letter also noted “the transfer of properties would potentially accelerate the redevelopment” of the north half of the Powers block, which it does not own. Retail space along Nicollet Mall has been emptying out beneath parking ramps there — most recently with the Oct. 14 closing of Walgreens at 413 Nicollet Mall.
Matthew Baker of Baker Investments, LTD, which owns the northwest corner of the block, said his company is not emptying out the retail for a coming development and is actively pursuing tenants. Baker said his company “would be open to exploring all alternatives” in the future.
“If [Opus is interested in developing both sites,] they’ll get to pay for both,” Christenson said (except for the publicly funded transit terminal). “And they understand that.”
The terminal would include three street-level passenger waiting areas and space for as many as 24 buses to “layover” while drivers used the on-site break room, restrooms or supervisors’ offices.