Wheeling and Dealing
When the Minneapolis City Council voted in late October for Ryan Companies to redevelop the former Sears store on Lake Street and Chicago Avenue, it looked like a new lease on life for a building that's long been symbolic of the area's economic swoon. But even bullish advocates of the $130 million project admit that the devil remains very much in the details.
Foremost among them is the actual transfer of the site, which the city was forced to buy in 2001 after a previous redevelopment plan foundered. Ryan proposes to pay $2.2 million for the 1.9 million square-foot building and adjacent lots. According to Jim White, a senior project manager for the city's Community Planning and Economic Development department, the city must now do its own appraisal of the site, for which it paid around $3.5 million two years ago. Yet because of state data-practices laws, the city's appraisal of the property is confidential until after a deal is negotiated.
Don Gemberling, an expert in data-practice law with the state's Information Policy Analysis Division, says the statute is designed to ensure that cities get a fair shake, rather than to protect sweetheart deals from public scrutiny. But, he adds, "If a property's appraised at $10 million, and sold to the mayor's brother-in-law for $5 million, it's smelly."
So the public won't know what kind of deal the city is cutting with Ryan until after it's on the books. "The proposed price is an item of concern," allows Robert Lilligren, Eighth Ward City Council member and a longtime booster of the project.
Also notable is Ryan's proposed use of federal low-income housing tax credits to finance as much as 15 percent of the project. Unlike Landmark Center, the huge Boston redevelopment project that's often trotted out as a model for the Lake Street Sears complex, Ryan's plan calls for 370 housing units, including 176 apartments for low-income seniors. The Boston project, while also a former Sears property, has the advantage of a central downtown location, big-box retailers as anchor tenants, and Boston's low office-vacancy rates.
According to CPED's White, including apartments in the Lake Street complex might actually make it an easier sell, since the project would qualify for federal housing subsidies. But there is no guarantee that the nearly $25 million in tax credits and tax-exempt bonds Ryan is banking on will materialize. Moreover, because the federal government allocates a limited number of those credits to Minnesota every year, the Sears redevelopment could end up siphoning off federal funding from other affordable-housing projects in the city.
"This is probably going to turn into something of a political battle on the Council," predicts Lilligren. "I've had people saying, 'You're going to use all our tax credits on this project.' But clearly I don't have that type of power. I do think the Council realizes that this is an important project, so there has to be that level of city involvement."
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