Sherman Associates


			5.26.05 Finance and Commerce Unusual parcel to house development near Guthrie By Bill Clements, F & C Feature Writer The proposed mixed-use development across Second Street South from the new Guthrie Theater in Minneapolis is unique in a way that has nothing to do with the project itself. The development stands out because of the land on which it will be built. The 62,600-square-foot site known as Parcel F - bounded by Washington Avenue South and Second Street between Ninth and 10th streets - is the only former railroad property that the Hennepin County Regional Railroad Authority plans to sell for residential development. Technically, of course, HCRRA is selling the parcel to the city of Minneapolis, which will then sell it to developer Sherman Associates Inc. That so-called "pass-through" land sale is needed because, by law, HCRRA can't negotiate with or sell to a private buyer, according to Marcia Wilda, head of the leasing and land management division for HCRRA. But everyone knows that the land upon which the old Milwaukee Road operated became hot property when the Guthrie made its move to the banks of the Mississippi River. That's why Minneapolis-based Sherman Associates is planning a multi-building, mixed-use development with 200-plus residential units and between 24,000 and 70,000 square feet of commercial/retail space. And it's paying at least $2.8 million for it. Sherman Associates will not comment on the planned development until it secures city council approval of a deal that involves the city, HCRRA and Precision Powerhouse, a production company that occupies 5,310 square feet of Parcel F. The council is expected to take up the proposal - known by its primary address of 900 Washington Ave. S. - in late June. But according to a staff report prepared by Bernadette Hornig of the city's Community Planning and Economic Development department, in March HCRRA and Sherman reached a price of $2.8 million for the HCRAA land, less a $300,000 deduction to cover the cost of anticipated environmental cleanup. HCRAA has subsequently offered to sell the property to the city for $2.5 million on behalf of Sherman in "as is" condition. What that means, Wilda said, is that no matter what any additional cleanup might cost, HCRRA will not be on the hook for it. That would be Sherman's responsibility. "The agreement will be very clear that once the sale happens, we are out of it," Wilda said. "Even if there's $1 million of cleanup needed, we're out of it." According to the staff report, Sherman Associates first approached CPED regarding the redevelopment of Parcel F in spring 2004. The developer had started negotiating - and has since obtained - a deal to purchase the Precision Powerhouse site (the rest of the parcel is an HCRRA parking lot); Sherman then wanted to determine CPED's willingness to complete a pass-through sale of the rest of the property. CPED was willing. Sherman started putting together a redevelopment proposal that would comply with the city's 2001 "Update" to the Mills Historic District Plan. The proposal involves knocking down the Precision Powerhouse building and putting up 200-plus units of market rate condominiums with some amount of commercial and retail space along Washington, according to Hornig. Adherence to the Mills District plan requires any commercial or retail to be along Washington, and restricts building heights to either eight stories or 112 feet, whichever is shorter. Hornig's report says that Sherman's development proposal "appears to comply" with both the Mills District design plan and the current zoning for the site - C3A: A community activity center district. A century ago, all the property that weaves along with the Mississippi belonged to the Milwaukee Road railroad. The rail line, first built in 1864, was originally known as the Minnesota Central Railroad. In 1867 the Milwaukee and St. Paul Railroad bought the Minnesota Central Railway, changing the name of the railroad to the Chicago, Milwaukee and St. Paul Railroad in 1874, later shortening the name to Milwaukee Road. The state Legislature formed HCRRA in 1980 as a local unit of government with taxing powers, and gave it the responsibility of planning, designing and implementing light rail transit (LRT) in the state. To that end, the HCRRA began acquiring all the former railroad land in Hennepin County. The railroad authority now owns and manages about 57 miles of railroad corridor in the county; HCRRA has leased out 80 mostly small sections to public and private entities whose adjacent operations spill over into the railroad property, Wilda said. But the main job of the HCRRA is to maintain and preserve former railroad property until it's needed for transit purposes. Wilda said the railroad corridors will eventually be used for six or seven different transit routes - once those routes are set. So far, the Minnesota Legislature has determined the path of only the Hiawatha LRT, which began operating last year. Once that happened, the land known as Parcel F officially became "excess" property that HCRRA was free to offer for sale, at a market rate price, to Minneapolis (actually, Sherman Associates). All of the other HCRRA former railroad property remains in limbo, waiting to be used for transit purposes. For now, the city of Minneapolis and Three Rivers Park District have converted about 40 miles of the 57 miles of railroad corridor into bike/pedestrian recreational trails. But even that may be temporary. "All of our leases have 30- to 90-day cancellation clauses - we offer no long-term guarantees," Wilda said. "When the transit route comes along, everybody else is out, gone. "Everyone hopes that when it comes down to it there will be a way to build the transit routes so they coexist with the recreational trails," she added. "But if it's necessary to remove those trails to build the transit routes, then that's the choice that will be made."
	233 Park Avenue South, Suite 201, Minneapolis, MN 55415 Tel: 612.332.3000 Fax: 612.332.8119