Change of plans for two downtown Minneapolis projects

Two major downtown Minneapolis development projects have stalled and fallen behind on their taxes, and now one of the sites could be changing ownership.

City planners said this week that the developers of One Washington, a mixed-use project proposed for the corner of Hennepin and Washington Avenues, are trying to sell the site.

"Our understanding is that they trying to sell or find additional partners," said Becca Farrar, a senior planner with the city's Department of Community Planning and Economic Development.

Milliken Development bought the former Downtown Jaguar car dealership site for $14 million in 2005. This year, it withdrew an application with the city for a project that would include a Whole Foods Market.

Don Milliken, president of the Seattle-based developer, declined to discuss whether his firm is looking for a buyer or investment partners.

"We're still the owners, for a while," he said Tuesday. "We're trying in varying ways to be able to continue with the development, but it's very difficult in the current [economic] environment."

Milliken also declined to discuss why his firm has failed to make timely property tax payments on the site. In June, the company paid $156,937 in taxes on the parcel, including a late penalty of $11,625, according to Hennepin County property records.

The firm is facing an identical penalty because it missed the Oct. 15 deadline for its bill of $145,312.

Meanwhile, the developers of the Nicollet, a high-rise project proposed about four years ago for a prime site at 10th Street and Nicollet Mall, have paid no property taxes this year, according to county property records. The site, made up of three parcels, currently has a combined tax bill of $212,298, including penalties of $19,300.

The developers are negotiating with some potential new partners who could help resolve the delinquent taxes and get the project going, according to Len Pratt. His firm, Pratt Ordway Properties, along with Hunt Associates took control of the development in 2005 after buying out two former partners.

The project initially held promise as downtown's tallest residential building, but it has since undergone a series of design and ownership changes. In 2006 Pratt and Hunt recruited Houston-based Hines Interests, a major player in the downtown market. Hines bowed out more than a year ago and was replaced by Minnetonka-based Opus Northwest, which ended its partnership with Pratt and Hunt in May.

The original plans called for condominiums, but when that market cooled, the developers considered adding a hotel, which would have reduced the number of condo units. More recently, the developers have described a mixed-use project that could combine some form of housing with retail and office space, but they have not disclosed specifics.

Milliken's plans for One Washington also initially called for condos, as well as the Whole Foods grocery. Last year, the plans changed -- first to an all-retail complex and later to a combination of apartments, the grocery store and other retail space.

In June, Milliken said financing was taking longer than expected because of revisions in the project and tighter credit markets. The company talked to city planners about the revisions, but after several delays it withdrew the application. At the time, Milliken denied speculation that the project might be canceled or that Whole Foods would back out, citing a lease signed in 2005 by the Austin, Texas-based grocery chain.

But since then, Whole Foods has reacted to sharply lower sales growth by terminating some leases and scaling back store openings. A developer in Seattle filed suit against the chain in September for terminating a lease one week before the shell of a newly built store was to be turned over to the grocery store chain.

Whole Foods reported its fourth-quarter results Wednesday, and said that during the period it terminated leases on 13 stores that were in development. It did not identify the store locations.

Susan Feyder • 612-673-1723