Developers discuss potential for St. Paul Sears site

Photo by Carlos Gonzalez

With the St. Paul Sears close to the Capitol set to shut its doors, underutilized acreage on the outskirts of downtown could soon be up for grabs by developers.

The 187,000-square-foot store and surrounding 17 acres of mostly parking lots that sits west of the Capitol grounds has been considered for years to be one of the city's prime properties for potential redevelopment.

With the announcement Monday that Sears had filed for Chapter 11 bankruptcy and would close the St. Paul store along with more than 140 other underperforming locations, speculation swirled on the future of the site with several developers guessing that a mixed-use project could replace the site.

"It's a billboard location," said Lee Krueger, president of the St. Paul Port Authority, in an interview.
Krueger predicted numerous developers would likely be interested in the site therefore the Port Authority wouldn't need to get involved.

In 2014, the Port Authority purchased the former Macy's department store in downtown St. Paul which earlier this year officially reopened as the Treasure Island Center, a mixed-use building with offices, a brewery and an ice rink.

"Even with the Macy's … we did everything we could to have other people buy it," Krueger said. "It was only when it was going to sit there and go idle for years and years that we stepped in."

A decade ago, the property was envisioned in area plans for the nearby Rice Street light rail station as a location for a "mixed-use urban village" similar to Wacouta Commons in downtown with mid-rise buildings surrounding a central green.

In 2013, Sears proposed plans to the Capitol Area Architectural and Planning Board to build additional retail as well as townhouses, apartments and offices on the north half of the site and keep the existing store with a slightly smaller footprint but nothing materialized.

In 2015, Sears sold the property to Seritage Growth Properties, the real estate investment trust it created to release and redevelop hundreds of its properties. Sears in turn leases the space in St. Paul.

Seritage has been marketing the site for lease. The property also includes a close to 32,000-square-foot auto center.

The site was discussed as an option for the city's new soccer stadium, which is currently under construction near Snelling Avenue close to University Avenue.

"We will continue to explore joint venture opportunities to leverage best-in-market mixed-use developers, and pursue opportunities to capitalize our larger projects, where appropriate, with asset-level funding," said Seritage President and Chief Executive Benjamin Schall, in a Monday letter. "We plan to continue to sell certain assets in smaller markets where the uplift is not significant enough to warrant the human resource allocation, given other opportunities available to us in our portfolio, and opportunistically sell other assets to recycle capital into our growing pipeline of redevelopment projects."

It would likely take a larger developer with big pockets to properly redevelopment the Sears site because of its size, said Jim Crockarell, head of Madison Equities which owns several downtown St. Paul buildings.

"That's a major undertaking. … The entry into the ballgame puts the bar pretty high," Crockarell said.

If a developer was to build six-story apartments at the Sears site, the property could probably accommodate about 1,500 rental units, he said. Apartments with first floor retail space could be a good fit for the site, Crockarell said.

"We're always interested in good real estate, and that's a nice location," said Shane LaFave, director of multifamily development for Sherman Associates, in an email, though he emphasized Sherman hadn't taken any concrete steps to pursue the Sears site.

Gary Holmes, head of CSM Corp., said in the past he had wanted to develop the site, but Holmes said he is undecided about what the best use for the site would be currently. With its proximity to government offices, the state could be a possible tenant, he said.

"I've been watching it for years," Holmes said.

David Wellington, the director of acquisitions and development at Wellington Management, said it could be hard to fill the building with a large user who could take the entire space which means that the building would likely need to be broken down into smaller anchors if it was to be kept intact.

Wellington recently repurposed a former Rainbow Foods grocery store in south Minneapolis into a charter school and other smaller leases.

"It takes patience and it's not often the quickest, high value solution," Wellington said.

Wellington said the company would spend some time to take a look at the potential of the Sears site for development. He said the site would likely have multiple uses including apartments either market-rate or affordable.

"The Sears store site is a key strategic property in the St. Paul area," said United Properties President Bill Katter, in a statement. "It's proximity to the new soccer stadium and other nearby expansion make it an interesting location for a variety of mixed-use developments."

United Properties is a major developer with its hand in several projects currently including plans for a mixed-use tower in downtown Minneapolis.

The Capitol Area Architectural and Planning Board (CAAPB) has restricted the height of development in the immediate area so that the Capitol building will remain as the dominant structure. On the Sears block, buildings aren't allowed to be more than 944 feet above sea level or about four to six stories.

Any redevelopment of the site would most likely include a parking ramp and erase the need for so much surface parking said, Paul Mandell, executive secretary of CAAPB.

"It does open up more flexibility for redevelopment of the whole site," he said.

The property is valued at $11.35 million, according to Ramsey County property records.