Minneapolis to buy site of Kmart at Nicollet Avenue and Lake Street

Years of negotiations and $8 million have brought Minneapolis one step closer to achieving a longtime goal: reopening Nicollet Avenue S. at Lake Street, where a Kmart store has blocked the intersection for 40 years.

The city is proceeding with plans to buy the 10-acre parcel beneath Kmart from the New York investor who owns it. But unless the city can reach an agreement with Kmart to move the store elsewhere, it could sit right where it is until Kmart's lease expires in 2053.

"We're hopeful that in the future, we'll come to an agreement," said David Frank, the city's director of economic policy and development. "Even though there's another 36 years on the lease, this puts us in a position that we know for sure that the street will reopen and that land will be available for development. Unfortunately, we don't know when."

A City Council committee signed off on a deal Tuesday to pay $7.2 million for the land underneath the Kmart store. The city already owns the adjacent parcel, formerly a Supervalu grocery store, and in 2015 paid $800,000 to initiate the purchase agreement for the Kmart site.

Pending approval from the full City Council, the $7.2 million will come from the city's Streetcar Value Capture Fund, which pools property taxes from the five-block area along the Nicollet-Central streetcar route for uses related to constructing the line. One of the eligible uses is acquiring right of way for the streetcar, which moving the Kmart store would accomplish, Frank said.

City staff members have been in talks with Kmart for 18 months in an effort to get the store moved.

As part of those negotiations, the city worked with Ryan Cos. to put together a lease proposal and a plan for a new Kmart location on the same site, with space for Nicollet Avenue to pass through. The city offered a one-time, $5 million moving subsidy to push rent below market rate, but Kmart rejected the proposal.

Howard Riefs, a spokesman for Kmart parent company Sears Holdings Corp., said in a statement that "no business would ever agree to [the] terms" of the city's proposal, which did not specify the type of development planned for the site and included a significant rent increase.

"If the City Council moves forward and becomes our landlord, we hope they would be a champion for our store and support the community members that we serve and the approximately 100 employees who are employed at our store," the statement said.

The store, built in 1977, is one of the nation's most successful. But its location is widely considered a major planning mistake, and long-term city plans identify reopening the intersection as a top priority to revitalize the area.

The Whittier neighborhood has been working on redevelopment ideas for the Kmart site for decades, said Whittier Alliance Executive Director Ricardo McCurley. The neighborhood's vision is that the store could remain as part of a new development with residential, commercial and industrial space, he said.

City staff members will work with the neighborhoods surrounding the Kmart site to incorporate residents' redevelopment ideas, Frank said.

At Tuesday's meeting, Council Member Alondra Cano asked staff to report back to the committee later this summer with suggestions for supporting local renters and minority-owned businesses as the area develops.

Council Member Lisa Bender said she and other council members and city staff members have met about the Kmart site monthly since she took office more than three years ago — a tradition started by former Council Member Robert Lilligren, who represented the area.

"Ten years ago when this project first began, the context of these neighborhoods was very different than it is today," Bender said. "And we're doing our best to imagine what it will be like when, in the future, … this project is fully realized."

Emma Nelson • 612-673-4509