Developer seeks $21 million from St. Paul for stalled housing and retail at Highland Bridge

The company leading the redevelopment of St. Paul’s former Ford plant is seeking $21 million from the city to help fund the construction of market-rate apartments and commercial space, as well as site prep for future row homes.

Minneapolis-based Ryan Companies has said the public assistance will be key to kick-starting stalled private development at Highland Bridge. High interest rates and construction costs, a restrictive lending environment and St. Paul’s rent control law have all made it difficult to finance projects planned prior to the pandemic, said Maureen Michalski, Ryan’s senior vice president for real estate development.

“These are not typical market fluctuations,” Michalski said. “We’re meaningfully far behind where we envisioned we would be because of these really exceptional circumstances that have occurred.”

Most of the public funding being requested — $18. 6 million — would go toward the estimated $61 million development of the vacant block along Ford Parkway, which Michalski described as the gateway to 135-acre site. Ryan would build a four-story building with 97 apartments and about 9,500 square feet of first-floor retail space and four separate one-story buildings with about 25,000 square feet of commercial space, as well as parking and a private access road.

Nearly $3 million more is being sought to help cover the costs of installing utilities, building alleys and other site prep for 55 new row homes.

The density proposed for the Ford Parkway block would be lower than what was laid out in Highland Bridge’s master plan, the product of extensive public debate leading up to its final approval in 2019. Developers originally envisioned 149 housing units and 80,000 square feet of commercial space, but making the project smaller gives it a better chance of being financially feasible, Michalski said.

The proposed designs and dollar figures are contingent on public assistance and not yet final. Ryan’s request to the city did not specify a financing mechanism, though the city’s options are limited since the projects are not geared toward affordability.

One possibility would be tapping into the existing tax-increment financing (TIF) district, which captures future property taxes to help pay for development that otherwise would not occur. City officials have said they generally do not use the tool to support market-rate developments, though St. Paul recently made an exception with the Landmark Towers conversion project downtown.

Highland Bridge is already using $53 million in TIF to fund the site’s infrastructure — a decision that previously drew criticism from some who argued the site is so desirable that it shouldn’t get incentives. Additional TIF has funded affordable housing projects on the site.

Nicolle Goodman, the city’s director of planning and economic development, said she has not yet examined the specifics of Ryan’s request.

“What we will do with this and any project — but especially these projects that have been multi-year and the planning was done before COVID — is look at what has changed and be willing to consider whatever it takes to get things moving forward,” Goodman said.

In its pitch for city help, Ryan is emphasizing the importance of continuing momentum at Highland Bridge. Michalski said the company has spoken with a number of interested local and national tenants, including a daycare provider, fast-casual restaurants and service-oriented retail.

Developers also argue that it is a good investment for the city. The 2024 market value of developed and undeveloped parcels at Highland Bridge is $77 million higher than what was projected at the time of the redevelopment agreement — and that’s excluding projects that were removed from the TIF district to fund affordable housing.

“That added value is accelerating the city’s debt repayment and creating more opportunities for community reinvestment,” Michalski said.

The row homes are a prime example, she said, exceeding initial projections by 72%. Pulte Homes, the company behind the existing units, elected not to acquire another 7.5 acres in 2022, so Ryan is now in talks with another potential developer. Building the infrastructure would help make the project viable for that partner, Michalski said.

While developers across the Twin Cities metro and beyond are struggling to get projects to pencil out – or make financial sense – in the current economic environment, those building in St. Paul have said the city’s rent stabilization policy makes it particularly difficult to get lenders and investors on board. In response to those concerns, Mayor Melvin Carter last week urged the City Council to permanently exempt new construction from the ordinance.

It remains to be seen whether the council will take up Carter’s request. When asked whether such a change would move the needle for Ryan’s projects at Highland Bridge, Michalski sent a statement saying that they look forward to hearing more about the specifics of the proposal.

“We all want to see the area be vibrant and thriving,” she said. “The neighborhood wants to see it. The city wants to see it. We want to see it. So we’re all striving towards the same goals here.”