St. Paul boosters launch new nonprofit to raise funds to redevelop struggling downtown

St. Paul civic leaders recently launched a nonprofit to raise money to redevelop the capital city’s downtown, with a focus on the central business district that has struggled to rebound from the COVID-19 pandemic.

The new St. Paul Downtown Development Corp. is a real estate-focused subsidiary of the nonprofit St. Paul Downtown Alliance, which has been working to attract more employers, investors and visitors to the urban core since its creation in 2018.

“As we’ve advanced efforts to revitalize downtown St. Paul, it’s become clear we need a centralized resource to lead conversations with potential developers and investors, as well as prepare key sites for redevelopment,” Joe Spencer, president of the St. Paul Downtown Alliance, said in a statement.

The Downtown Alliance hired Dave Higgins, former vice president of development for both McGough and Roers Cos., to serve as president of the new organization.

Before coming to Minnesota, Higgins worked on large-scale urban redevelopment projects in Boston and New York, with stints at the Boston Redevelopment Authority and the real estate group of global law firm DLA Piper.

Corporate and philanthropic organizations — including the St. Paul & Minnesota Foundation, the Bush Foundation, the Knight Foundation and Securian Financial — provided grants to get the nonprofit off the ground, Spencer said.

“We’re also thinking about raising some capital funds from our institutional partners — downtown businesses and hopefully foundations — that might see an opportunity not for a philanthropic grant, but perhaps a different kind of capital investment in some of these real estate opportunities in downtown," Spencer said in an interview. “Perhaps below a market-rate return. Or maybe we can even create a market-type return.”

Though the organization’s early work will likely focus on evaluating the state of downtown assets, it’s possible it could buy or redevelop property down the road.

“Successful development doesn’t happen without substantial financial resources,” Higgins said. “We are certainly looking to tap financial resources across the economic spectrum to catalyze these projects.”

Both Higgins and Spencer listed Cincinnati’s long-standing downtown development corporation, 3CDC, as a model for their work. Since its founding in 2003, the nonprofit has played a role in more than $2 billion in development projects.

St. Paul’s new organization also has a great model in its own backyard: The Lowertown Redevelopment Corp., fueled by a $10 million grant from the McKnight Foundation in 1978, led efforts to revitalize the downtown neighborhood as an enclave for artists.

These days, Spencer said, St. Paul’s downtown has strong edges in Lowertown and the western entertainment district, which includes the Xcel Energy Center and theaters. The central area, home to mostly office buildings, has suffered the most since the pandemic and rise of remote work.

With downtown St. Paul office vacancies peaking at 29% late last year, according to brokerage firm Colliers, properties have started to fall into foreclosure or sell for steep discounts. The capital city’s challenges are exacerbated by the fact that its largest property owner, Madison Equities, is attempting to offload its entire portfolio of distressed buildings at once.

The Downtown Alliance has proposed office-to-residential conversions as a partial solution. A recent study from Gensler, a national architecture and design firm, identified 10 buildings that are good candidates structurally.

But conversion projects are often notoriously expensive, so that might be a challenge the Downtown Development Corp. can help tackle, said City Council Member Rebecca Noecker, who represents downtown.

“I envision us wanting to bring in federal and state dollars, private dollars from developers, philanthropic dollars from our foundation partners and corporations, city dollars and potentially new tax-increment financing structures or tax credits,” Noecker said. “To have one receptacle that can bring all of those together in a seamless, nimble way is a huge part of what I think this corporation will be able to do.”