Posted: 4:15 pm Mon, June 25, 2012
By Burl?Gilyard
Tags: Clint Blaiser, Halverson & Blaiser Group, Marie Franchett, Mike Zipko, Patty Lilledahl, Penfield, Pioneer-Endicott, Rich Pakonen, West Side Flats
The Endicott Building in downtown St. Paul dates to 1890 and was designed by Cass Gilbert. (File photo: Bill Klotz)
234 units; 31,900 sq. ft. comm. space envisioned
Developer Rich Pakonen is getting busy again in downtown St. Paul. Pakonen, who converted several vintage buildings during the condo boom, now has a plan for 234 market-rate apartments at the long-vacant Pioneer-Endicott buildings in downtown St. Paul.
?This has been a very complicated project ? we?re just taking it a step at a time,? said Mike Zipko, a spokesman for Pakonen. On Monday, Zipko said that Pakonen was not available for comment.
The proposed conversion project means that St. Paul?s newest apartments could be in a pair of its oldest buildings. Both date to the late 19th century and have been standing empty since 2007.
The project is up for a vote on Wednesday before St. Paul?s Housing and Redevelopment Authority (HRA). The HRA commissioners are members of the St. Paul City Council. City documents outline an overall project budget of $46.65 million. The developer is seeking $2.5 million in tax increment financing for the project. The HRA is set to vote on establishing a TIF district and plan for the project.
While downtown St. Paul is not seeing the same level of apartment development activity as downtown Minneapolis, the Pioneer-Endicott project is one of three larger projects that could start construction this year. Others include the 254-unit Penfield and the 178-unit West Side Flats. Finance & Commerce is currently tracking more than 14,000 apartments under construction or proposed across the Twin Cities.
The Pioneer Building in downtown St. Paul was originally the home of the St. Paul Pioneer Press newspaper. The building dates to 1889. (File photo: Bill Klotz)
Marie Franchett, a project manager with the city?s Planning and Economic Development (PED) department said that the financing for the Penfield project closed on Friday. The city is the developer for the project, which will include a Lunds grocery store. She said that city began working on the Penfield site on Monday; a formal groundbreaking is expected in July. Minneapolis-based Sherman Associates is expected to start construction on the West Side Flats project this summer, Franchett said.
Pakonen is the chief manager for Pioneer Endicott LLC, which bought the buildings last year. Property records and city documents show that the group paid $1.1 million for the properties at end of March 2011. The previous owner paid $10.2 million in April 2007, but left the buildings sitting empty.
The investment group includes frequent Pakonen partner Clint Blaiser of the Bloomington-based Halverson & Blaiser Group. ?They are business partners on this project,? Zipko said.
Project financing is not complete yet, but Zipko said: ?It?s very close to being done.?
City documents outline plans for assembling a $25.5 million permanent mortgage. State and federal historic tax credits are expected to provide a combined $15.9 in equity towards the project. The balance would come from a combination of developer equity, TIF and cleanup grants.
Patty Lilledahl, director of business development and finance for St. Paul?s Planning and Economic Development (PED) department, said that the TIF is meant to pay for streetscape and other public improvements.
Zipko said that he could not comment on rental rates for the apartments in the building, but said, ?They?ll be market-rate and they?ll be competitive.?
The most recent market report from Minneapolis-based Marquette Advisors reported an apartment vacancy rate of 5.1 percent for downtown St. Paul at the end of March, compared to an overall market vacancy rate of 2.8 percent across the Twin Cities. Marquette Advisors reported the average apartment rental rate in downtown St. Paul at $1,183 per month.
Zipko noted that the Pioneer-Endicott buildings are between two stops on the future Central Corridor light rail transit (LRT) line which is scheduled to open in 2014 and one block from the defined boundary of the popular Lowertown district.
Plans also call for 31,900 square feet of commercial space in the Pioneer-Endicott project. It?s not clear yet what could occupy the commercial space.
?Those decisions haven?t made yet,? Zipko said. He noted that the building will provide space to the Minnesota Museum of American Art, which has been without a home in downtown St. Paul since 2009.
The Pioneer Building, at 336 N. Robert St., dates to 1889. It was originally built for the St. Paul Pioneer Press newspaper. The L-shaped Endicott Building, at 350 N. Robert St. and 141 E. Fourth St., wraps around the Pioneer Building. The Endicott, which dates to 1890, was designed by the noted architect Cass Gilbert, best known locally for designing the state Capitol.
During the days of condo fever, Pakonen was a prolific player in downtown St. Paul. He converted vintage commercial buildings such as the Rossmor, Produce Exchange and the former Lowry Medical Arts Building into condos.
Today condos are out and rentals are in.
?The market has shifted,? Zipko said.
St. Paul real estate veteran Dick Zehring thinks that the project will be a boost for downtown St. Paul.
?I think Pakonen?s project is just great. There?s going to be a substantial portion of empty-nesters among others who are going to want to rent, rather than buy,? Zehring said. ?He?s going for a little bit of a niche market. I think it?s going to be more upscale, which I think is great.?
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