With Tuesday’s approval of the master lease, Irgens will control 60 percent of 15 acres on the site. Minnesota United, under the name MUFC Investor, will own 30 percent and the St. Paul Port Authority 10 percent. The partnership would lease 15 acres from RK Midway, and it’s owner Rick Birdoff. Irgens will also work with Birdoff on a strip of land the latter subdivided several years ago, running along Snelling Avenue from the bus barn site to University Avenue. Birdoff has said the parcel is his most valuable piece of property among the 25 acres. He had hoped to redevelop it first, which is still a likely scenario as most of the property presently sits empty.
Most of Birdoff’s properties across the U.S. are suburban-type strip malls with big-box stores as anchors. Birdoff will now be aided by Irgens’ vast experience in developing and managing larger scale properties. The master lease also offers the opportunity for the group to purchase the property from the New York-based Birdoff sometime in the future, with a deadline of Dec. 31, 2022. The St. Paul Port Authority would opt out of the deal if the property were sold, which it expects will occur before the end of 2017.
The St. Paul Port Authority became involved in the redevelopment of Midway Center when Birdoff seemed to get mired down with several long-term leases he had in place with current tenants, and which he wanted to honor. Those same leases have complicated the redevelopment of his 25-acre site which sits adjacent to the 10-acre bus barn property where Minnesota United plan on building their $150 million-plus stadium. In fact, it was at a meeting to find partners to redevelop that suburban-like ’70s-style strip mall that brought Minnesota United owner Bill McGuire and Birdoff together.
Ironically, the soccer stadium that appears a catalyst for redevelopment has also proven one of the biggest hurdles for Birdoff. While most of the stadium will be built on land owned by Metro Transit, there are still two acres that are needed by Minnesota United. That property sits on the northern-most end of the stadium and is owned by Birdoff and leased long term to Rainbow Foods, owned by SuperValu. The long term leases which were good for Birdoff’s business have not necessarily been good for the long-term development of the site from a community perspective. Part of the issue for Birdoff is he has been making money and a good amount of it. According to documents released by the SPPA, Birdoff’s lease fees generate $2.3 million per year even though most passersby would observe that the car-oriented, asphalt-laden shopping center feels run down and is not conducive to the feeling of a vibrant transit-oriented community. The property sits on an intersection that offers both light rail transit and bus rapid transit and is ripe for development.
Seeing an impasse, the St. Paul Port Authority got involved with the Midway Center site trying to find a solution to some very complicated problems involving divisions of property, taxes, and long-term leases. They created an industrial development district in September of 2016, hoping to use their vast experience to help resolve some of the issues that were bogging down both Minnesota United and Birdoff. The biggest of those being the SuperValu-leased property, with SuperValu in the middle of a grocery war with just about everyone, including Target, and particularly Walmart.
SuperValue also owns the Cub supermarket just two blocks to the east. In 2010 Cub sued Walmart because of a lease agreement that they claimed allowed them to be the only grocery store in the shopping center. Walmart had been building superstores at many locations across the U.S. which included large grocery departments. When Walmart remodeled their Midway store they expanded their grocery section to 7,150 square feet. Cub demanded Walmart cut back their grocery section which they did not. The property owner, DDR MDT eventually filed their own lawsuit demanding Walmart stop selling many of their fresh produce items.
A recent conversation with a Rainbow employee who did not want his name used, expressed the competitive nature of the grocery store business, especially with the addition of Hy-Vee expanding into the upper Midwest. “SuperValu would be crazy to give up their lease on the Midway Center site,” he said. “With Target, ALDI, Walmart and others — if I was them I’d never give up this property.”
Yet Minnesota United desperately needs the two acres of land where the Rainbow Foods currently sits. SuperValu’s resolve is seen most any day of the week as that particular Rainbow’s aisles are filled with products, yet only a handful of shoppers roam the empty store.
Rainbow is not busy today. pic.twitter.com/sIfGPIKpRx
— FredMelo, Reporter (@FrederickMelo) March 22, 2017
A possible scenario is a fairly expensive buyout of SuperValu’s long term lease and the promise of a right of first refusal for any future grocery store development on the property. According to Lee Krueger, president of the Port Authority, Birdoff’s RK Midway has been in negotiations with SuperValue. However, with the new master lease agreement — which they hope to have signed in the next seven to 10 days — they would help Birdoff with that particular parcel of land. Meaning they will most likely get involved with the negotiations with SuperValu once the master lease is finalized.
Krueger said the build-out on the east end of Midway Center would most likely take years since there are so many leases in play on that portion of the property. “I don’t see anyone being in a hurry to leave,” Krueger said referring to those long term leases. “Retail leasing is probably the most complicated of all types of leases in real estate and we are honoring those leases.”
The master plan calls for retail, office, housing, and entertainment on the site. The Port Authority president said that nothing really changes with the new master lease and the long-term vision of the 25-acre site. They are hopeful however, that with the new agreement they will be able to execute that plan.
“The Port Authority’s selection of Irgens, which has demonstrated a commitment to a vibrant, environmentally sustainable development and thoughtful building design, brings another exciting entrant to the St. Paul market,” said St. Paul Mayor Chris Coleman. “Irgens has a commendable track record of developing mixed-use, transit-connected projects. Like so much of the work that we’ve done in St. Paul, the Snelling-Midway project is a responsible and bold step toward St. Paul’s future.”
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