St. Paul points to Penfield for downtown renaissance

Downtown St. Paul has worked for years to revive its retail and residential development, and its quality of life. But successes like the Minnesota Wild hockey team have not made up for losses like the departure of West Publishing 20 years ago.

Other revitalization efforts like Galtier Plaza in the 1980s, the Cultural Corridor in the 1990s and the Housing 5,000 program a decade ago have not reversed downtown's fortunes.

Now, the city is officially breaking ground Monday afternoon on a downtown development that's been in the works for nearly a decade. It means a new grocery store and high-end housing within sight of the state Capitol. And city leaders hope it will help fuel a downtown revival.

Development at the complex, called the Penfield, has already begun. Demolition is under way to make room for Lunds, a 28,000-square-foot full-service grocery store. Cecil Bedor, the planning and economic development director for the city of St. Paul, says the new store site, which will be topped with more than 250 high-end apartments, will build on the city's other successes.

"Architecturally, it's beautiful," Bedor says. "It's got great public art, and we think it will be a tremendous asset to Lowertown, building on the activities that have been taking place in the last few years in Lowertown. The renovation and the grand opening that will be forthcoming of the Union Depot. The Lofts at Farmers Market, which we just opened, which leased up in record time with record rents. Lots of new bars and restaurants are downtown, and then, of course, the opening of light rail."

But the $62 million project, just south of Interstate 94 between Minnesota and Robert streets, may be among the most ambitious efforts for the city itself in nearly 20 years, other than the Xcel Energy Center.

In the past, St. Paul subsidized builders looking to renovate downtown buildings or build new ones. The Penfield, too, originally had a private developer planning a 33-story, $130 million grocery/luxury condo project. The collapse of the housing market halted that idea.

With the 58-unit Farmers Market project and the bigger Penfield, the city is doing the development itself and shifting its focus away from low-income, affordable housing to market-rate rentals.

That shift has upset some developers, who say St. Paul is taking too big a role in the housing market.

Stuart Nolan, who owns a Bloomington-based development company that rents hundreds of apartments around the Twin Cities, got his start in St. Paul, and he says he thinks downtown needs a project like the Penfield.

But not one built by the city.

"It's a turn-off to me," he says, "and I suspect a lot of other developers, I know some, that are unhappy that if we go into St. Paul, we have to compete with the city. It's not a level playing field."

But in two recent cases -- the Farmers Market and the Penfield -- private projects stalled. The city feared that keys to downtown revival, like retail amenities and luxury apartments, looked lost.

Andrew Shlack heads the Capitol River Council, downtown St. Paul's neighborhood group. He lives and works downtown and says he and his neighbors need the Penfield.

"I think Lunds will be a game changer in downtown, to have access to that caliber of grocery store," he says.

He also says that low housing vacancy rates are a sign that demand is poised to grow downtown, and two other nearby buildings may also be headed for conversion to market-rate rental housing.

One market researcher says the demand is there.

"What's missing in downtown St. Paul is product that really has the upgraded features and amenitites that renters would be looking for who are willing to pay the high-end rents for new construction these days," says Tom Melchior of the consulting firm Clifton Larson Allen. "You know, 9-foot ceilings, granite countertops, wine refrigerators."

It'll be a while before anyone can enjoy those features, however. The building isn't expected to be finished until next winter.

Mayor Chris Coleman is scheduled to formally break ground on the Penfield project on Monday afternoon.

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