Proposed redevelopment of Cottage Grove Home Depot falls through

• LA Fitness

A sign announcing the arrival of LA Fitness in Cottage Grove stands at 80th Street and East Point Douglas Road, near the vacant former Home Depot building, last year. The proposed development has fallen through after the developer was unable to revive a deal to purchase the building in time to complete the project before a Dec. 31 deadline. Bulletin file photo by Jon Avise

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A proposed redevelopment of Cottage Grove's largest vacant retail space to feature an LA Fitness health club is dead for now, scuttled by the developer’s inability to complete a property deal before a special tax revenue program key to the project expires.

Empty since 2008, the former Home Depot building at 7210 East Point Douglas Road will remain vacant as city officials and Minnetonka-based developer Stonehenge USA start over after the company’s president said he was unable to revive a purchase agreement in time to meet a looming December deadline.

Cottage Grove Economic Development Authority members on Tuesday voted to allow a development agreement between city and developer to lapse, scrapping the proposed redevelopment.

The agreement included the city's commitment to chip in nearly $2 million in pooled tax increment financing funding that was made possible by a provision in a state jobs stimulus bill. But that mechanism expires Dec. 31, and Alan Dale, Stonehenge president, said Tuesday that the project had become unworkable within that timeline.

Declining to grant another extension of the development agreement to Stonehenge – and, in effect, halting a redevelopment plan that city officials had enthusiastically supported – was “the logical outcome from here,” said City Administrator Ryan Schroeder. “We then have the opportunity to try to regroup and build a different development.”

At a hastily-called meeting on Oct. 31, EDA members punted the issue to Tuesday, granting a temporary extension of the agreement with Stonehenge to allow the company to attempt to resuscitate a deal that Dale said had collapsed in October.

The company’s plan, which the city approved in June, was to redevelop the 68,000-square-foot former Home Depot into a multi-tenant property. City officials had expected the project to be complete by this fall.

Dale said Stonehenge was reliant on the tax increment financing provision, however, to make the estimated $10.8 project financially viable. Without that, he said Tuesday, it would be difficult to move forward with the redevelopment as proposed.

“I have not lost interest in the project and would like to continue to work with the city,” Dale told city officials Tuesday.

Despite disappointment at the setback, Mayor Myron Bailey made clear the EDA’s decision was, realistically, its only move to make.

"It's the right thing to do to terminate the deal today," he said.

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