Cottage Grove city officials start over after failed Home Depot redevelopment plan

• Home Depot

City officials remain optimistic about redeveloping the vacant Home Depot building after a multi-tenant development plan collapsed. Bulletin photo by Scott Wente

Talk about it

A developer’s plan to redevelop Cottage Grove’s largest vacant retail space fell apart last week, dealing a setback to city efforts to rehabilitate one of its most visible commercial properties.

But city officials remain confident of developer interest in the site, despite dashed hopes that the empty former Home Depot building at 7210 East Point Douglas Road would be occupied by the end of the year.

“Do I think that there will be something developed by the end of the year? I would say no,” Mayor Myron Bailey said recently. “But, do I see [developers] coming back with a proposal early next year? Yes.”

Minnetonka-based developer Stonehenge USA had proposed to divide the 68,000-square-foot big box building that is still owned by the home improvement retailer into a multi-tenant commercial property anchored by an LA Fitness.

A sign announcing the gym’s arrival appeared at the busy corner of 80th Street and East Point Douglas Road in the fall of 2011, almost nine months before the developer submitted formal plans for city review.

Cottage Grove officials had enthusiastically supported the proposal, with the City Council quickly approving Stonehenge’s plans in June and agreeing to contribute nearly $2 million in special tax revenue through a provision in a state jobs bill that allowed cities to pool tax increment financing dollars from different redevelopment districts toward one project.

To meet the requirements of that law, the project needed to spend the pooled tax revenue by Dec. 31. But when Stonehenge’s deal to purchase the property from Home Depot collapsed in October — and with the company unable to revive an agreement by last week — that became a nearly impossible deadline to meet, Stonehenge President Alan Dale and city officials agreed.

Now, Bailey said, the city is back to where it stood last fall, when Stonehenge first began expressing serious interest in the property. At least three developers have been in talks with Home Depot about the property, according to the city’s Economic Development Authority. Stonehenge is still expressing interest in piecing together a new redevelopment plan.

“Getting something in this spot is a priority of mine,” said Bailey, who was re-elected earlier this month.

Bailey placed the blame for the failed redevelopment squarely on Stonehenge’s shoulders — an assessment shared by Dale, the company’s president — and said the city had learned from the more than year-long process that ended with last week’s EDA decision to not extend a development agreement with the developer.

“Things kind of dragged and dragged and dragged,” he said.

YMCA back in picture?

Stonehenge is still interested in redeveloping the site, Dale told city officials last week.

However, without the special tax increment financing funding, a project that includes LA Fitness as a tenant becomes more difficult because of the high building costs that would accompany it, Dale said.

Officials last week said they would lobby local legislators to introduce language in January to extend the special tax revenue provision.

“Without the [pooled] TIF, at the end of the year, the Home Depot [building] isn’t worth what it’s worth today,” Dale told the EDA last week.

LA Fitness’ inclusion in the proposed project generated much of the excitement around it over the past year, said City Council member Justin Olsen, a liaison to the EDA.

If the fitness chain isn’t involved in a future redevelopment proposal, Olsen continued, city officials should again explore its options with the YMCA Twin Cities. City officials had engaged in serious discussions with the YMCA Twin Cities over the possibility of partnering on a Cottage Grove facility before Stonehenge stepped forward in 2011.

“Being that we’re back at square one and looking forward … I think we need to reengage the YMCA immediately,” he said.

“We better find a suitable alternative,” Olsen continued. “And we better do it soon.”

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