The Free Press, Mankato, MN

October 27, 2012

Much ado about Marigold project

By Tim Krohn
The Free Press

— A proposed six-story, 108-unit rental housing project in lower North Mankato will get a series of city hearings, as supporters say it will bring residents and vitality downtown and critics warn it puts taxpayers at risk and would mar the historical and architectural ambiance of Belgrade Avenue.

The fate of the project also will decide whether property taxpayers will or won’t be on the hook for bonds sold to pay for demolition of the old Marigold Dairy in 1990 and the city’s subsequent purchase and removal of several houses on the site. Those bonds balloon from $17,000 a year now to $90,000 in 2016. Without a development on the site, the city would likely have to use general funds to cover the added costs. (See related story.)  

The first meeting on the project is before the Planning Commission 7 p.m. Monday. Because the project is taller than the three stories allowed under city code, it must receive a conditional-use permit from the commission.

Acting City Administrator Mike Fisher said the height issue is the only issue before the Planning Commission. Issues about the project’s financing, feasibility and other issues will be taken up at the Port Authority meeting Tuesday morning and a later City Council meeting.  

Developer Van Moody, who built the two-story Marigold I project, is hoping to  win approval for the $17 million project.

With mostly one- and two-bedroom units, the complex would aim for higher-end renters with rents estimated at $1,100 to $1,800 per month, with two penthouse suites renting for $3,500 a month.

The developer will seek tax-increment financing to help finance the project. The amount of TIF was estimated at $1.8 million when the project was first unveiled last spring. TIF is a subsidy in which additional future property taxes generated by the apartments are used, for a certain number of years, to help the developer pay for the project rather than going into the city’s general fund.

The project would include underground and surface parking and some covered parking on the first floor. The first floor would also contain a lobby, bar/lounge area for tenants, and a fitness room.

The five stories of housing would include amenities such as granite countertops and individual balconies on each room.

U.S. Bank would provide primary financing. Moody said he expects final approval for the bank financing in the next two weeks.

Mayor Mark Dehen said he’s tentatively supportive of the plan.

“From my perspective, the idea of adding residents to our downtown central  district and potentially bringing more retail purchasers down is good,” Dehen said.

And, he said, based on the county assessor’s estimates, the project will bring in about $250,000 in annual property taxes, which is more than originally estimated when the plan was first unveiled in March.

The downtown business owners association supports the project as does the City Center Partnership.

Too big, too risky?

Barb Church, who lives on Wheeler Avenue, just behind the proposed project, says the building is too tall and its design would collide with the older atmosphere of Belgrade Avenue.

“The project will change the unique flavor of that downtown and you’ll never be able to take it back.”

Church said that when the city has sought public input on the future of downtown, residents have repeated three wishes: that projects fit in the area, are limited in size, and a separation exists between residential and commercial areas.

“People intuitively know this type of development isn’t what’s wanted, that it doesn’t fit the context of the area,” Church said.

She points to a recent downtown planning document completed for the city by I&S Group following a series of public meetings and discussions with stakeholders. That report states the purpose of the plan is “To preserve the existing context of the area” and to preserve the history and small-town feel of the area.

Church also questions whether the project is financially sound considering the rent costs and the fact hundreds of apartments are being built in Mankato.

“If TIF is involved, it’s the taxpayers who will get hung if this fails.”

She views the project as a desperate attempt by some city leaders to build a large project on a site they’ve sunk a lot of money into with a variety of proposed projects never materializing.

The city years ago bought and removed several homes in the area with hopes of a hotel and other development occurring. “For 20 years the city has been spending, buying houses on wishful thinking. Now they’re doubling down on losses and past mistakes.”

Is there enough demand?

Matt Atwood, whose management firm would market and manage the apartments, said he believes demand will be strong for the apartments.

“There’s nothing that’s been built or going to be built that’s going to be for that market — the income of $40,000 or more a year,” he said.

“I think our pricing will be as good or better for the amenities people will get. With all the upgrades we’re doing, like large community rooms, people will want to stay in them rather than just an apartment people sleep in.”

He said the project includes two 2,500-square-foot penthouse suites for $3,500 a month. He said he already has pledges to rent both.

Moody also said all four of the high-end apartments in his Marigold I building are currently rented.

The city of Mankato this spring commissioned an apartment demand analysis for the Mankato, North Mankato and Eagle Lake region.

That analysis showed that between 65 and 95 rental units could be added in the region annually for the next five years to meet demand. That’s a total of up to 475 new units in the next five years.

Since that report, Mankato alone has approved or given preliminary approval for 499 new apartment units. The 108 units in Marigold would bring a total of 607 units in the two cities — 132 units more than the analysis said could be absorbed without increasing vacancy rates.

 Mankato projects include a large complex going up near hilltop Hy-Vee and a planned 172-unit upscale apartment project on land behind Madison East Center. Those upscale apartments on the Kearney Addition would likely be competing directly with the Marigold project.

The market analysis did not specifically look at the demand for higher-end apartments.  

Of all current renters in Mankato, 17 percent make $50,000 or more in household income, according to the analysis.

Dehen said he is relying on U.S. Bank, which would finance the project, to be in the best position to judge if the project is feasible.

“I have to go with the due diligence done by the other parties involved. The financers are weighing the market in deciding if they’re going to finance (Marigold).”

Dehen, who also sits on the North Mankato Port Authority — the economic development arm of the city — said the Port Authority (which will get the Marigold proposal before the City Council does) will have to ask the questions about the financial feasibility of the project.

And he encouraged residents to become familiar with the project — including at an open house Tuesday evening — so they can provide input to the council before it would make a final decision Nov. 5.

“It’ll be worth it for the public to come to the Port Authority meeting and open house to see for themselves how solid this proposal is and give the council their input before the council meeting,” Dehen said.

“We want a project there, but we want to make sure it’s good for the city in the long run.”