StuartCo pays $8M for four Penn-American sites

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Apartment developer StuartCo has shelled out $8 million in cash for a stretch of retail property in Bloomington’s Penn-American district that’s close to one of its new complexes.

Knox & American I LLC, an entity related to the Bloomington-based developer, bought four contiguous sites totaling 9.75 acres along the 1900 block of American Boulevard from the longtime owner of the properties, according to a certificate of real estate value made public Tuesday. The deal closed Jan. 26.

Two of the sites are occupied by a Red Lobster restaurant, at 1951 American Blvd., and a Saver’s thrift store, at 8049 Morgan Circle. Both have leases through 2017 with options to extend up to five years, according to a market listing of the properties. The sale also includes two vacant buildings once leased by a bank and a home interior remodeling store that closed in 2010. The buildings included in the sale total 74,148 square feet.

The parcels are bounded by American Boulevard to the north, Morgan Circle to the west and Knox Avenue to the east. The Knox Landing apartment building to the south — on the northwest corner of Knox Avenue and West 82nd Street — is not part of the deal.

The seller is Minneapolis-based Peerless Land Co. The deal works out to nearly $108 per square foot, or about $820,512 per acre.

The combined estimated market value of the properties is $8.84 million, according to Hennepin County property sale records. The sites, just south of the Southtown Center, were listed with an asking price of $12.25 million.

The area is one-quarter mile east of the 242-unit Genesee apartments that StuartCo built in 2012 as part of the multi-phase Penn-American mixed-use redevelopment on the southeast quadrant of Penn Avenue and American Boulevard. StuartCo partnered with Bloomington-based United Properties and the city on the project, the second phase of which was recently completed with the opening of the Home2Suites hotel and supporting retail at the site.

While StuartCo believes potential exists for residential redevelopment at its new sites, it views the acquisition as a strategic protection of its investment in the Penn-American project to the west, said Ryan Dunlay, StuartCo’s president of development and acquisitions.

“When the opportunity came along to buy the parcels, we felt we wanted to have a say in what might (redevelop) there,” Dunlay said.

Dunlay said StuartCo’s long-range plans are likely to include some residential, but any redevelopment would hinge on market conditions and possible city involvement.

“There’s flexibility at the site to do housing,” Dunlay said. “The city wants density in that district, so depending on the timing we would try to provide a product that not only fits with current zoning, but complements what we started at the Penn-American development to fulfill the vision for the district.”

Although the Penn-American district is zoned for high-intensity mixed-use redevelopment which includes multifamily, any major redevelopment would likely need substantial involvement from the city, said David Knoblauch, principal for Peerless Land Co. Knoblauch owned the parcels for 50-plus years before selling them to StuartCo.  

The city has spoken with StuartCo about future redevelopment at the site, but has not received any development applications, said Glen Markegard, Bloomington planning manager.

“The city’s district plan envisions several of these parcel will redevelop as higher density mixed uses, including a mix of residential, retail and office,” Markegard said.

The Bloomington Housing and Redevelopment Authority purchased and then sold the Penn-American I and II sites to United Properties and StuartCo as part of a development agreement.

The Red Lobster has served up seafood at the site since 1977. Saver’s has been there for more than 15 years, Knoblauch said.

The Genesee apartments opened at 8055 Penn Ave. S. in August 2012. The four-story complex and adjacent town homes have a 95.4 occupancy rate, according to CoStar.

“When Genesee came along there was a lack of new product in Bloomington, and we thought an upscale housing project would do well there,” Dunlay said. “It’s been really well-received and we are happy with how the second phase of the Penn-American development has turned out.”

The city has long targeted the Penn-American corridor for high-density, mixed-use redevelopment and demand still exists for more multifamily housing in that district, said Mary Bujold, president of Minneapolis-based Maxfield Research.

“StuartCo was fairly successful with Genesee, and it’s a strong area” for multifamily, said Bujold, who added that a private/public partnership in redevelopment projects like Penn-American has become a popular method to kick-start urban infill redevelopment.

“Redevelopment is tough when you have to start removing other buildings and put in different [infrastructure] improvements,” Bujold said. “So it’s very logical a city would come to the table and participate in these types of projects.”

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