The developer of the vacant Home Depot site in Cottage Grove has letters of intent in place with various retailers and is soon expected to sign a development agreement with the city.
Cottage Grove officials began working with Wayzata-based HJ Development, Inc., earlier this year to secure leases for the empty commercial site that anchors the Gateway retail development.
In May, Mayor Myron Bailey confirmed the developer had put money down for the anticipated $7.1 million redevelopment project and was given five months to secure leases.
Multiple attempts to reach HJ Development were unsuccessful, but founder Gary Janisch confirmed the company was handling the redevelopment of Home Depot.
The Cottage Grove Economic Development Authority approved the plans to move forward last week but did not name the intended leaseholders.
However, Bailey said the progress is positive.
“I am encouraged by the movement, but the biggest challenge I would say, from a development perspective, is trying to get all the parties joined together,” he said.
Previously, LA Fitness was going to be the anchor tenant in the Home Depot building redevelopment.
While the developer secures the leaseholders, the redevelopment also includes improvements to infrastructure, parking and access, and even-use agreements with adjacent property owners.
City Administrator Ryan Schroeder told the EDA last week that in order for development to occur on the adjacent and vacant Hollywood Video site, access to water lines emanating from the Home Depot parcel is needed.
If the water lines are not accessed, redevelopment at Hollywood Video would not be possible.
In order to facilitate the improvements, the EDA requested that the city partner with the Home Depot developer. The partnership, Schroeder explained, would result in a financial gain for the city.
“It is proposed we would invest about $500,000 into the (ownership of the) parking as part of the closing,” he said. “When the developer closes on the property, we would lease the parking back to the developer through a benefit assessment.”
The agreement will give the city a 5 percent return on its investments over a 10-year period.
The EDA is also expected to enter as a “limited partner,” Schroeder added, with an investment of $322,000. The EDA’s involvement reduces the required project debt and assists in meeting lender equity requirements.
Funding for the redevelopment project could also be curbed by using Property Assessed Clean Energy loans, Schroeder said. The city of Cottage Grove recently partnered with the St. Paul Port Authority to participate in the voluntary program that funds clean energy projects across Minnesota.
“We intend to take advantage of the PACE loans for energy improvements such as lighting or windows,” Schroeder said.
Earlier this year, Bailey said some business development in Cottage Grove was contingent upon what goes into the vacant Home Depot site, adding that if it is filled it could entice other retailers to occupy other vacant sites.
“The fact that this is being brought to us at this time leads me to believe we’re progressing forward,” he said.