As part of its agreement with the city, Dayton's agrees to keep the store open for 10 years. If it leaves sooner, it must repay the city's $6.3-million subsidy. "They're spending about $100 per sf for the remodeling, so I would have to say that is pretty substantial," says Mike Scott, a retail broker with Bloomington, MN-based United Properties.
City officials were applauding the deal given Dayton's importance to Downtown St. Paul's commercial district. After all, it comes at a time when Downtown retail is shrinking fast despite costly attempts to boost consumer traffic with the expanded convention center,new hockey arena and new Science Museum.
Downtown St. Paul has added the equivalent of an office building with conversions of retail to office space. Town Square converted its retail to office space several years ago, and the World Trade Center and Galtier Plaza are both well into plans to converttheir considerable retail areas into office as well. For the most part, if you throw out the coffee shops, the copy centers and the places to eat, Dayton's is about all that's left of retail in Downtown St. Paul.
Dayton's spokeswoman Melissa Stark confirmed that an agreement with the city was close, but says that the retailer had not signed a deal yet. Officials close to the deal expect an announcement next week.
The $20.45 million deal breaks down to Target Corp. paying $12.65 million, the city paying $6.3 million and the Minnesota providing a $1.5 milliongrant to pay for asbestos removal. Of the money, $16.93 million would be spent to remodel the interior, $1.57 million on exterior improvements, $456,000 on parkingramp upgrades and the $1.5 million for asbestosremoval.
Retail analysts would argue the city is getting a bargain for its $6.3 million. A study Jim McComb, a Minneapolis-based retail real estate consultant, did for the St. Paul Port Authority shows that other cities have spent considerably more on keeping orattracting department stores. For instance, Minneapolis spent some $53 million to lure a Target store to its Downtown.
The St. Paul Port Authority represented the city in negotiating the Dayton's deal. Dayton's is likely to convert at least part of the vacated 140,000 sf of space to office, which could add to the building glut.
A new report from United Properties concludes that Downtown St. Paul's office vacancy rate is 11.8%, one of the higher rates in the Twin Cities. Add to the rolls all the space available for sublease, and that vacancy goes up to 15.1%, according to United.
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