March 02--Developer Jim Stolpestad has signed a purchase agreement for the 17-story central post office building on Kellogg Boulevard in downtown St. Paul, with the goal of building at least 250 units of market-rate apartments overlooking the Mississippi River.
Stolpestad, an owner of Exeter Realty Co. and the Ironton Asset Fund, was one of five developers to place bids in January for the Eugene McCarthy Post Office at 180 E. Kellogg Blvd., which was recently vacated.
He declined to discuss the purchase price, but the U.S. Postal Service sought bids of $5 million for the 750,000-square-foot building through property brokers CBRE.
"It's such a big building, there will be parking inside. And we'll have a lot of additional space we'll have to figure out what to do with," Stolpestad said Friday, March 1.
"We signed a purchase agreement on Monday, so we have it under contract," he said. "We have earnest money down. We have a due diligence period that runs until Memorial Day."
The purchase, which would close in July, is the latest evidence that the private market is feeling optimistic about development opportunities in downtown St. Paul.
In late December, the 32-story, 450-apartment Kellogg Square building at Robert Street and Kellogg Boulevard was sold to Bigos Management for $51 million.
Not long after, developers unveiled a plan to redevelop the area surrounding the Sears store near the state Capitol, preserving the store while adding housing and retail
space.
Also in January, the Mille Lacs Band of Ojibwe announced plans to buy the Crowne Plaza Hotel at Kellogg Boulevard and Wabasha Street and the Double Tree by Hilton on Minnesota Street.
The city has added its own market-rate housing to downtown St. Paul with the Lofts at Farmers Market, which opened last year, and the Penfield, under construction near Interstate 94.
In 2010, as part of the renovation of the Union Depot as a transit hub, St. Paul mail processing relocated from the central post office to a new facility in Eagan. Retail postal operations moved in mid-February to the ground floor of the U.S. Bank Building at Fifth and Robert streets. A smaller retail postal location, the Uptown Station in the Hamm Building on St. Peter Street, will close March 23.
Stolpestad said real estate experts have identified the Twin Cities market as the third most attractive in the nation for multifamily housing. Within the Twin Cities market, the vacancy rate for apartments in St. Paul is 2.4 percent, "which is pretty phenomenal," he said.
Stolpestad recently redeveloped the Chittenden & Eastman building, on University Avenue near Raymond Avenue, into market-rate lofts, which are half leased.
The Eugene McCarthy Post Office, built in phases from 1933 to 1966, sits on 1.67 acres of land along the riverfront. Stolpestad said he expects it will qualify for state and federal tax credits targeted to the redevelopment of historic properties.
The project will be privately financed, but he may ask the city and the Metropolitan Council for funding for possible environmental remediation, such as asbestos removal.
"That's typical of a building of that era," he said. "We'll soon investigate that."
Frederick Melo can be reached at 651-228-2172. Follow him at twitter.com/FrederickMelo.
