Minneapolis-based Hillcrest Development had proposed converting the 530,000-sf retail center into high-tech offices, reserving the option of using it for warehouse and light industrial purposes in the interim. The deal would have required a new tax increment-financing district, a subsidy equal to about$4 million over 15 years.

Hillcrest had already arranged to sign an 80,000-sf lease with Liberty Enterprises, a Mounds View, MN-based company that sells payment and marketing systems to credit unions.

Since Apache Plaza is in a residential neighborhood, the plan would have required a change in zoning. City Council members, who rejected the project in a 3-2 vote, were concerned about converting the area to industrial use, even on a temporary basis. Instead, they prefer a mix of residential, retail and office uses.

"There's really no chance of reviving the project at this point," says Spencer Isom, assistant to the city administrator of St. Anthony Village, an inner-ring suburb just north of Minneapolis.

Over the years, key tenants have left Apache, including J.C. Penney, Braun's, Woolworth and Minnesota Fabrics. The building also has changed hands. A partnership managed by West St. Paul development firm C.G. Rein Co. turned the deed over in 1995 to the property's lenders, U.S. Bancorp., which now holds the property in a subsidiary called the Ste. Marie Co.

Shortly after the deed was turned over, Minnetonka-based Opus Northwest tore down part of the mall and built a separate Cub Foods building and businesses across the road, including a Video Update and a gas station. But plans to redevelop the rest of the center never came to fruition.

The council wants to develop a comprehensive plan for the 35-acre site as well as the larger area around it. The city is in the process of applying to the Minneapolis Metropolitan Council for $150,000 to cover planning and pre-development work, which the city would match.

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Plan to Convert Apache Plaza to High-Tech Office Use Blocked by City

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