|By Jennifer Bjorhus, Star Tribune,
MinneapolisMcClatchy-Tribune Regional News
August 12, 2010 -The Mall of America has revived long-delayed plans for a luxury hotel, thanks to federal stimulus help.
The $130 million project was nearly scuttled two years ago when financial markets seized. But an important piece of financing fell into place Tuesday when Hennepin County indicated it will allow the Bloomington Port Authority to issue $40.3 million in desirable tax-exempt bonds for the project -- a financial tool created by the 2009 stimulus bill. Typically, tax-exempt bonds are used for public projects such as roads and bridges.
The County Board is expected to approve the move Tuesday.
The federal government offered the county that amount in tax-exempt bonds, but qualified projects had to be significant and shovel-ready and start construction by the end of this year. There wasn't much to choose from in Hennepin County, Commissioner Randy Johnson said.
"This was the only one that qualified," said Johnson, who happens to live in Bloomington. "Now that the Twins ballpark is done and you look around, there is not a lot of working cranes in the Twin Cities."
Tax-exempt bonds are attractive because investors don't pay taxes on the income. Because of that, investors will accept lower interest rates than offered by conventional bonds. That will result in cheaper financing for Mortenson Development, which is working with the mall owners on the deal.
The 12-story hotel, proposed to open in 2013, is not the blow-out, much-discussed Phase II expansion the Mall of America was trying to finance earlier. But the 501-room hotel now will mark the first step of Phase II, mall officials said. Next in line is the Mayo Clinic's project at the mall, which mall officials said they hope will break ground in a year.
Mortenson Construction, the hotel's general contractor, plans to build against the south side of the mall between Macy's and Bloomingdale's, demolishing existing parking. The hotel will feature a spa, restaurants and 22,000 square feet of meeting space above three levels of public parking. A skyway will connect to the mall's second floor.
"It's intended to be a much more upscale sort of hotel than is sort of generally in that vicinity," said Paul Campbell, senior vice president at M.A. Mortenson Co. in Golden Valley. He and the mall's owners are thrilled.
"It's been a challenge, to say the least, to put this deal back together," said Kurt Hagen, senior vice president of development for Triple Five Corp., the Edmonton, Alberta, real estate company that owns the mall. "We're very close, and we're very excited about that." Triple Five, owned by the Ghermezian brothers, and its partners developed the mall, which opened in 1992.
Several local construction workers showed up to support the project when the Bloomington City Council approved the revised final development plan last week. They really need the work, they said.
"You just can't imagine what it's going to be like for our families," said one man who identified himself as a construction worker who's been unemployed since November.
Scott Gale, business manager of the Minneapolis Building and Construction Trades Council, which represents about 22 local unions, told the City Council that the hotel "means jobs for my members." Unemployment and underemployment among his members runs close to 50 percent, Gale said in an interview.
State Rep. Ann Lenczewski, DFL-Bloomington and the House Taxes Committee chair, said the Mall of America hotel project also got an important assist from several provisions in a 2010 state jobs bill, including one statewide provision that enables the City of Bloomington to use excess tax-increment funding (TIF) money already collected -- but no new tax increments -- to help fund the hotel. TIF uses the extra property taxes from the enhanced market value of a development to pay for part of the development costs, instead of going to local government.
The jobs bill also authorized the city and mall to use money collected from special mall taxes to fund any Phase II project.
The mall's owners may contribute the land for the hotel, valued around $12 million, in exchange for partial ownership, Hagen said.
Mortenson and Mall of America officials are talking to potential hotel operators and could finalize a deal in a few weeks, Hagen said. Campbell, of Mortenson, said Marriott is currently "sort of on the sidelines" and that discussions are going on with Starwood and Radisson. The hotel operator may also have part ownership in the hotel, Campbell said.
"That's the one part of the overall package that hasn't been finalized yet," Campbell said.
Campbell said the biggest question mark on the project is starting construction by the end of the year without dusting up the mall's all-important holiday shopping. They probably won't go full bore on construction until after the holidays, he said.
"We'll figure that out," Campbell said. "It would be very exciting and very gratifying if we're able to pull this off."
Jennifer Bjorhus --612-673-4683
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