A bulldozer appeared this week on the former Sharkee’s lot signaling work is about to begin on the long-awaited Towne Square Addition.
Luverne developer Don Jahnke announced Monday that financing is in place and construction can start this summer on the three-story apartment building.
He also announced a micro winery and Mexican restaurant will be part of the commercial portion of the development.
‘Seven Five Lofts’
Known as “The Seven Five Lofts,” the housing development will offer 27-units as a mix of one- and two-bedroom market-rate apartments geared for single renters or young families.
“We’re just so excited to finally get moving on it,” he said about the plans that began in 2017.
The project qualified for a federal Workforce Housing Grant through the USDA and the location later became eligible for Opportunity Zone incentives through the federal Tax Cut and Jobs Act of 2017.
Meeting requirements of the two federal programs was cumbersome enough, but the process ground to a halt when the government shut down from Dec. 22, 2018, through Jan. 25, 2019.
Since then, Jahnke has been working with lenders on the project to qualify for Opportunity Zone incentives and meet the criteria for the Workforce Housing Grant.
The paperwork fell into place this spring and the bank signed off on financing last week.
“If it weren’t the town I live in, I wouldn’t have fought so hard to get this done,” Jahnke said. “None of this has been easy.”
For example, to keep the apartments affordable for working class renters, he was encouraged to build the three-story project without an elevator.
“I just couldn’t do that,” Jahnke said. “I can’t see a single working mother carrying her groceries and her baby up three flights of stairs.”
He said he didn’t see an elevator as a luxury.
“I don’t care if you’re 35 years old and healthy. You could get in an accident and need a wheelchair,” Jahnke said.
“A lot of this is why developers don’t build apartments in small towns. You don’t have 500 working class people to pick from to fill these apartments. I want to be able to get any people from any demographic to fill these apartments.”
As it is, the apartments will rent for $895 to $995 per month.
Without the federal grants and incentives, and without support from the city of Luverne, Jahnke said the project wouldn’t be feasible.
“There’s a reason developers don’t build market-rate apartments in small towns,” Jahnke said. “You don’t have enough people for it to cash flow.”
The Workforce Housing Grant was initially approved to accommodate employees for Tru Shrimp, which fell through. But housing studies show apartment rentals are more than needed in Luverne to meet existing demand plus more than 250 Premium Minnesota Pork workers starting this summer.
Coming soon: micro winery and Mexican restaurant
The overall plan is to transform the entire six-acre area over the next five years into a commercial and housing neighborhood known as the Towne Square Addition.
Jahnke is focusing on the apartments first in order to meet local housing demand, but he announced commercial plans for the Highway 75 corner of the addition.
“Blazing Star Winery,” a micro-winery named for a local wildflower, will feature wine made with grapes grown in a vineyard east of Towne Square in Warren Baker’s land he recently sold to the city.
Jahnke said a friend of his who already has two micro wineries in central and northern Minnesota will plant 4,000 dry-root vines this week for grapes that will be harvested in 2022.
The Mexican restaurant, “Fiesta Brava,” which is committed so far on a verbal agreement, will be a sister restaurant to the one in Rock Rapids, Iowa, under the same ownership.
City contributions
The city this week will start on the preliminary dirt work to be included in the Tax Increment Financing for the district that was formed from the former Sharkee’s and Mert’s Repair properties.
“This is a really good news story,” Mayor Pat Baustian said Monday. “We could use some good news right now.”
The project utilized a $680,000 grant through the Department of Employment and Economic Development that was set to expire next year.
The grant required a matching investment from the city, which fulfilled that obligation with a $469,000 investment in improvements (water, sewer, electric, etc.) to the initial four-acre site.
Meanwhile, the TIF district will recapture some of the acquisition and demolition costs.
The city paid $220,000 for the condemned Sharkee’s property and $160,000 for the piece that housed Mert’s Repair (that moved to a new shop built on a city lot in the industrial park).
The costs for acquisition, demolition, and site improvements of both lots (nearly $500,000) will be recouped with future tax increments.
What that means is new owners of the bare lot will pay full taxes on the improved property, but the difference between the current tax amount and the new tax amount will pay down the TIF debt.
After the TIF expires in 25 years, local governments will benefit from taxes paid on the full value of the developed lots.
The multi-phased project could produce up to $10 million in market value once the whole area is developed.