River Bluffs Center
The former Sunfish Cellars is among the storefronts that have sat empty for three years now as redevelopment plans continue to languish at River Bluffs Center in Lilydale.

Regulatory and financial challenges have prompted the Opus Group to pull out of a proposed five-story senior apartment complex on the former site of the Moose Country restaurant and River Bluffs Center on Highway 13 in Lilydale.

Last month, Opus informed the Lilydale City Council that it had cancelled a purchase agreement with Joe and Linda Schaefer, owners of the 5.7-acre property. Opus had received approval from the city in 2019 to begin final design work on a 143-apartment development on the site.

The Schaefers had owned Moose Country since 1984. They bought the adjoining 29,000-square-foot former Diamond Jim’s Mall in 2004 and renamed it River Bluffs, which was home to around 16 small shops. In 2018, the couple announced plans to sell the site to Lifestyle Communities LLC for a senior housing complex. All of the tenants were told to evacuate by that spring and the site has been vacant ever since. Opus took over after Lifestyle pulled out.

Opus planned a complex with 122 independent and assisted living units and 21 memory care units, with climate-controlled parking at ground level. The building would have been managed by Ebenezer Senior Living.

Opus had asked the city for nearly $4 million in tax increment financing (TIF) for the project. Lilydale Mayor Warren Peterson said Opus pulled out of the deal just before a public hearing was scheduled for the City Council meeting in May.

“I was surprised because I thought it was a done deal,” Peterson said. “We had worked out the financing and we were ready to go.”

“I was surprised because I thought it was a done deal,” Peterson said. “We had worked out the financing and we were ready to go.”

Phil Cattanach, vice president of Opus, said the site was “phenomenal,” but plagued by several challenges. It required setbacks from the bluff to meet the Mississippi River Critical Corridor Area requirements and from Highway 13, which is owned by the Minnesota Department of Transportation (MnDOT).

Because of underlying bedrock, the first level of the building also had to be set aside for parking, which decreased the potential number of units. The long, shallow property “is a complicated site to try to figure out,” Cattanach said. “You couldn’t build what’s there today.”

But perhaps the biggest blow came when the state updated its building code for senior housing that requires steel or concrete for the apartments Opus was planning, Cattanach said. The new regulations, which take effect in August, are intended to protect vulnerable senior residents in case of fire.

“After August 1, it’s unlikely we’ll see much activity in the space until supply and demand get back to being more balanced,” Cattanach predicted.

The other looming issue Opus faced was financing, as many investors have reportedly gravitated to industrial properties and other types of housing. “There were a lot of challenges in financing a project of this nature now,” Cattanach said.

The Saint Paul native was disappointed in not being able to build the project. He said the area still has a demand for senior housing and the location held promise based on the success of nearby Lilydale Senior Living.

Opus worked with the Friends of the Mississippi River and others over stormwater drainage, setbacks from the bluff and the building’s height to stay within state guidelines. Cattanach praised city officials and MnDOT for being part of a collaborative effort that offered “a solution that was sensitive enough to all of the various stakeholders’ needs.”

Opus looked at the potential for offices or retail stores on the site, but found problems there as well. Cattanach said the property has no walkability to other property in the area and little demand exists for offices in the East Metro. The shopping center’s limited size and parking would argue against either use, according to him. High construction costs, the underground parking issue and height restrictions took other housing off the table.

“We did everything we could,” he said. “You know you should never get emotionally attached to a deal, but we certainly were at this for quite a long time. The sellers and the city and really everyone rolled their sleeves up to try to find a way to get there.”

The sale of the property is now being handled by Transwestern real estate. Managing principal Mike Selman said that though the property no longer has appeal as senior housing, he believes he will find a multifamily developer to buy the property and remains hopeful a deal can be completed by the end of the year.

Mayor Peterson seemed less optimistic. “I’m not confident,” he said. “People are looking at it, but I don’t know what’s going to happen.”

— Frank Jossi

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