Rochester finally looks to land $150M apartment building next to Mayo Clinic expansion

ROCHESTER - It took four years, a new developer and debate over whether to use city incentives, but a new 340-unit, $150 million apartment building across the street from Mayo Clinic’s $5 billion expansion is back on track.

The Rochester City Council last week approved tax-increment financing for the long-awaited CityWalk Apartments project. The complex, which was first announced in 2021, more than doubled in size and added tens of millions of dollars to its bottom line before new developer Reuter Walton brought it before the city this spring.

Nick Walton, CEO of Reuter Walton, said the company plans to close on construction funding in November and begin demolition for the project in December. He said Reuter Walton was happy to build a project next to Mayo, as staff have ties to the area and to Mayo workers.

“We wanted to build an amazing building they could call home after an important day at work helping others,” he said in a text message.

The project already garnered $500,000 in state funding to improve street infrastructure at 2nd Street and 6th Avenue SW. If it opens on time in 2028, CityWalk will be the closest apartment to the new Mayo Clinic expansion and across from one of seven new transit stations along a proposed rapid transit line that’s set to start construction next year.

The tax increment agreement would result in a little over $18 million in savings by exempting the property from taxes for up to 25 years, though final details need to be set by the end of June.

Several council members had misgivings. Council Member Patrick Keane said at a May 20 meeting that he was concerned that there wasn’t enough evidence the project needed financial assistance from the city, while Council Member Norman Wahl said he was wary of using tax-increment incentives for another major project.

“I’m a little worried that almost every project can say ‘Well, you know, I’m bettering this corner or this block, and because of that I get to keep the enhanced property taxes for 15 or 20 or 25 years,’” Wahl said. “That is troublesome.”

City staff said the project qualifies for assistance in part because developers probably couldn’t secure bank loans or investor funding without it.

The city, county and school district also wouldn’t receive increased taxes in the long run without the project, city staff argued. The CityWalk site is valued at a little over $3 million at the moment, but is estimated to be valued at around $86 million once the apartment project is complete.

Josh Johnsen, Rochester’s strategic initiatives director, said seven similar tax-increment financed projects are scheduled to stop withholding taxes over the next year. He also pointed out that downtown Rochester hasn’t had new market-rate apartment units since 2020 — one apartment project, Bryk on Broadway, has fixed-rate pricing, while the First & Banks complex at the site of the former YMCA is still under construction.

The CityWalk project idea has been around since 2021, before Mayo officials announced a $5 billion expansion downtown, when Twin Cities-based DM Cos. started buying property at 2nd Street SW. near 6th Avenue.

Developers initially proposed a six- to seven-story building with 130 to 140 units, but the project grew in scope.

In preparation, developers have bought up surrounding lots that included the century-old house built by then-Mayor Martin Heffron in 1919. Reuter Walton didn’t get involved in the project until late last year.

About three-quarters of CityWalk Apartments will be long-term rental units, ideally taken up by Mayo employees, with 90 spots for short-term rentals for families and Mayo patients. Reuter Walton officials said they plan to charge “market-rate premium” rents based on the area’s need.

Walton said his team took design elements from a similar complex, Forte on the Park, in Minneapolis, though the units in Rochester will be smaller with more amenities.

Those amenities include a fitness center, golf simulator and game lounge, a conference room and co-working space, an outdoor fire pit, a sky lounge, coffee bar and a pool deck, among other things. Apartments are expected to range in size from 400-square-foot studios and short-term units to two-bed, two-bath units at more than 1,500 square feet.