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Restrictions dictate price of former government buildings in Winona

September 5, 2018
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Rich Dahman

WINONA — $700,000.

That’s the high bid Winona County received for its government center building, an old bank building from the 1960s — two stories plus a basement — that while in fairly good shape, would require some renovation if it gets rented out for office space.

The building will be leased back to Winona County for a year while the county moves most of its operations to the Winona County Extension Office building a few blocks away.

The county board of commissioners has yet to approve the deal, but the bid’s size — and the building’s lack of red tape — are probably tied together.

Tom Hoseck, property manager with Main Square Development, said part of the draw for the government center is its current zoning and other regulatory encumbrances.

“Any building that’s got historic significance downtown, they have to put a lot of investment into it,” he said.

Back to School Sale

Those encumbrances are a big reason the Winona Area Public Schools are still looking to sell their empty school buildings, the former Madison and Central elementary schools.

“They are on the market right now, and we’re taking proposals,” said WAPS Superintendent Rich Dahman.

The school district had received bids of $131,000 and $171,000 for Madison and Central, respectively. That’s a total for two buildings at about half what the county was offered for an office building.

Hoseck said Main Square’s main purpose in buying the government center at this point is to provide commercial parking for its new development going up across Fourth Street at the old Hardee’s block. The building could be renovated for offices or, if the housing demand warrants it, razed to make way for more apartments like the ones going up across the street.

With favorable zoning and a lack of a historical designation, Main Square can do whatever it wants with the government center building.

Meanwhile, the bids for the schools were canceled after the high bidder’s contingency of getting the zoning for the buildings changed by the city council looked likely to fall through.

“It’s completely off,” said Ben Schwab of Building Value Partners, the developer that planned to renovate the deteriorating schools into market-rate apartments and add townhouses on the school properties. “At the last school board meeting they threw out all the bids because my contingency that it be rezoned R3 (high-density residential). They said that gave me an unfair advantage.”

At this point, Dahman said, the schools are listed with a realtor for sale. Rather than go through the bid process, Dahman said the district is looking for someone who has a good plan for the buildings. The lone limitation the school district will put on buildings is they cannot be used as a K-12 school.

However, both buildings come with other regulatory burdens. In addition to being zoned R2, meaning no more than four residential units per building, the schools have been designated as historically significant by the city. That means neither building can be torn down or altered on the exterior without approval by the city council.

Schwab said he is still considering whether he’ll approach the city with a proposal to purchase the buildings.

“I haven’t decided yet,” he said. “It’s a pretty significant risk with the planning commission saying no to rezoning. I don’t know what else you can use it for.”

The City’s Plans

One of the school buildings has caught the eye of the city of Winona, however. Mayor Mark Peterson said the city has been looking to move its Friendship Center into a new, roomier home.

Currently, the senior center is located in a part of the old Masonic Lodge building.

“There’s a lack of parking and space in the building,” Peterson said. “In the last couple of years the idea’s been picking up steam.”

The city had talked with the Winona Area YMCA about partnering with their new building, but that did not work out. Now, he said, the former Central Elementary is a potential option.

“We have expressed to the school district that we have an interest,” Peterson said. “This will take a while before we know whether this facility will work for us.”

Hang Your Hat

Meanwhile, dirt is moving on the block west of Main Street between Fourth and Fifth streets where Main Square Development broke ground Thursday on its development that will include 29 luxury and 31 market-rate apartments as well as 15,000 square feet of office space and a Montessori preschool.

“Affordable housing is certainly a big issue,” said Peterson on Thursday. “And that’s being addressed with the project we’re breaking ground on today.”

Hoseck said the first phase of building on the block where the Hardee’s restaurant formerly stood will include a total of 60 apartments, with another 30 possible during phase two if the demand is there.

“All that commercial space already rented,” he said.

The project will be completed in late fall 2019, though the Montessori will likely open late next summer. “The plan is to get the footings in as soon as possible, get it framed in and do interior stuff this winter,” he said.

As for any plans to turn either of those schools into much-needed housing in Winona, Peterson said it’s still a possibility for Madison. “The city has also undertaken a reuse study on Madison,” Peterson said. “The most likely reuse is housing, but that doesn’t mean some other reuse won’t come along.”

After the zoning and other red tape torpedoed the schools’ sale last month, Dahman said finding a buyer who can work with the issues surrounding the buildings presents a challenge.

“You have to find a buyer who is both interested for the property and their planned usage is possible from a regulatory standpoint,” Dahman said. “The historical designation and zoning definitely plays a role.”

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