Bloomington city officials want to transform the Penn American District into a denser, more urban style of development. Recently, ground was broken on a project that’s exactly what planners are hoping to see in the area.

Phase II will bring a commercial focus to the development, which launched two years ago with the opening of the Genesee Apartments at the intersection of American Boulevard and Penn Avenue S. Three commercial tenants have already signed leases:

• Home2 Suites by Hilton, an extended-stay hotel.

• Fresh Thyme Farmers Market, a grocery focused on affordable organics.

• Red Robin Gourmet Burgers, a casual dining chain that also offers full liquor service.

Both Home2 Suites and Fresh Thyme are making their first entry into the Twin Cities market. The project is expected to open in about a year.

“The big thing is, it’s more momentum for the district,” said Glen Markegard, Bloomington’s planning manager. “We’ve talked with numerous residential developers who are interested in this district, and one of the uses that really attracts them is the Fresh Thyme. They regard that as an attractive amenity.”

United Properties is handling the project in partnership with StuartCo, which owns the Genesee Apartments. Keith Ulstad, senior vice president at United Properties, said the site is well-positioned for more commercial development.

“Our site is kind of smack in the middle of the most dense daytime office population outside of the central [Minneapolis] business district. So we feel very good about our commercial prospects,” Ulstad said, noting the proximity to Centennial Lakes, Normandale Lake and the airport area. That’s important for a restaurant like Red Robin, which needs more than just a dinnertime crowd to thrive.

The new approach for the Penn American District did hit one snag recently when the Bloomington Planning Commission rejected another proposal, for rezoning of the Southtown Shopping Center area. That proposal would allow existing businesses to remain as they are, but require new development or major redevelopment to follow regulations calling for taller buildings, more sidewalks, and multiple uses including retail, housing, hotels and offices.

The proposal, which has run into opposition from the shopping center’s owner, is scheduled to go before the City Council on Oct. 6. The planning commission vote was nonbinding.

Different starting points

Ulstad said neither his project nor Southtown is necessarily the only answer for development in the area.

“I don’t think either of us is right or wrong,” he said. “The fundamental difference between us and them is the starting point. They’re starting with a shopping center which by all metrics is successful. They legitimately feel they’re bringing the community something it wants.

“With us, we went in and before we even bought the land, we had worked our deal with the city and the HRA [Housing and Redevelopment Authority]. It was, ‘Let’s look at your vision for this.’ And we can execute on that.”

Ulstad added, however, that mixed-use development like the Penn American project is “probably the wave of the future. In today’s world, you don’t have the luxury of building a big, spacious parking lot with little landscaping and no stormwater [drainage system].”

Bloomington’s HRA assisted both phases of the Penn American project by buying the land and selling it to the developers at less than market rate. Doug Grout, the city’s HRA administrator, said the city will recover much of its investment through an eight-year tax increment financing district covering both sites.