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With a little help from the city, Yellow Tree Development hopes to bring a 160-unit apartment building to a difficult-to-develop site in Cottage Grove, a community with low rental vacancy rates and a need for more housing.
The Minneapolis developer, which has completed more than 2,500 housing units and 30 buildings in the Twin Cities, is proposing market-rate apartments on a “steeply sloped and wooded site” at East Point Douglas Road South and Hardwood Avenue South, according to a city staff report.
As a market-rate project with no blighted buildings on the site, the $40.8 million development isn’t eligible for tax increment financing. But to help make the project pencil out on the challenging site, Yellow Tree is asking the city to abate 15 years of taxes, which has a value of $1.18 million, according to the city.
Yellow Tree made its case to the city council on Wednesday night. Though the local governing body didn’t take formal action on the tax abatement or any other requests, Cottage Grove Senior Planner Samantha Pierret said Thursday that the council “saw the project favorably.”
Pierret said next steps include a “formal tax abatement process” with the council, followed by a plan review by the planning commission and the city council.
“They’ve got a couple things to work out, like the architectural material standards, parking and access from the road. … But we are willing to work with them,” Pierret said.
Robb Lubenow, co-founder and development lead for Yellow Tree, said the meeting with the council was “encouraging.”
“It’s a very difficult site, but they’re looking for some additional development and different types of housing stock, so they’re certainly supportive,” Lubenow said Thursday.
City documents reveal that the site poses challenges for development, in part, because of its topography, and a restrictive Minnesota Land Trust covenant that doesn’t allow grading to occur beyond the 860-foot elevation point. Also a factor is the “required preservation of a future trail and overlook.”
The elevation increases from East Point Douglas Road South running north. In addition, the staff report notes, the property is located at “a curve in the road with right-of-way on three sides,” which creates additional complications for development.
“It will probably be the hardest site we’ve ever done. We’re building into the side of the hill, so the grade on the site is dramatic,” Lubenow said. “On top of that, we found shallow bedrock through most of the site.”
Lubenow said the plan is to design around the challenges. City documents reveal plans for an L-shaped building with “staggered elevation to preserve the site grades.” In all, the project calls for 129 enclosed and 89 surface parking spaces. Also planned are two levels of covered parking and two surface lots with access points from East Point Douglas Road.
Though Yellow Tree currently envisions 160 dwellings, Lubenow said the project could lose a few units because of the bedrock and other site impacts.
Overall, “I like our approach, kind of wrapping around that hill. It will be a good building in a good location, backing up to the walking trails that Cottage Grove has,” Lubenow said.
Cottage Grove could use more rental housing, based on the findings of a recent report. The city staff report cites a study from Maxfield Research, which shows Cottage Grove’s rental vacancy rate at 2.7%. According to the study, 5% is considered an “equilibrium rate” for rental turnover.
Yellow Tree’s project isn’t the only one in town with problematic site conditions.
Elsewhere in the city, for example, a development team led by Pulte Homes of Minnesota wants to bring 99 single-family and 84 townhome units to part of a 72-acre site at Jamaica Avenue and Military Road. Pierret said in February that the Pulte site is challenging because of its proximity to Lake Robert, the presence of bedrock in the soil, and the need for extra right of way on the site to accommodate future improvements on Jamaica Avenue.
Even so, Cottage Grove has been a hot spot for single-family development, and a number of multifamily projects are in the works. The city saw an uptick in planned housing units last year. In 2024, the city permitted 328 new housing units, up from 267 in 2023, according to the Keystone Report.
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