Downtown rail yard redevelopment restarts with city approvals readying for vote

A redevelopment announced more than three years ago on the east end of downtown is now moving forward.

Iowa-based Christensen Development plans to purchase about 4 acres of former rail yard land from the city of Sioux Falls east of 8th & Railroad Center.

The land sits south of Eighth Street, and the $95 million development plan includes three multistory buildings plus a parking ramp.

“I think the vision is almost identical,” founder Jake Christensen said. “We made some refinement to the overall site plan, most notably the parking ramp is on the south end of the project instead of the south end of the first building, (but) the makeup of the project is virtually the same.”

The concept includes a 60,000-square-foot retail and office building with retail on the first floor and four floors of Class A office.

“We were delayed, but the market is responding very differently now than it was six months ago in terms of office, so I think the timing is good,” Christensen said. “We have several interested parties, some of which have been part of the mix all along, but in the last 90 days we’ve gotten pretty significant interest from a couple other groups that would take sizable portions of the building. So the activity is much stronger than it has been at any other point.”

There’s an opportunity to build an internal staircase to allow for two-story office floor plans, as well as potentially do a lease as small as 1,500 square feet, he said.

There is interest from a Des Moines-based retailer in the project, as well as a plan for food and beverage.

“We actually have had a couple of good meetings with groups not from Des Moines but new to Sioux Falls,” Christensen said.

There will be underground parking for tenants in addition to the ramp that will serve the development.

The other two buildings will be apartments — roughly 300 units between them — with a rooftop indoor-outdoor lounge for development tenants. Both apartment buildings will have fitness centers and grilling areas.

Rents are being set to range from about $900 to $1,450 per month for studio through two-bedroom floor plans, intended as “workforce housing.”

“So it’s focused on anybody in that economic spectrum,” Christensen said. “What it will do is add supply in that space if someone is paying almost that and wants to upgrade to a new building.”

There also will be an on-site dog park, bike and dog wash stations and bike storage, as well as potentially raised planter beds for gardening.

The plan was to build more downtown apartments as other newer properties filled up, Christensen said.

“I think there’s some continued absorption that needs to occur, but the earliest it could be done is the beginning of 2028, and we are pretty bullish on being able to start our first apartments shortly after we get the first building under construction,” he said.

Assuming the City Council approves the deal, the first building would start construction later this year and be done by the end of 2027. Construction of the apartments is estimated to take 14 months once it starts.

Christensen’s project originally was selected through a competitive process because “it was the proposal that best fit the rail yard redevelopment plan,” said Jeff Eckhoff, the city’s director of planning and development services.

“It provided the most density, the best mix of retail, office, residential; it just really fulfilled the mission of the plan.”

The city is recommending a tax increment financing district be established around the development to support the cost of redevelopment. It would allow Christensen Development to utilize up to $8 million in increment to support creation of a parking ramp that can be used by the public on nights and weekend.

The development’s estimated future value is $45 million initially and $60 million by the end of a 20-year TIF. Some of the land is being retained by the city for a bike trail connection.

The TIF is supported by “the high cost of development in the downtown area,” Eckhoff said. “There’s bedrock on the property, there’s some soil remediation that will have to be done, and we also know to get the density we want downtown, he has to go above and beyond with parking.”

The sale of the land will happen at the same time the TIF is voted on April 21.

The proposed purchase price is $1.66 million, the same cost per square foot that the Cherapa Place development paid for other parcels of rail yard property.

“Our goal is always the highest and best use,” Eckhoff said. “It is just different than other land downtown because of the rail line and the amount of bedrock. But we settled on the same price.”

As with other TIFs downtown, the developer is required to personally guarantee the loan in the event the development were not to generate the expected increase in property taxes. There also are protections for the city if development does not begin in a set amount of time.

Christensen, who founded the firm in 2003, had been looking to expand from Des Moines into another market for several years and was introduced to Sioux Falls by ISG, which is designing the Cherapa Place expansion and locating its office there. The two had worked together previously.

Because Christensen is a new developer to Sioux Falls,” we spent a substantial amount of time working with (the city of) Des Moines, touring properties he’s worked on, having conversations with city staff in the Des Moines area, to become more familiar with his work and how he has worked with the city in Des Moines,” Eckhoff said.

ISG is the architect on the project, and Journey Construction will be the general contractor.

At first reading Tuesday night, Christensen addressed the delay in bringing the project forward since it originally was announced.

He said he waited in part for the market to absorb the inventory added with Cherapa Place and The Steel District, as well as needing an easement from an adjacent property for life and safety issues.

“We achieved a win-win for all parties and I think the city is better for it as well,” he said.

Second reading, which includes a vote, is scheduled for April 21.

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