OWATONNA — The developer of two recently opened apartment complexes in Owatonna took a step toward building a third Tuesday when the city council set a date for a public hearing related to the project.

The new apartment building, to be located at 175 18th Street SW near Hy-Vee supermarket, would be the second phase of South Pointe Apartments. The first phase — a 37-unit complex, located just down the street from the Steele County Fairgrounds — opened on Aug. 1 of last year. The second phase will be located to the east of the current complex, across 2nd Avenue SW.

The current block building that sits on the site — a former but now empty warehouse that has been deemed “blighted” — would be demolished to make way for the new 24-unit block of apartments. That fact that was not lost on Fourth Ward Council Member Kevin Raney, who represents the area in which the old building will be torn down and the new building built.

“We will potentially get rid of a blighted property,” Raney said of the replacement of the old building with the new complex. Then, he turned his eyes to Mac Hamilton, the developer of South Pointe, and added, “Thank you.”

Because the new project is on a piece of property with a building deemed blighted, the property qualifies for TIF — or tax-increment financing. The council voted to hold a public hearing about the TIF district on Sept. 3

The project would be the third set of apartments that Hamilton, the CEO of the Rochester-based Hamilton Real Estate, would build in Owatonna. In addition to the first phase of South Pointe Apartments that opened last year in the south part of town, Hamilton is also the developer of 111 Vine, a five-story, 54-unit higher-end apartment complex located in downtown Owatonna. That complex opened June 1.

Hamilton said Wednesday that the first phase of the South Pointe Apartments have been “extremely well-received” by the Owatonna community.

“We haven’t had a vacancy since we opened 11 months ago,” Hamilton said, adding that though there has been turnover in a few of the apartments, those apartments have been immediately leased again.

“I’m tickled with Owatonna as a marketplace,” he said.

Hamilton said that the second phase of South Pointe, with an assessed value of $2.1 million, will be similar to the first with a few tweaks. There will be just two stories of units with private garages beneath, giving each tenant an opportunity for a garage below. The upper floor apartments will have vaulted ceilings, giving them the feel of being larger units.

Hamilton also said that he and his team had met with city officials on Tuesday before the council meeting and were told that they could make the windows on the new units a bit larger than the windows in the first phase and still meet energy codes.

Current plans are to have 12 two-bedroom, two-bath units; eight one-bedroom, one-bath units; four one-bedroom units with dens; and four studio apartments. Each apartment, with the exception of the studio apartments, will have a balcony.

Hamilton said that when the second phase of South Pointe is complete, that will bring his company up to 119 units in Owatonna. He anticipates beginning work on the new complex in September with completion and occupancy in June 2020.

“When you see the opportunity, seize it,” Hamilton said.

The South Pointe units will be “market-rate” apartments, he said, while the downtown apartments — 111 Vine — are more expensive. That could account for why the downtown complex is not yet full, he said.

“It was a cultural shock for the community,” Hamilton said of the downtown complex. “It’s a contemporary, edgier building — something they haven’t seen before.”

And, he added, it was a more expensive building to build. With an expensive building, the rent had to be higher, he said. Still, he believes it will be successful.

“I believe in it,” he said. “It will do well.”

There may be a possibility for a fourth block of apartments in Owatonna for Hamilton, but that depends on how the 111 Vine complex pans out, Hamilton has said. That fourth complex would also be downtown, just a block over from the Vine Street apartments on Pearl Street.

In 2017, the City of Owatonna signed a development agreement with Steve Nicolai of Nicolai Builders for the construction of a 33-unit apartment complex with underground parking in the 100 block of East Pearl Street in downtown Owatonna. The original agreement between the city and Nicolai said that the project would start at the end of last year, which it did, with a completion date set for the end of 2018, which didn’t happen.

The city pushed the completion date on the Pearl Street project in part because the architect with whom Nicolai had worked died unexpectedly, forcing Nicolai to start over.

It was then that Hamilton entered the picture with the Pearl Street project. Hamilton expressed interest in the Pearl Street property, the city connected the two, and a purchase agreement was drawn up for the property. The city agreed to transfer the development agreement to Hamilton, as well as the tax-increment financing plan.

But the development of that property is on hold until Hamilton sees how 111Vine works out.

Still, Hamilton is pleased with Owatonna and the response he has received from the community.

“I think the community is grateful that we are doing something about the housing issue,” he said.

Reach Managing Editor Jeffrey Jackson at 444-2371 or follow him on Twitter @OPPJeffrey.

Jeffrey Jackson is the managing editor of the Owatonna People's Press. He can be reached at 507-444-2371 or via email at jjackson@owatonna.com

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