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Plans for third Discovery Square project emerging

Developer looking at options for third building before tenants are secured for second building on Mayo Clinic-owned lot.

04 Two Discovery Square
The fifth floor of the Two Discovery Square building on Tuesday, Jan. 11, 2022, in downtown Rochester. Plans are emerging for a third phase of the project
Joe Ahlquist / Post Bulletin
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ROCHESTER — A proposal for a third building by Discovery Square developer M.A. Mortenson Co. is emerging as efforts continue for finding tenants of the second.

Catherine Malmberg, Destination Medical Center Economic Development Agency director of public infrastructure and development strategy, said a seven-story Three Discovery Square is being planned next to the first two buildings.

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“It fills out the block,” she said of the site on the northeast corner of Third Avenue Southwest and Fifth Street.

The proposal, which is expected to be reviewed by the DMC Corp. board in September, calls for space to be equally split between lab space and areas that would hold FDA-certified manufacturing facilities.

“I do not believe there are any other spaces like this in Minnesota, so that would be a very unique aspect of this proposal,” she said of the certified space.

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The unique space drives increased construction costs, which are estimated at $72.8 million for the proposed 156,000-square-foot facility, which is expected to come with a request for $12.7 million in public subsidy.

DMCC Chairwoman Pam Wheelock pointed out the potential public funds nearly mirror the $12.8 million in planned owner equity for funding the project.

“If we are going to invest at that level, is there some creative way to structure our financing so we have some upside potential for the future?” she said.

The proposed match outpaces the percentage of DMC contributions to the first two buildings, but DMC EDA Executive Director Patrick Seeb said some flexibility exists if Mortenson outperforms current estimates.

Malmberg said the public benefit would be the creation of up to 330 permanent jobs and the potential to generate $951,250 a year in property taxes.

DMCC board member RT Rybak said the project is important but could be approached differently to partner with Mortenson and protect potential public amenities.

Another concern was the lack of tenants in the neighboring Two Discovery Square doesn’t have any tenants at this point, but Chris Schad, director of business development for Destination Medical Center’s Discovery Square District, said discussions have started with potential occupants.

“There are conversations with numerous companies on every floor,” he said.

Randy Petersen joined the Post Bulletin in 2014 and became the local government reporter in 2017. An Elkton native, he's worked for a variety of Midwest papers as reporter, photographer and editor since graduating from Winona State University in 1996. Readers can reach Randy at 507-285-7709 or rpetersen@postbulletin.com.
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