Old Post Office Becomes New Custom House

7 min read

Unique partnership finds multiple uses for St. Paul landmark

Opened in 1934, the 17-story Art Deco United States Post Office and Custom House changed the St. Paul skyline. It may not be the tallest building in the city, but clad in granite and Minnesota Kasota limestone and broadly anchored near the Mississippi River, it represents the strength of the government it was built to serve. Its storied history includes a funding scandal with national repercussions and investigations into federal spending around the country, multiple vertical additions, and nearly 80 years of continuous use as a U.S. Post Office.

2016 marked a new chapter for this monumental 748,000 square foot building as it opened as the reborn Custom House, a multi-owner historic rehabilitation. Located on the edge of St. Paul’s Lowertown Historic District, St. Paul-based developer Exeter Group took on the project in 2013 for what has become its second award- winning conversion in direct response to the 2010 passing of Minnesota’s Historic Structure Rehabilitation State Tax Credit. “We like unique and creative projects, and obviously historic rehabilitations, as challenging as they are, lend themselves to that,” said Tom Nelson, Exeter Group Principal and Chief Investment Manager. “The addition of the 20% State Historic Tax Credit, cumulative to the 20% Federal Historic Tax Credit, has allowed us the opportunity to do creative work in urban infill.”

Exeter’s development plan centered on the creation of 202 units of luxury apartment housing in downtown

St. Paul with first class amenities, including some of the best views of the Mississippi River St. Paul has to offer. Taking advantage of these views, amenities include a Rooftop Terrace that boasts a pool, spa, outdoor kitchen,lawn bowling and fire pits. Residents enjoy 10-foot ceilings, state of the art appliances, and premium flooring and finishes. A 1961 six-story annex was converted into three levels of indoor parking, six lofted housing units and a three-story self-storage facility managed by Acorn Self Storage.

While Exeter’s plans were robust, there was still more opportunity to develop over 150,000 square feet of the exceptionally large building. Utilizing a condominium structure, Exeter sought out a top quality developer to sell four lower floors and part of the first floor for the development of downtown St. Paul’s first hotel offering since the mid-1980s. This type of shared ownership is often seen in mill complexes or old brewery campuses, but what makes the ownership model different at Custom House is the sharing of vertical space and a unique set of challenges and solutions this brings, primarily in the funding of the overall project.

Bound together in a three-legged race
Exeter found what they were looking for in Nelson Construction & Development and Hyatt Hotels. Red Leaf Development, an EB-5 investor also known as SPMU, is a co-developing partner for the hotel. Nelson Construction

& Development has partnered with Hyatt in other Midwest cities to create unique hotel experiences; they developed the first historic Hyatt Place in downtown Des Moines and a Marriott Residence Inn in Omaha. Their experience with Historic Tax Credit projects was integral to a successful co-ownership of the space. “We were an amendment to the Part 2 application for the State and Federal Historic Tax Credits,” explains Danny Heggen, Nelson Development Project Manager, “so we were bound together [with Exeter] in a three-legged race, and we had to come across the finish-line at the same time to make the project equity work.”

Since the hotel occupied many of the earliest post office lobby, sorting, and office spaces, historic finishes and features were very influential in the design scheme. Guests check in at a historic teller window on the first floor, walking across marble floors that still show the patterns of lines formed by patrons patiently waiting to mail birthday cards and Christmas presents for 80 years.

Taking cues from the historic fabric of the building, the Hyatt design team, along with BKV interior design, broke from the usual fixtures and finishes. This is most apparent in the guest corridors where historic terrazzo floors have been retained and lighting solutions were created to respect the historic hanging halogens and the Art Deco influence of the 1934 building design. Vibrant jewel tones bring life to guest rooms that feature 16-foot ceilings, large 13-foot windows, and Art Deco influenced textiles and decoration.

One of the biggest challenges that the hotel development faced was creating a lightwell between the original 1934 building and the 1961 annex, a design feature critical to creating guest rooms in that part of the building. The hotel now offers 149 guest rooms on four floors thanks to this adaptation.

City alters zoning requirements

Tom Nelson of Exeter credits the success of the Custom House to solid city planning and infrastructure, as well as the leadership of city officials. “The city staff at the St. Paul Planning and Economic Development Department were absolutely critical to the success of the project,” says Nelson. “The leadership of their team helped orchestrate the tax increment financing (TIF) district, a zoning change that allowed for the self-storage facility, and advocacy for infrastructure that surrounds the Custom House at street level.” St. Paul mayor Chris Coleman has also been an outspoken supporter of the reuse of the U.S. Post Office and Custom House, speaking at many of the building’s grand opening events.

No supporter, however, has been more important than Exeter Group’s own Chairman and Principal Jim Stolpestad. It was his vision and personal investment in the project that made the Custom House possible. With a Bachelor’s degree in history from the University of Minnesota and deep roots in St. Paul history, Stolpestad not only led the development of the Custom House but was inspired to write and publish a book about the building at the same time.

Working within the current infrastructure in place near the Lowertown Historic District, the inventive repurposing of this 1930s-era federal building is an experiment in modern urban planning. Residents and patrons of Custom House rely on a transit-oriented development model.

Even with the three floors of indoor parking created in the 1961 annex, the location of Custom House in land-constrained downtown St. Paul makes public transportation a necessity. Its location directly across the street from the multi-modal Union Depot transit hub – servicing Amtrak trains, local and regional buses, and lightrail trains – and adjacent to the Samuel H. Morgan Regional Trail for bikes and pedestrians – make the Custom House easily accessible by nearly every form of transportation in the city. This accessibility, coupled with the proximity to St. Paul’s business district, the new CHS Field (home of the minor-league St. Paul Saints), and the hip warehouse district of Historic Lowertown – make Custom House an ideal place to live, work and play.

For all involved in the project, they see the rehabilitation of large obsolete historic buildings as an important element of future real estate development in cities across the country. Exeter Group began its third historic project in the Spring of 2016 with the rehabilitation on the east side of Saint Paul of the original 3M Headquarters Building. The cumulative 20% State and 20% Federal Historic Tax Credits have been a key economic factor for these re-developments. So, while consumers are demanding a type of authenticity of place that comes from buildings that are part of the historic fabric of a community, without the financial subsidy provided by the credits, opportunities derived from projects like these would remain unrealized.

Bill MacRostie is based in the MHA DC office where he advises clients on historic rehabilitation tax credit design and regulatory issues. From 2000 to 2003, Bill was the Washington, DC principal of a national historic consulting firm. From 1997 to 2000, he was National Director of Historic Property Services for Ernst & Young LLP where he advised developers, institutional investors, and equity syndicators on historic certification matters. While at E&Y, Bill originated historic credit investments for the firm’s corporate and institutional clients. Bill has also worked for Langelier Historic Properties, Inc., an equity syndication firm specializing in rehabilitation development, and served as an architectural historian on the staff of the Technical Preservation Services Division of the National Park Service in Washington, DC where he performed historic tax credit project review. In private practice for more than 30 years, Bill has advised clients nationwide on projects ranging in size and type from the multi-phased $175 million mixed-use Stroh’s Riverplace project in Detroit, Michigan to a $1.5 million hotel rehabilitation in Santa Rosa, California. He has represented clients in over two dozen tax certification administrative appeals in Washington, DC. For the 14 years that NPS certification project review was conducted in regional offices, Bill worked extensively in every regional office and most major states around the country. Bill has lectured widely on the subjects of historic rehabilitation and real estate development. His speaking credits include the nationwide, 21-city “Rehab for Profit” seminar series on historic rehabilitation development co-sponsored by the National Association of Realtors and the National Trust for Historic Preservation, as well as testimony before the Committee on Ways and Means of the US House of Representatives. Bill’s recent publications include articles in Urban Land Magazine, Multi-Housing News, Affordable Housing Finance Magazine, and the Section 42 Report. Bill serves on the board of directors of the National Housing & Rehabilitation Association and is a past treasurer of the board of directors of Preservation Action, the national lobby for preservation and rehabilitation. Bill holds a Bachelor’s degree in History from Lewis and Clark College in Portland, Oregon and a Master’s degree in Historic Preservation Studies from Boston University.