City wants Danfoss industrial site redeveloped for residential, retail and office

Sensing a rare chance to influence the redevelopment of nearly 60 acres in the heart of Eden Prairie, city officials are taking steps to ensure that the Danfoss industrial property along State Highway 5 is eventually repurposed for multi-family residential, retail and office uses.

But Danfoss officials are resisting the move, saying the city’s vision to move away from industrial use limits their ability to sell the property.

Danfoss is a Danish engineering company that acquired Eaton Hydraulics nearly four years ago. It announced in January that it would close the Eden Prairie plant by the end of 2025, displacing 110 workers and shifting some operations to its Plymouth facility.

The plant, with its tall water tower painted with the Danfoss logo, dates to 1965, when it was home to Char-Lynn Co., a pioneering hydraulics firm founded by inventor Lynn “Buck” Charlson.

Now, Danfoss is selling the three-parcel, 58-acre site, and the city is proactively urging that the property move away from its long industrial past and become a prime site for mixed uses, including affordable housing.

Its effort to change the city’s long-range comprehensive Guide Plan to show future mixed uses instead of industrial on the property was endorsed Monday in a 7-1 vote by the Eden Prairie Planning Commission, a panel that advises the city council on development matters. The change would need to be approved by the city council as well as the regional planner for the Twin Cities, the Metropolitan Council, before going into effect.

Dave Neuberger, head of real estate for Danfoss in the Americas, said the company wants to keep its industrial-use options open, for both the main plant that exists and an undeveloped, adjacent parcel along Highway 5 that could accommodate an expanded plant or new industrial building.

“Danfoss is not supportive of the comp plan amendment for the entire property,” said Neuberger, telling the commission that the city’s long-range opposition to new or expanded industrial on a portion “is going to spook our industrial buyers for that site, for fear that future investment in or possible expansion of the factory would be denied.

“I see that as a significant risk for the property and a significant impact to Danfoss,” he added.

City sees a 60-acre opportunity

The availability of the Danfoss property wasn’t known when the city’s long-range plan, called Aspire 2040, was put together in 2017 and ’18, said Julie Klima, the city’s director of community development. Now, “it’s an opportunity for the city to look at what are the appropriate uses for the long term, based on community need, community feedback,” she said, noting that city officials have shared their vision with Danfoss.

A Guide Plan change wouldn’t guarantee mixed-use development, Klima said Monday, but she anticipates any future development “will fall in the line with that use.” The exception, she added, might be the largest Danfoss building, which could remain in industrial use for the foreseeable future.

Nate Erickson, a principal and senior vice president at Transwestern’s Minneapolis office, said Danfoss is under contract with a buyer for the entire property. As of yet, however, no formal plan for redevelopment has yet been offered to the city for its review and approval. 

Erickson said designating the entire property for mixed uses would delay full utilization of the property, affecting the price and costing Danfoss “millions.”

“Going from a plan that is executable today versus going to a mixed-use development, it would be years of downtime and it would be several million (dollars),” he said. “It would be significant.”

He said the city’s Guide Plan change would make it difficult for a buyer who wants to continue using Danfoss’ industrial plant to expand or make significant improvements to the factory.

Long-term industrial use is at issue

With a mixed-use designation, city staff say about 33 acres could be used for residential, 11 acres could be used for commercial or retail, and 5 acres could be used for offices. That equates to an estimated 1,889 residential units, 95,383 square feet of commercial or retail, and 43,393 square feet of office, according to a memo by City Planner Jeremy Barnhart.

“It’s not a prescriptive ratio, it’s a guide,” Klima said.

The impact the change would have on property taxes generated by the property is uncertain. Commercial/industrial properties are taxed at a higher rate than residential properties, and among residential properties apartment complexes are taxed higher than single-family homes.

But the city says the change in land-use designation allows it to determine what might be the “highest and best uses” of the property for decades to come, and that additional affordable housing and destination retail are among the city’s goals.

For example, Klima said, the property is within walking distance of the SouthWest Station transit hub, which would be a plus for multi-family residential and office uses. Also, additional shopping and dining options continue to show up as a “want” and “need” in the city’s survey of residents, including the one conducted in late 2024 and early ‘25.

City staff acknowledge that mixed uses will increase traffic and demand for water and sewer services, but say plenty of infrastructure is in place to handle the increase. Those impacts would be studied by the city and a developer, should a development application materialize, as would the environmental impacts of any new plan.

Klima said she doesn’t believe Topgolf, the company behind high-tech driving ranges and previously reported as a potential user of the Danfoss property, would be part of any redevelopment plan.

Erickson, the broker who has been working with Danfoss, said retail development would likely require a large anchor store, such as a grocery store, and none of the grocery stores they’ve contacted are interested in the property.

Danfoss’ Neuberger said the company is not opposed to the development of residential and “light retail” on the eastern side of the property, where an existing Danfoss office building stands near Mitchell Road. That vision has been shared with potential developers, he said, but providing retail on a larger scale “is not only not recommended, but considered undesirable.”

Barnhart, the city planner, conceded there are competing interests at play, including the company’s interest in the short-term sale and quick re-use of the property versus the city’s vision of how the property will be used for decades to come. 

The city is not opposed to continued use of the industrial building or buildings, at least short-term, he added. At issue is industrial as a permanent use.

“Whatever land use decision we make here is good for 40 or 50 years,” he said. “I think the biggest issue is do we want to see a new industrial building on that vacant parcel – heavily wooded, unique features in terms of visibility from Highway 5.

“We all have goals,” he added. “We have to look at it from a planning perspective the long-term goals for the community, and we see that the mixed use offers the best path forward. Really it boils down to: What goals should have precedence?”