VOLUME 34, NUMBER 8
©2018 Real Estate Publishing Corporation
August 2018
E-commerce Boom Helps Fuel Demand for Industrial Real Estate in Twin Cities
By Liz Wolf
W
hile industrial is arguably the least glamorous real estate sector, the Twin Cities industrial market is booming, and one big reason is the explosive growth of e-commerce. The strong economy is also driving demand. There’s growth in manufacturing companies and traditional warehouse tenants, and there are more big
users in the market seeking space. “The overall economy is healthy,” says Chris Garcia, principal with the local office of Lee & Associates. “I don’t think e-commerce is driving the entire absorption and the lower vacancy; it’s certainly a big part of it. But manufactures are also growing. All types of businesses are growing.” The overall vacancy rate for Twin Cities industrial space dropped to 4.4 percent in the second quarter, reports CBRE.
“The last time the vacancy was that low was probably in the late ‘90s,” Garcia says. The quarter marked the 32nd consecutive quarter of positive net absorption. Average asking rates increased to $5.92 per square foot, and more than 300,000 square feet of new industrial space was delivered to the market. About 1.5 million square feet of new product has broke ground year-to-date, including both speculative and build-to-suit projects. e-commerce to page 10
Three Top Doran Executives Launch New, Independent Development Venture Doran Real Estate Partners to pursue unique development deals throughout the Midwest.
D
oran Companies announced that three top Doran executives are launching a new, independent development venture in the Twin Cities. Doran Companies Chief Operating Officer Anne Behrendt, Doran
Companies President of Development Tony Kuechle and Doran Companies Chief Financial Officer Ryan Johnson will own and lead Doran RE Partners, LLC, which will pursue development deals using new sources of capital, independent of Kelly Doran. “I have always believed in providing increased opportunity to the talented people who help me lead Doran Companies,” said Doran Companies Founder Kelly Doran. “Whether offering profit sharing to all employees or an ownership stake in key projects, I
believe hard work should be rewarded and all good organizations should evolve to create new opportunities for highly talented employees. I’m excited to give this team the freedom to pursue their own development projects and view it as one more way to evolve in this business.” The three executives will remain full-time in their current roles at Doran Companies, continuing to lead all development deals. Separately, they will lead Doran Doran to page 14
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August 2018
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AUGUST 2018 • VOLUME 34, NUMBER 8
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Departments CLOSINGS BREAKING GROUND
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E-COMMERCE BOOM HELPS FUEL DEMAND FOR INDUSTRIAL REAL ESTATE IN TWIN CITIES THREE TOP DORAN EXECUTIVES LAUNCH NEW, INDEPENDENT DEVELOPMENT VENTURE
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Minnesota Real Estate Journal (ISSN 08932255) Copyright © 2018 by the Minnesota Real Estate Journal is published monthly except combined in March & April for $85 a year by Jeff Johnson, 13700 83rd Way North, Suite 209, Maple Grove, MN 55369. Monthly Business and Editorial Offices: 13700 83rd Way North, Suite 209, Maple Grove, MN 55369 Accounting and Circulation Offices: Jeff Johnson, 13700 83rd Way North, Suite 209, Maple Grove, MN 55369 Call 952-885-0815 to subscribe. For more information call: 952-885-0815. Periodical postage paid at Maple Grove and additional mailing offices. POSTMASTER: Send address changes to Minnesota Real Estate Journal, 13700 83rd Way North, Suite 209, Maple Grove, MN 55369 ©2018 Real Estate Publishing Corporation. No part of this publication may be reproduced without the written permission of the publisher.
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TIAA Pays $66.2M for Plymouth Apartments TH Real Estate, part of the investment arm of TIAA, paid $66.2 million for Vicksburg Village apartments in Plymouth, Minnesota, which the owner and developer hopes to upgrade and reposition in the market. Vicksburg Village, at 15730 Rockford Road, is a 334-unit complex comprising six, three-story buildings. It was completed in 1990 and has sold only twice during that time, according to Hennepin County records. The seller is a limited liability company tied to Charlotte, North Carolinabased asset management company Barings, according to Pete Evans, a broker from the Chicago office of Moran & Co., who represented Barings. Executives with Barings were not immediately available for comment. The deal closed last Thursday. “We liked the location and the vintage of the property. It’s very consistent with our strategy,” said Mike Schwaab, senior director of TH Real Estate’s CASA series of a multifamily housing funds and student housing investment. “It’s a strong, long-term location.” Schwaab said on Wednesday that the company plans to put capital toward “significant renovations,” though he declined to get more specific than that. The complex has recently been managed by Addison, Texas-based Pinnacle. That will no longer be the case, Schwaab said. The Excelsior Group of St. Louis Park, Minnesota, will be taking over at Vicksburg Village. London-based TH Real Estate is a subsidiary of the private asset management firm Nuveen, which in turn is a subsidiary of New York-based TIAA (Teachers Insurance and Annuity Association of America). TH Real Estate also operates a new real estate investment trust, Nuveen Global Cities REIT, which formed in May 2017 and will likely make purchases in the Twin Cities as well. The REIT focuses on buying large, stable properties in less than 100 “future-proof” cities with resilient economies, low exposure to climaterelated change, and youthful, growing populations, according to investor materials. Of those, just two are in the
Midwest: Minneapolis and Chicago. The REIT has spent $204 million on additions to its nascent portfolio so far. The REIT made its first buys in December 2017: It paid $54 million for Kirkland Crossing, a 15-year-old, 266-unit multifamily development in Chicago; $51 million for a three-building, 486,000-square-foot industrial portfolio in Denver; and $16.8 million for a 265,000-square-foot logistics hub in Phoenix. In June 2018, it added Tacara Steiner Ranch, a multifamily property in Austin, Texas, that it bought for $47.9 million, and Defoor Hills, a 90,000square-foot creative office building in Atlanta that was renovated last year. The REIT paid $33.8 million for the Atlanta property. For the Record: Peter Evans with Morgan & Co. represented the seller in the transaction. For additional information regarding this transaction, please refer to CoStar COMP #4488868. Clare Kennedy, Minneapolis / St. Paul Market Reporter CoStar Group
Grandbridge Finances $30.5 Million Multifamily Property Grandbridge Real Estate Capital recently closed a $30,500,000 first mortgage loan secured by a 124-unit, Class A property in Minneapolis, Minn. The financing was originated by Minneapolis-based Vice President Matt Halberg. The loan was funded through Grandbridge’s exclusive balance sheet lending platform, BB&T Real Estate Funding (BBTREF). This nonrecourse refinance featured a seven-year term with three years of interest-only followed by a 30-year amortization, closing with a fixed interest rate in the mid four percent range. BB&T Real Estate Funding (BBTREF), a wholly owned subsidiary of Grandbridge Real Estate Capital, offers both fixed and floating rate nonrecourse loan products for all major property types across the United States. The combination of BBTREF's responsiveness, reliability, structuring capabilities and pricing, combined with Grandbridge’s knowledgeable professionals, makes it one of the strongest, most
August 2018
competitive nonrecourse lending products in the market. BBTREF’s permanent, fixed rate loan program offers some of the most attractive prepayment flexibility in the market by allowing its loans to be prepaid halfway through the loan term for only a 0.5% exit fee. The property was developed by Curt Gunsbury of Solhem Companies and was 100 percent leased within three months of construction completion, a testament to the product Gunsbury creates and the property’s premier Minneapolis North Loop location. A vibrant, walkable community, the North Loop is home to many popular restaurants and shops. In the past few years the North Loop has become one of the most highly desired residential neighborhoods in the Twin Cities. The property features a high-end amenity package that includes: a fitness center, yoga room, rooftop deck, underground parking, and community lounge.
Minnesota Developer Lures Defense Contractor to Brooklyn Park Industrial Project A company that specializes in upgrading battle tanks and other armored vehicles has signed on to be the tenant at a new facility in Brooklyn Park, a suburb north of Minneapolis that is in the midst of an industrial building boom. NAPCO International plans to move from its current home in Hopkins to a $5.6 million, 75,000-square-foot warehouse and office building at 9200 75th Ave. N., to be constructed by Indianapolis-based developer Scannell Properties, according to materials presented to the Brooklyn Park Economic Development Authority on Monday. The next step is to submit an application for job creation funds to the state of Minnesota. If successful, NAPCO would be the sole tenant, said Erik Hansen, economic development and housing director for the city. The company, which caters to foreign militaries, has 51 employees and banked about $45 million in annual sales, according to its application for job creation funds from the state. All Closings to page 6
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but $81,000 of that total came from outside Minnesota. NAPCO is currently located at 11055 Excelsior Blvd. in Hopkins, Minnesota. Its new building would go up on an 8.2-acre stretch of land that is one of the last remaining vacant sites in the Northland Interstate Business Center. The land was platted in 1996 but has gone undeveloped due to poor soil conditions, which will require about $500,000 to correct, according to Scannell, which is asking the city for $450,000 in tax increment financing (TIF). Scannell, which paid $240,451 for the site in late 2017, says the project would not be economically viable otherwise. Hansen said that other developers have attempted to build on the site without success. “This is the third proposal we’ve had for this land in three-and-a-half years,”
Minnesota Real Estate Journal
Hansen said. “It probably has to do with this being the last site in Northland Business Center to be developed. The substandard soil removed from the other project sites was likely deposited there.” The ground is wet and mossy, not contaminated, Hansen said, but to make it stable enough to support the building Scannell will have to excavate much of the site and replace the damp dirt with hardier materials. Nevertheless, the spot is a desirable one, Hansen said. It is well connected to public transit and sits just off the intersection of Interstate 94 and Highway 169. Most important, it was priced low enough to accommodate a smaller, single-tenant building in a market that is regularly sprouting industrial buildings of 250,000 square feet or more. “It was one of the few spots where the land values made sense for a project of
this size,” Hansen said. “That’s getting harder to find.” If all goes according to plan, Scannell will begin earthwork this September, Hansen said, with the hope of completing the building by the end of 2019. Once installed in Northland, NAPCO plans to add 18 full-time employees over three years’ time. Neither NAPCO nor Scannell could be reached for comment. The leasing agents are Mark Sims and Noam Newman of Cushman & Wakefield’s Minneapolis office. A spokesman for Cushman & Wakefield said that interest in leasing at the facility is high but otherwise could not comment on the matter. - Clare Kennedy, Minneapolis / St. Paul Market Reporter CoStar Group
August 2018
NYC Firm Pays $36M for Twin Office in Plymouth, Minn. DRA Advisors is now the owner of both Waterford office buildings in Plymouth, MN. The New York-based company paid Chicago-based owner and developer CA Ventures $36.1 million for the 505 Waterford Park office building at 505 N. Hwy 169, the southern twin sister to a property already in DRA’s portfolio, 605 Waterford. The pair of 12-story office buildings were built by Minneapolis-based Ryan Cos. in 1987 and 1989. The two sit on 18 acres just off the interchange between Highway 55 and Highway 169, tucked into a wooded area with a pond, fountains, gardens and walking paths. Closings to page 8
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Minnesota Real Estate Journal Closings to page 6
CA Ventures acquired the 505 building in 2013 from Franklin Street Properties Corp. for $33 million, or about $115 per square foot, according to CoStar data. The property is currently assessed at $36.8 million for taxes payable in 2019, according to Hennepin County records. DRA Advisors has owned the nearby 605 building for about three years. In October 2015, it bought the property from Canadian real estate investment trust Artis REIT, paying $31.5 million, or $139 per square foot, according to CoStar data. A team from Jones Lang LaSalle’s Minneapolis office has handled leasing for 505 Waterford, though that may change. CBRE is the leasing brokerage for DRA’s 605 Waterford. At the time of the latest transaction, 505 Waterford was 81.8 percent leased to multiple tenants, including Verizon Wireless, occupying about 30,000 square feet, and Wealth Enhancement Group in roughly 28,000 square feet. In terms of office stock, DRA Advi-
sors also owns the MoneyGram and 1600 Towers at 1600 Utica Ave. S in Saint Louis Park, MN, and Wells Fargo Plaza at 7900 Xerxes Ave. S in Bloomington. Since 2016, the company also has held a portfolio of grocery-anchored retail centers in the Twin Cities, which it took on as part of a $2.3 billion deal to acquire Oak Brook, IL-based Inland Real Estate Corporation (IRC). However, IRC has been paring down its holdings here as of late. DRA Advisors, CA Ventures and the various brokers involved could not be reached for comment on the sale. - Clare Kennedy, Minneapolis / St. Paul Market Reporter CoStar Group
Carlson, Inc. renovating iconic 701 Carlson; leasing to outside tenants Includes multimillion-dollar renovation of 268,000 square feet. Carlson, a global leader in the travel industry, has begun a multifaceted remodel and modernization of its world headquarters – named 701 Carlson –
located at 701 Carlson Parkway in Minnetonka, Minn. The multimillion-dollar project includes full building renovations to the 268,000-square-foot landmark. The project will begin in the fall of 2018 with an expected completion date in the summer of 2019. 701 Carlson is already considered a luxury icon in the Western metro and this renovation, from the finishes to the expanses, will help it exceed standards of any existing or new construction projects in the entire metro. Building updates will include a new lobby, fitness facility with possible adjoining outdoor area, conference and training center, and a new café with a designated coffee bar. For the first time, multi-tenant space in 701 Carlson will be available for lease to tenants outside of the Carlson company. The space available for multi-tenant lease includes 58,000 square feet spread across the upper floors of the tower. Carlson will retain its world headquarters in the building. “701 is a trophy asset along the 394 corridor and this renovation will take an already beautiful building and elevate it even more,” said Jon Dahl, JLL Manag-
August 2018
ing Director. “We are thrilled to continue our relationship with Carlson, to deliver a best-in-class environment for their employees, tenants and guests.” RSP is the architect for the project. The JLL Agency Leasing Group responsible for the lease-up includes Jon Dahl, Brent Robertson, Sam Maguire and Andrea Fischer.
Infrastructure Giant AECOM a Front-Runner for Coveted Minneapolis Site Los Angeles-based, multinational engineering and construction services firm AECOM is poised to win development rights to a sought-after sliver of land in downtown Minneapolis, beating out three local companies in the process. AECOM is the favored candidate in the city of Minneapolis’ bid to find a suitor for 800 Washington Ave., said Emily Stern, senior project coordinator with the city’s planning and economic development department. Stern gave a brief update on the city’s selection at a neighborhood meeting on Monday. Closings to page 14
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Minnesota Real Estate Journal
e-commerce From page 1
CBRE reports that an increasing number of industrial users want modern facilities and are upgrading from their current locations to new buildings. The “Amazon effect” The growth of e-commerce and what’s known as the “Amazon effect” is a major driver fueling demand for bigbox distribution space. There’s a mad rush by retailers and e-commerce players to locate their distribution facilities near population centers to meet consumers’ need for fast product delivery. As consumers want goods delivered quicker, there’s more demand for that “last mile.” The last mile is essentially the last leg of the product’s trip before it arrives on the consumer’s doorstep. Historically, the Twin Cities hasn’t been a huge distribution market due to its geographic location. However, Amazon came in and built a massive, 820,000-square-foot fulfillment center in Shakopee. It also operates another facility in Shakopee and facilities in the Midway and Eagan, and it’s looking to expand. “They’re looking for another 1 million-square-footer,” says Dan Swartz, a
Dan Swartz senior vice president at CBRE specializing in industrial real estate. “It’s been rumored to be in the east [metro].” Amazon also has ancillary contractors or vendors that follow them around and lease space, says Phil Simonet, principal at Paramount Real Estate Corp. “Those are the 3PLs, trucking companies and transportation companies, and so you’ve seen some of those companies leasing space.” For example, Paramount recently did a 46,000-square-foot lease in Eagan with a 3PL that does Amazon work.
Chris Garcia
Impact of the last mile “What’s happening locally is obviously the concept of last mile, which is how quickly can I get the product to the end user?” Swartz says. He says a good example is a company called Tire Rack, where consumers can order tires online and they will ship them to their house or favorite mechanic. The company opened a distribution center in Roseville in 2016. “The reason they came to Minneapolis was they couldn’t guarantee same-
August 2018
day delivery from Chicago, which is their closest distribution center,” Swartz says. “We were their seventh distribution center in the country. If you look at Minneapolis-St. Paul from a population standpoint, we’re like 15th in the country, so what’s happening is these companies are coming to Minneapolis because they need to get the product to the enduser quicker. It’s a positive for this market because in the old days you would distribute out of Chicago. You would lease 1 million square feet in Chicago and run it up to Minneapolis in two days, and everybody would be fine with that. Obviously, as consumers’ expectations have changed, the product needs to get into their hands quicker.” What do e-commerce players want in their space? E-commerce companies want warehouses with 32-foot clear ceilings, lots of loading docks, truck storage, and truck parking if available, and very little office finish. “They’re good operators and very demanding about what they’re going to lease,” Simonet says. “All of these ecommerce companies tend to value state-of-the-art distribution centers. Generally speaking, they’re not going to e-commerce to page 12
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August 2018
e-commerce from page 10
get into a lower-clear building with funny accessibility that’s not set up with multiple docks. They’re occupying state-of-the-art, newer product, and they’re paying the rates for that, because it’s what they need to be operationally efficient.” Simonet says the e-commerce boom is impacting every submarket. “Everybody is seeing e-commerce, 3PL, last-mile home people, because they’re bigger users, and they’re doing distribution centers that have to be within reach of a certain geographical area in the Twin Cities or the region,” he says. They’re looking for efficiency, Swartz agrees. “Traditionally, they’re only looking at buildings built in the last five years, and there’s not a lot of vacancy in existing buildings in that age range,” he says. Some companies are opting to build new buildings, but infill sites near customers, labor and amenities are becoming more difficult to find. Some cities are opening up land for industrial Some municipalities – in an effort to attract more jobs -- are providing industrial sites to developers. Maple Grove is one example. The new Arbor Lakes
Phil Simonet
Business Park in Maple Grove – being developed by Duke Realty Corp. -- was initially slated for retail. The 50-acre, master-planned park is located at the intersection of Interstates 94 and 694. “The city of Maple Grove in their
wisdom realized that they have enough retail and they need more daytime population and they need more jobs,” Swartz says. “Duke approached them with the opportunity to take some land and build warehouses adjacent to the retail. They
approved that, and it’s a four-phase development.” The first phase is a 288,000-squarefoot, build-to-suit for Illume, a Bloomington-based manufacturer and distributor of candles, fragrance and personal care products. The company will consolidate from six locations into a new updated corporate headquarters. The new facility, scheduled to open first quarter 2019, will handle everything from the design process and fragrance e-commerce to next page
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Paul Hyde selection to manufacturing, sales, marketing and distribution. The company markets its merchandise under the Illume brand as well as private labels. Its products can be found through the company's online retail store and in more than 7,000 retailers nationwide including Target and Anthropologie. Duke says Illume’s new location and nearby amenities will provide the company the opportunity to attract new employees to accommodate its planned growth. Access to a skilled labor force is a major issue when industrial companies
decide on a location. The park’s second phase is a 262,000square-foot, speculative building slated to open this fall. Redevelopment opportunities Demand for space is also spurring redevelopment including the Northern Stacks industrial park in Fridley, a $100 million-plus project led by Hyde Development and M. A. Mortenson Co., both
based in Minneapolis. The park was developed on the massive BAE Systems site, a former Superfund site. The 122-acre park is the Twin Cities’ biggest infill commercial redevelopment, and it’s located five minutes from downtown Minneapolis. The entire park is 1.8 million square feet including a newly acquired, 180,000-square-foot industrial building that Hyde will renovate into Phase VIII of the Northern
Stacks project. The park, not including that building, is 93 percent leased. The entire park was built on spec. Recent activity includes Intertek signed a lease for a 70,509-square-foot space at Northern Stacks VI, and the 200,000-square-foot Stacks VII has been leased to LKQ Corp., a Chicagobased auto parts supplier. e-commerce to page 18
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Doran From page 1
RE Partners, LLC, which will pursue independent joint venture deals and partnerships that rely on new sources of capital. “We are excited to pursue new development opportunities and to invest our personal capital in the projects we take on,” said Behrendt. “We believe deeply in what we do and in the possibilities of the market. While the cities and municipalities within which we do business can expect the same quality they have come to expect from Doran Companies, this new partnership enables us to engage in projects independent of Kelly’s financial commitment.” Doran, age 60, made clear that he Closings from page 8
The infrastructure company has pitched condominiums, office and retail, crowned with rooftop gardens, for the narrow rectangular site, which covers 0.56 acres in all. The neighborhood land use committee provided a total development cost for AECOM of $65 million.
Anne Behrendt
Tony Kuechle
Ryan Johnson
has no intentions of retiring or getting out of the real estate development business. “I have no intention of retiring,” said Doran. “In fact, we have more engaging projects than ever before –
from The Expo in Minneapolis to Aria in Edina to The Triple Crown at Canterbury Park. However, just because I don’t plan to retire does not mean I can’t support my talented team by
empowering them to pursue their own projects. I strongly support their efforts in every way.”
There are two possible scenarios under AECOM’s proposal, which differ in magnitude, Stern said: The more modest plan calls for a nine-story building with 76 condominiums, but if AECOM elects to add height to the building, the unit count could go up to 111. In the latter case, the building
would be 12 stories tall. A portion of the condominiums would be affordable to those making 80 percent of the area’s median income, which currently stands at $94,300 a year in the Minneapolis-St. Paul region, according to data on file with the Metropolitan Council. About
10 percent of the units in the smaller development would be affordable, with the remainder selling at market rates, Stern said. The cut of affordable units would go up to 15 percent if the larger plan goes through. On the retail side, AECOM has letters of interest from three small retailClosings to page 15
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ers. A representative for AECOM, Sandra Rieger, said the company has a potential lineup that includes Five Watt Coffee, a fitness business, and Esso 44, a new venture by Romeny Chan, cofounder of Roe Wolfe boutique. Rieger explained Esso 44 as a, “boutique apothecary startup concept (housewares, soaps, wellness items).” As for the office component, the development site is located next to the American Academy of Neurology’s office building, which has expressed a strong interest in expanding. AECOM has a letter of support from the Academy, but its rival for the development of 800 Washington, Minneapolis-based Sherman Associates, has a letter of intent. Sherman also has a letter of intent with Pinstripes, an eatery that offers bowling and bocce ball. Nevertheless, the city is leaning heavily toward AECOM’s proposal, Stern said.
Minnesota Real Estate Journal
“AECOM’s project has by far the most innovative design. They incorporate a number of very interesting public open spaces and rooftop agriculture elements,” Stern said. “Overall, by every other criteria, AECOM ranked above Sherman. That said, Sherman’s proposal is still very solid.” “However, the staff team felt there was nothing very innovative about the building design,” Stern continued. “Not that it was bad. It was just more of the same.” Stern, City Council Member Steve Fletcher, and members of the neighborhood land use committee also felt that condominiums were preferable to the 112 rental units Sherman proposed. “There is no entry level housing anywhere in the city right now. It’s very, very hard for someone at 80 percent AMI to think about homeownership,” Fletcher said. The city is still negotiating a purchase
price, Stern said, but she noted that both Sherman and AECOM made offers that were above the appraised value. The other two parties, 45 North Group and Oppidan, made offers that fell short, she said. Their proposals also included only office and retail, no housing, which also excluded their proposals from consideration, she added. The city council will vote on the matter at a meeting scheduled for Aug. 31, Stern said. For now, the offer to AECOM would be tentative, pending a period of due diligence. “If for whatever reason that doesn’t work out, we would like to revisit Sherman’s proposal,” Stern said. Though Stern’s words do appear to leave the door open a crack, Sherman will not alter its plans, said Shane LaFave, the company’s director of multifamily development. “We’re not interested in doing condos
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due to the high risk level both legally and financially, so we’ll keep our proposal as is and see if it comes back our way,” LaFave said in an email on Tuesday. It is the second time that Sherman has been runner up for the site. In 2015, the city granted Golden Valley, MN-based M.A. Mortenson rights to build a hotel there, but the project was canceled in August 2017. The city reissued a request for proposals in March of this year. AECOM is a Fortune 500 company that offers engineering, design and construction management services, but also has a real estate investment arm of its own. It has 87,000 employees and a presence in more than 150 countries on all seven continents. Executives there could not be reached for comment. - Clare Kennedy, Minneapolis / St. Paul Market Reporter CoStar Group
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Minneapolis Unveils Draft Plan of $125M Riverfront Development City of Minneapolis and the Minneapolis Park and Recreation Board The city of Minneapolis and its master development team are showing off sweeping plans for redevelopment of the Upper Harbor Terminal, 48-acre tract of industrial land running along the Mississippi River. The concept will be outlined Thursday evening by Minneapolis development firms United Properties, Thor Cos. and First Avenue Productions, which runs the famous downtown Minneapolis nightclub of the same name. So far, the plan only addresses the first of three planned phases for the site, a former barge terminal between the Lowry Avenue and Camden bridges that includes a mile of riverfront and direct
Minnesota Real Estate Journal
freeway access off Interstate 94. Phase I will develop the northernmost part of the Upper Harbor. It calls for a fivestory office building, five- or six-story residential development, a hotel, an innovation hub, two public parks, a plaza and a performing arts venue with space for 10,000 people. The total development cost will reach $125 million or more in private funding, and will require a significant public investment as well. This year, the Minnesota Legislature granted $15 million to build infrastructure and parks at the site. The city and its park board will kick in $16 million more for the effort, which could see construction begin in 2020 or 2021. All of the land is owned by the city, so the developers will not be able to take ownership until the plan is firmed up and approved. The project will be discussed from 6-
8 p.m. Thursday at the park board’s building, 2117 W. River Road North. For those who cannot attend the meeting, the city has set two more dates for the public to review the plans: 6-8 p.m. Aug. 28 at the park board building, and 11 a.m. to 1 p.m. Sept. 8 at North Regional Library, 1315 Lowry Ave. N. - Clare Kennedy, Minneapolis / St. Paul Market Reporter CoStar Group
Sherman Steps Away from Minneapolis Development Alongside New Thrivent HQ Sherman Associates is pulling the plug on plans to build a mixed-use complex with a 12-story apartment tower and 10-story hotel next to Thrivent Financial’s new corporate headquarters, even as multifamily development surges across Minneapolis. In March, Minneapolis-based Sher-
August 2018
man unveiled a proposal for “two-and-ahalf” structures immediately to the south of an eight-story office building that Thrivent will build on a 2.5-acre block bounded by Fifth Avenue South, South Sixth Street, Portland Avenue and South Seventh Street in downtown Minneapolis. At the time, Sherman pitched a 150unit apartment building to the west, a 120-key hotel to the east and a two-story connecting building that would include a daycare center. Last week, Sherman called it quits on the project. “Due to a combination of factors (rising interest rates, other commitments/projects we have going on, and increasing construction costs) the project was no longer feasible for us and we decided we needed to step away,” wrote Shane LaFave, director of multifamily development at the compa-
Public Notice For Qualifications Statements for Professional Consultant Services for Airport Land Assessment at Minneapolis-St. Paul International Airport The Metropolitan Airports Commission (MAC) is requesting qualifications statements from firms interested in providing service as MAC’s Land Assessment Consultant as set forth in the Request for Qualifications. To obtain a copy of the Request for Qualifications, please go to the following website www.metroairports.org/business/solicitations and look under Request for Qualifications. The RFQ will be released on or about August 20, 2018. MAC contact for the RFQ is Karen Racek at 612-467-0514 or karen.racek@mspmac.org. Questions regarding the RFQ are due to MAC no later than 5:00 p.m. CST on September 13, 2018. Submission of qualifications statements is due on or before 5:00 p.m. CST on November 9, 2018.
August 2018
ny, in an email. Sherman’s proposal was scheduled for approval by the city’s planning commission this week, but will now be taken off the agenda, LaFave said. As of Wednesday, LaFave was not aware of another suitor for the site, which is currently a surface parking lot owned by Thrivent, though he was under the impression that Thrivent is shopping the site to other developers. Thrivent Spokesperson Samantha confirmed that this is indeed the case on Monday. “Thrivent is in the process of inviting other prospective developers to share their ideas for this site. This announcement does not disrupt the timeline or construction schedule for our new corporate center, which is expected to be completed in mid-2020,” she wrote in a prepared statement. John Breitinger, executive director at
Minnesota Real Estate Journal
Cushman & Wakefield’s Minneapolis office, has been tasked to find a new developer. Meanwhile, multifamily activity continues to bustle all over Minneapolis. Here are some of the highlights: • Chicago’s CA Ventures has yet another apartment project in the works for Minneapolis, this time at a site that sits between the city’s Northeast neighborhood and Dinkytown, a district heavily populated by students from the University of Minnesota. According to materials submitted to a neighborhood group, the company is floating plans for a six-story apartment building at 1202 Fourth St. SE. The building would have 120 to 130 market-rate units, which would be targeted at student renters. • CA Ventures recently completed a luxury apartment building in Prospect Park with partner Harlem Irving, also of Chicago. The two have another project
in Prospect Park, and last week pitched an apartment tower for downtown Minneapolis as well. • On the other side of campus, Minneapolis’ Wall Cos. hopes to embark on Phase I of Malcom Yards, a massive mixed-use project in Prospect Park. This Thursday, the developer will debut a plan at the planning commission’s committee of the whole that calls for three buildings at 445 Malcom Ave. SE: A sixstory structure with 145 market-rate apartments and 33,000 square feet of commercial space on the ground floor; a six-story building with 142 affordable apartments; and a food hall in the newly overhauled Harris Machinery Building, which dates to 1890. • At the intersection of Chicago Avenue and Lake Street, Minneapolisbased North Bay Cos. wants to build a five-story building at the current site of Los Ocampo taqueria. The development
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would have 48 studio apartments and 4,200 square feet of commercial space on the street level. • Plymouth-based Dominium is moving ahead with apartments at historic Fort Snelling. The company has asked Hennepin County’s housing and redevelopment authority to issue $58 million in housing revenue bonds for the project, which calls for the renovation of 26 buildings at the Upper Post at 6247 Bloomington Rd. The buildings, which were constructed between 1879 and the early 1900s, will be turned into 176 affordable rental units. The total development cost is estimated to be $98 million. The item will go before the county redevelopment authority on Tuesday. - Clare Kennedy, Minneapolis / St. Paul Market Reporter CoStar Group
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Minnesota Real Estate Journal
August 2018
e-commerce from page 13
Industrial users tend to lease space in urban areas because they want to be near a skilled labor force, close to the interstate system and downtown core, and near their customers, so they can reach them as fast as possible. “The biggest draw is our location,” says Paul Hyde, owner of Hyde Development. “Tenants are also able to find the new, modern product that they want. So it’s location, access to the interstate and access to the labor pool – all of those things along with building the right product and the amenities.” E-commerce users drawn to Northern Stacks Hyde says, “You have to be careful talking about e-commerce, because if you’re just talking about Amazon and their warehouses, there are only a handful of those and that’s a very distinct market. That really isn’t what we’re doing at Stacks. But a big part of the ecommerce trend is the shipping and receiving departments for companies — whether they’re retailers or manufacturing companies—and it has all been outsourced from their plants or the retail store to buildings like ours. “A lot of the people doing that work are the third-party logistics providers or the companies themselves and we have a bunch of those,” Hyde adds. “We’ve
got OnTrac, which is a 3PL company doing a lot of work for national retailers out of our project. LKQ is really the same thing for automotive parts.” What does the future hold? “E-commerce is definitely a trend that will keep rising,” Garcia says. “I think we will see more and more of these ecommerce users, and I think we will see
bigger users in our market. I would bet we’re going to start to see guys that are 200,000, 400,000, 500,000 square feet and even up to 1 million square feet.” Simonet sees continued growth as well. “Absorption by e-commerce, lastmile home and 3PL-related e-commerce has helped solidify the market, drive down vacancy and also helped to start
push rates up,” he says. “Net rates are as strong as they’ve ever been right now. There are exceptions to that, but if you go into new construction, you’re going to pay for it. Without e-commerce, we wouldn’t be as healthy of a market as we are. We wouldn’t be as bullish as we are.”
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www.mrej.com Speakers Include: Jacob Frey, Mayor City of Minneapolis Bill Katter, President & CFO, United Properties Kelly Doran, President, Doran Companies Kjersti Monson, Principal, Duval Companies Steve Cramer, Executive Director, Minneapolis Downtown Council Dan Collison, Director of Downtown Partnerships, Minneapolis Downtown Council David Wellington, Director of Acquisitions and Development, Wellington Management, Inc. Mark Ruff, CFO City of Minneapolis Shane LaFave, Director of Multifamily Development, Sherman Associates Bob Lux, Principal, Alatus LLC. Eric Omdahl, Development Associate, Dominium Lisa Austin, Planning Coordinator, MNDOT Tim Bildsoe, President, North Loop Neighborhood Association James Graves, CEO, Graves Hospitality Lynn Leegard, President, Shamrock Development Public Realm Investments and How it Impacts the Downtown Commercial Real Estate Market • City of Minneapolis Changes & Updates • Downtown Council’s 2025 Plan • Public Infrastructure Update – Road Improvement Projects • Public Policy Update • Nicollet Mall – What has the impact been on Downtown & Activating Nicollet • New City of Minneapolis Building • Lock & Dam • Stone Arch Bridge Reinvestment
Downtown Minneapolis Game Changer Projects • Market Sales Update: What has sold in the last year?
• Dominium’s Affordable Housing Project – Duffy Paper building • The Nordic • Target Field Station North Loop • Alatus Condo Tower • Alatus Apartment Tower – Second Church of Christ Site • Thrivent Development • Ironclad/Moxy Hotel • The Legacy Lofts
Downtown Office Rebound • Tenants Expectations when relocating downtown and why move downtown • Market Update: Vacancy Rates, Rents & Trends • Case Studies of New Tenants that are moving Downtown • United Properties Proposed Office & Mixed Use Development • Macy’s redevelopment To become involved in • City of Minneapolis new Office Tower this event or upcoming
Future Trends & Opportunities Downtown • Impact of new Condo Legislation on Downtown Development • Update on Proposed Multifamily Development in Downtown • Transit Orientated Green Line Development Opportunities • Rideshare & Transit Issues into Downtown • North Loop – Dealing with Parking Issues, Access & Opportunities • Revisioning Parking Ramps A, B & C • Retail Initiative to spur growth • Changing Landscape of East Downtown
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