MREJ December 2015 by REjournals

VOLUME 31, NUMBER 12

December 2015

Avison Young: Industrial market soaring in Midwest markets, including Minneapolis/St. Paul

By Dan Rafter

ow strong is the industrial market in Minnesota and across the nation? A new report from Avison Young says that the volume of spec industrial construction delivered in the United States has jumped 240 percent since 2012. In raw numbers? The volume of spec construction has jumped from 43.3 million in 2012 to 147 million square feet this year, according to Avison Young's research. Erik Foster, principal of Avison Young and practice leader of the firm's industrial capital markets division, said that the speculative industrial boom started on the coasts -- mostly the West Coast -- and has now moved across the country, including to several major Midwest markets. "Certain Midwest markets, such as Columbus and Indianapolis, Chicago,

have seen a lot of spec industrial activity starting about two years ago," Foster said. "We feel that this increase in spec development will only continue, and in more Midwest markets." One of those strong industrial markets in the Midwest? Foster said that the Minneapolis/St. Paul market is a solid one. It might not be quite as busy as traditional distribution-focused markets such as Indianapolis and Columbus, but Foster said that it continues to be a strong industrial performer. Foster said that the Minneapolis market showed its industrial strength in July. That's when the market saw the $48.5 million sales transaction of the 585,200square-foot BAE Building at 4800 E. River Road. That property sold for an impressive $80 a square foot. "We think the trend toward more spec industrial development will only continue," Foster said. "We are at record-low vacancies for many of the markets in Avison Young to page 20

JLL’s Mazzocco: CRE markets only getting stronger in the Twin Cities By Dan Rafter, Editor

ick Mazzocco knows just how strong the Minneapolis/St. Paul commercial real estate market is. He’s the newly promoted project and development services lead in Minneapolis for JLL. We recently spoke with Mazzocco about the strength of this real estate market. Here is some of what he had to say about the boom times in the Twin Cities.

A solid base: One of the reasons for the success of the commercial real estate market here is that we have a high concentration of Fortune 500 companies in this town that are all growing in this market. The strength of our corporate sector is a big reason for the activity in this market. We have been fortunate, too, to have a lot of large public infrastructure-type work going on, too. The last thing I’d mention is that people and businesses here really want to be in the CBD. That is creating a lot of activity in downtown Minneapolis and

downtown St. Paul. A sizzling apartment market: Apartments, in particular, are getting built at a rapid pace. And there are a few more major multifamily projects yet in the pipeline here. The Downtown East development surrounding the new Minnesota Vikings stadium is having a significant positive impact on the area. That is a billion-dollar investment in a part of town that was not Mazzocco to page 21

2nd Annual St Paul Development Summit Thursday, January 14, 2016 James B. Woulfe Alumni Hall in the Anderson Student Center 2115 Summit Avenue, Saint Paul, MN 55105 7:15 AM Registration 7:30 AM Hot Buffet 8:00 AM – 12:00 PM Program

Speakers Include: Mayor Christopher B. Coleman Jonathan Sage-Martinson, Dir of the Dept of Planning and Economic Development, City of St Paul Jamie Spencer, Vice President, New Business Development & Assistant to the Chairman, Minnesota Wild Louis F. Jambois, President, Saint Paul Port Authority Monte Hilleman, Vice President of Real Estate and Development, Saint Paul Port Authority Lee Krueger, Senior Vice President of Real Estate, Saint Paul Port Authority Andrea Christenson, Vice President, Cushman & Wakefield Northmarq Stephen B. Wellington Jr., President, Wellington Management Russ Nelson, President/Principal Real Estate Services, NTH, Inc. Bruce Thompson, Director of Property Management, Ramsey County John Shardlow, Senior Principal, Stantec George Sherman, Sherman Associates Nick Murnane, Senior Manager, Real Estate | Opus Development Company, L.L.C.

Major League Soccer • The Saint Paul Midway’s new soccer stadium • Bringing 2 great cities together • Transit Oriented Development • Redevelopment of a vibrant urban area • Financing the stadium • Job creation, new housing and commercial opportunities • The team

Former Macy’s Site - Saint Paul’s Newest Destination Point in Downtown • Leveraging Saint Paul’s investment in other downtown redevelopment projects • The building the location and the scale • Economic impact of this site • Minnesota Wild training facility • Other positives this project will bring to the city

Saint Paul’s Renaissance: Downtown Redevelopment Hear about several catalyst projects in downtown Saint Paul • Ecolab / Travelers Project • Palace Theatre • Ramsey County Riverfront Properties • Gateway & 7 Corners

Keynote Speaker: Mayor Christopher B. Coleman

Emcee: Louis F. Jambois, President, Saint Paul Port Authority

Saint Paul’s Renaissance: Neighborhood Redevelopment • Investment in every part of town, East/West/Central • Beacon Bluff / Midway Stadium / League of MN Cities • Schmidt Brewery • Housing Projects

December 2015

Contents

Minnesota Real Estate Journal

DECEMBER 2015 • VOLUME 31, NUMBER 12

AVISON YOUNG: INDUSTRIAL MARKET SOARING IN MIDWEST MARKETS, INCLUDING MINNEAPOLIS/ST. PAUL JLL’S MAZZOCCO: CRE MARKETS ONLY GETTING STRONGER IN THE TWIN CITIES

COMMERCIAL REAL ESTATE PROS: CELEBRATE, DON’T FEAR THE FED’S INTEREST RATE HIKE

MINNESOTA BROWNFIELDS HONORS FOUR PROJECTS WITH THE RESCAPE AWARD

ONLINE RENT PAYMENTS, WALKABLE NEIGHBORHOODS AND PET PAMPERING KEY FOR TODAY'S RENTERS

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Departments PEOPLE

NEWS

The Minnesota Real Estate Journal (ISSN 08932255) is published monthly for $85 per year by Minnesota Real Estate Journal, 13700 83rd Way N, STE 206, Maple Grove, MN 55369. Phone: 952-885-0815. Periodicals postage paid at Minneapolis, MN. POSTMASTER: Send address changes to Law Bulletin Publishing Co, 415 State Street, Chicago IL 60654. Lanning Macfarland, Jr. chairman; Sandy Macfarland, CEO; and Brewster Macfarland, president. Back issues $10.00. Subscriptions are non-refundable. For more information call 952-885-0815. ©2015 Law Bulletin Publishing Co. No part of this publication may be reproduced without the written permission of the publisher.

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Minnesota Real Estate Journal

December 2015

People a division of Law Bulletin Publishing Co.

NAI Everest’s Gina Dingman Named One of Minnesota’s 100 People to Know in 2016 13700 83rd Way N, STE 206 Maple Grove, MN 55369 For information call 952-885-0815

Publisher | Managing Editor Jeff Johnson jjohnson@recg.com Associate Publisher Jay Kodytek jkodytek@recg.com Consulting Editor Dr. Tom Musil tamusil@stthomas.edu Conference Manager | Art Director | Graphic Designer | CE Specialist Alan Davis adavis@recg.com

Gina M. Dingman, President of NAI Everest, a full service brokerage firm, has been honored with the distinction as one of Twin Cities Business Magazine’s 100 People to Know in 2016, or briefly known as the “TCB 100”. The recognition ceremony will take place on December 16, 2015 at Windows on Minnesota in the IDS Center. This year’s honorees lead organizations that span all industries, and in some cases, have overcome major personal or professional obstacles. Dingman has a long track record brokering investment property sales. In 2010, she launched her own boutique firm, initially known as Everest Real Estate Advisors, now NAI Everest, and earlier this year she brokered the $40 million sale of the Parkdales office portfolio in the West End neighborhood of St. Dingman Louis Park, a vibrant retail, office and multifamily redevelopment within the Minneapolis market that has seen significant growth over the past years. "Gina is a true professional and leader in our industry. Opus has relied on her market knowledge and expertise over the years and I have always appreciated her open and candid style of communication. This has served her well as she's successfully grown the NAI Everest platform in the Twin Cities," said Dave Menke, President of Opus Development Company.

News PCL Construction Begins Crayola Experience at Mall of America

EDITORIAL ADVISORY BOARD JOHN ALLEN Industrial Equities ROBERT ANGLESON Navigator Real Estate RICK COLLINS Ryan Cos. US Inc. JEFF EATON Cushman & Wakefield/NorthMarq MARK EVENSON ULG Equis PATRICIA GNETZ US Bank TOM GUMP TAG Consulting JON HEMPEL Hempel Properties DAVID JELLISON Liberty Property Trust CHAD JOHNSON Hellmuth & Johnson BILL WARDWELL Colliers International GEORGE KLUEMPKE Braun Intertec JEFFREY LAFAVRE CBC Griffin Companies WADE LAU Founders Properties MIKE LE JEUNE Fabcon JIM LOCKHART WIPFLI DUANE LUND Exchange Realty PATRICK MASCIA Duke Realty Corp. CLINT MILLER Cushman & Wakefield/NorthMarq DR. THOMAS MUSIL University of St. Thomas WILLIAM M. OSTLUND CBC Griffin Companies WHITNEY PEYTON CB Richard Ellis MIKE SALMEN Transwestern STEWART STENDER Stewart Capital Partners

a division of Law Bulletin Publishing Co. 13700 83rd Way N, STE 206 Maple Grove, MN 55369 For information call 952-885-0815

PCL Construction is underway with its latest addition to the Mall of America in Bloomington. This time it’s Crayola Experience, a 60,000 square foot hands-on attraction and interactive experience that will attract an anticipated 400,000 annual visitors to experience Crayola colors, products and technologies. It will occupy the entire third floor of the former Bloomingdale’s department store. In May, 2016 Crayola Experience will open its doors to the public, one of only three such attractions in the United States. The other two are located in Orlando, Florida and in Crayola’s headquarters of Easton, Pennsylvania. The themed attraction will offer over 25 unique interactive experiences for all ages. On the exterior of the building, Crayola will add bold graphics to the southeast corner of Mall of America, wrapping around the entrance to the new L.L. Bean store. Crayola Experience combines traditional art materials with emerging immersive technologies to make it one of the most exciting destinations within the expanding Mall of America complex. PCL is teamed with Weber Group, designer of the Crayola Experience and one of the foremost attraction designer firms in North America, with clients ranging from Seaworld to Great Wolf Resorts. Established in 1903, Crayola is one of the oldest, best known and most respected brands in the world. PCL Construction served as construction manager for the original Mall of

America and has constructed over fifty subsequent projects at the mall, including the seven acre Nickelodeon Universe theme park.

Cushman & Wakefield/NorthMarq, AtWater Group expand Twin Cities partnership after new acquisition Duluth-based firm adds Long Lake Executive Center to growing portfolio Cushman & Wakefield/NorthMarq will partner with the Duluth, Minnesota-based AtWater Group to manage and lease its latest acquisition, the Long Lake Executive Center in New Brighton, Minnesota. AtWater, a commercial real estate development, investment and services firm, closed Nov. 12 on the building, a 67,159 sq. ft. office property at 900 Long Lake Road. The firm is planning a substantial upgrade to the building’s amenities and infrastructure. “AtWater Group is always looking for high-value investment opportunities in the Twin Cities market, and the Long Lake Executive Center represented just that,” said Marva Beckman-Lasky, Vice President and Asset Manager-AtWater Group. “We will continue to work with Cushman & Wakefield/NorthMarq in our search for even more assets in the market. We have full faith in the firm’s experience, skills and abilities, and it makes it easier to do what we do.” AtWater plans to own the building for the long-term. Many of the company’s properties have been under AtWater ownership for several years.

Cushman & Wakefield/NorthMarq Senior Director Aaron Barnard will lease the property on AtWater’s behalf. Property Manager Jared McKie will handle day-to-day operations. “Cushman & Wakefield/NorthMarq is excited to grow our relationship with AtWater Group and looks forward to helping the firm manage more properties in the future,” said Rob Loftus, Senior Vice President and Regional Director-Property Management for Cushman & Wakefield/NorthMarq. “We appreciate AtWater’s willingness to commit resources to properties and work with tenants to provide the best experience possible.” Cushman & Wakefield/NorthMarq has worked with AtWater since 2013, when it worked with the company to acquire the Normandale Place office building in Bloomington, Minnesota and the Ridge Point Medical building in Burnsville, Minnesota. The firm handles leasing and property management for those buildings, along with Park Glen Corporate Center in St. Louis Park. Earlier this year, AtWater awarded the firm management and leasing of three other properties in the Twin Cities, including: Concorde Executive Center: a 104,000 sq. ft. office building located at 6160 Summit Drive N. (Highways 100 and 694) in Brooklyn Center, Minnesota with Class A finishes and a state-ofthe-art energy management system. The Atrium: located adjacent to the Mall of America at 2626 E. 82nd St. in Bloomington, the nearly 90,000 sq. ft. Class B office property is just minutes

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News from the Minneapolis/St. Paul International Airport and one block west of the metro transit terminal and light rail transit station. Penn American Center: This nearly 70,000 sq. ft. Class B office building is in a prime location at 2740 American Blvd W. in Bloomington. “We continue to see value in awarding management and leasing contracts to Cushman & Wakefield/NorthMarq,” said Beckman-Lasky. “The professionalism, knowledge and best practices they bring to the table make my life as an asset manager easier. I trust that they have our best interest in mind when making decisions about our properties.” Cushman & Wakefield/NorthMarq now leases and manages seven properties totaling 500,000 sq. ft. on AtWater’s behalf. AtWater has already made considerable renovations to several of its newest Twin Cities properties. AtWater’s goal is to be recognized as a landlord that cares about its tenants, and the compa-

Minnesota Real Estate Journal

ny achieves this by providing modern, comfortable spaces that create stable environments and help build long-term relationships.

Dougherty Mortgage LLC closes $7.3 million Fannie Mae loan for Park Row East Apartments Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $7.3 million Fannie Mae loan for the refinance of Park Row East Apartments, a 205-unit market rate multifamily apartment property located in Arlington, Texas. The 10-year term, 30-year amortization loan was arranged for borrower DCP 3201 East Park Row Drive, LLC through a partnership with Old Capital Lending and Dougherty’s Minneapolis, Minnesota office.

The Davis Group project wins award Healthcare Real Estate Insights™ magazine recognizes Minnetonka Medical Center in Minnetonka, Minn., with a national HREI Insights™ Award for

development excellence MINNEAPOLIS, Dec. 17, 2015 – Minnetonka Medical Center, which was developed by Minneapolis-based The Davis Group, has been named a national winner in Healthcare Real Estate Insights™ magazine’s annual awards program. The HREI Insights Awards™ are the only national awards dedicated to recognizing excellence in the areas of healthcare real estate (HRE) development and executive leadership. The awards are presented by HREI, the first and only national magazine entirely devoted to covering HRE development, financing and investment. The Davis Group’s prize-winning development project, located in the western Minneapolis suburb of Minnetonka, Minn., was named the winner of the “Best New Medical Office or Other Outpatient Facility” in the 50,000 to 99,999 square foot category. “We are honored to be named a winner of the very prestigious HREI Insights Awards,” says Mark A. Davis, Principal of The Davis Group. “We dealt

December 2015

with a number of challenges in developing this facility, but we met those challenges head-on. This award is a testament to the creativity and hard work of our team.” That team, Mr. Davis adds, includes the firm’s financial partner, Milwaukeebased Physicians Realty Trust (NYSE: DOC), a healthcare real estate investment trust (REIT) that recently acquired a majority interest in seven Davis Group healthcare facilities, including Minnetonka Medical Center. John T. Thomas, President and CEO of Physicians Realty Trust, noted, “When we announced the acquisition with Mark Davis and The Davis Group, we had great confidence that we had identified a partner with whom we could execute, quickly and efficiently, this investment as well as future potential investments with him and his healthcare clients.” Mr. Thomas added, “This award is a wonderful accolade for this beautiful, state-of-the-art facility and reconfirms that we made the right decision in partnering with The Davis Group. We

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expect to have the opportunity to continue to partner with Mark and his clients on additional facilities in the future.” North Memorial Health Care engaged The Davis Group to find a site in the Minnetonka area that could support the development of a 35,000 square foot ambulatory hub with room for expansion. The Davis Group used patient profiles, a demographic analysis and competitor locations to identify the optimal location. To assemble the 5.2-acre site, the firm negotiated purchase agreements for three commercial buildings and four residential parcels – only one of which was on the market – and worked with several governmental bodies on rezoning, changes to the city’s master plan and other challenges. “Our judges found The Davis Group’s development solution to be the most compelling of those submitted in the 50,000 to 99,999 square foot category,” HREI Publisher Murray W. Wolf says. “The challenges it overcame on behalf of its client were truly extraordinary and

Minnesota Real Estate Journal

made The Davis Group very deserving of this year’s award.” The resulting two-story, 63,500 square foot Minnetonka Medical Center, met North Memorial’s objective of locating an ambulatory hub in a high profile site in the Minnetonka market. The Davis Group structured the lease to enable North Memorial to meet its initial space requirement of 35,000 square feet with the ability to expand its clinical presence to more than 60,000 square feet at defined intervals. The architect for the project was Edina, Minn.-based bdh+young, the contractor was Timco Construction Inc. from Plymouth, Minn., and United Properties Investment LLC, Bloomington, Minn., was one of The Davis Group’s strong investment partners on the project.

recently closed a $15.1 million HUD 221(d)(4) loan for the substantial rehabilitation of 700 Central, currently a pair of conjoined historic warehouse buildings located in Minneapolis, Minnesota that will be converted into 80 units of market rate multifamily housing with approximately 5,600 square feet of first floor commercial space. Because this project has been placed on the National Register of Historic Places, the Borrower was able to utilize equity from the sale of historic tax credits for the project. Additionally, grant funds from the City of Minneapolis (DEED), Metropolitan Council (TBRA TOD) and Hennepin County (ERF) are being used for environmental remediation needed at the site. The financing was arranged by Dougherty Mortgage's Minneapolis office for borrower 700 Central Owner, LLC.

Dougherty Mortgage LLC closes $15.1 million in HUD 221(d)(4) loan for 700 Central

Minnesota Real Estate Exchangors announces its 2016 Officers:

Dougherty Mortgage LLC, a full service national mortgage banking firm,

Minnesota Real Estate Exchangors (MREE), one of Minnesota’s oldest and

December 2015

most established real estate exchange groups, is pleased to announce the 2016 Officers. 2016 President: Brian Doyle: Principal, Doyle Property Group LLC Past President: Neil Friedman: Founder, Commercial Real Estate Resources New Board Members: Todd Wilson: Commercial, Broker KW Commercial Stuart Simek: Principal, Meridian Management Inc. Continuing Board Member: Eli Rupnow: Principal, Twin Cities Real Estate –Since 1962, members of this professional networking and real estate exchange organization have met twice monthly to share marketing ideas, to hear from relevant industry experts and most importantly to promote, in person, their investment real estate property listings. MREE meetings are open to anyone interested in buying, selling or exchangNews to page 18

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Minnesota Real Estate Journal

December 2015

Commercial real estate pros: Celebrate, donâ&#x20AC;&#x2122;t fear the Fedâ&#x20AC;&#x2122;s interest rate hike By Dan Rafter, Editor

he Federal Reserve Board finally did it: Yesterday, it announced that it would raise the federal funds rate for the first time since 2006. And though this first move is largely symbolic -- the Fed raised the rate from a range of 0 percent to 0.25 percent to a range of 0.25 percent to 0.5 percent -- it is making headlines, many focused on the new economic strains that a rate hike might mean for consumers. But in a brief published shortly after the Fed's move, Cushman & Wakefield said that commercial real estate professionals should view the rate hike as mostly good news; the Fed wouldn't raise the federal funds rate if it didn't believe that the economic's recovery was on solid ground. Cushman said, too, that the move signals that members of the Fed's Federal Open Market Committee believe that the country's labor market is close enough to, or already at, full employment. Job gains were an important factor

in the Fed's decision. According to the Cushman & Wakefield report, more than 500,000 net non-farm jobs were added to the U.S. economy in October and November. More than one-quarter of these new positions were in officeusing sectors. The country's unemployment rate stood at 5 percent in November, a figure that Cushman & Wakefield economists say is consistent with full employment. Because job gains have been strong, the Fed decided that the time was right to raise its key interest rate. Cushman & Wakefield's report says that commercial real estate professionals should be less concerned with the federal funds target rate or even the 10year rate and more concerned with the overall strength of the U.S. economy. Commercial buildings perform better when companies are hiring and job growth is strong. It's during these times that vacancy rates fall and asking rents rise. At the same time, the uncertainty of the global economy means that the United States remains a safe haven for investors, Cushman & Wakefield reported. These investors are increas-

ingly turning to commercial real estate in this country as a safe place for their dollars. Cushman & Wakefield's report says that the United States is attracting "massive capital flows" from around the world. That isn't about to change, and will continue to have a positive impact on the performance of commercial buildings. "In general, the Fed's decision today is not something that the commercial real estate industry should fear," Cushman said in its report. "To a degree, it is something that should be celebrated." Jeffrey Rinkov, chief executive officer of Lee & Associates, doesn't disagree. In a statement released today, Rinkov, too, said that commercial real estate companies should not fear the Fed's rate hike. "Based on a strengthening and stabilizing economy, I believe this was a logical move by the Fed," Rinkov said. "I think this signifies its belief that the economy can operate in an environment with a normal monitory policy. Relevant to real estate investment, long-term interest rates should remain

at historical low levels, which will continue to incentivize investment." Marcus & Millichap, too, had a positive reaction to the interest rate hike, saying that the Fed's decision represents a "major psychological threshold." That's because the move, as Marcus & Millichap says, marks the end of an era, a time in which the government had to take extraordinary measures to fight the nation's financial crisis. Marcus said that the quarter-point increase signals that the economy has finally returned to normal operating levels. Marcus & Millichap said that employment, retail sales and even housing prices have largely returned to healthy levels. Marcus & Millichap even predicted that interest rates will see relatively little upward pressure in the immediate future because this initial interest rate hike was so small. "By raising the rate for the first time since 2006, the Fed has finally expressed its confidence in economic growth, potentially opening the door to increased consumption and business investment," Marcus & Millichap said in its report.

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Minnesota Real Estate Journal

December 2015

Minnesota Brownfields honors four projects with the ReScape Award T

he St. Paul-based nonprofit organization Minnesota Brownfields recently honored four projects with the ReScape Award, given each year to redevelopment projects demonstrating excellence and innovation in reusing formerly contaminated land. Now in its fourth year, the ReScape Awards event was held November 12 at St. Paul’s Union Depot. Surly Destination Brewery in Minneapolis’ Prospect Park neighborhood received the Economic Impact Award. The most ambitious facility to emerge from Minnesota’s fast-growing craft brewing industry, Surly has created more than 200 FTE jobs and added over $200,000 to the local tax base. As is now well known, a destination brewery was only possible through the Minnesota Legislature’s passage of the 2011 “Surly Bill” that allows breweries to also serve beer on premises. However, changing the law wasn’t the only major challenge for Surly, but merely the first step. Owner Omar Ansari evaluated 80 possible development sites for the new brewery -- seeking a central industrial

location in an up-and-coming neighborhood was large enough for Surly’s operations and a beer garden, and close to transit and bikeways -- before settling on an 8-acre former Superfund site in Prospect Park. The first lender Ansari approached balked due to the property’s complicated environmental history. Undaunted, Ansari and his development team found a different lender, and pursued significant cleanup, soil vapor mitigation, and geotechnical corrections necessary to redevelop the 8.5-acre property. Overall remediation costs totaled nearly $3.5 million, with key funds coming from the MN Department of Employment & Economic Development, Metropolitan Council, and Hennepin County. Since opening last December, the Brewery has become a trend-setting regional tourist destination. The project enabled expansion of Surly’s production facilities and workforce, and has grabbed awards and honors for everything from beer to architecture to economic development. On receiving the ReScape Award, Ansari simply said “this one means alot,” noting the enor-

mous commitment and struggle it took to transform the blighted property into a crown jewel of Minnesota’s craft brewing industry. Northern Stacks 1, the first phase of a joint venture of Hyde Development and M.A. Mortenson Company, received the Small City Impact Award. The Fridley property was once owned by the U.S. Navy for advanced weapons manufacturing during World War II, and recently occupied by BAE Systems. Northern Stacks 1 will create 200 jobs, over $10 million in new property tax base and over $400,000 in new annual property taxes. Historical industrial operations involving heavy solvents and chemicals landed the property on Federal and State Superfund lists, with one of its highest-ever rankings due to the threat posed by groundwater contamination to the Mississippi River and Minneapolis’ drinking water. Getting the site de-listed was an enormous challenge, as was assembling necessary financing. Unlike Hennepin and Ramsey Counties, Anoka County lacks an Environmental Response Fund, meaning one less source of remediation

funding was available. Hyde Development and Mortenson pieced together public and private financing, including $4.5 million in tax-increment financing from Fridley’s Housing Redevelopment Authority, $1.3 million in grants from the state Department of Employment and Economic Development, and a $547,000 brownfield cleanup grant from the Metropolitan Council. Northern Stacks’ name comes from one of the old smoke-stacks adorned with the Navy Battle Effectiveness (Battle “E”) awards, which were saved and incorporated into the project’s design. The entire redevelopment, expected to be complete in the next few years, will eventually yield 3,000 new jobs, over $100 million in new property tax base and over $3 million in annual new property taxes. St. Paul’s CHS Field, the new home of the Saint Paul Saints baseball team, took the Environmental Impact Award honors. The project, built on the longvacant former Gillette site at the eastern edge of downtown adjacent to the Farmer’s Market, faced myriad chalBrownfields to page 18

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Minnesota Real Estate Journal

December 2015

Online rent payments, walkable neighborhoods and pet pampering key for today's renters What should apartment buildings offer if they want to attract the most renters? How about walkable neighborhoods, on-site fitness classes and online rent payments?

hose are some of the amenities that respondents cited in 2015 version of the National Multifamily Housing Council/Kingsley Associates’ Residence Preferences Survey. The survey, released this month, compiled data from nearly 120,000 renters across the country. The survey found that the most important factor that renters consider when choosing an apartment remains location. Respondents said that they want to be able tow alk to the grocery store, restaurant and bar. They also want to be located near public transit. But this doesn’t mean that renters want to ditch their cars. The survey also found that renters prefer driving over walking to work, school or

to their university classes. The survey found, too, that a typical apartment commmunity can receive as many as 100 packages for renters a week, a figure that doubles during the holiday season. It’s no surprise, then, that 72 percent of renters said they want their apartment building to ffer a package storage or holding area. However, 87 percent of residents said they would not be willing to pay extra for a package locker. Landlords who want to attract the most tenants must also offer top mobile-phone reception in their apartments. According to the survey, 53 percent of potential renters test their cell-phone connectivity while touring apartments, and 98 percent say that good mobile recep-

tion is important. However, only 68 percent of renters say the cell-phone coverage at their current apartment communities is great. Landlords need to take pets into account, too. The National Multifamily Housing Council says that 33 percent of apartment residents own a pet, and these owners want amenities for their fuzzy friends. The survey found that 67 percent of pet owners living in apartments are interested in dog parks while 54 percent are interested in a community pet-washing station. Residents don’t enjoy paying their monthly rents, of course. But when they do pay, they prefer to pay electronically. The survey found that 78 percent of tenants prefer paying their rent online. The number of renters has grown significantly, with the National Multifamily Housing Council reporting that 1.6 million new renter households have been created during the last five years. Many of these new renters are choosing

apartment living not because they can’t buy a single-family home or condominium, but because they prefer the renting lifestyle. And these renters-by-choice want top amenities. “Many of these new residents are making a lifestyle choice to rent instead of buy, and are looking for personalized services and amenities,” said Rick Haughey, vice president of industry technology initiatives with the National Multifamily Housing Council. “The apartment industry is stepping up to provide those experiences.”

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Minnesota Real Estate Journal News from page 8

ing investment real estate, capital equipment, or other business opportunities. The group meets on the first and third Wednesdays of each month in the conference center at the law offices of Hellmuth & Johnson PLLC located at 8050 West 78th Street Edina, MN 55439.

MARCUS & MILLICHAP ARRANGES THE SALE OF A 17,927-SQUARE FOOT RETAIL PROPERTY Marcus & Millichap, a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Jefferson Plaza, a 17,927-square foot retail property located in Brooklyn Park, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $2,600,000. Mike Marzinske, Matthew Hazelton, Adam "AJ" Prins, Sean Doyle and Cory Villaume, investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a private

investor. The same team secured and represented the buyer, a private investor. Speaking with Mr. Marzinske, “The Jefferson Plaza transaction is a great example of continued strength in the local retail market. This property had some unique characteristics, but with some creativity by both the buyer and the seller, we were ultimately able to get the transaction closed.” Jefferson Plaza is located at 85018511 Jefferson Lane North in Brooklyn Park, Minnesota.

Blackstone to Buy Apartments From Greystar in $2 Billion Deal Blackstone Group LP agreed to buy 32 multifamily properties for about $2 billion from Greystar Real Estate Partners LLC as the private equity giant expands its push into the U.S. apartment market. The buildings, with a total of 10,399 units, are spread throughout the country in states such as California, Florida, Washington and New York, Greystar said in a statement Tuesday. The Charleston, South Carolina-based com-

pany, the largest U.S. apartment manager, will continue to oversee the properties. Peter Rose, a Blackstone spokesman, declined to comment on the transaction. Blackstone’s multifamily holdings are ballooning as values surge amid a shift away from homeownership and escalating rents. The Greystar purchase would give the world’s largest private equity firm control of 57,000 units, including the acquisition of more than 11,000 apartments at Manhattan’s Stuyvesant Town-Peter Cooper Village. Multifamily buildings have led the five-year recovery in commercial real estate, with values exceeding the 2007 peak by about 34 percent, according to Moody’s Investors Service and Real Capital Analytics Inc. In big cities, prices are as much as 57 percent higher than prior records. Greystar, founded by Chief Executive Officer Bob Faith in 1993, manages 400,000 units globally. The deal with Blackstone represents about a fifth of the roughly 55,000 units the company owns, Faith said in an interview. The apartments are in a mix of mid-rise,

December 2015

high-rise and garden-style buildings. Property Upgrades Greystar specializes in buying apartment properties in need of upgrades and refurbishing them to get higher rents, Faith said. The company started acquiring the buildings in the Blackstone deal in 2011, when it closed on a $600 million fund, he said. “We executed most of our value-add strategy and felt it was time to take it to the market,” Faith said. Greystar capitalized “on the opportunity to take the whole portfolio out in one fell swoop. There is a lot of appetite for very highquality multifamily properties.” Blackstone started buying apartment buildings about two years ago after becoming one of the first Wall Street investors to break into the single-family rental business. The New York-based firm made its residential foray into Manhattan with a $690 million purchase in September, followed two months later by a $5.3 billion deal to acquire Stuyvesant Town, the city’s largest apartment complex.

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Avison Young From page 1

the Midwest. Consequently, that will drive more spec development." Foster said that Avison Young is seeing more rent increases, too, in the industrial market, another factor that will inspire more speculative industrial building across the Midwest. "The fundamentals are in a good place right now for continued spec development," Foster said. What do tenants want to see in these new spec industrial developments? Foster said that tenants with better credit are looking for new buildings in the best locations with the top amenities. This means plenty of trailer storage space, 32-foot to 36-foot clear heights and locations close to transportation options. In certain Midwest markets -- such as Minneapolis and Chicago -- spec industrial developments are often of the infill variety. Even with new spec buildings, industrial construction is not keeping up with demand, according to Avison Young's report. The company said that while 476 million square feet of new distribution, warehouse and flex space

Minnesota Real Estate Journal

has been delivered across the nation since 2012, these buildings are not coming online quickly enough for investors. Increased demand will lead to salesprice increases of 3 to 6 percent during 2016, Avison Young predicted. Avison Young reported, too, that investment sales of speculative industrial buildings increased by 63 percent from the first three quarters of 2014 to the same period in 2015, jumping from $1.6 billion to $2.6 billion. Avison Young predicts that going into 2016, the sales volume should continue to climb by as much as 15 percent in some markets. A look at the construction deliveries in the industrial sector shows just how high demand is. In 2012, developers brought 43.3 million square feet of industrial deliveries to the market. In 2013, that number jumped to 71.3 million square feet. In 2014 it hit 105 million square feet, and in 2015 it reached 147 million square feet. In the Midwest, Chicago was a leader with 10 million square feet under construction now, following 10.7 million square feet delivered in 2015 through the third quarter of the year. Indianapolis saw 5.7 millions square feet delivered in 2015 through the third

quarter, while in the St. Louis market, Gateway 673, a 673,137-square-foot building at 9 Gateway Commons Center Drive in Edwardsville, Illinois, sold for $35 million or $52 a square foot in August. Nationally, in the first three quarters of 2015, there were 1,522 industrial brownfields from page 12

lenges, including remediating contamination, dealing with a tight building envelope, and concurrent construction with the Metro Green Line and the Lafayette Bridge project. CHS Field has been dubbed the “greenest ballpark in America” for its numerous sustainable features, including 100 KW of solar energy, reuse of rainwater for toilets and field irrigation, reuse of building materials, and a onsite recycling/composting program with the goal of being a zero-waste facility. The ballfield owns the honor of being the the first sports venue to meet Minnesota’s aggressive B3 Sustainable Building 2030 energy standards. CHS Field is on track to host over 160 events and entertain approximately 400,000 visitors per year.

December 2015

buildings under construction totaling 545 million square feet. The amount of space currently under construction, which is a sign of deliveries yet to come, stands at 183.7 million square feet versus 82.7 million square feet at the end of 2012.

The Trout Brook Nature Sanctuary received the Community Impact Award. The Sanctuary restored a 26acre degraded former railyard located in St. Paul’s North End neighborhood just west of interstate 35E north. Determined community volunteers and neighborhood organizations partnered with the City of St. Paul, Great River Greening and others to restore the site’s ecology, including stormwater management and treatment, and daylighting of a buried creek. Pedestrian and regional bike trail connections were also established. Main project funding came from State grants, (Clean Water Fund, LCCMR, Outdoor Heritage Fund), Federal Grants (US EPA, Federal Highway Administration), St. Paul capital improvement budget, grants from the Capitol Region Watershed District, and private donations.

December 2015

Minnesota Real Estate Journal

Mazzocco From page 1

being utilized well before. Wells Fargo took a huge step in boosting that project when it announced that it was building a new office tower. The fact that nearly half of the stadium costs are being paid for by the public coupled with the corporate buy-in is giving people a lot of hope that this is going to be a special development. Strong industrial development: We have had a good run of industrial development out in the outer-ring suburbs of the metropolitan area. That was a sector that was hit hard by the recession. Within the last few years, we have seen developers and investors actually going back to building on spec. That is an indication that they have a lot of confidence in the market. Large users are out there looking to occupy large spaces. Industrial has really accelerated in the past few years. End of the apartment boom coming? Everyone believes that we are nearing the end of the apartment boom. But

Nick Mazzocco there are still a few more major multifamily developments in the pipeline. We will see the new apartment projects, though, start to slow down next year. Office vacancy rates keep falling: The office vacancy rates have definitely come down. Itâ&#x20AC;&#x2122;s been a long time since weâ&#x20AC;&#x2122;ve seen a new office tower built in Minneapolis or St. Paul.

Because there has been so much movement with existing businesses here, everyone has been able to work within the existing office envelope at this point. I think it will take another big move by a corporate entity that wants to bring its business to the CBD to really spur additional office construction here. But in the first-ring suburbs and in some of the major corridors in the suburbs around the Twin Cities, we are seeing more new office construction. That is satisfying whatever need there is right now for new office space. It is also keeping some of the businesses from making major moves downtown. Mall moves: There is a lot of interesting activity going on with retail right now. Mall of America has made a big move coming out of the recession. The mall just completed a major expansion. Mall officials are now already planning the next phase of their expansion. We are also seeing activity with the major regional retail centers around Minneapolis and St. Paul. Two of the large regional malls have completed significant renovation projects. A third one

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has a renovation cued up for the next year. Retail did take a hit in the CBD during the recession. But as we are getting a bigger residential population downtown, we are starting to see retail pick up again. It has been a little slow, with everyone hesitant based on past experiences with retail in the CBD. But we are seeing some significant new retail tenants downtown. Everyone is looking to see how they perform before weâ&#x20AC;&#x2122;ll get a lot of additional growth in that area.