VOLUME 34, NUMBER 1
©2018 Real Estate Publishing Corporation
January 2018
Allianz Field Construction Moving Along at Rapid Pace Redevelopment plans around new soccer stadium call for mixed-use development By Liz Wolf
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llianz Field – the future home of Minnesota United FC – is taking shape and on track for a
spring 2019 completion. The $200 million, privately-financed stadium is being constructed at the intersection of Snelling and University Avenues, off Interstate 94, in St. Paul’s Midway neighborhood. It’s being built on a vacant bus barn site that previously was used by Metro Transit. Part of the Midway Shopping Center, including anchor tenant Rainbow Foods, was also razed to make way for the stadium. “Everything that we need for stadium construction, which is the first phase of this giant redevelop-
ment, has been demolished,” says Hannah Burchill, marketing and PR manager at the city of St. Paul. “There’s still some foundation cleanup continuing,” she adds. Site is part of superblock The stadium site is part of a 34.5-acre superblock. The city of St. Paul has a master plan to guide redevelopment of this large urban area with the new stadium as the anchor. The area is bounded by UniversiStadium to page 10
The New Tax Bill: Boom or Bust for Commercial Real Estate? By Jeffrey Shea and Patricia Weller, Monroe Moxness Berg
primary concern to owners and operators of commercial real estate.
L
Changes to Section 179 of the Tax Code According to Congress, one of the primary goals behind of the new Act was to stimulate reinvestment by companies into their facilities. The Act seeks to accomplish this by providing generous depreciation treatments and cost recov-
et’s jump right to the conclusion: the real estate industry is one of the winners under the recently passed Tax Cut and Jobs Act (“Act”). Although the new Act affects many aspects of the Tax Code, this article will focus on three of
Shea
Weller
eries for improvements made to facilities and equipment purchased and placed into service after December 31, 2017. The Act increases the maximum amount a taxpayer may expense under Section 179 to $1,000,000 and the maximum cost of eligible equipment and improvements (before the phase out Tax Bill to page 14
January 2018
Minnesota Real Estate Journal
Contents
1
JANAUARY 2018 • VOLUME 34, NUMBER 1
ALLIANZ FIELD CONSTRUCTION MOVING ALONG AT RAPID PACE THE NEW TAX BILL: BOOM OR BUST FOR COMMERCIAL REAL ESTATE?
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PLACE – A MODEL FOR FUTURE DEVELOPMENT
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Departments PEOPLE
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NEWS
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Minnesota Real Estate Journal (ISSN 08932255) Copyright © 2018 by the Minnesota Real Estate Journal is published for $85 a year at 12 times per 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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Minnesota Real Estate Journal
January 2018
People
13700 83rd Way N, STE 209 Maple Grove, MN 55369 For information call 952-885-0815
President | Publisher Jeff Johnson jeff.johnson@resummits.com Vice President | Publisher Jay Kodytek jay.kodytek@resummits.com Consulting Editor Dr. Tom Musil tamusil@stthomas.edu Conference Manager | Art Director | Graphic Designer | CE Specialist Alan Davis alan@resummits.com
Real Estate Attorney Jeffrey Shea Joins Monroe Moxness Berg Jeffrey Shea has joined the law firm of Monroe Moxness Berg as a shareholder in the Real Estate practice group. A well-rounded transactional attorney, Jeff has 25 years of experience in corporate real estate, primarily as Associate General Counsel at U.S. Bank. He has a proven track record of providing exceptional legal service for corporate real estate users, owners, investors and developers in a pragmatic fashion while incorporating a unique mix of business and analytical insights gleaned from over his many years in the industry. He has considerable experience as both an attorney and a business decision maker in all areas of commercial real estate including leasing, development, acquisition and disposition, land use, commercial contracts and risk management.
CBRE Recruits Two New Hires to Strengthen Minneapolis Retail Team EDITORIAL ADVISORY BOARD JOHN ALLEN Industrial Equities ROBERT ANGLESON Navigator Real Estate JEFF EATON Cushman & Wakefield MARK EVENSON Avison Young PATRICIA GNETZ US Bank TOM GUMP TAG Consulting CHAD JOHNSON Hellmuth & Johnson BILL WARDWELL Colliers International JEFFREY LAFAVRE IAG Commercial WADE LAU Founders Properties JIM LOCKHART WIPFLI DUANE LUND Exchange Realty CLINT MILLER Cushman & Wakefield DR. THOMAS MUSIL WHITNEY PEYTON MIKE SALMEN Transwestern
13700 83rd Way N, STE 209 Maple Grove, MN 55369 For information call 952-885-0815
Rob Wise and Charlie Hexum join the Minneapolis office to focus on landlord representation. CBRE announced Rob Wise and Charlie Hexum, a top-performing pair of retail leasing specialists in the Twin Cities, have joined the firm’s Minneapolis office as Vice President and Senior Associate, respectively. They join CBRE’s growing retail business to focus on landlord representation for retail assets. Mr. Wise and Mr. Hexum join CBRE from Mid-America Real Estate in Minneapolis. During his six-year tenure at Mid America most recently as Vice President of Leasing, Mr. Wise represented institutional landlord clients and regional developers in transactions totaling more than 1,000,000 square feet. His teammate Mr. Hexum also spent four years at Mid-America focused on landlord representation for retail clients. “We are excited to add this great pair to our retail team in Minneapolis and further boost our retail business. Rob and Charlie have deep relationships with landlords and developers in the Twin Cities area and, most importantly, are well-known for their dedication to their clients,” said Blake Hastings,
Managing Director, CBRE. “Rob and Charlie will be instrumental in growing our retail presence in the Minneapolis/St. Paul market.” Mr. Wise is a graduate of the commercial real estate program at Nottingham Trent University. After beginning his commercial real estate career in London, Robert pursued and became a member of the Royal Institution of Chartered Surveyors. He is an active member of the Minnesota Shopping Centers Association (MSCA), RICS America and a board member of the Minnesota Commercial Association of Realtors (MNCAR). Mr. Hexum earned his degree in real estate with an emphasis in sales and marketing from St. Cloud State University while working as an intern at MidAmerica. He is an active member of the International Council of Shopping Centers, MSCA, MNCAR, and is currently a CCIM candidate.
Laura Hanneman joins Schafer Richardson and SR Realty Trust Laura Hanneman joined Schafer Richardson and SR Realty Trust in January as a member of the Capital Markets team and is the Manager of Investor Services. In this role Laura will work on all aspects of the Company’s investor relations, equity sales, and marketing efforts. Most recently, Laura was a part of the Minneapolis MultiFamily Investment Sales team at CBRE. Laura brings nearly two decades of commercial real estate experience and involvement in over four billion dollars of investment sales to Schafer Richardson and SR Realty Trust. “SR Realty Trust is pleased to introduce Laura Hanneman as the newest member of the REIT’s growing team,” said Evan Richardson, Vice President – Capital Markets. “We are confident Laura’s 18years of diverse experience in commercial real estate and client relations will enhance our ability to deliver best-inclass service to investors.”
United Properties names Student executive vice president, asset management/finance United Properties announced today that Richard Student, senior vice president of investments, has been promoted to executive vice president, asset management/finance, effective Jan. 1, 2018. Student, a 23-year veteran of the firm, leads day-to-day business management for company assets and financing activities. Within asset management, he provides supervision and direction to property managers and leasing agents and is responsible for lease underwriting, lease negotiation and lease execution, as well as the management of property capital investment. “Richard has been both instrumental and innovative in leading the financing activities for our portfolio and development projects,” said Eva Stevens, president and chief operating officer, United Properties. “We are pleased to recognize his successes and look forward to continued contributions.”
BKV Group Hires Commercial Real Estate Professional Julie Lux Addition expands BKV’s pre-development service offerings Julie Lux has joined BKV Group’s Minneapolis office as Pre-development Services Director. BKV’s pre-development services address the critical first phase of a real estate development. This phase includes identification, evaluation, and owner acquisition of potential development sites. Julie will support market studies, site assemblage, due diligence, project entitlement, and permit approvals. Prior to joining BKV Group, Julie Lux was a Vice President and part of Colliers’ Multifamily Advisory Group. With over 20 years in commercial real estate sales, she was involved with both private and institutional capital markets specializing in investment sales. Julie’s prior experience includes land acquisition, and financial analysis and dispositions for multifamily developers.
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Minnesota Real Estate Journal
News Dougherty Mortgage LLC closes Fannie Mae loan for Hulen Park Place Townhomes Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a Fannie Mae loan with Green Rewards for the acquisition financing of Hulen Park Place Townhomes, a 100-unit market rate multifamily apartment property located in Fort Worth, Texas. Hulen Park Place is conveniently located five minutes from Downtown Fort Worth and offers petfriendly 1- and 2-bedroom units with stainless steel appliances, stone fireplaces and in-unit washer and dryer. The Fannie Mae 12-year loan has a 30year amortization schedule and was arranged through a partnership with Old Capital Lending and Dougherty’s Minneapolis and Vienna, Virginia offices for Rosewood Capital, the local managing entity for borrower 3602 Eldridge, LLC.
MARCUS & MILLICHAP ARRANGES THE SALE OF A 1,834-SQUARE FOOT NETLEASED PROPERTY Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Starbucks, a 1,834-square foot net-leased property located in Murfreesboro, Tennessee, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $1,666,666. Mike Marzinske, an investment specialist in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a private investor. The buyer, a REIT, was secured and represented by Joseph Sigal, an investment specialist in Marcus & Millichap’s Chicago Oak Brook office. Starbucks is located at 2935 S Rutherford Blvd in Murfreesboro, Tennessee. “This property went under contract inside of a week and closed as expected. The buyer was a REIT out of Canada
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January 2018
that identified this property as a perfect fit for their Net Leased portfolio,” says Marzinske.
HomeServices of America Leaders Recognized with Industry Honors HomeServices of America, a Berkshire Hathaway affiliate, today congratulated executives from across its brokerage and franchise companies for being named to the 2018 Swanepoel Power 200 list. The Swanepoel Power 200 is a comprehensive roster of leading CEOs and senior executives whose leadership and experience drive the industry and their organizations. “The individuals on this list have differentiated themselves by their influence within the real estate industry,” said Ron Peltier, chairman and CEO of HomeServices, who himself was ranked within with Power 200 list. “On behalf of HomeServices, we thank them for their leadership, ingenuity and commitment. Their contribution to HomeServices and our collective suc-
cess is an ongoing source of pride for the entire organization.” The HomeServices’ executives recognized on the 2018 Swanepoel Power 200 list are: Candace Adams—president and CEO, Berkshire Hathaway HomeServices New England Properties; region president, HomeServices of America Mary Lee Blaylock—president and CEO, Berkshire Hathaway HomeServices California Properties; region president, HomeServices of America Gino Blefari—president and CEO, HSF Affiliates Jenni Bonura—president and CEO, Harry Norman, REALTORS® Jon Coile—president and CEO, Champion Realty Jeff Detwiler—president and CEO, Long & Foster Companies; region president, HomeServices of America Joan Docktor—president, Berkshire Hathaway HomeServices Fox & Roach, REALTORS® Larry Flick IV—chairman, Berkshire Hathaway HomeServices Fox & Roach, REALTORS®; region president, HomeServices of America
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Dan Forsman—president and CEO, Berkshire Hathaway HomeServices Georgia Properties Rosey Koberlein—CEO, Long Companies; region president, HomeServices of America Greg Mason—president and CEO, Edina Realty Home Services; region president, HomeServices of America Robert "Bob" McAdams, Jr.—president, Real Living Real Estate Stephen Meyers—president and CEO, Houlihan Lawrence Nancy Nagy—president and CEO, Berkshire Hathaway HomeServices KoenigRubloff Realty Group Peter Niederman—CEO, Kentwood Real Estate Ron Peltier—chairman and CEO, HomeServices of America Dana Strandmo—senior vice president and chief administrative officer, HomeServices of America Tom Tognoli—president and CEO, Intero Real Estate Linda Vaughan—president and CEO, ReeceNichols Jason Waugh—president and CEO, Berkshire Hathaway HomeServices
Minnesota Real Estate Journal
Northwest Realty
MARCUS & MILLICHAP ARRANGES THE SALE OF A 3,678-SQUARE FOOT NETLEASED PROPERTY Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of BB&T Bank a 3,678-square foot net-leased property located in Plano, Texas, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $2,145,000. Mike Marzinske, an investment specialist in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a private investor. The buyer, a developer, was secured and represented by Mike Marzinske as well. BB&T Bank is located at 6360 W Plano Pkwy in Plano, Texas. “This is a fantastic piece of property and a sterling example of what investors are looking for today. The marketplace for well-
priced and fundamentally sound real estate continues to produce excellent results for its sellers,” says Marzinske.
Northern Stacks III Welcomes Resolution Medical 35,781 square-foot lease brings Stacks III building to 100% occupancy Hyde Development, M. A. Mortenson Company and Colliers International | Minneapolis-St. Paul are pleased to welcome Resolution Medical to Northern Stacks, the state-of-the-art industrial distribution and office/warehouse business park in Fridley, MN. Resolution Medical signed a multi-year lease to occupy 35,781 square feet of the 133,200square-foot Stacks III, bringing the building to full occupancy. Northern Stacks is a joint venture of Hyde Development and M. A. Mortenson Company. Resolution Medical is a growing medical device engineering and manufacturing firm that provides innovative business solutions to the medical industry. Leadership at Resolution Medical were looking to expand not only their custom device clean room manufactur-
January 2018
ing capabilities, but also their research and development “incubator” space which houses their team of engineers and designers who develop, test and produce custom devices to solve for their clients’ specialized medical device needs. The team at Resolution Medical scoured the Twin Cities metro in search of a space that would fit their needs and found that moving into a med-tech building previously occupied and built for another tenant’s need wasn’t going to fit the bill. In regard to the opportunity at Northern Stacks Jon Ewert, Vice President of Operations at Resolution Medical says, “What attracted us to Northern Stacks was not just the visibility and community that the Stacks offer, but the opportunity to customize our space to fit our exact needs, with an eye on how the space can flex to fit our future growth as well.” Jon added, “The location of the Stacks is ideal for our new facilities, as it keeps us close to our clients and at the center of the med-tech industry in the Fridley area.” The move to Northern Stacks comes at an exciting time for the News to page 15
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Minnesota Real Estate Journal
January 2018
Stadium From page 1
ty Avenue, Snelling Avenue, I-94 and Pascal Street. Construction of the 346,000-squarefoot stadium kicked off in June 2017. The construction manager is Minneapolis-based Mortenson Construction and Kansas City-based Populous designed the facility. The expandable, bowl-shaped stadium will seat nearly 20,000 including a standing supporters section for 2,800 “super fans.” The stadium will also feature a natural-grass field, and the farthest fan will be seated just 125 feet from the pitch, the team reports. A large, 360-degree canopy will be built around the stadium to protect spectators from inclement weather and help contain interior sound. The stadium will also include 25 suites, 38 semi-private loge boxes, and four club rooms. Construction is progressing at a very solid pace. Structural steel started going up at the southeast corner of the site, and now is beginning to wrap around to the south. The exterior translucent fabric installation will begin in summer 2018. The first of the seats will be installed in fall 2018. The grass will be installed and “put to
sleep” for the winter in preparation for the team’s first season at the new facility. Project is on schedule “Things are progressing and we’re really excited about that,” says Donna Drummond, director of planning for the city of St. Paul. “We meet every couple of weeks with all of the various city staff and different departments that are working on the stadium site and the subgroups that are interacting with
Mortenson or team officials. We all check in regularly because there are a lot of details to work through with the construction.” Minnesota United CEO Chris Wright is excited about the new stadium for two main reasons. “No. 1, the fact that we‘re building a soccer-specific stadium in the Twin Cities is absolutely huge for the game,” he says. “The fact that we’re able to construct a 20,000-seat, purpose-built stadium -all privately funded – is sort of remark-
able. “And No. 2 for the Midway area, you’d love to think that you can be involved in a project that’s going to be about urban redevelopment,” Wright says. “When I see the location and the meaningfulness of this development in that particular neighborhood, I really think it’s not going to be economic, it’s going to be social. We’re going to create the vibrancy in the neighborhood that maybe traditionally hasn’t been Stadium to next page
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there. I think we can do sort of a face change for the neighborhood and help it continue to re-establish itself in the Twin Cities marketplace.” When completed, the stadium is expected to draw thousands of visitors to the area. 20-acre redevelopment planned around stadium Plans call for the stadium to anchor a redevelopment of the old Midway Shopping Center site, located immediately to the north. The goal is to create an “urban village” around the stadium that includes retail, residential, office and public open spaces. The city says that development will likely occur in phases over time. The city’s master plan was drawn up for the redevelopment of this broader area, including the stadium site and adjacent properties owned by New York-based RD Management (including the Midway Shopping Center). The buildings occupied by Rainbow Foods, Walgreens, Home Choice, Big Top Liquor and Midway Pro Bowl have been or will be demolished. “Our plan to expand the Midway/Allianz Field project and turn it into a mixed-use experience is an early-stage development that presents tremendous opportunity,” says Richard Birdoff, principal and president of RD Management.
Minnesota United closely involved with the redevelopment “We’re jointly developing the site,” Birdoff explains. “When I define the site, it’s other than the stadium. On the balance of the property, Bill McGuire (owner of Minnesota United), myself and related entities will be developing a mixed-use project that will have a variety of uses that will include commercial such as retail, food and beverage, a health club, possibly a theater and above that would be residential. [There will also be] hospitality on the site. And plans have shown a vast amount of open, green space that would be a community park-like setting.” Birdoff says the stadium is the “catalytic event to jumpstart redevelopment,” and he’s seeing a very strong
interest in residential development with first-floor commercial. “Down the street, the Whole Foods/Ryan project has been a great success,” he says. “As you go up and down the Green Line at all the various stations, you see new development and redevelopment. Those are some great developments, but none has the acreage that this site has and it just gives it endless possibilities of what can be developed here.” He says they’re in the planning stages and doing various designs. They hope to be under construction some time in 2018, and it will likely be a phased project. “There’s a retail section of the old Midway Shopping Center that’s still standing and will stay for the time being,” Birdoff adds. “But ultimately, we hope to be able to redevelop the
entire site and give those merchants that are still at Midway Center the opportunity to be part of the new development… Bill McGuire and myself are both very excited about the redevelopment here.” Drummond explains that RD Management owns the remaining acres outside the stadium site on the superblock, and McGuire has a master lease for that land. The two are working together. “They sent out a national call for development partners or development proposals last fall,” she says. “We haven’t heard the results yet.” Drummond says the Snelling Avenue frontage would probably be redeveloped first, because it has the most visibility and is closest to the LRT station.
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Minnesota Real Estate Journal
January 2018
PLACE – A model for Future Development Demolition work has begun on Chris Velasco’s St. Louis Park project at the Intersection of Hwy. 100 and Hwy. 7. By Todd Phillips, Minnesota Real Estate Journal Chris Velasco’s Bold Vision St. Louis Park is understandably excited, PLACE’s development checks all the boxes; affordability, transit-oriented, sustainable, live-work, concealed parking, not to mention an urban forest. But Executive Director Chris Velasco doesn’t just talk the talk and throw around buzzwords to get through entitlements. Their vision is bold and ambitious: A 360-degree approach to community building that makes a difference by addressing energy, food, mobility, affordable access to art and culture, and in some states even health insurance. Essentially, the team has found a way to really combine sustainability with affordability. Not just to live in their silo’s side-by-side, but rather entangling their benefits so that one helps the other in a symbiotic relationship. For example, by incorporating renewable energy sources such as an anaerobic digester, wind turbines
and solar panels, the project is designed to create more affordable energy for its residents and businesses. Another example is incorporating a hotel in the site, not only potentially giving jobs to residents, but also eliminating the costs of commuting, both financial and environmental. A Model for TOD “We are raising the bar on transit-oriented development”, says Velasco. “In the past, developers have plopped down apartment buildings next to light rail and simply called it Transit-Oriented. We are challenging that, incorporating the largest regional bike trail in the country by adding a multitude of bike amenities, such as repair and storage into our development.” And that’s not all, the project incorporates space for local retail and micro-business as well as live/work space for creatives. Add in the hotel and urban forest and you have one of the most intensely transitoriented developments in the country.
A Model for Public Private Partnerships The streets of the commercial real estate industry are lined with the broken dreams of ambitious developers. An industry that is increasingly dominated by large firms with deep pockets, development is no longer the place for under-funded, up and coming developers, let alone a non-profit like PLACE. But that hasn’t swayed Velasco and his team, they are breaking the mold and bringing creative solutions to the
process. PLACE claims grants from five separate sources including perhaps the largest grant ever funded by the Met Council. However, grants are just part of the story. PLACE’s website boasts eleven additional project partners, one of which is national behemoth Stantec. “We love the project,” says Steve Alm, Senior Principal at Stantec. “We’re thrilled to be able to leverage our deep bench of design and engineering PLACE to next page
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Minnesota Real Estate Journal
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experts from across the country, the best in their fields, to support PLACE’s vision for affordable living. The opportunity to partner with our other IPD team members, including Stahl Construction and the rest of the build team, is just icing on the cake.” According to Velasco, they have found working with partners instead of vendors brings a different perspective out of the work. “They are invested in the project, financially and emotionally and it shows up in the execution.” A Model for Sustainability The project started as a proof-ofconcept for PLACE’s e-generation process. They were to occupy the old McGarvey Building and had approached the city of St. Louis Park for changes in zoning. But the project evolved as the city and state had plans that would coalesce with Velasco’s vision over time. E-generation is still a major component to the project. The company describes it as “a neighborhood-scale system that, quite simply, takes food waste from a community (think: food scraps) and turns it into energy, which then grows organic produce for distribution via CSA (community supported agriculture). As a result, the people and businesses in this community will have lower energy bills, and will have access to fresh, organic
produce -- even in the long, cold Minnesota winters.” A Model for Persistence and Flexibility Velasco and his team has endured several major changes to its site proposal. At first, it was to merely redevelop the McGarvey Building, which turned into a full-scale development. After light rail plans got in the way, the
project was split into two components flanking the new light rail line. The project has been discussed at no less than 21 different city council, planning and EDA meetings; not to mention the dozens of public and private stakeholders now entangled in the project. Four years from the first Council session, demolition is nearing completion, with environmental remediation only steps
away. Financing is lined up and the project should break ground in 2018. Will this be a model for development in other markets, other cities? Velasco and his team thinks so. They are in the planning stages for other sites across the country, bringing sustainability and affordability together in a novel approach to community building.
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Tax Bill From page 1
threshold) to $2,500,000. If eligible, a company can expense 100% of these costs in the first tax year that they are purchased and placed into service. Property owners and operators should take note that the definition of assets qualifying for Section 179 treatment has been expanded under the terms of the Act to now include items such as roofs, HVAC systems, and fire protection, alarm and security systems. Bonus Depreciation In addition to the changes to Section 179, bonus depreciation has been enhanced to allow for depreciation of 100% (as opposed to 50%) of the cost of certain eligible assets in the first tax year they are placed into service. This change is for a limited time for eligible assets placed into service after September 27, 2017 through December 31, 2022, after which there is a phase-out period. Another change is to allow bonus depreciation on used equipment where previously used equipment was only a 179 deduction. Bonus depreciation is still only for interior improvements. To take full advantage of the changes to allowable depreciation under the
Minnesota Real Estate Journal
Act, owners and operators of real property should consider performing a cost segregation study. Such a study will provide a separation of values of personal property and other assets from real estate. This in turn will allow a taxpayer to depreciate personal property and other non-real estate assets for a shorter period (5, 7 or 15 years depending on the asset) than that allowed for real estate (27.5 or 39 year). It is important to note that a taxpayer can “opt out� of the Section 179 cost recovery and bonus depreciation in the event there is not enough income in the first year to fully utilize the deductions, or if the taxpayer anticipates being in a higher tax bracket in subsequent years and would receive greater value from the depreciation then. If the taxpayer chooses to opt out, then the assets will amortize over the useful life as provided in the Code. Section 1031 Section 1031 like-kind exchanges are still allowed under the new Act; however, they are limited to real property interests only. Personal property and intangibles are no longer eligible for a Section 1031 like-kind exchange. This affects items such as equipment, vehicles, franchise rights and other items. Still, some of the sting of this change is alleviated by the beneficial
depreciation rules described above. Disclaimer Please note that this article is not meant to give tax advice, but rather to highlight certain provisions of the Act. The Act is in its infancy and we expect technical corrections and modifications when it is codified and state tax responses to the effects of the Act. As always, consult a tax professional to determine how the changes fit your
January 2018
specific circumstances and to keep up with the latest interpretations and modifications to the Act. Jeffrey Shea and Patricia Weller are attorneys in the real estate practice group at the law firm of Monroe Moxness Berg.
January 2018
Minnesota Real Estate Journal News from page 8
rapidly-growing firm who have been headquartered in Fridley since their inception 6-years ago and are moving into a much larger space at Northern Stacks Vice Presidents Eric Batiza and Jason Simek with Colliers International | Minneapolis-St. Paul represented the Landlord in the completion of the Resolution Medical lease. Jack Tornquist of CBRE represented Resolution Medical. Resolution Medical will be the first medical device firm to occupy Northern Stacks, “We are excited to be adding the medical manufacturing use to the diverse group of businesses at Northern Stacks, which already include distribution, entertainment, manufacturing and defense” said Eric Batiza, Vice President of Colliers International | Minneapolis- St. Paul. “We hold Resolution Medical in high regard and are thrilled to welcome them to the Stacks, their move tips the scale at the Stacks, bringing all completed buildings in the park to 100% occupancy”
said Paul Hyde of Hyde Development. When the Northern Stacks complex is complete there will be a total of 7 buildings. To date, five buildings have been completed and four are fully leased. Availability remains in Stacks V with Stacks VI slated for delivery March 2018 and Stacks VII breaking ground Spring, 2018. Current tenants at Northern Stacks include, most recently; Axalta Coating Systems (Stacks V) MYGrant Glass, VStar Entertainment Group and Benchmark Logistics (Stacks IV) Dero and Everlast both PlayCore Companies (Stacks III) as well as, MB2 Raceway and Trio Supply Company (Stacks II) and Lindenmeyr Munroe, OnTrac International and Kaufman Container (Stacks I).
firm, recently closed a $10 million Fannie Mae loan for the acquisition financing of Toscana Apartments, a 160-unit market rate multifamily apartment property located in Bedford, Texas. Toscana Apartments offers petfriendly one- and two-bedroom units, with many units having been recently renovated. Units feature air conditioning, ceiling fans, walk-in closets and wood-style flooring. Community amenities include clubhouse, fitness center, swimming pool and gazebo. The Fannie Mae 12-year loan has a 30year amortization schedule and was arranged through a partnership with Old Capital Lending and Dougherty’s Minneapolis and Vienna, Virginia offices for borrower TS Asset Toscana LLC.
Dougherty Mortgage LLC closes $10 million Fannie Mae loan for Toscana Apartments
CBRE FACILITATES $368 MILLION SALE OF IRET MEDICAL OFFICE BUILDING PORTFOLIO TO HARRISON STREET
Dougherty Mortgage LLC, a full service national mortgage banking
CBRE announced today that it facilitated the $367.7 million portfolio sale
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of 25 medical office buildings owned by IRET, a real estate company based in Minneapolis and Minot, North Dakota, to Chicago-based Harrison Street Real Estate Capital LLC, (“Harrison Street”), one of the largest real estate investment firms dedicated to the education, healthcare and storage sectors. CBRE’s Healthcare Capital Markets Group, led by Chris Bodnar and Lee Asher, partnered with BMO Capital Markets to serve as advisors on the sale, which closed Dec. 29, 2017. Most of the healthcare properties included are located in the Twin Cities metro area, with additional facilities in North/Central Minnesota, Montana, North Dakota, Nebraska and Wisconsin. “It’s very rare in our industry for over a million square feet of medical office assets to be offered in one portfolio, primarily located in one market. Many of these buildings are positioned on the campuses of the top health systems in the Minneapolis-St. Paul region, considered one of the top medical markets in the country. This was an
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exciting transaction to be a part of and transformational for both buyer and seller,” said Chris Bodnar, Vice Chairman, CBRE U.S. Healthcare Capital Markets. Mark Burkemper, a Director at Harrison Street said, “This is a compelling investment opportunity to build scale in a premier medical market through a portfolio of high-quality properties. We look forward to working with our diverse, high-quality tenant base over the long-term to provide a high quality and enjoyable patient environment.” The sale follows a November announcement by IRET that the company had entered into a purchase and sale agreement to sell its entire healthcare portfolio, which totals 29 medical office building and healthcare tenant-occupied properties. According to an IRET press release, the company plans to complete the sale of its remaining healthcarerelated properties over the next six months as part of its transition to a multifamily-focused company.
GLT PARTNERS AT MARCUS & MILLICHAP ARRANGES
Minnesota Real Estate Journal
THE SALE OF TAMARIND APARTMENTS; A 102-UNIT APARTMENT BUILDING Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Tamarind Apartments, a 102-unit apartment property located in Saint Louis Park, MN, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $15,650,000. Mox Gunderson, Dan Linnell and Josh Talberg, GLT Partners at Marcus & Millichap’s Minneapolis office, represented the seller, a local partnership and also secured the Buyer. Speaking with Mr. Talberg, “Tamarind is a trophy multi-family property in the heart of the West End neighborhood of Saint Louis Park. The Buyer, Saint Louis Park based Main Street Companies, was attracted to the asset due to its size, age and most importantly location.” Talberg also added, “tenants live at Tamarind due its prox-
imity to retail, dining and entertainment venues, all within walking distance and its easy access to downtown Minneapolis, not to mention Tamarind’s relative affordability compared to newly constructed projects in the area. Tamarind Apartments is located at 2300 Ridge Drive in Saint Louis Park, Minnesota. The property is comprised of one- and two-bedroom apartments and was 100% occupied at the time of sale. Built in 1986 Tamarind enjoys walk-in closets, oversized balconies, underground heated parking and rests on approximately 2.5 well-manicured acres.
The Opus Group® Announces Start of Construction on Senior Living Project in Minnetonka, MN The Opus Group (Opus) announced today the start of construction on a new four-story, 147-unit senior living center in Minnetonka, Minnesota. The project
January 2018
will provide a wide continuum of housing and service choices, including independent living, assisted living and memory care apartments. Ebenezer Management Services will operate and manage the project upon completion in spring 2019. “We are pleased to expand our collaborative business model into senior living through this shared effort with Ebenezer,” said Matt Rauenhorst, vice president, Opus Development Company, L.L.C. “The market demand coupled with our vision for this site and Ebenezer’s strong track record managing these properties is a recipe for success.” The project is designed with an amenity-rich interior, featuring a salon, chapel, club room and a full-service dining room. Additional unique outdoor spaces that augment the community environment include walking paths, a memory care garden, an orchard, water features and raised planter beds for resident use. “Ebenezer is pleased to be part of this exciting new senior living project,” said Jon Lundberg, president of Ebenezer
January 2017
and Fairview Senior Services. “We are looking forward to partnering with the Opus team to provide quality lifestyle choice for older adults in the greater Minnetonka area.” Opus Development Company, L.L.C. is the developer and Opus Design Build, L.L.C. is the design contractor. Opus AE Group, L.L.C. is the architect and engineer of record and Sperides Reiners Architects is the design architect. Consilium Home is the interior designer on the project.
Minnesota Brokerage Group arranges $18.6 million St. Paul apartment community sale of Grand Pre by the Park! Tom Cooper, CCIM of Minnesota Brokerage Group and Stuart Simek, CCIM of Minnesota Brokerage Group and Meridian Management, Inc. represented both the Buyer and Seller of a 216 unit apartment community located in St. Paul, MN Tom Cooper represented the Seller
Minnesota Real Estate Journal
Jack Hurley of Greenhead Investments, LLC/Hurley Partners and had a long term relationship with the family including previous apartment sales transactions. Stuart Simek represented the Buyer, Don Kasbohm of 200 South Winthrop, LLC/Main Street Companies. Stuart had known Don Kasbohm for over 15 years as a fellow apartment owner/investor from his days of property ownership on St. Paul’s Eastside. The property was not officially listed and the seller had spoken with several well-known apartment brokerage houses in the Twin Cities including Minnesota Brokerage Group. The Seller was reluctant to formally list the building, but was receptive to limited showings with qualified buyers. Simek call his friend Don Kasbohm who owned a nearby property on Century Ave. and told him he might want to look at the property. Kasbohm immediately recognized the property that he had sought to purchase back in 2006, but was unsuccessful when it was sold to Hurley partners.
The property was built in 1972 with a mix of 1BR, 2BR and 3BR apartments complete with underground parking, swimming pool with an inner courtyard parklike setting. The property is well located near Ramsey County Parks; Battle Creek West and Battle Creek Upper Afton with numerous bike and walking trails just North of Lower Afton Rd. Stuart was able to bring a unique brokerage perspective to the transaction, being both an apartment owner and investor. “I consider it an honor being able to work with a successful investor like Don Kasbohm and help him continue to build his apartment portfolio. This property should be a great strategic fit with his other locations.”
AMERICAN REALTY ADVISORS ACQUIRES 403,219 SQUARE-FOOT MIXED-USE RETAIL CENTER IN EAGAN, MINNESOTA
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American Realty Advisors (“ARA”), an institutional fund manager with more than $8.0 billion in assets under management, has acquired Central Park Commons, a newly constructed retail shopping center and medical office building in Eagan, Minnesota. The 403,219 square-foot center is located within the Twin Cities suburb of Eagan, approximately 8.5 miles southwest of downtown St. Paul and 10.5 miles southeast of downtown Minneapolis. “This acquisition is well-aligned with our forward-looking strategy to acquire quality retail centers in top-tier trade areas,” says Kirk Helgeson, Chief Investment Officer at ARA. “Central Park Commons is strategically located between St. Paul and Minneapolis and is positioned to benefit from these two large-scale population bases.” Helgeson explains that the primary trade area surrounding Central Park Commons has extremely strong market fundamentals and demographics. Its population has increased by more than
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4.3 percent since 2000 with an additional anticipated increase of 1.9 percent over the next five years. In addition to its exceptionally strong trade area, ARA’s Senior Director in the Investment Group, Albert Pura, notes that the newly-constructed center was also an attractive investment for the firm based on its diverse range of national and regional credit-worthy tenants. “The retail center is currently 97-percent occupied by a variety of strong high-quality tenants,” says Pura who points to the center’s grocery-anchor Hy-Vee, as well as tenants including Home Goods, Marshalls, Hobby Lobby, ULTA, and Petco, among others. “With any of our retail acquisitions, we are looking for high-quality anchor tenants that will continue to perform in this highly competitive retail market,” says Pura. “Retailers offering branded items at discount pricing in limited assortment that are difficult to transition online such as Marshalls, Home Goods, etc. are well-positioned to continue to perform in this retail landscape compared to retailers who may face more
Minnesota Real Estate Journal
online competition. Central Park Commons is dominated by these types of tenants, strategically positioning it to perform over the long-term.” Central Park Commons is located at 3333 Pilot Knob Road in Eagan, MN 55121. Bob Mahoney at CBRE represented the seller, a joint-venture between CSM Corporation and John Johannson.
CBRE Capital Markets Closes Sale of the Southwest Office/Tech Portfolio CBRE Capital Markets represented ownership in the sale of the Southwest Office/Tech Portfolio, a 166,650square-foot office/tech portfolio in Eden Prairie, Minnesota. Judd Welliver, Ryan Watts, Sonja Dusil, and Tom Holtz of CBRE Capital Markets in Minneapolis, represented the seller. The buyer is Red Tail Acquisitions (RTA), a private real estate investment firm based in Irvine, CA. The sale closed December 20, 2017, and marks RTA’s second industrial purchase in the Minneapolis market.
January 2018
The Southwest Office/Tech Portfolio consists of three single-story office and tech buildings totaling 166,650 square feet. The portfolio includes Edenvale Executive Center A & B and Valley Gate North. The properties are located in Eden Prairie, a southwestern suburb of Minneapolis, Minnesota. The properties were built in 1986 and 1987 with 11' to 14' clear heights and 82.7 percent overall office finish. The portfolio is currently 82 percent occupied.
CBRE Capital Markets Arranges Sale of Two Minneapolis Creative Office Properties CBRE Capital Markets announced today the sale of The Broadway and Icehouse Plaza in Minneapolis, two buildings in First & First’s Twin Cities creative real estate portfolio, to Northpond Partners. Ryan Watts, Sonja Dusil, Judd Welliver and Tom Holtz of CBRE’s Minneapolis office arranged the sale on behalf of Minneapolis-based developer First & First. Together, the buildings in the sale total 95,895 square feet and were 98 percent occupied at the time of closing. First & First is committed to reimagining historically significant sites within the Minneapolis and St. Paul urban landscape. They transform these unique assets into inspired places that facilitate a creative and cultural experience. CBRE is also marketing additional properties for sale within First & First’s Creative Real Estate Portfolio. Chicago-based Northpond Partners
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focuses on the acquisition, development, and redevelopment of retail and mixeduse properties located in select urban and suburban markets domestically. Leveraging decades of expertise and relationships, Northpond targets valueadd and opportunistic investment strategies. The Broadway, at 945 Broadway Street NE, is a 56,156-square-foot creative office and retail building fronting Broadway Street in northeast Minneapolis. The two-floor building was originally constructed in 1922 and renovated in 2013. Major tenants include Spyhouse Coffee, 612Brew and CorePower Yoga. Icehouse Plaza, located on Minneapolis’ Eat Street in the Whittier neighborhood, includes two office and retail buildings totaling 39,739 rentable square feet with 13 multifamily units and an outdoor plaza. The properties, at 2550 and 2548 Nicollet Avenue South, were renovated in 2011. Tenants include restaurants Icehouse, Eat Street Social and Black Sheep Pizza; and indoor bouldering gym Vertical Endeavors.
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