VOLUME 31, NUMBER 06
Š2015 Law Bulletin Publishing Co.
June 2015
Mayo Clinic Square set to make big impact on downtown Minneapolis By Dan Rafter, Editor
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he Minnesota Timberwolves of the NBA and the Lynx of the WNBA have moved into their new training center and corporate headquarters in the center of downtown Minneapolis, the newly rejuvenated and renamed Mayo Clinic Square. And Chris Wright, president of the Timberwolves, couldn't be happier. He describes the training facilities of his team -- which formerly trained in the nearby Target Center -- as the most advanced in the entire NBA.
"This is the next generation of training facility," Wright said. "We wanted to separate ourselves from other NBA teams. To do that, we needed a facility with a healthcare provider right next door and embedded into what is now our global headquarters. We've done that, and it really does elevate us from other NBA teams." The Timberwolves and Lynx are sharing space at the 107,000-square-foot training facility at 600 Hennepin Ave. What makes this so impressive -- despite the large size of the training facility -- is that the famed Mayo Clinic has opened its own clinic here, too, the 20,000-square-foot Mayo Sports Medicine Clinic. Mayo to page 16
JLL helping Wendy’s, Chick-fil-A and other quick-service restaurants beat back the Chipotles and Smashburgers of the world By Dan Rafter, Editor
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hipotle, Five Guys Burgers and Fried and Smashburger grab the headlines today. These chains are part of the growing fast-casual restaurant category. And consumers today prefer this segment to traditional fast food. Just ask McDonald's and Burger King, two fast-food giants that are seeing their sales drop
quarter after quarter. But this doesn't mean that traditional fast-food restaurants -- known in the real estate business as quick-service restaurants -- can't fight back. JLL has done its research on the steps that quickservice chains such as Wendy's and Chick-fil-A can take to beat back the Chipotles of the world. The key? Steve Jones, managing director of retail multi-site program management at JLL says it all comes down to the three "f"s: fast, fresh and friendly.
If chains such as Wendy's or Arby's can focus on those three keys? Jones says that they do have a chance to regain their lost market share. Consider the first of the "f"s, fast. "We are in a mobile society today," Jones said. "People want things fast, whether they go inside or to the drive-thru. Quick-service restaurants have realized that JLL to page 17
June 2015
Minnesota Real Estate Journal
Contents
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JUNE 2015 • VOLUME 31, NUMBER 05
MAYO CLINIC SQUARE SET TO MAKE BIG IMPACT ON DOWNTOWN MINNEAPOLIS JLL HELPING WENDY’S, CHICK-FIL-A AND OTHER QUICK-SERVICE RESTAURANTS BEAT BACK THE CHIPOTLES AND SMASHBURGERS OF THE WORLD
10
ONEVILLAGE PARTNERS – WITH A BIG ASSIST FROM TWIN CITIES CRE INDUSTRY – MAKING A DIFFERENCE IN SIERRA LEONE
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FACES OF NAIOP - MICHELLE FOSTER
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CUSHMAN & WAKEFIELD: TO ATTRACT TOP YOUNG WORKERS, BUSINESSES NEED TO MAKE BIG CHANGES
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MARCUS & MILLICHAP'S PREDICTION: EXPECT PLENTY OF RETAIL ACTIVITY THROUGH REST OF 2015
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Departments PEOPLE
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NEWS
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Minnesota Real Estate Journal
June 2015
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Doran Companies announced today the promotion of their current General Counsel, Anne Behrendt, to the position of Chief Operating Officer (COO). Behrendt, who has been in the General Counsel role at Doran for four years, will assume the newly created position immediately while continuing to supervise the companies’ legal affairs. A Cum Laude graduate of the University of Minnesota Law School, Behrendt began practicing real estate law in 2004 with the Minneapolis law firm of Zappia & LeVahn. In 2011, she moved to the Doran Companies as General Counsel but was also actively involved in the day to day management and strategic growth of the company. Kelly Doran, the owner and principal executive of Doran Companies, said the new position was made necessary by the company’s upward growth trajectory and the difficulty for him to monitor all aspects of the various entities on a daily basis. “As COO, in addition to her monitoring of company goals and quotas and the execution of strategies to sustain our growth and profitability measures, we will continue to rely on Anne’s proven leadership and strategic direction,” Doran said.
THE EXCELSIOR GROUP HIRES TOM TRACY AS VICE PRESIDENT The Excelsior Group (TEG) is proud to announce the recent hiring of Tom Tracy. As Vice President for TEG, Tom will create and execute strategic plans for office-related investments including leading the development of office buildings at West End. Prior to joining TEG, Tom spent 18 years with Cushman & Wakefield NorthMarq, most recently as Executive Director in the office leasing group. Specifically, Tom was the leasing broker for Bloomington’s 1.7MM square foot Normandale Lake Office Park; one
of the United States’ premier suburban office parks. He has played a key role in two sales of Normandale Lake Office Park as well as the development of two office buildings within the park. Throughout his career, Tom has completed more than 600 transactions totaling more than 1.5 million square feet. In 2013, he was named MNCAR’s Broker of the Year. Tom grew up in St. Paul, MN; he is a graduate of the University of Notre Dame and began his real estate career at Shelard/Koll.
Dominium Adds Cody Dietrich as Development Staff Associate Dominium, a leading apartment development and management company, today announced that it has hired Cody Dietrich as a development staff associate at its home office in Plymouth, Minn. Dietrich will work with project partners in analyzing new projects, negotiating with lenders, investors and vendors, while preparing and coordinating financing and equity packages. He will also assist with design processes and construction management. Dietrich was previously a development intern with Dominium. The hire was effective on May 26, 2015. Dietrich has a Bachelor of Science in finance and marketing from St. Cloud State University. He enjoys baseball, basketball and golf. Dietrich currently resides in Minnetonka, Minn.
Mid-America – Minnesota Hires Two New Employees Minneapolis-based Mid-America Real Estate – Minnesota, LLC announces the recent hire of two new employees to their team. Michael Lund will serve as Retail Tenant Specialist. In his position, Mr. Lund with work on the tenant representation team with Principal Michael Sims and Vice President Patrick Daly. Prior to working at Mid-America, Mr. Lund worked for the Frauenshuh Commercial Real Estate Group working in the retail,
office, healthcare and industrial markets. Mr. Lund specialized in corporate services for Frauenshuh clients and the portfolio, including a wide array of duties such as: strategic planning, development, and project management, in addition to leasing and brokerage services on a local and national level. An active member of the International Council of Shopping Centers (ICSC), Mr. Lund graduated from The University of St. Thomas, Opus School of Business with a Bachelor of Arts degree in Financial Management. “Michael brings passion and energy to the team with a lifelong background in the real estate business. He is a great addition to Mid-America,” said MidAmerica Principal Michael Sims. Alexander (Zander) Fried will serve as Project Leasing Assistant. In his position, Mr. Fried will support the project leasing team, conduct market research and utilize mapping tools to analyze property data. Prior to joining MidAmerica, Mr. Fried worked in international economic development and American export regulation. He interned with the United Nations Development Programme, helping a global policy team with "Post-2015" Development consulting. While interning at the United States Department of Commerce, Mr. Fried assisted a group of export enforcement analysts. In these roles, Mr. Fried conducted open source research, drafted press releases and speeches and provided written analyses to his superiors. Mr. Fried graduated Cum Laude from Occidental College in Los Angeles, where he obtained a Bachelor of Arts in Economics.
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News Dougherty Mortgage LLC Closes $5.3 Million Fannie Mae Loan for Meadow Creek Apartments Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $5.3 million Fannie Mae loan for the acquisition of Meadow Creek Apartments, a 128-unit market rate multifamily apartment property located in Garland, Texas. The 12-year term, 30-year amortization loan was arranged for MPG Texas 2, LLC through a partnership with Old Capital Lending and Dougherty’s Minneapolis, Minnesota office. Property features include a community room, pool, barbecue area and on-site laundry.
Star Tribune Names Bridgewater Bank a 2015 Top Workplace Bridgewater Bank has been named one of the Top 150 Workplaces in Minnesota by the Star Tribune. The Top Workplaces special section was pub-
Minnesota Real Estate Journal
lished in the Star Tribune on Sunday, June 14. Produced by the same team that compiles the 24-year-old Star Tribune 100 report of the best-performing public companies in Minnesota, Top Workplaces recognizes the most progressive companies in Minnesota based on employee opinions measuring engagement, organizational health and satisfaction. The analysis included responses from over 69,100 employees at Minnesota public, private and nonprofit organizations. The rankings in the Star Tribune Top 150 Workplaces are based on survey information collected by WorkplaceDynamics, an independent company specializing in employee engagement and retention. Bridgewater Bank was ranked 21st on the small company list. “We are incredibly honored to be recognized as a Top Workplace by the Star Tribune, but more importantly, by our employees,” explains President and Chief Executive Officer Jerry Baack. “Our people really are our biggest asset and we see this designation as a good indicator that our culture is engaging
and allows opportunities for continued personal growth.”
NAI Everest Brokers Sale of Superior Plating Site Northeast Minneapolis NAI Everest is pleased to announce the successful brokering and sale of the 5.45 acre Superior Plating site located in the Northeast Minneapolis neighborhood of the Twin Cities. The two city block site was sold by First & University Investors LLC to Lennar’s Multifamily arm for $13,740,000, equaling $2.5M per acre. The site is at 315 First Avenue NE, just two blocks from the Mississippi River and the first phase of development will include 278 apartment units as well as 22,000 square feet of commercial space. “The Northeast Minneapolis neighborhood is one of the most vibrant and sought after locations for restaurants, retail and apartment living,” said Gina Dingman, President of NAI Everest. “It is terrific that Lennar was able to acquire this site to meet the demand for further development in one of Minneapolis’s most dynamic communities.”
June 2015
StuartCo Voted Top Workplace for Fifth Consecutive Year StuartCo has been named one of the Top Workplaces in Minnesota for the fifth consecutive year based on an employee-based survey project from the Star Tribune. The Star Tribune Top Workplaces special section was published on Sunday, June 14. The report can also be found at: http://www.startribune.com/jobs/topworkplaces Produced by the same team that compiles the Star Tribune report of the bestperforming public companies in Minnesota, Top Workplaces recognizes the most progressive companies in Minnesota based on employee opinions about company leadership, communication, career opportunities, workplace environment, managerial skills, pay and benefits. The rankings in the Star Tribune Top Workplaces are based on survey information collected by Workplace Dynamics, an independent company specializing in employee engagement and retention.
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Minnesota Real Estate Journal
Dougherty Mortgage LLC Closes $4.9 Million Fannie Mae Loan for Ponderosa Acres Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $4.9 million Fannie Mae loan for the refinancing of Ponderosa Acres, a 120-unit multifamily affordable housing property located in Billings, Montana. The 10-year term, 30-year amortization loan was arranged by Dougherty’s Minneapolis office, for borrower Heartland Ponderosa Limited Partnership. Property features include a playground, community room, resident computer lab, barbecue area and on-site management and maintenance.
Doran Construction Kicks off $100 Million in Construction in June Doran Construction, the Bloomington, Minnesota-based general contracting company, announced today that they have been awarded more than $100 million in construction projects that have
commenced in late May and early June. BlueStone Flats, a 142 unit luxury apartment project developed and owned by Summit Management. The project is located at the BlueStone Commons residential and commercial development near the UMD campus. The Encore, a Sherman & Associates 122 unit 12-story luxury apartment project with three levels of underground parking at 935 Second St. S. in Minneapolis, across the street from the Guthrie Theater and Gold Medal Park. 610 West, a 480 unit luxury apartment community located one block east of Target’s Corporate Campus on Oak Grove Parkway in Brooklyn Park. The project is owned by Doran Companies and will be developed in two phases. The current construction contract includes 287 of the 480 unit project and a 23,000 square foot high amenity clubhouse. Jupiter Plaza, a 6000 square foot expansion of Woodbury Village which is owned by Robert Muir Properties. 5300 Central, a new 6000 square foot out parcel building owned by Totem
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Foods. The project is located in Fridley, MN near the Target Plaza. In addition to significant commercial projects, over the past five years Doran Construction’s residential unit has built, or has under construction, 20 multi-family projects in Minnesota and North Dakota with over 3500 apartment units and a value of over a half billion dollars—achieving a reputation as one of the most experienced multi-family builders in this market.
MARCUS & MILLICHAP ARRANGES THE SALE OF 134,165 SQFT OF LAND 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 Park Place on France, 134,165 square feet of land (just over 3 acres), located in Bloomington, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $1,671,000. Brian Klancke, Sean Doyle and Cory
June 2015
Villaume, investment specialists in Marcus & Millichap’s Minneapolis office, brokered a successful closing between the seller, a limited liability company and the buyer, an owner/developer. Speaking with Mr. Klancke, “This acquisition offers the new owner/developer the ability to significantly impact the retail trade area at West Old Shakopee Road and France Avenue South in Bloomington. Driven by strong demographics, traffic counts and an ever increasing tenant demand for quality sites, retail vacancy rates continue to drop in the south metro.” Park Place on France is located at 10700 France Avenue South in Bloomington, Minnesota.
Cushman & Wakefield | NorthMarq represents Weidner Investments LLC in office property acquisition for new regional office Cushman & Wakefield | NorthMarq recently represented Weidner Apartment Homes LLC., in its acquisition of CarlNews to page 21
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Minnesota Real Estate Journal
June 2015
OneVillage Partners – with a big assist from Twin Cities CRE industry – making a difference in Sierra Leone By Dan Rafter, Editor
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efore he ever made his mark in Minneapolis' commercial real estate industry, Jeff Hall served in the Peace Corps in Sierra Leone in Africa. Hall lived in Sierra Leone in the late 1980s for two years, spending most of his time in the village of Jokibu. He then returned to the Twin Cities to start his successful real estate career. Today, he is the founder of Ursa Investors, an industrial real estate firm that does business in Minnesota and Wisconsin. But Hall's time in Sierra Leone changed him. He felt connected to the country, and had made friends during his time there. In 2004, he returned to the country. Once there, he discovered that the village in which he had lived during his Peace Corps days had been destroyed because of war. Hall decided to help. "I wanted to help them get going again," he said. Hall raised money from family members and friends to help the peo-
ple of the region rebuild their homes and their community. And once he did this, Hall decided that he didn't want to stop helping. He formed the Minneapolis-based non-profit OneVillage Partners in 2007. Since that time, the organization has provided money to help bring clean water to Sierra Leone villages and help send Sierra Leone children to college. The organization's members have worked alongside Sierra Leone villagers to build latrines and develop agricultural programs. "We have a long-term commitment to this country," Hall said. "We are there for the long run. And it's not about us doing everything for these people. It is about us working with them to make the residents of Sierra Leone self-sufficient. The residents are the ones making the changes and taking the steps to improve their living conditions." Real estate support The commercial real estate community in the Twin Cities has been a big supporter of OneVillage Partners, not
surprising considering Hall's own background in the industry. For the last three years, OneVillage Partners has organized a breakfast meeting with commercial real estate
professionals to help raise funds for the organization. This year's breakfast, the fourth, will be July 22 at 7:30 a.m. at the Minikahda Club just west of Lake OneVillage to page 18
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Minnesota Real Estate Journal
FACES of NAIOP
MICHELLE FOSTER, president of Foster Real Estate Advisory Services, has worked in the commercial real estate industry for more than 35 years, with a personal practice spanning every aspect of the field---from development (encompassing more than five million square feet of build-to-suit and multi-tenant office, industrial and retail space, winning the Minnesota Chapter’s Award of Excellence for seven of them)---to project management, land acquisition and disposition, brokerage transactions and advisory services.
MICHELLE FOSTER President Foster Real Estate Advisory Services
Q. You have been a leader in NAIOP’s diversity efforts. How has that paid off for the chapter ? NAIOP's efforts have grown to become a partnership of the major commercial real estate organizations known as the Commercial Real Estate Diversity Collaborative. The Collaborative is working toward creating a more racially diverse industry reflective of our changing client base and demographics. The Collaborative also awards scholarships to minority students at area universities interested in a career in com-
June 2015
“My involvement in NAIOP Minnesota stretches back almost as far, 24 years in all,” she says, “beginning with a stint on the Chapter’s board of directors in 1991 and ’92, and returning to the board for another term starting in 2011, ending last year.” She has also been a member of the Public Policy Committee since 2008, and chaired the Task Force on Diversity in 2009. Along the way she won NAIOP’s “Volunteer of the Year” award in 2011, and was honored by Finance & Commerce as one of its “Outstanding Women in Finance.”
mercial real estate. The first recipient now works in property management at Welsh & Colliers. Additional recipients are expected to join the industry soon. Q. Although still dominated by men, commercial real estate as an industry seems to be attracting an increasing number of women. What in your view is the potential for young women to build a career and assume leadership roles in the industry? NAIOP to page 19
Michele is widely recognized as one of those rare leaders in the development community who combine outstanding private sector development skills with an intimate knowledge of how the public sector thinks and works, earned in her early years actually working in local government. Her interest in public policy and policymaking led her as a college student to earn a B.S. in political science from the University of Nebraska, followed by a master's in public affairs (M.P.A) from Princeton. She began her working career with the Minneapolis Planning Department, focusing on zoning issues and policies, and with the Minnesota Housing Finance Agency, where she provided research, policy and program analysis to senior management and the Board of Commissioners. She joined the development world in 1978, going to work for Opus Northwest LLC (previously Rauenhorst Corp.) rising to Senior Director, Real Estate Development. At Opus she managed the development of three major business parks--in Chanhassen, Plymouth, and Minnetonka among other projects. In 2006 she moved on to CSM Corporation as Vice President, Commercial Real Estate Development, leaving the following year to launch her own firm.
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Minnesota Real Estate Journal
June 2015
Cushman & Wakefield: To attract top young workers, businesses need to make big changes By Dan Rafter, Editor
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ere is a staggering figure, courtesy of the Deloitte Millennial Survey: By the year 2025, Millennials will make up 75 percent of the global workforce. That’s big news. And for businesses, the message is clear: They need to do whatever they can to attract Millennial workers if they expect to remain successful into the next decade. John Morris, head of industrial for the Americas, and Jeff Lessard, managing director of global business consulting, for Minneapolis’ Cushman & Wakefield, have been studying the impact that Millennials are and will have on the business world. In an interview with Midwest Real Estate News, the two Cushman & Wakefield pros said that businesses need to develop plans today to attract and retain the Millennials who will continue to flood the workforce in the coming years. What do businesses need to know about Millennials? Lessard said that the younger generation of workers isn’t
interested in merely following orders and picking up paychecks. They want to make a bigger impact on their companies. They want to voice their opinions and lead projects. And they want to do this from the very start of their careers. “The Millennials are tech-savvy and highly collaborative,” Lessard said. “They reject structure in all forms. They are an expressive and optimistic generation. They want to make a difference. We see those attributes coming through in what they want in their workplaces.” Job hoppers? Not really Millennials have a reputation as being job-hoppers, moving from one job to the next as they move throughout their working years. Lessard, though, said that this reputation isn’t accurate. Millennials instead are what Lessard calls experience-hoppers. They’ll stay at a company if that company can provide them opportunities to tackle several different tasks and jobs. If companies don’t do this? If they
don’t provide Millennials with plenty of opportunities to move into new positions? They shouldn’t be surprised when their younger workers leave for new experiences elsewhere, Lessard said. Morris said that Millennials are more educated than any other generation. He said that the number of 25- to 29-year-olds who have four-year college degrees has tripled in the last 30 years. This has an important impact on the type of work that Millennials are good at, and the type of work with which they struggle, Morris said. “One thing that is true about people with four-year degrees is that the majority of them will not do an industrial job,” Morris said. “They won’t work in manufacturing, for the most part. And they won’t work in the warehouse.” This can cause problems for companies. More shoppers today – many of them Millennials, of course – are ordering good online. These goods come from a warehouse, not from stores. It can be challenging for com-
panies to find quality laborers willing to work in these warehouses. “The Millennials, many of them, won’t do that work,” Morris said. “And if they do it, they’re bad at it. It’s not what fits them. They are not productive at it. That means that these megawarehouses filling orders for Amazon have to become more mechanized and automated so orders can be filled. If you don’t have access to productive labor, you need productive capital instead.” At the same time that younger people are less willing to work in warehouses, they are ordering goods from their laptops, phones and tablets, Morris said. “That volume of goods that they buy through their devices is creating a challenge in the industrial world,” Morris said. “The demands on facilities are rising at the same time that the labor pool to work those facilities is shrinking.” Are businesses ready? The big question, then, is this: Are companies across the globe ready for Workers to page 20
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Minnesota Real Estate Journal
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Marcus & Millichap's prediction: Expect plenty of retail activity through rest of 2015
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he retailers are following the people. That's why so many new shops are opening in the downtowns of Midwest cities today. Retailers need shoppers. And a growing number of the most valued shoppers -- young adults under the age of 35 -- are moving into the downtowns of cities such as Chicago, Indianapolis, Columbus and Louisville. And Minneapolis/St. Paul, of course. In its second quarter retail report, Marcus & Millichap reported that the Twin Cities is now in the middle of a strong retail recovery, especially in the urban core of Minneapolis. The numbers are impressive: Marcus & Millichap reports that 1,600 apartment units have come online in downtown Minneapolis during the last two years. And during the next several years, developers are expected to bring 2,500 more apartments to the heart of the city. Many of these new apartment projects will boast ground-level retail. The apartments themselves, dotted with modern amenities, are attracting high-
The Nicollet Mall in downtown Minneapolis is on top for a facelift beginning this year. er-paid tech and creative workers, according to Marcus & Millichap. They are also attracting downsizing
Baby Boomers who are eager to live the urban lifestyle. There has been plenty of retail activ-
ity in downtown Minneapolis to meet the growing demand from new resiRetail to page 20
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Mayo From page 1
Having the Mayo Clinic as a partner means that Timberwolves and Lynx players will receive the best treatment and rehabilitation work possible, Wright said. "Time is your enemy in so many ways when you're dealing with athletes and injuries," Wright said. "If one of our players gets injured, we don't have to send for an ambulance. We can immediately get to work on the injury right on site. It is fluid and quick. And that can make all the difference." A new beginning The presence of the Timberwolves, Lynx and Mayo Clinic are all key to the future of the newly renamed Mayo Clinic Square. The two basketabll teams celebrated the grand-opening of the training facilities and their corporate offices -- also located in the development -- in mid June. Having these important tenants is making Mayo Clinic Square -- which officially opened late last year -- a key retail destination in downtown Minneapolis. Mayo Clinic Square was originally known as Block E. But that retail cen-
Minnesota Real Estate Journal
ter never really succeeded. It initially attracted retail clients, but most of them gradually left the space. That's why Plymouth, Minnesotabased Provident Real Estate Ventures, owner of the development, decided a major renovation was needed. The $50 million renovation has resulted in Mayo Square Clinic, a decidedly more modern development that is friendlier to pedestrians. "This is such an important development for downtown Minneapolis," said Phillip Jaffe, chief executive officer of Provident Real Estate Ventures. "It is right in the heart of our entertainment and sports district. It's right across the street from the Target Center. It's a block from the Twins' new baseball stadium. Hennepin Avenue is where all the theaters are. It's a strategic piece of real estate." The original Block E had a serious flaw: Hennepin and First avenues are the two major streets that surround the development. When the development was Block E, there was no way for shoppers to get from Hennepin Avenue on the first floor to First Avenue. Shoppers had to go around the entire building to do this. That has changed: Now that the development is Mayo Clinic Square, it's easy for shoppers and pedestrians
to circulate throughout the entire development and to get from one of the major avenues to the other, Jaffe said. Then there's the partnership with the pro basketball teams and the Mayo Clinic. Both bring instant credibility to Mayo Clinic Square, Jaffe said. "This represents a new paradigm in professional basketball," Jaffe said. "This is the gold standard with how the corporate offices, practice facilities, arena and health providers all integrate together. And getting the Mayo Clinic to come to downtown Minneapolis, to put its name on our building, is a huge plus for our development." The basketball teams and the Mayo Clinic fill the third and fourth floors of the development. The second floor contains office space that is available for lease, while the ground floor has about 45,000 square feet for lease. Jaffe expects primarily restaurants to fill that space. "We are in the billboard district in downtown, so that is important for any potential tenants," Jaffe said. "We have the only building that can offer office tenants exterior signage on the outside. We can light up our building at night. As I am recruiting office tenants, I am focusing on the tremendous branding opportunities that we can offer. Everyone will know our building because it
June 2015
lights up at night, any color that we want. Tenants will have great signage and branding opportunities on the side of our building." What office tenants will locate in Mayo Square Clinic? Jaffe says that the space won't necessarily appeal to a 100-year-old law firm. But it will make sense for marketing firms, architecture companies and brokerages looking for a trendy space with access to plenty of parking. "It's all very exciting in downtown Minneapolis today," Jaffe said. "There is so much momentum in downtown, and Mayo Clinic Square is another example of this."
June 2015
JLL From page 1
drive-thrus are always increasing in importance. That's why so many are adding second drive-thru lanes today. That is important to keeping the fast pace that quick-service restaurants need." The second "f," fresh, is just as important. Chains like Chipotle promote their fresh ingredients. To compete with that, and to win the dollars of today's fussy consumers, quick-service restaurants must offer fresh food, too. This means that the days of letting burgers sit wrapped under heat lamps are coming to an end, at least for those quick-service restaurants that don't want to keep losing customers. "Look at the fast-casual chains. They charge a bit more, but their food is perceived as being fresher," Jones said. "The quick-service restaurants have to take note so that they don't keep losing market share to the fast-casual chains." Finally, there's "friendly," the third "f." One quick-service chain already does this well. Think of the last time you stepped into a Chick-fil-A. The odds are high that your server asked you how your day was or smiled when you stepped up to the counter. Consumers want to feel special, even
Minnesota Real Estate Journal
when they're just eating at a quickservice restaurant. Friendly service helps. "People have to recognize that consumers have more options today," Jones said. "You want to eat somewhere where people are friendly." To grow today, quick-service restaurants must appeal to Millennials, according to JLL's research. JLL reports that these young consumers account for about 23 percent of all annual restaurant spending in the country, or about 46 billion restaurant visits every year. Quick-service chains that focus on Jones' three "f"s will give themselves an advantage in trying to win over these consumers. But these chains are also making real estate decisions to help grow in a more competitive industry. JLL points to Wendy's, which is overhauling its basic restaurant design. The odds are high that at least one Wendy's restaurant in your community has been closed for remodeling. That's because Wendy's is now building restaurants with more comfortable seating, fireplaces and more soothing lighting. The goal now is to encourage customers to actually sit down inside the restaurant to enjoy their meals. "The traditional quick-service dining
experience encourages customers to get their food, eat and leave," said Bruce Allendorfer, regional director of construction at Wendy's. "We're changing that standard by making the environment in our dining rooms more inviting and comfortable. Customers can stay longer and can make an event out of their visit." JLL worked with Wendy's to design the new restaurants. In addition to the fireplaces and new seating, the revamped Wendy's design includes WiFi service, flat-screen televisions and digital menu boards. It's important for quick-service restaurants to tackle these challenges today. JLL reports that in 2013, sales for fast-casual chains rose by 11 percent. Quick-service restaurants, though, have mainained revenue growth at about 1.2 percent every year because of flat sales. Chick-fil-A might be the exception. The chain still makes big news whenever it opens in a community. JLL has worked with this chain, too, to help it manage its expansion and renovation plans without breaking its budget. Chick-fil-A, after all, has been far from shy about expanding into new markets these days. "The biggest challenge that Chickfil-A was facing was a large increase in the number of projects we needed to
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manage within the reinvestment portfolio," said John Mark Wood, a program manager from the chain. Wood said that Chick-fil-A's budget for its reinvestment portfolio soared from about $30 million to $100 million in a span of one-and-a-half to two years. Jones said that those quick-service chains that are doing well, such as Chick-fil-A, recognize that consumers' tastes are changing. They want every meal that they eat out to be special. It's no longer good enough to run to McDonald's for a cheap hamburger to eat in the car. "People have to understand who their customers are," Jones said. "They are not the same customers that these chains had 15 or 20 years ago. The ones that are struggling are the ones who don't understand that. If they are struggling, they haven't recognized that customers have changed. They haven't focused on being fast, friendly and fresh."
Page 18 OneVillage from page 10
Calhoun in Minneapolis. Hall said that the commercial real estate community has been incredibly supportive of OneVillage Partners. He expects that 30 to 35 companies involved in the commercial real estate business will have signed up as sponsors of the breakfast by the time July 21 rolls around. Hall said that the real estate breakfast raised $25,000 its first year, $35,000 in its second and $50,000 last year. The goal this year is for the real estate breakfast to take in more than $75,000. Hall said that he expects more than 100 people to attend the breakfast. Hall described the annual breakfast event as a combination of a networking event and presentation about OneVillage Partners and fund-raising. "Real estate folks tend to travel a lot. They really enjoy seeing their friends at this event," Hall said. Hall said that it makes sense for members of the Twin Cities commercial real estate community to be such strong supporters of OneVillage Partners. "As real estate people, we are trying to help our communities develop here," Hall said. "We want to provide quality spaces here where people can live and shop and work. That spirit translates into wanting to help these other communities in Sierra Leone build their own spaces to do the same." John Breitinger, vice president of investment and development at United Properties, and Brian Carey, executive vice president at United Properties, traveled with Hall in late 2013 to Sierra Leone. Breitinger said that he went on the trip to determine what economic development efforts really work. It was a way for Breitinger to learn what approaches
Minnesota Real Estate Journal
June 2015
might work when it came to economic development work in North Minneapolis. "More than anything, I have been inspired by how much one person's persistent initiative has improved lives," Breitinger wrote in a e-mail message describing his trip. As Breitinger wrote, he and Carey visited villages in Sierra Leone that sat just a few miles from the start of a deadly Ebola outbreak in West Africa. The villages here, though, were among the least-impacted in the region. Much of the credit goes to the clean water and new latrines that OneVillage Partners helped bring to these residents, Breitinger wrote. "Simply being set up with a culture of collaboration and problem-solving kept these villages largely healthy and intact," Breitinger wrote. "There are many great leassons here." Hall travels to Sierra Leone about once a year. During these trips, he gets to see the good that his organization -- fueled in large part by the Minneapolis/St. Paul real estate community -- has done in the country. "We have helped bring 100-percent clean water to some of the villages," Hall said. "That has made a huge difference. People were getting sick so often before. They have built latrines, which also helps to reduce germs. We are helping to send hundreds of more kids to school. Some villages have had 15 to 20 kids go to college. It is rare for any kid to go to college. We've made investments in agricultural development and income generation. It is inspiring to be able to go back and see some of these changes." For more information about OneVillage Partners, visit the organization's Web site at OneVillagePartners.org.
June 2015 NAIOP from page 12
There are great career opportunities for women in all aspects of the industry by acquiring skills, exercising their leadership capabilities and seeking advancement in those organizations where their contributions can be rewarded. There are women who have pioneered successfully in their respective fields, and hopefully we will see more women advance into management and executive positions in the future. Q. How about millennials in general--is the industry in Minnesota drawing enough young people to replace the generations that will soon be aging out? Or is it going to be facing the same “labor� shortage that will be plaguing other industries and professions? The commercial real estate industry has a bright future. Many commercial real estate organizations have responded to the generational transition which will occur by establishing "developing leader" groups that provide engagement, support, and education specifically for younger members of the industry. There are mentoring and educational programs and leadership opportunities aimed at creating a strong pipeline of competent real estate professionals. We are now seeing members of these groups advance successfully in their careers. Q. What do you see as emerging public policy issues of concern to NAIOP members and the industry? The level of property taxes on commercial real estate have been a long time focus of the industry and require constant vigilance to avoid an extraordinary burden on Minnesota businesses. As local governments face budgetary challenges, there are increasing efforts to create new fee impositions on development and existing commercial real estate which will negatively impact new projects and increase occupancy costs for Minnesota businesses. Regulation of new development projects has also become increasingly complex by all levels of government, sometimes with conflicting expectations and requirements. This increases development timeframes and costs. There is a need to simplify and coordinate the regulatory process among all levels of government Q. What is your personal assessment of the state of development and CRE investment in Minnesota? Minnesota is respected for having a strong, capable, and professional group of developers, brokers, owners, and other commercial real estate profes-
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sionals. It is a market that is more balanced than many by avoiding huge swings in the economy and therefore attracts investors looking for a more stable investment environment. However, each real estate product type follows its own individual cycle. Developers tend to follow each other in each product type and always need to be watchful of overdevelopment as those cycles occur. Some multi-family developers are now becoming more cautious after a large wave of projects. There is now strong development of industrial product which could lead to an over-
supply in that market. The State will always need to find a balance between creating revenues for needed infrastructure, both human and physical, and creating a tax structure which does not inhibit private sector motivation, risk taking, and investment. That balance is often difficult to find in an increasingly polarized political environment, but Minnesota needs to remain competitive in all aspects of its investment climate.
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Page 20 Workers from page 14
the rise of Millennial workers? Are they willing to change the way they operate to attract and retain these younger workers? Morris, the industrial specialist, says that manufacturers are adapting, but mostly because they have no other choice. Customers today expect the items that they order online to arrive at their front doors quickly, often as quickly as one day. Companies that can’t fulfill this expectation – whether through increased automation or a skilled workforce – will struggle in today’s evolving economy, Morris said. “I think companies in the industrial market are only learning because they are in the fire now,” Morris said. “There is no substitution today for the expectation that an order be fulfilled from a customer’s computer in one day or two days, at the most. Businesses are trying to meet those expectations in a cost-effective manner. They are learning by fire in the distribution world right now.” Lessard said that most businesses today are not yet prepared for the increase in Millennial workers. For instance, Lessard said, humanresources professionals report that Mil-
Minnesota Real Estate Journal
lennials flip the script during job interviews. Increasingly, Millennials spend much of their interviews asking companies about what they can offer them, Lessard said. They want to know about the varying opportunities companies can offer them. They want to know if companies have a diverse workforce and if they are committed to sustainable ways of doing business. They’ll ask about company charitable programs. “The best, most progressive companies are able to answer these questions,” Lessard said. “But a lot are left sort of scratching their heads.” Of course, head scratching isn’t enough today. Morris and Lessard both said that companies need to offer Millennials what they want – plenty of diverse opportunities, flexible work schedules and the opportunity to take on interesting work – if they want to nab the best workers of tomorrow.
June 2015
Retail from page 15
dents. Walgreens has signed a lease for a two-level store in Gaviidae Common. Saks Off 5th has signed a lease for the former Office Depot location in City Center, and will take occupancy here in 2016. Construction crews will later this year start a renovation of the city's Nicollet Mall. And retailers such as Dunkin' Donuts, HyVee and Aspen Dental are filling vacant space in downtown Minneapolis. Not surprisingly, vacancy rates have fallen in this market. Marcus & Millichap reports that retail vacancy rates throughout the Minneapolis market should fall by 30 basis points to 5.4 percent this year. About 1.3 million square feet of retail space should be absorbed during the year. Asking rents should rise, too. Marcus & Millichap predicts that the average asking rent for retailers should climb 2.6 percent to $14.45 a square foot by the time 2015 ends. Construction crews have been busy in the retail sector in the Minneapolis market, too. Marcus & Millichap's report says that 80,000 square feet of retail space was added to the market during the first quarter of 2015. The most significant recent retail project completed during the last year is the 441,000square-foot outlet mall in Eagan. The biggest retail projects that should wrap up this year are a pair of 90,000square-foot Hy-Vee stores. The grocer will open stores in the New Hope and Oakdale regions. Hy-Vee isn't through expanding, though; The retailer plans to begin construction later this year on stores in the Brooklyn Park and Lakeville neighborhoods. In all, Marcus & Millichap predicts that 800,000 square feet of retail space will be added to the Minneapolis market this year. That's a bit of a dip from the 1 million square feet of retail that joined the market last year, but it's still a significant amount of new construction.
June 2015
Minnesota Real Estate Journal News from page 8
son Center East II, a 62,112 sq. ft. office building at 130 Cheshire Lane in Minnetonka. Weidner, based outside of Seattle, Washington, is a private REIT that invests and operates multifamily properties in nine states and four Canadian provinces. The company recently acquired four properties in the Twin Cities, bringing its total assets in the Twin Cities to 10. The office building will become the company’s Midwest regional headquarters. “We hold and operate properties for the long term, so having a physical presence in the Twin Cities will help us become more aware of opportunities and stay close to our newest investments,” said Jackie Fischer, Commercial Leasing Manager, Weidner Apartment Homes, LLC. Weidner owns more than 41,000 multifamily units with an estimated market value of $4.8 billion, employs more than 1,200 and manages and owns 224 properties. The property, in a convenient, wooded location at the intersection of I-394 and I-494, will stay as Carlson Center
East II, according to Paul Gibbs, associate director – CWN, who represented Weidner in the acquisition and is coordinating a leasing team to market the building. Currently the building is 77 percent occupied, with spaces available on the first and second floors. The building has Class A finishes with a newly renovated lobby, sits in a wooded setting and has an exterior pond wrapping half the building.
MARCUS & MILLICHAP ARRANGES THE SALE OF A 240 SELF-STORAGE FACILITY 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 Dot Mini Storage with Developable Land, a 240 self-storage facility, with 6.7 acres of developable land, located in Coon Rapids, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $2,005,000.
Adam Haydon, 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 private investor, was secured and represented by Adam Haydon and Adam Schlosser, an investment specialist in Marcus & Millichap’s Denver office. Speaking with Mr. Haydon, “The seller was able to take advantage of a great market where the demand for self-storage assets is continually growing and the buyer will be able to capitalize on a property with great upside.” Dot Mini Storage with Developable Land is located at 9900 Vale Street Northwest in Coon Rapids, Minnesota. The facility was built in 1984 and features an on-site manager’s office and apartment, coded-access gate, perimeter fencing and a heated warehouse.
MARCUS & MILLICHAP ARRANGES THE SALE OF AN 11-UNIT APARTMENT BUILDING Marcus & Millichap (NYSE: MMI),
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a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of an 11-unit apartment property located in Saint Paul, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $1,050,000. Annie Arneberg, Mox Gunderson and Dan Linnell, investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a limited liability company. The buyer, a private investor, was also secured and represented by Annie Arneberg, Mox Gunderson and Dan Linnell. Speaking with Ms. Arneberg, “2003 Grand Avenue presented a rare opportunity for an investor to acquire a turn-key asset on Saint Paul’s renowned Grand Avenue. Today’s historically low interest rates, coupled with the upside potential to adjust current rents to market rate, made this a very attractive property to the buyer. We had significant activity, News to next page
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which generated numerous offers for this asset.” 2003 Grand Avenue in Saint Paul, Minnesota was constructed in 1953 and consists of one studio unit and 10 onebedroom apartments. Many of the units feature original hardwood floors and artdeco tiled bathrooms, as well as, in-unit upgrades including granite countertops and new cabinets.
Ryan Companies US, Inc. Holds Topping Off Ceremony at Wells Fargo Towers in Downtown East Ryan Companies US, Inc. held a topping off ceremony at the first of two Wells Fargo office towers currently under construction at the $400 million Downtown East project in Minneapolis. The two, 17-story towers will include approximately 1.2 million square feet of space and be home to 5,000 Wells Fargo
Minnesota Real Estate Journal
team members. Tower one is expected to be completed by January 2016 with tower two completed by March 2016. “Today’s event marks an important milestone for our Downtown East development,” said Collin Barr, President of Ryan’s North Region. “We are very proud of our on-site Field Construction Team, including all of our subcontractors and consultants. This Team has done outstanding work on this very challenging assignment. We also want to express our appreciation and gratitude to Wells Fargo, as none of this would happen without their visionary commitment to this project.” The topping off ceremony was held to mark the securing of the highest steel beam atop the tower, signifying the symbolic completion of the structural phase of the building. Executives from Ryan and Wells Fargo, along with local City officials, including City Council Member Jacob Frey, and John Stiles,
Chief of Staff for Minneapolis Mayor Betsy Hodges, were asked to sign the final steel beam before it was hoisted into place at the building’s summit. “This project is a symbol of Wells Fargo’s commitment to Minneapolis and the Twin Cities,” said Dave Kvamme, CEO of Wells Fargo Minnesota. “We’re excited to be part of the revitalization of the Downtown East neighborhood and all that it means for the city’s future.” In addition to the Wells Fargo towers, the Downtown East project will include over 25,000 square feet of retail space, 195 apartments, a six-level parking ramp, a select service hotel, and a nearly two block urban park. A topping off ceremony is a longstanding tradition, which finds its roots in ancient Scandinavia and includes placement of a tree top or branch affixed near the structure’s summit at the point in construction where the building structure is “topped-out.”
June 2015
Cushman & Wakefield | NorthMarq Chosen by Archdiocese of Saint Paul & Minneapolis to Market Four Properties The Cushman & Wakefield | NorthMarq (CWN) www.cushwakenm.com Advisory Service Group team of Executive Director Paul Donovan and Associate Jeremy Striffler has been selected by the Archdiocese of Saint Paul and Minneapolis to sell four properties totaling approximately 152,000 square feet. The buildings, all located in St. Paul, Minn. around the Cathedral of St. Paul, are currently being utilized as administrative offices, housing and as a publishing hub for The Catholic Spirit, the official publication of the Archdiocese. According to Donovan, when sold, the Archdiocese will relocate and unite its staff into one structure providing for a more efficient use of its office space.
June 2015 News from previous page
Available for sale are: · Hayden Center – Named after the late Monsignor Ambrose Hayden, an ordained priest and librarian, the Hayden Center is located at 328 Kellogg Boulevard West. This former school building was built in 1914 and is now being used to house administrative offices. The three-story structure has undergone numerous capital improvements over the years and totals nearly 90,000 sq. ft. and sits on 1.77 acres. · The Chancery – Located at 226 and 230 Summit Avenue, the Chancery is a two-building, approximately 44,000 sq. ft. complex and was built in 1961. 226 Summit is a three-story office building with 230 Summit as an attached two-story structure that serves as the residence of the Archbishop. The Chancery has undergone numerous capital improvements since 2004 and sits on 3.38 acres of land. Together or separately 226 and 230 present re-purposing opportunities into office or residential as well as a complete ground up housing development. · 224 Dayton – Currently housing the publishing offices of The Catholic Spirit, the official publication of the Archdiocese, this three-story structure built in the Renaissance Revival Style is located in the National Register of Historic Places, Historic Hill District and the local St. Paul Heritage Hill Preservation District. Its 18,301 sq. ft. formerly served as the chancery for the Archdiocese prior to the construction of the 226 Summit Chancery building. · 250 Dayton – A vacant lot of 0.0789 acres, 250 Dayton is zoned as a RM2 medium-density multi-family residential district. According to Donovan and Striffler, the location of two properties – 244 Dayton and 226/230 Summit Avenue – in the Historic Hill District may be noteworthy from a tax perspective. “Because of their historic significance, both properties may be eligible for state and federal historic tax credits for reuse,” said Donovan. “And while 328 West Kellogg Boulevard – the Hayden Center – has not been formally studied, it has a unique history and may be eligible for historic designation, which would then also qualify it for financial incentives for reuse.” Additionally because 244 Dayton and 226/230 Summit are located in
Minnesota Real Estate Journal
a historic district, they may also be eligible for municipal, state or federal grant programs. "The Hayden Center and Chancery offer unique re-use or re-development opportunities which could leverage outstanding locations that feature wonderful views of downtown St. Paul, the Mississippi River as well as the Cathedral and the State Capitol. These are wonderful properties in a location with many possibilities,” said Donovan. Property tours are currently being conducted with an offer deadline of August 15, 2015.
Renewed Eddy’s Resort Returns Timeless Experience to Lake Mille Lacs The new Eddy’s Resort brings a modern-vintage fishing resort experience to the shores of Lake Mille Lacs. The must-see redesign offers destination resort-style amenities for today’s guests while capturing the classic Northwoods feel of the original Eddy’s, which opened in the 1960s. This is manifested in the simple lines of the new hotel and cabins’ exterior and enhanced by the mid-century modern theme of the interior design. Eddy’s is one of the largest redevelopment projects in recent Lake Mille Lacs history. Grand Casino Mille Lacs purchased Eddy’s Resort in 2002 to offer further amenities to casino guests. When they decided a renovation was needed, Mille Lacs Corporate Ventures (MLCV) hired BKV Group to provide full architecture, engineering, and interior design. PCL Construction delivered construction and contractor services. The renovation is part of MLCV’s investment in the local community and its renewed effort to expand its hospitality investments. “When we sought a partner to complete the Eddy’s Resort redevelopment we turned to BKV Group and PCL Construction because we knew they were up to the task of freshening up the entire property, from guest rooms and amenities to meeting spaces and the bar and restaurant,” said Joe Nayquonabe, CEO of Mille Lacs Corporate Ventures. “Both companies went above and beyond to deliver, and the result is exactly what we had hoped for.” The resort offers 64 hotel rooms, one
Parlor Suite, and four two- and threebedroom cabins. Guests can also enjoy the 70-seat Launch Bar & Grill, which expands to a capacity of more than 100 with an outdoor patio. New amenities include fishing launches, boat rentals, a retail/bait shop, meeting and banquet room, and icehouses for winter fishing excursions. The entire resort is complimented by contemporary landscaping, which will be completed later this spring. “We were inspired by the site’s rich history, which begins with an entrepreneur’s story — young Eddy Silker building boats by hand and creating his dream resort,” said Will Jensen, AIA, partner at BKV Group. “The original jigs are still here and his craftsmanship is seen everywhere. We wanted to honor this tradition, to use materials that were lasting and well-crafted, and that respect the time the resort was conceived: the vibrant 1960’s.” Many guest rooms have been located in a way that engages the lake and enhances the guest experience. Each of the guest cabins is oriented to maximize privacy while maintaining a connection to the shoreline and resort amenities. The parking lot was also relocated to expand lake views. “We are truly humbled to have served on this project,” said Jensen. “The lake is a beautiful site and a Minnesota treasure, and Eddy Silker’s fantastic homegrown success story lives on through the new resort. MLCV is a visionary client that has made an unwavering commitment to this community.”
CBRE ARRANGES $36,875,000 CONSTRUCTION FINANCING FOR THE CENTRAL PARK WEST MULTI-FAMILY DEVELOPMENT IN ST. LOUIS PARK, MN CBRE Capital Markets’ Debt & Structured Finance (DSF) team is pleased to announce it has arranged $34,875,000 in construction financing for Phase I development of Central Park West in conjunction with a $2,000,000 land loan for Phase II. Phase I of Central Park West will consist of 199 luxury apartment units on the southwest corner of Interstate-394 and Highway 100, adjacent to The Shops at West End and
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the 1550 & 1600 Towers at West End. Construction on Phase I of Central Park West is anticipated to commence this summer, with an estimated completion date in the Fall of 2016. CBRE Capital Markets successfully secured the construction financing of Phase I on a 42-month interest-only loan at a sub-2.50% spread over LIBOR. The loan was originated through the CBRE Capital Markets relationship with PNC Bank, National Association. “The attractive term and rate of this construction loan from PNC provided advantageous metrics and flexibility, thus adding value to the borrower’s project,” said Murray Kornberg, Senior Vice President with CBRE Capital Markets. The Sponsor, DLC Residential, was represented by CBRE’s Debt & Structured Finance group led by Murray Kornberg, Doug Seylar, Scott Larson, and Ben Bastian. DLC Residential is a fully-integrated multi-family project development company with projects across the United States. Since 2004, DLC Residential has been focusing on the concept, development, construction and project management of income property in the strongest markets across the United States. By focusing on integrity, cost controls and careful market research, DLC Residential creates tangible assets and real cash flow, resulting in viable investments and industryleading returns. Phase I of Central Park West will be the second construction project for DLC Residential in the Minneapolis market, following Millennium at West End which is set to open in the summer of 2015.