VOLUME 30, NUMBER 3
©2014 Law Bulletin Publishing Co.
March 2014
Minnesota’s Oppidan: Enjoying booming success after the Great Recession
By Dan Rafter, Staff Writer
H
ow good of a year did Oppidan Investment Company have in 2013? The development firm based in Minnetonka, Minn., developed 783,467 square feet of property across the country in the second half of the year alone. That second-half surge means that for the entire year of 2013 Oppidan developed more than 1.8 million square feet. Also in the second half of 2013, the company sold 342,353 square feet of retail space, 12.13 acres of land, 114 apartment units and 50 home sites.
What was behind this big success? Joe Ryan, president of Oppidan, said that the brokers at his firm laid the groundwork for 2013's success by the way they conducted themselves during the worst days of the Great Recession. "We had to weather the storm during the down times just like everyone else. And we we weathered it well," Ryan said. "And once the economy started to improve, we were aggressive in expanding to new parts of the country. We've also broadened our base. We've taken on industrial work and we're doing more on the residential side. Those were areas that we weren't tackling in the past." Oppidan to page 16
It's official: Cabela's loves Minnesota By Dan Rafter, Staff Writer
W
es Remmer doesn't hesitate: Yes, Cabela's loves Minnesota and its people. Cabela's Incorporated, the giant retailer specializing in hunting, fishing and outdoor gear, will prove this once again on May 15. That's when the newest Minnesota Cabela's will open in the community of Woodbury.
"We love Minesota," said Remmer, Cabela's corporate communications manager, in a phone interview. "We've had great success with our previous Minnesota locations. Based on the response from those three stores, and the feedback from the people in Woodbury, we are really excited about opening the doors to this store." Cabela's will hold a ribbon-cutting ceremony at 10:45 a.m. on May 15. Then the business will officially open its doors at 11 a.m. The opening-day event will be the first in a weekend-long celebration featuring
outdoor celebrities, family events and giveaways. The Woodbury store boasts 85,000 square feet and sits at 8400 Hudson Road in the Tamarack Village Shopping Center. This marks Cabela's fourth location. The company already operates Minnesota stores in Rogers, East Grand Forks and Owatonna. The Woodbury store will employ about 185 full- and part-time employees. Remmer said that Cabela's officials first studied the Cabela’s to page 18
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GENERAL Module Course for 2013-2014* Topic: Risk Management – 7.5 credit hours *As Required by the MN Dept. of Commerce, This is a specific module training course and will fulfill this requirement.
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Retail & Restaurant Summit
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High Performance Space & Data Center Summit
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Renewable Energy Summit
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Property & Facility Management Conference
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March 2014
Contents
Minnesota Real Estate Journal
FEBRUARY 2014 • VOLUME 30, NUMBER 2
Page 3
Departments PEOPLE
4
NEWS
6
RESOURCE GUIDE
22
The Minnesota Real Estate Journal (ISSN 08932255) is published monthly for $85 per year by Law Bulletin Publishing Company, 13400 15th Ave North STE C, Plymouth 55441. Phone: 952-885-0815. Periodicals postage paid at Minneapolis, MN. POSTMASTER: Send address changes to Minnesota Real Estate Journal, 415 State Street, Chicago IL 60654. Lanning Macfarland, Jr. chairman; Sandy Macfarland, CEO; and Brewster Macfarland, president. Back issues $10.00. Subscriptions are non-refundable. For more information call 952-885-0815.
1
MINNESOTA’S OPPIDAN: ENJOYING BOOMING SUCCESS AFTER THE GREAT RECESSION
14
LAURUS CORPORATION MAKES FIRST ACQUISITION IN MINNEAPOLIS MARKET
I
T'S OFFICIAL: CABELA'S LOVES MINNESOTA
20
FINAL REPAIR REGULATIONS: NAILING DOWN THE RULES FOR THE REAL ESTATE INDUSTRY
©2014 Law Bulletin Publishing Co. No part of this publication may be reproduced without the written permission of the publisher.
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Minnesota Real Estate Journal
March 2014
People a division of Law Bulletin Publishing Co.
13400 15th Ave North, Suite C Plymouth MN 55441 For information call 952-885-0815
Publisher | Managing Editor Jeff Johnson jjohnson@rejournals.com Associate Publisher Jay Kodytek jkodytek@rejournals.com Consulting Editor Dr. Tom Musil tamusil@stthomas.edu Conference Manager Alan Davis adavis@recg.com
EDITORIAL ADVISORY BOARD JOHN ALLEN Industrial Equities ROBERT ANGLESON Navigator Real Estate RICK COLLINS Ryan Cos. US Inc. JEFF EATON Cushman & Wakefield/NorthMarq MARK EVENSON ULG Equis PATRICIA GNETZ US Bank TOM GUMP TAG Consulting JON HEMPEL Hempel Properties DAVID JELLISON Liberty Property Trust CHAD JOHNSON Hellmuth & Johnson BILL WARDWELL Colliers International
Knutson adds promotes two project managers at its office in Rochester, Minnesota Knutson Construction has promoted Tom Leimer to senior project manager and Mike Stafford to project manager. Leimer most recently served as a project manager at Knutson. He joined the company in April 2007 and has been involved in several notable projects including the expansion and remodel of Mayo Clinic Health System in Austin, Minn. He earned a Bachelor of Science in construction management from Minnesota State University, Moorhead. Leimer continues to pursue professional development and education, such as with the U.S. Green Building Council as a LEED® Accredited Professional and in Best Value contracting methods. Promoted from the position of assistant project manager, Stafford also has been involved in several notable projects including many at the Mayo Clinic, such as its Richard O. Jacobson Proton building. He joined Knutson in the summer of 2005 after graduating from Minnesota State University, Mankato with a Bachelor of Science in construction management. “Tom and Mike’s dedication has established each as a leader who ensures that our clients get the best project for their budget,” said David Bastyr, executive vice president of Knutson’s Minnesota operations. “These promotions represent Knutson’s continuing commitment to provide growth opportunities from within our company.”
GEORGE KLUEMPKE Braun Intertec JEFFREY LAFAVRE CBC Griffin Companies WADE LAU Founders Properties MIKE LE JEUNE Fabcon JIM LOCKHART WIPFLI DUANE LUND Exchange Realty PATRICK MASCIA Duke Realty Corp. CLINT MILLER Cushman & Wakefield/NorthMarq DR. THOMAS MUSIL University of St. Thomas WILLIAM M. OSTLUND CBC Griffin Companies WHITNEY PEYTON CB Richard Ellis MIKE SALMEN Transwestern STEWART STENDER Stewart Capital Partners
a division of Law Bulletin Publishing Co. 13400 15th Ave North Suite C Plymouth MN 55441 For information call 952-885-0815
Charles Patenaude Joins Dougherty Mortgage LLC as Senior Vice President/ Fannie Mae Production Manager Dougherty Mortgage LLC, a full service national mortgage banking firm, has announced Charles Patenaude has joined the firm as a Senior Vice President/Fannie Mae Production Manager. Charles is an accomplished commercial relate estate finance professional whose career spans over thirty years, including financing within the consumer, residential and commercial real estate realms, as well as experience negotiating terms, underwriting requirements and pricing for multifamily deals being submitted by Fannie Mae Delegated Underwriting
and Servicing (DUS®) lenders. Patenaude’s talent in designing creative solutions to anticipate and meet customer’s needs will contribute to Dougherty Mortgage’s growth and expertise as a leader in providing loan products for the acquisition, refinance, construction or rehabilitation of various property types, particularly multifamily housing. The appointment of Mr. Patenaude to this position comes at a time of growth for Dougherty Mortgage, currently servicing more than $3 billion worth of loans.
PAUL BERG JOINS MARCUS & MILLICHAP CAPITAL CORP. AS ASSOCIATE DIRECTOR IN MINNEAPOLIS Marcus & Millichap Capital Corp. (MMCC), a leading provider of commercial real estate financing and capital markets expertise, has named Paul Berg associate director in the firm’s Minneapolis office, according to Charles D. Krawitz, MMCC’s central region vice president. Berg will be responsible for securing financing for all asset classes of commercial real estate nationwide. “Paul is an accomplished lending professional,” says Krawitz. “His expertise will be of great value to our clients in the Twin Cities and throughout the upper Midwest.” Prior to joining MMCC, Berg served as vice president in the Real Estate Department of US Bank. He was also a senior vice president at Centennial Mortgage & Funding, Inc. and a development associate with JPI Development Partners LP in its Denver office. He has closed more than $700 million in transactions over his career. Berg graduated from the University of Wisconsin - Madison with a M.S. in real estate appraisal & investment analysis and earned a B.S. in business from the University of Colorado – Boulder. He is co-chair of the Legislative Committee of the Minnesota Shopping Center Association, a member of the Minnesota chapter of NAIOP and a member of the Board of Directors of the Boys & Girls Clubs of the Twin Cities.
Gina Dingman Named NAI Global Investment Council Chair Gina Dingman, CCIM, President, NAI Everest, was named the 2014 Investment Council Chair for NAI Glob-
al, the largest, most powerful global network of owner-operated commercial real estate brokerage firms. “Gina’s experience in institutional investing, capital markets and real estate finance will greatly benefit our Members,” said Jay Olshonsky, President, NAI Global. “We are delighted she will serve in this role.” The NAI Global Councils focus on elevating the professional competency of its Members and ensuring consistent service delivery across the network. The Councils are committed to fostering partnership and cooperation among Members by enabling sharing of best practices, including presentations, proposals, documents, collateral, tools and techniques. They work to create valuebased programming at meetings and conventions, develop networking forums, and deliver content via Web conferences and industry events. Gina Dingman, CCIM founded Everest Real Estate Advisors in 2010, which became NAI Everest in June 2012. Dingman has more than 20 years of experience in commercial real estate providing solutions to a broad range of clients including local, regional and national multifamily and office owners/developers, institutions, private equity groups, and global corporations. She is a currently a member of the board directors for NAI Global and the National MHC. She has extensive experience in investment sales with an emphasis on multifamily and office assets as well as multifamily land sales. Dingman is a nationally-recognized expert in the multi housing industry and a soughtafter speaker for industry conferences. From Finance & Commerce daily news Dingman has received the Top Women in Finance in 2006 and in 2012 the Circle of Excellence award. She has also won the Transaction of the Year Award from the Minnesota Commercial Association of Realtors. In addition, Dingman received the Power Broker Award from CoStar for 2011 and 2012.
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Minnesota Real Estate Journal
March 2014
News Kontor Realty Group Arranges the Sale of 36-unit Multi Family Property in Brooklyn Center. Kontor Realty Group of Eden Prairie, Minnesota announced the sale of Humboldt Commons, a 36 unit multi family property located in Brooklyn Center, Minnesota. The asset sold for $1,620,000/ $45,000 per unit. Cindy Tews of Add-vantage Realty Inc. Shakopee, MN and Neil Friedman of Jordan Realty Inc. Minneapolis, MN respectively had the exclusive listing to market the property on behalf of the seller, a private investor. The buyer, a local private investment group, was secured and represented by Michael Berglund, president of The Kontor Realty Group. “This was a great example of a class C property that was priced to reflect its current market value.” according to Michael Berglund of Kontor. “I’m glad I mentioned this property during a speed dealing session at a
recent Minnesota Real Estate Exchangors meeting” Neil said. “Michael just happened to have a client looking for an off market opportunity in that part of town.” The 3 building 36 unit property, located at 6807, 6813, & 6819 Humboldt Ave. North Brooklyn Center was formerly known as the Humboldt Commons Condominiums. The sale was closed in less than 30 days by Michele Malacko, Commercial Closer at Commercial Partners Title.
The Dandies Project The Dandies Project is proud to announce its official launch on April 5, 2014 at Handsome Cycles in downtown Minneapolis located at 115 Washington Avenue North. The Project began with a portfolio of photos which highlight the positive impact men of color have brought to their own community, not only doing it with a sense of purpose but a sense of style. Event producer and philanthropist,
Richard Moody set out with this idea and brought it to two Minneapolis businesses; Playfessionals, a networking company merging professionals with business, and Handsome Cycles, a Minneapolis lifestyle brand dedicated to creating the best bicycles and experiences in the cycling world. Other local businesses that joined The Project include Renee Larson, owner of The Bow Tie Shoppe, for her passion in design and styling and Susan Swanson owner of Style by Susan, which does makeup artistry. Nick Gallop of Gallop Studios, was enlisted for his work in photography and used his modern style to highlight the Dandies of this coffee table book. EXIT Realty Metro was added as a financial sponsor and for overall project coordination.
EQUUS ACQUIRES A TWO PROPERTY MULTIFAMILY PORTFOLIO IN SUBURBAN MINNEAPOLIS Equus Capital Partners, Ltd. (Equus), one of the nation’s leading private equi-
ty real estate fund managers, announced today that its affiliates have acquired a two property multifamily portfolio located in suburban Minneapolis from Henderson Global Investors. The communities, known as Atrium Apartments and Trailway Pond Apartments, total 588 units and were 95 percent occupied at the time of closing. Madison Apartment Group, L.P. (Madison), the multifamily operating arm of Equus, will manage the communities for the firm. “The transaction provided us with the opportunity to acquire two well-located multifamily communities in Burnsville, a desirable suburb of Minneapolis,” commented Brant Glomb, vice president of Equus who oversaw the acquisition for the firm. Collectively, Atrium and Trailway are the third acquisition Equus has made in the Minneapolis metropolitan area of Minnesota but the first multifamily investment. Equus also owns and operates the 920,000 square foot Metropoint office complex in St. Louis Park, Minnesota as well as the 540,000 square foot office park known
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as Grand Oak in Eagan, Minnesota. Atrium Apartments is the larger of the two properties. The 348 unit garden style community has been renamed Madison Atrium. It includes a mixture of one and two bedroom apartments situated within four buildings each atop a heated underground parking garage. Onsite amenities consist of a clubhouse, indoor and outdoor pools, spa, fitness center, indoor recreation court and tennis courts. Situated just four miles away, Trailway Pond Apartments is a 240 unit garden style community that also includes a mixture of one and two bedroom apartments situated within three buildings each atop a heated underground parking garage. Laundry or fitness centers are located on each floor of the apartment buildings. Additional onsite amenities include a clubhouse, pool, tennis courts and a pond surrounded by bike paths and nature trails. Trailway Pond Apartments has been renamed Madison Trailway. Over the coming months, Equus will invest more than $4.5 million to improve both communities including a compre-
Minnesota Real Estate Journal
hensive rebranding program, improvements and updates to the community amenities, common area hallway renovations and apartment interior upgrades. Steve Pogarsky, head of multifamily acquisitions for Equus commented, "We continue to expand our national presence by investing in those markets with favorable supply/demand fundamentals.” Equus is actively seeking additional opportunities to add to its existing nationwide multifamily portfolio. Madison Atrium and Madison Trailway are both located within the City of Burnsville, which is part of the Dakota County submarket. The communities are equidistant (17± miles) from the Minneapolis and St. Paul Central Business Districts and are situated at the confluence of Interstates 35W and 35E, a major commercial corridor, providing convenient access to employment centers, shopping and entertainment venues including the Mall of America. The acquisition of this two property multifamily portfolio was made on behalf of BPG Investment Partnership IX, L.P. (Fund IX), Equus’ $310 million private equity fund.
NorthMarq Capital arranges $5.5 million acquisition financing of Cameron Medical Center in Coon Rapids Patrick S. Minea, senior vice president/managing director of NorthMarq Capital’s Minneapolis based regional office secured acquisition financing of $5.5 million for the Cameron Medical Center, a 31,843 sq.ft. medical office building located at 3789 Coon Rapids Boulevard, Coon Rapids, Minn. Financing for the borrower was arranged by NorthMarq through its relationship with a correspondent life company.
The Opus Group® Announces Completion of Expansion for Visitation School The Opus Group announced today the completion of a 31,100 square-foot expansion and renovation for Visitation School in Mendota Heights, Minn. “We had a great partnership with Visitation School to bring these exciting new spaces to students and faculty,” said Craig Larson, vice president of Opus
March 2014
Design Build, L.L.C. “By completing the project in two phases we allowed heavy traffic areas to bypass the construction, limiting disruptions to the educational environment.” The first phase, completed in January 2013, included constructing a new 4,000-square-foot Science, Technology, Engineering and Math (STEM) building, known as Opus Hall, to serve as the workshop and assembly space for the school’s award-winning robotics program as well as engineering and math classes for Upper School students and computer programing classes for grade school students.. The first phase also included a 1,800-square-foot expansion to the school’s dining area and the creation of an interior courtyard. Construction of phase two began in June 2013 the day after the end of classes. Known as the Heart of the School, the second phase included 14,300 square feet of new construction, including the addition of a third level and 11,000 square feet of renovations. The project created a new entryway and commons for the school, increasing connectivity between different areas of the
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school and featuring a three-story atrium space, new classrooms, and breakout and study areas. Renovations included technology updates in the school’s library as well as updates to the heating, cooling and water systems in the school. Phase two was completed March 2014. “Given the unique nature of the buildings springing from the Visitation Heart and Mind project, we knew that a special approach would be needed,” said Dawn Nichols, Ed.D., head of school, Visitation School. “From design of these precious spaces through to construction completion, Opus did not disappoint. The vision, patience, attention to detail and budget oversight of the Opus team have been exemplary.” Opus Design Build, L.L.C. was the design-builder and Opus AE Group, L.L.C. served as the design architect and architect of record. NELSON provided interior design services.
Ackerberg to Purchase Calhoun Square Ackerberg announced that they will be purchasing Calhoun Square, a
Minnesota Real Estate Journal
170,521 square foot shopping center located at 3001 Hennepin Avenue, at the heart of the Uptown area in Minneapolis, Minnesota. The center was built in 1984 and renovated in 2008. Major tenants include LA Fitness, Kitchen Window, H & M, Famous Dave’s, BayStreet Shoes, Timberland and CB2. "Ackerberg is the right owner for Calhoun Square. Their feet on the ground involvement in Uptown is unsurpassed, from a community and business involvement standpoint. They get the importance of each project that they touch being unique, and I couldn’t be more excited to be a partner in their plans.” Doug Houemoeller, owner of Kitchen Window, a tenant of Calhoun Square since 1989. "We are incredibly excited to make Calhoun Square lively again. We’ll be focusing our leasing efforts on local entrepreneurs, regional players, and new to the market national retailers, to really make this asset a destination, as well as continuing the strong dining reputation that the Center has long had,” says Ackerberg CEO Stuart Ackerberg. “We’ll also be investing in renovations,
March 2014
to help Calhoun Square differentiate itself from some of its’ suburban counterparts; it’s going to be fun to ‘re-urbanize’ this uniquely urban asset. We’re confident that we have the vision, focus, and team to make this gem shine again," Ackerberg said. In addition to a focus on leasing efforts, Ackerberg plans to overhaul the interiors of Calhoun Square and has engaged the services of award-winning architect and designer David Shea of Shea Architects. Ackerberg is also investigating improvements that can be made to what is referred to as the “Girard Meander,” a pedestrian friendly walkway that begins at Calhoun Square, extends past the newly completed Walkway project, and through Ackerberg’s MoZaic project, connecting Uptown residents and those visiting the area from the Midtown Greenway to the core of the area. Terms have been agreed to on the purchase of Calhoun Square by Ackerberg from the seller. The expected closing date is early April .
Oak Grove Capital Secures $17.9 Million in Financing for Renovation of Three Minnesota Affordable Housing Complexes Oak Grove Capital, a leading national provider of real estate financial services, recently originated $17.9 million in FHA financing for the National Foundation for Affordable Housing Solutions. The loans will be used for the acquisition and substantial rehabilitation of three affordable housing complexes in Minnesota: Seward Square Apartments in Minneapolis, Lewis Park Apartments in St. Paul and Eastport Apartments in Mankato. As the lead lender, Oak Grove Capital worked diligently with the borrower, HUD and other capital sources to simultaneously close all three loans, each of which included tax exempt bonds, MHFA soft financing, and the use of Low Income Housing Tax Credits. All three fixed-rate HUD 221(d)(4) loans carry a 12 month construction period, plus a 40-year term. Seward Square, an 81-unit Project-based Sec-
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tion 8 development, received $6.5 million of the financing. Lewis Park, a 103unit Project-based Section 8 complex, received $7.8 million. The remaining $3.6 million went to Eastport Apartments, a 78-unit Project-based Section 8 community. The financing will be used to substantially renovate and preserve the three long-term affordable housing projects originally constructed in the late 1970s. “We worked hard to lock in the low interest rate at a very aggressive level during a period of consistently rising rates,” said Ken Dayton, managing director of Oak Grove Capital’s St. Paul office. “Despite a tight timeframe, our deep relationships with HUD and MHFA helped us to facilitate the timely closing of these three very complicated loans, allowing the borrower to preserve the Project-based Section 8 housing.”
Minnesota Real Estate Journal
Larkin Hoffman Daly & Lindgren Secures 49,000 Sq. Ft. Lease at Normandale Lake Office Park Cushman & Wakefield | NorthMarq has secured a 49,000 sq. ft. lease for Larkin Hoffman Daly & Lindgren (Larkin Hoffman) at Normandale Lake Office Park, Bloomington, Minn., which is owned by a joint venture partnership led by Equity Group Investments. Larkin Hoffman has served the legal and business counseling needs of clients since 1958. As the largest multi-tenant office property in the Twin Cities, Normandale Lake Office Park comprises 1.7 million square feet of space in five towers, which are connected by enclosed skyways. The complex is situated on 23 acres overlooking the 2,500-acre Normandale Lake Recreational Area. The site is home to more than 85 companies, including Prime Therapeutics; Aon Benfield; Towers Watson; Schwans; Tata Consultancy Services; Oracle Corporation; Emerson Process Management;
Kincaid’s; Parma 8200; and Rasmussen College. Approximately 5,000 employees work at the complex which is leased and managed by CWN on behalf of the joint venture partnership led by EGI. “We are thrilled to welcome Larkin Hoffman to Normandale Lake Office Park. Larkin Hoffman is a premier firm, making it an ideal addition to the market’s premier office project,” said Tom Tracy, executive director, Brokerage Services at CWN, who represented EGI in the transaction.
Dougherty Mortgage LLC Closes $2 Million Loan for Cota Apartments Dougherty Mortgage LLC, a full service national mortgage banking firm, has originated a $2 million loan for the acquisition of Cota Apartments, a 48unit market rate multifamily apartment property, located in Thatcher, Arizona. The 7-year term, 6.5-year yield maintenance loan was arranged by Dougherty's Minneapolis, Minnesota office for JGx5 Cota Apartments LLC. Dougherty Mortgage LLC is a full
March 2014
service mortgage banking firm, an approved FHA MAP and LEAN lender, as well as a Fannie Mae Delegated Underwriting and Servicing (DUS®) lender, offering a variety of loan products for the acquisition, refinance, construction or rehabilitation of various property types. In addition, Dougherty Mortgage LLC provides loan servicing on their mortgages and is an approved Ginnie Mae seller/servicer, currently servicing in excess of $3 billion of loans. Based in Minneapolis, Dougherty Mortgage also has additional offices in Colorado, Texas and Maryland.
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Minnesota Real Estate Journal
March 2014
Laurus Corporation makes first acquisition in Minneapolis market By Dan Rafter, Editor
M
inneapolis' commercial real estate success is no secret. Just ask officials with Laurus Corporation. The Los Angeles-based real estate investment and development firm at the end of January made its first acquisition in the Minneapolis area, purchasing the 190,000-square-foot Woodlake Centre in suburban Richfield, Minn. The mixed-use development is home to office and medical tenants, and is anchored by a Houlihan's restaurant. The development is also the site of an M&I Bank location. Austin Khan, chief investment officer of Laurus Corporation, said that company officials are excited to have broken into the strong Minneapolis market. "We think Minneapolis is an incredibly dynamic market," Khan said during a phone interview. "The concentration of significant office users and Fortune 500 companies there is strong. And, specifically for our investment, we're also excited about the strength of
the medical office segment in that market." The goal of Laurus officials is to attract a greater number of medical and professional users to the facility. Right now, Khan said, the Woodlake Centre is an underperforming property. But Khan expects this to change. Laurus plans to make several millions of dollars worth of capital improvements to the property, he said. "We want to make it a real anchor in the community for medical and professional services," Khan said. "There are some great medical tenants in the building already. We think we can build it up even more. We can make this a destination for community members with medical needs. As we continue to invest in the building it will be a very attractive space for medical tenants and professional services." The Woodlake Centre does have plenty of positives. It is located close to the interchanges for Interstate-494 and Interstate-35. More than 1,000 new residential multi-family units are within walking distance of the center. And many of these new units cater to active adult living and seniors care.
The Southlake Centre and Galleria Edina malls are less than two miles from the property. These retail destinations feature more than 180 stores and dining options. The 4.2-millionsquare-foot Mall of America and Minneapolis-St. Paul International Airport are 10 minutes from Woodlake Centre. Jean Paul Szita, co-founder and chief financial officer of Laurus Corporation, said that his company plans to add several new amenities to the center, including a cafe, concierge services and improved parking. "Our first acquisition in the Minneapolis market is a prime example of Laurus' ability to identify opportunistic assets in regional markets that display robust demand drivers and tremendous upside for potential
investors," Szita said in a written statement. The Woodlake Centre might be Laurus' first acquisition in the Minneapolis market, but it probably won't be the last. Khan said that the Minneapolis market is one that's not only strong today but will certainly be strong for years. And that makes it an attractive market for Laurus, he said. "We are not alone in looking at Minneapolis," Khan said. "There is a lot of interest in this market. And it's for a good reason. When you look at the growth of the market, it looks to be a very attractive market for investors for years to come."
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Minnesota Real Estate Journal
Oppidan From page 1
The downturn was not an easy period for Oppidan. Like all real estate development companies, the work dried up. But Oppidan maintained its relationships with its lenders. It didn't reduce its staff. And, most importantly of all, it paid all of its bills. When the economy started to heat up, Oppidan's clients and vendors remembered this. The company's actions have now paid off in the form of a full pipeline of projects. "There was never a more difficult time than running our company through the downturn," Ryan said. "But it was also the most educational time for us. We came off better and stronger. We developed better relationships. There is not a greater accomplishment. We did it. We got to the other side and we didn't lose a friend or miss a payment. I'm damn proud of that." Some of the bigger projects completed by Oppidan in 2013 included the 130,000-square-foot Watford Plaza retail center in Wattford City, N.D.,
Joe Ryan completed in July of last year, and the 180,000-square-foot Southgate Crossing in Minot, N.D. Southgate Crossing, which was completed in August of last year, includes a Cash Wise Foods, Petco, Gordmans and Great Clips. Oppidan also built a 40,000-squarefoot Orchard Supply Hardware for Lowes in Los Angeles and remodeled a second Orchard Supply Hardware, this project totaling 50,625 square feet, in Van Nuys, Calif. Oppidan also started several con-
struction projects last year, including an 8,712-square-foot retail building in Minot, N.D.; the 140,000-square-foot Westview Plaza project in Stanley, N.D.; the 50-lot residential development Woodland Hills II in West Des Moines, Iowa; and the 1.5-acre Tioga Retail outlot in Tioga, N.D., among others. North Dakota's Bakken region has been a big market for Oppidan. And Ryan expects the region to remain an important one as oil companies continue to remove large deposits of oil from the ground there. "North Dakota is another geographic diversification for us," Ryan said. "But it's just a part of our diversification strategy. North Dakota will be with us for a long time. They are just scratching the surface of the oil available there. There is great opportunity in that market." While developing projects in North Dakota, Oppidan has created several long-lasting relationships with clients. Those relationships are now paying off in additional work in markets such as Texas and Canada. "We are credible," Ryan said. "Many of the companies that rushed into North Dakota to take advantage of the activi-
March 2014
ty there haven't been. Many talk a good game but don't deliver. That's not how we operate. People have seen us take on work in North Dakota and finish it. We've brought projects to the market and sold them." Ryan, like other developers, says that North Dakota's oil production isn't a boom. He refers to it instead as an industry, one that will provide new jobs and opportunities in the Bakken region for decades to come. "North Dakota is as important to us as any other of our markets," Ryan said. "It's not any more important or any less important. But it is exciting. It's a lot of fun because it's so fastpaced there. There is great demand. It's not easy, though. It's not for the faint of heart. But we are having a ball up there."
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Minnesota Real Estate Journal
March 2014
Cabela’s From page 1
Woodbury area before deciding to open a new store here. This is standard procedure, of course. And Cabela's has an edge when performing this analysis: The retailer operates a thriving direct-mail business. Through its catalogue sales, Cabela's officials can more easily determine where their customers live and what they buy. When analyzing the Woodbury area, Cabela's officials saw a community that already boasts plenty of residents who buy Cabela's merchandise. It made sense, then, to open a store here, Remmer said. "The people across Minnesota live the Cabela's lifestyle," Remmer said. "They are interested in hunting, fishing, camping and hiking. They are interested in what Cabela's is all about. Woodbury is a great fit for Cabela's." The new Cabela's, like all of the retailer's locations, will include several unique features. This includes hundreds of trophy-animal mounts recreated in their natural habitats; a two-story mountain complete with wild-game displays; a built-in aquarium stocked with freshwater fish native to the region; a gun
library; bargain cave; indoor archery range; fudge shop; deli; and fly shop. "The region's natural resources and its many passionate hunters, anglers, campers and outdoor recreation enthusiasts, as well as the many tourists it attracts from out of state, make the Woodbury area a perfect fit for Cabela's," said Shelby Rockhold, general manager of the new store, in a written statement.
Minneapolis-based Kraus-Anderson Construction Company, which has an extensive history of working with Cabela's, is building the Woodbury store. Remmer said that Cabela's officials are comfortable working with KrausAnderson. "Cabela's stores are unique," Remmer said. "They are large. They have unusual features. our goal is to bring the out-
doors indoors. On every project that we have completed with Kraus-Anderson, the stores have turned out beautiful. The customer response has been positive. We have had great success in the past with Kraus-Anderson. We are confident that the Woodbury store will live up to the high standards that Kraus-Anderson has already set."
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Minnesota Real Estate Journal
March 2014
Guest Column
Final Repair Regulations: Nailing down the rules for the real estate industry By Wendy Landrum, Baker Tilly and Scott Johnson, Baker Tilly
Betterment The first capitalization standard, betterment, results if an expenditure:
O
1. Fixes a material condition or defect at acquisition or production 2. Results in a material addition or expansion 3. Is reasonably expected to materially increase the productivity, efficiency, strength, quality, or output
n Sept. 13, 2013, the IRS and Treasury Department released the final regulations providing guidance regarding the deduction and capitalization of expenditures related to tangible property (commonly referred to as the repair and maintenance regulations). The final regulations will affect all taxpayers that acquire, produce, or improve tangible property, especially real estate owners with substantial property portfolios. The repair regulations generally permit these property owners to deduct expenses for repair and maintenance costs that keep property in efficient operating condition and may provide substantial tax savings opportunities. Capitalization standards The starting point in determining whether an expenditure is an eligible repair cost is identifying what unit of property to apply the capitalization standards to. The unit of property for building property is each building and its structural components. The building is further broken down into the building structure and eight building systems: HVAC, electrical, plumbing, gas distribution, elevators, escalators and building security. An improvement to a unit of property, or to the building structure and/or the building systems, results when one or more of the following capitalization standards is met and the expenditures may not be treated as a deductible repair cost: 1. Betterment 2. Restoration 3. Adaptation
Restoration The second improvement standard, restoration, results from any of the following: 1. Recognition of a loss on component 2. Gain/loss on sale of component 3. Basis adjustment as a result of a casualty loss 4. Return to former operating condition—no longer functioning 5. Rebuild the property to like-new condition after class life 6. Replacement of a major component/substantial structural part A major component is defined as a part or combination of parts that performs a discrete and critical function in the operation of the unit of property. A substantial structural part is defined as a part or component of parts that comprises a large portion of the physical structure of the unit of property. An incidental component of a unit of property, even though such component performs a discrete and critical function in the operation of the unit of property, generally will not, by itself, constitute a major component. Because the discrete and major functions from building to building are similar, the regulations provide a list of the major components within each building structure/system.
Adaptation The final capitalization standard is the adaptation of a unit of property to a new or different use inconsistent with the intended, ordinary use of the building. For example, converting a warehouse to office space would be a change in use of the property. Election to follow book capital improvement costs Taxpayers may now elect to follow its book capitalization policy for improvement costs that were capitalized for book purposes. The intent was to reduce uncertainty in applying the subjective capitalization standards and to reduce administrative burden. This election is helpful for companies that: • are in net operating loss positions or do not need any additional deductions • do not want book/tax differences • have a fixed asset system that makes implementation of the changes difficult Routine maintenance safe harbor for building property The routine maintenance safe harbor includes the recurring activities that the taxpayer expects to perform to keep the building structure or system(s) in its ordinary efficient operating condition. The taxpayer must reasonably expect to perform the activities more than once during a 10-year period beginning at the time the building structure or building system(s) is placed in service. De minimis safe harbor election Under the new de minimis safe harbor, a taxpayer may follow its book minimum capitalization policy if there is a written accounting procedure in place at the beginning of the taxable year and the policy includes a specified dollar amount that does not exceed a per invoice or per item cost as substantiated by the invoice.
• For taxpayers with an applicable financial statement, the dollar amount ceiling is $5,000 per item. • For taxpayers without an applicable financial statement, the dollar amount ceiling is $500 per item. Effective date The final regulations generally apply to taxable years beginning on or after Jan. 1, 2014; however, certain provisions only apply to amounts paid or incurred in taxable years beginning on or after Jan. 1, 2014. Wendy Landrum leads Baker Tilly’s national fixed asset planning and research tax credit practices. She specializes in the areas of fixed asset planning, research tax credit studies, and tax accounting methods. Senior manager Scott Johnson provides tax services to construction and real estate clients, including assisting businesses with strategic planning and entity structuring, tax research, and tax planning. To ensure compliance with requirements imposed by the IRS, you are hereby advised that any written tax advice contained in this communication (including any attachments) was not written or intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
Upcoming MREJ EVENTS Dates and Topics subject to change, please check www.rejournals.com/conferences for latest updates April
16 Student Housing Summit
June
April
24 Capital Markets Conference
September 5
May
2
September 17 Hotel & Hospitality Conference
May
14 Opportunities in Duluth & NE Minnesota
October
May
30 High Performance Space & Data
October 23 Senior Housing Summit November 7 Using Tax Credits and Grants for Real Estate Development November 21 Industrial Real Estate & Economic Development Conference
10th Annual Land Conference
Center Summit June
6
June
10 Renewable Energy Summit
Retail & Restaurant Summit
13 Property & Facility Mgnt Conference
3
Real Estate & Construction Contractors
Brownfields and Urban Redevelopment
Christopher Dolan
REAL ESTATE SERVICES Continental Property Group, Inc. 1907 Wayzata Blvd, Suite 250 Wayzata, MN 55391 Tel-952-473-1700 www.leasespace.com
Monroe Moxness Berg 8000 Norman Centeer dr. #1000 Minneapolis, mn 55437 952-885-5999 www.mmblawfirm.com
REAL ESTATE EDUCATION MN Real Estate Exchangors Henry votel 651-426-1610 Www.mree1031.com Info@mree1031.com
Speakers Include: Robert Perry, Carval Investors Wade Lau, Founders Properties Andy Finn, Ryan Companies Annie Welker, Dorsey Murray Kornberg, CBRE Andrew Webb, ICM Realty Steve Buss, CBRE Mike Binger, Gradient Investments Jim Lockhart, Wipfli Anthony Navarro, MSP Capital Fund Chris Perry, Grandbridge Real Estate Capital Scott Pollock, Cushman & Wakefield/NorthMarq Brant Glomb, Equus Capital Partners Tom Martin, Dorsey Arne Cook, The Excelsior Group Herb Tousley, University of St. Thomas Luke Korbmacher, Wells Fargo Scott Riser, Wipfli 8:00 AM The State of the United States Banking System • How does the uncertainty Europe effect the US Banking System • What are the Big Banks outlook on the Commercial Real Estate Industry • How does Minnesota stack up to the rest of the country • The Future of Banking and the Impact it will have on Commercial Real Estate 8:45 AM The loosening of Credit Markets and what that means for banking • Issues faced in today's lending environment and how to approach permanent lenders to increase your chances of securing debt • How are deals being underwritten today and what are the challenges • Where is the opportunities for investors in the debt market and how do you access them
• What are the barriers to entry and how to overcome them • What is the outlook for the capital markets 9:35 AM Break 9:45 AM Alternative Financing Solutions for Real Estate Deals • Permanent financing options • Life Companies back in the market? • CMBS 2.0: What does this look like • How to access SBA loans for Real Estate Projects • Mezzanine lenders and other hybrids sources for acquisition or rescue 10:30 AM 1031’s, Private REIT’s & The 2012 JobsAct • What impact does the 2012 JobAct have on the Real Estate Industry • Understanding the growing 1031 market • Delaware Statutory Trust Investments: What are they and what are the benefits • The growing number of Private REIT’s • Other Emerging Trends and where are the opportunities 11:15 AM Real Estate Equity Investors Requirements & Investment Deal Flow • What types of investors are active? What are their return expectations? • What is the best investment asset class and why • How much money is really out there? • How have underwriting standards changed? • How to be more attractive to get capital • Bid ask spread narrowing? • Which buyers are active in the market? • Recent deals that have been done • Future Predictions 12:00 PM Networking