VOLUME 31, NUMBER 05
Š2015 Law Bulletin Publishing Co.
May 2015
Oppidan bringing grocery-anchored retail to Twin Cities’ lakeside community By Dan Rafter, Editor
E
xcelsior had long been known mostly as a resort town, one that attracted tourists from the Twin Cities -- just about 12 miles away -- and beyond during the summer months but was quiet when the temperatures rose. And why not? This Minnesota city sits on the shores of Lake Minnetonka. And its population in 2010 was a smallish 2,188. That would seem to be the definition of a resort town. But Joe Ryan, president of national property development firm Oppidan Investment Company, says that this is changing. Today, Excelsior is becoming
a 12-month destination, he said. One that attracts visitors all year long to its shops, recreational activities and restaurants. That's why Oppidan has invested so much into its Excelsior Marketplace development. This development -- which was just about completed by press time -- is a retail and office project that sits on the former site of Mason Motors, Inc., at the busy intersection of Water and George streets in downtown Excelsior. "Excelsior has changed over the years. It's become a real destination in the Twin Cities area," Ryan said. "The city officials have done a nice job keeping the historic nature of the community while expanding its amenities. You are Oppidan to page 21
Cushman & Wakefield, DTZ creating another mega-firm By Dan Rafter, Editor
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rett White just became an even bigger name in the commercial real estate industry across the Midwest and the country. White is the new chairman and chief executive officer of the newly created mega-firm that will result from the merger between Cushman & Wakefield and DTZ. The parent company of DTZ, TPG Capital,
announced yesterday that it has reached an agreement to pay $2 billion to buy Cushman & Wakefield from Exor SpA, that company's majority owner. The new company will operate under the Cushman & Wakefield name. It will also boast more than 43,000 employees across the globe and annual revenues of $5.5 billion. It will manage a portfolio of more than 4 billion square feet. White, in a prepared statement, said that the merger creates a real estate firm that will have unprecedented reach.
"The companies have remarkable complementary skills and reach in different geographies," White said in his statement. "Whether in New York, London or Shanghai, this will be a formidable combination." White, of course, is no newcomer to the commercial real estate industry. He brings more than 30 years experience to his new position. Formerly, he served as chief executive officer of CBRE. The deal, as large as it is, happened relatively quickMerger to page 16
May 2015
Minnesota Real Estate Journal
Contents
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MAY 2015 • VOLUME 31, NUMBER 05
OPPIDAN BRINGING GROCERY-ANCHORED RETAIL TO TWIN CITIES’ LAKESIDE COMMUNITY CUSHMAN & WAKEFIELD, DTZ CREATING ANOTHER MEGA-FIRM
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CSM CORPORATION: BROOKLYN PARK’S INDUSTRIAL MARKET STILL A STRONG ONE
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FACES OF NAIOP
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OAK GROVE CAPITAL’S DAYTON: APARTMENT BOOM CONTINUES IN TWIN CITIES – BUT HOW MANY RENTERS CAN’T AFFORD TO LIVE HERE?
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BREATHE EASY: THE MOVE TOWARDS SMOKE-FREE RENTALS
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FROM THE NHL TO COMMERCIAL REAL ESTATE, NORTHMARQ’S TREBIL STILL A COMPETITIVE SPIRIT
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Departments PEOPLE
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NEWS
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Minnesota Real Estate Journal
May 2015
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Doran Adds New Hires to Meet Construction Demand Citing continued growth in construction general contracting, Doran Construction announced today the hiring of five new employees to boost its capacity in the areas of retail, hospitality and multi-family construction. Robert McIntyre, Project Manager Working as both a general contractor and project manager in the Mid-Atlantic & Southwest United States, McIntyre recently built six Marriott & Choice flagship hotels over a two year period within budget and on schedule. Additional experience includes his working with many other hotel, multi-family, orthopedics, educational, government and retail franchise groups, including Hilton, Holiday Inn, Orthodontic Centers of America, USACE/GSA/FAA, JoAnn Fabrics, Office Max and Toys-RUs. McIntyre is a graduate of Kansas State University earning a Bachelor of Architecture in a five-year degree program. James A. Oliver, Construction Controller Oliver comes with 18 years of construction accounting experience including 14 years at Mortenson Construction. Prior to joining the construction industry he spent 5 years in public accounting as a CPA. He is a graduate of the University of Wisconsin–Whitewater and will assume responsibility of
overseeing Doran Construction’s financials, financials, job cost reporting, owner billings and subcontractor qualification. Amber Noel Jacobsen, Project Engineer Jacobsen has over seven years experience with Kraus Anderson Construction working in the field on a variety of constructions projects, including multifamily, retail, educational and medical. Her organizational skills will add a key asset to Doran Construction job site operations and administration. Jacobsen attended Montana State University (Bozeman) for two years where she studied Environmental Design/Architecture and has earned Associated General Contractor certifications for Lean Construction. Brian D. Laabs, Superintendent Laabs brings 25 years of experience to Doran Construction. His recent experience with GM Northrup Corporation included running successful retail projects for O’Reilly Auto Parts in four states and additional franchise retail projects for Pizza Hut and Master Cuts. Laabs earned his A. A. in Mechanical Drafting and Engineering at Hennepin Technical College in Eden Prairie. Zachary Nelson, Assistant Superintendent With nine years as a foreman at Kelleher Construction and having served the
same amount of time in the Air Force Reserve, Nelson joins Doran Construction where he will put his leadership skills to work in the general contracting arena. A graduate of the University of Minnesota with a major in Construction Management, Nelson was a Distinguished Graduate in Military Training, contributed 300 hours of leadership and mentorship at the U of M Solar House and was a College Dean’s List recipient.
THE EXCELSIOR GROUP HIRES JIM HEGEDUS AS VICE PRESIDENT The Excelsior Group (TEG) is proud to announce the recent hire of Jim Hegedus. As Vice President for TEG, Jim is responsible for commercial investment management, strategy formulation and implementation, and investor relations for the Opportunity Fund series. Prior to joining TEG, Jim spent seven years at Prudential Real Estate Investors (PREI), where he served most recently as an asset manager for a national portfolio of value-add commercial and residential properties valued in excess of $1 billion. Previously he served roles in acquisitions, covering the Northeast and Midwest regions, and portfolio analytics for PREI’s flagship fund. Jim holds bachelor’s degrees in real estate and finance from the University of Wisconsin – Madison.
News Cushman & Wakefield | NorthMarq Represents DLC Residential in 14-acre Land Sale to Create New West End Mixed-Use Development Complicated land deal receives approval from St. Louis Park and Golden Valley for future development Cushman & Wakefield | NorthMarq represented DLC Residential in a justcompleted complex sale and assembly of 14 acres of prime inner-ring suburban land, which will be repurposed as a Class A apartment complex, up to a 700,000 sq. ft. office building and a new hotel. The entire 14-acre site, which was previously owned by Duke Realty, is
located just south of I-394 and west of Hwy. 100, on the north edge of the Shops at West End. The sales, with a total value of $20 million, closed late last week. Jon Rausch and Luke Appert, Cushman & Wakefield | NorthMarq, represented DLC in the site assembly and land sales. Prior to closing, DLC managed the master development and municipal approval process, receiving approvals for all components of the plan from both St. Louis Park and Golden Valley. The two sites totaled 14 acres, but the transaction included three separate sales, including: • DLC resold six acres to the Excelsior Group for the potential 700,000 sq. ft. office property
• TPI Hospitality purchased 1.8 acres of the site for a new 200-room hotel • The remaining 6.2 acres will be developed by DLC into two Class A apartment buildings with 363 high-end apartment homes and an adjacent oneacre, $1 million park. “Our strategy is to identify the best sites for Class A, amenity-rich apartments and Jon Rausch has been a great partner for us as we enter the Minneapolis/St. Paul market,” said Russ Krivor, DLC president/founder who develops apartments in Chicago, Dallas and Houston, Texas, and the Twin Cities. “We are committed to continuing to build our presence in the Twin Cities, as we think our high-end apartment projects with the best amenity and interior
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News design packages will be very attractive to working professionals here.” The new site will be the home of the firm’s second apartment building in the Twin Cities; its first project was the Millennium West End, a Class-A, high-end, amenity-rich project with 158 units located on the 1.6-acre former Chili’s restaurant site across Utica Ave. S. from the new site. That project is leasing now and expected to open in summer 2015. Rausch and Krivor credit David Weigman, attorney with Messerli & Kramer, P.A., with the insights to guide the complicated transaction. “Dave worked closely with me to identify the issues and helped guide Russ through the municipal approvals,” said Rausch. In addition to the phased development on the site, DLC is planning a stormwater retention system that will irrigate the park and common areas within the complex and a new walking/biking path that connects the complex to Shops at West End. “We are very excited to be in the midst of the great mix of activity occurring at West End, as it offers a
Minnesota Real Estate Journal
great suburban location near downtown Minneapolis but with an urban feel,” said Krivor.
Dougherty Mortgage LLC Closes $9.6 Million Fannie Mae Loan for Summit Ridge Apartments Dougherty Mortgage LLC, a full service national mortgage banking firm, has closed a $9.6 million Fannie Mae loan for the refinancing of Summit Ridge Apartments, a 125-unit market rate multifamily property located in Moorhead, Minnesota. The Fannie Mae, 12-year term, 30-year amortization loan was arranged by Dougherty’s Minneapolis office, for borrower Apartments at Johnson Farms LLC. Summit Ridge Apartments are located on a quiet street backing up to open space and nearby parks. Apartment features include open plan kitchens and living areas, 9 foot ceilings on the first and second floors and vaulted ceilings on the third floor. First floor units have walkout patios and second and third floor units have balconies. Floorplan options include 1-, 2- and 3-bedroom options
and include washer and dryer, dishwasher, microwave and garage.
Oppidan Investment Company’s Excelsior Marketplace Nearing Completion National property development firm Oppidan Investment Company today announces that its highly anticipated Excelsior Marketplace is nearing completion. Excelsior Marketplace is a retail and office development located on the former Mason Motors, Inc. site at Water and George Streets in downtown Excelsior, Minn. Last fall, Oppidan announced that a Kowalski’s Market grocery store would be built on the site along with a 20,000square foot retail and office building that will face the new Kowalski’s. With construction nearing completion, Kowalski’s Market plans to open in mid-summer. In addition, Oppidan plans to move its corporate offices to the upper level of the retail and office building in midJuly. Miyabi Japanese and Asian Bistro and M the Art of Hair hair salon, located on street level, plan to open in early
May 2015
and late summer respectively. “It’s exciting to see the progress being made at Excelsior Marketplace and to realize that the end of construction is near. The Mason Motors site was full of potential when we purchased it, and it’s incredibly rewarding to see our vision coming to fruition,” said Joe Ryan, president of Oppidan. “I think Excelsior residents will be very pleased with the additional amenities that will soon be available to them.” Oppidan purchased the former Mason Motors, Inc. building and adjacent property in 2012. In early 2013, Steele Fitness became the first tenant on the site. It was joined by College Nannies + Tutors, SportClips and, most recently, YogaFit. That 8,744-square foot building remains fully occupied. Oppidan continues to seek three additional tenants for approximately 4,000-square feet of remaining retail space in its retail and office building.
CBRE’s Multifamily Group Announces Sale of 402 Unit Apartment Community in Woodbury
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Continued demand for value-add multifamily product is apparent. CBRE announced today that it has closed the sale of the 402 unit Valley Creek Apartments in the premier east metro suburb of the Twin Cities, Woodbury, Minnesota. Abe Appert, Keith Collins and Laura Hanneman of CBRE’s Minneapolis office represented the seller, TMF I Valley, LLC, an entity controlled by Chicago based, Trilogy Real Estate Group, LLC. Marquette Valley Creek, LLC based in Naperville, Illinois purchased Valley Creek. This is Marquette’s first multifamily acquisition in the Minneapolis-St. Paul metro area. "The transaction provided us with the opportunity to acquire a well-located multifamily community in an established suburban Minneapolis submarket. We continue to seek value-add opportunities to expand our footprint in the greater Minneapolis market,” said Bryan Berkey, Director of Acquisitions. Valley Creek was built in 1987 and 1989 and has one bedroom units at 767 SF to three bedroom units at 1,468 SF. The seller added a new clubhouse (win-
Minnesota Real Estate Journal
ner of Best Clubhouse Renovation in 2012 by Minnesota Multi-Housing Association) and has renovated apartments. Marquette’s plans call for additional unit upgrades including stainless steel appliances, new cabinets, granite breakfast bars, updated bathrooms and other unit upgrades. Marquette will also further invest in the common areas and amenities to provide the best amenity package in the Woodbury submarket. Valley Creek has convenient access to Interstate 494, major retail, and proximity to major employers such as 3M headquarters, Imation, Hartford Insurance, Woodwinds Health campus, and downtown St. Paul employers such as Travelers, Ecolab, Securian, and state, county, and city government offices.
MARCUS & MILLICHAP ARRANGES THE SALE OF A 20,656-SQUARE FOOT OFFICE BUILDING Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today
announced the sale of Tamarack Office Building, a 20,656-square foot office property located in Woodbury, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $4,300,000. Sean Doyle, Matthew Hazelton, Adam "AJ" Prins and Cory Villaume, investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a limited liability company. The buyer, a private investor, was represented by an outside brokerage firm. Speaking with Mr. Doyle, “The property is 100 percent occupied by two desirable tenants and is well located in the Tamarack Hills Park; which is supported by other high quality office and retail buildings in a growing pocket of Woodbury. This opportunity generated significant interest in the investment community because of its tenants, location and quality of construction.” Tamarack Office Building is located at 659 Bielenberg Drive in Woodbury, Minnesota
May 2015
Cushman & Wakefield | NorthMarq Secures Sale of AmericInn Hotel & Suites in Rochester, Minnesota Cushman & Wakefield | NorthMarq (CWN) www.cushwakenm.com represented Rochester, Minn.-based Titan Development & Investments in the sale of AmericInn & Suites Rochester Airport hotel, located at 7320 Airport View Drive SW, Rochester, Minn., to CLT Investments, LLC, Prairie Du Chien, Wis. Titan will be aligned as a partner, but will not be involved with the management of operations. The sale closed on April 16. The 72-room limited service hotel was originally built as a Sleep Inn in 2001 before being converted into the AmericInn & Suites in 2010. Ronn Thomas of CWN represented the seller, Titan Development, the buyer, CLT Investments, LLC, represented itself during the transaction. Located in close proximity to Rochester International Airport (RST) News to page 21
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Minnesota Real Estate Journal
May 2015
CSM Corporation: Brooklyn Park’s industrial market still a strong one By Dan Rafter, Editor
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cott Moe counts Brooklyn Park as one of the most aggressive communities in the Minneapolis/St. Paul area when it comes to attracting new business. That's why Moe isn't surprised that CSM Corporation's Boone Avenue Business Center II in Brooklyn Park has managed to fill all of its available space. "Officials in Brooklyn Park are always working hard to figure out how to attract businesses and how to create one of the best business climates in the Twin Cities area," said Moe, vice president of leasing and development with CSM Corporation. "The officials there are going out of their way to figure out how to make their community attractive to companies. Brooklyn Park really stands out right now in that northwest submarket and in the Twin Cities area." The latest example? Output Technology and Superior Paper Handling Solutions recently leased 22,975 square feet of office and warehouse space at the Boone Avenue Business Center II.
The new leases bring this project from 69-percent to 100-percent occupancy. The Boone Avenue Business Center II is located at 7150 Boone Avenue North and features easy access to Interstate-694 and Interstate-94. Dan Terry of JLL represented CSM Corporation as the exclusive leasing agent for the Boone Avenue Business Center. Brian Netz of Colliers International represented the tenant. Moe said that CSM Corporation has been able to keep the Boone Avenue Business Center building filled because of that site's ideal location close to highways and in the booming Northwest submarket of the Twin Cities. "The building has really good access to transportation arteries," Moe said. "And it's a well-maintained building with a very sizable truck courtyard. It is a great location for employees who can live around the Twin Cities and still easily get to the site. And it's a good image building that has plenty of driveup appeal. It helps to have a building like that when you are attracting potential employees for recruiting." Moe says that there is always
turnover at any industrial building. Companies might outgrow their space and need to expand. Others might get sold, and the new buyers might move operations to a new location. But even when these inevitable turnovers happen, CSM Corporation should have little trouble finding replacement tenants, Moe said. "There's a long history of companies locating in the Northwest submarket,"
Moe said. "Success breeds success. There is good executive housing in this area. It has a great employee base for what I would call high-end blue-collar employees, skilled labor. The Northwest submarket will remain strong for a long time."
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Minnesota Real Estate Journal
FACES of NAIOP PATRICK MASCIA Real Estate Attorney and Partner Briggs & Morgan
Q. What led you to leave Duke Realty and the development world? A. I was looking for a new challenge. In 2004, Duke gave me the opportunity to run a business and lead an office with more than 50 employees. When I left ten years later, we had fewer than 15 associates here and the company and its Twin Cities strategy had changed considerably. We had achieved much over the decade, and I believed we had positioned the company well in the market,
so I felt the time was right to move on. Q. Was it always your intention to return to the practice of law? A. I enjoy practicing real estate law and the opportunity to work with smart people, both co-workers and clients. I also get to work on a variety of different matters, which keeps things interesting and challenging. My management and development experience at Duke and my investment, disposition and
May 2015
PATRICK MASCIA, If there were such a thing as a prototypical member of the Minnesota Chapter of NAIOP, the commercial real estate development association, he or she would look a lot like Patrick Mascia: veteran of multiple chapter leadership positions, including terms as chapter president, board member, and chair of multiple committees…dedicated, reliable volunteer…”on demand” legislative testifier…enthusiastic battler against higher commercial property taxes…articulate spokesperson for the CRE industry…wise counselor to younger members and developing leaders…and doing it all with the good humor and the pleasant collegiality that is the hallmark of the Twin Cities commercial real estate community. A real estate attorney and current partner in the firm of Briggs & Morgan, Minneapolis, Pat is probably best known for his long tenure as senior vice president for Duke Realty Corporation, a position he left last year to return to his professional roots at the law firm where he began his legal career 24 years ago. Prior to joining Duke, he combined his legal expertise with management positions at Opus US Corporation as associate general counsel (1997-1999) and at Opus Properties, now Founders Properties, as vice president, dispositions, finance and investments (1999-2004). He joined Duke in 2004, managing the firm’s Twin Cities development, leasing and property management activities, where he was responsible for such notable developments as the West End mixed use complex in St. Louis Park, Norman Pointe Office Park in Bloomington and Gateway North Business Center in Otsego.
finance experience at Opus also made me unique in the legal marketplace, and I saw an opportunity.
Q. Has the change in careers lived up to your expectations? A. The practice of law has changed, but I love the work, the people with NAIOP to page 19
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Minnesota Real Estate Journal
May 2015
Oak Grove Capital’s Dayton: Apartment boom continues in Twin Cities – but how many renters can’t afford to live here? often, is “no.” "I love to see the multifamily sector here so strong," Dayton said. "But we are really falling short on the affordable side of things. There is a big demand for workforce housing that is not being met. There are some affordable units here. But there aren't enough to really meet the demand that is out there for the worker making $40,000, $50,000 or $60,000 a year."
By Dan Rafter, Editor
T
he numbers are strong: Apartment rents are rising and developers are adding new luxury apartment buildings across the Minneapolis/St. Paul market. Developers are even moving into the Twin Cities’ suburbs to serve the growing number of residents who are becoming “renters by choice” – those who want apartment living and aren’t interested in owning a single-family home. And Ken Dayton, managing director with St. Paul’s Oak Grove Capital, says that the multifamily boom in the Twin Cities should last for at least two to three more years before slowing. But here’s the big question: As developers put up modern apartment buildings filled with amenities such as media centers, green rooftops and 24hour concierge services, are they neglecting to add enough affordable units to the mix? What about those Twin City residents working hard to earn $50,000 to $60,000 a year – not a tiny sum, but not
Ken Dayton a fortune, either – here? If they want to live the urban lifestyle that has become so popular – walking to public transportation, shops, restaurants and theaters while mostly ditching their cars – can they find an apartment unit with a monthly rent low enough for them to afford? Dayton says that the answer, too
A growing market It's uncertain how many new affordable apartment units developers will add to the mix in the Twin Cities. But what is certain is that the area's multifamily market has been hot for several years. Marcus & Millichap, in its first quarter apartment report, said that in 2015 developers will bring 5,000 apartments to the Twin Cities market. That will result in a 1.8 percent rise in apartment inventory here. And developers were even busier last year. Marcus & Millichap reports that in 2014, developers brought 5,700 new apartment units to the Minneapo-
lis/St. Paul market. Since 2010, developers have added 18,400 apartment units to the Twin Cities area, according to Marcus & Millichap. Demand is still high, though, which means that apartment rents continue to rise, something that is making it a challenge for many Minneapolis/St. Paul residents to find apartment units that they can afford. Marcus & Millichap reports that a large supply of new luxury inventory means that effective apartment rents will rise 3.6 percent this year to an average of $1,091 a month. In 2014, effective rents rose 3.4 percent, Marcus & Millichap said. The influx of luxury apartments isn't hitting just the urban center of the Twin Cities, either. NAI Everest in its firstquarter apartment report said that more than 50 percent of the multifamily developments now under construction in the Twin Cities area are in the suburbs, especially the region's outer-ring suburbs. These suburban developments offer one luxury that new urban apartments Dayton to page 18
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Minnesota Real Estate Journal
May 2015
Breathe Easy: The Move Towards Smoke-Free Rentals by Kevin Ortner, President & CEO Renters Warehouse Want a simple, free, and effective way to slash your vacancy rates, reduce maintenance costs, lower both your liability and risk of fire AND boost your property value? If you’re like most of us, the answer may surprise you! Going smoke-free is an excellent way to do all of the above –and more. While many landlords are hesitant to implement a smoke-free policy out of concern that it may have a negative impact on their ability to attract tenants, in fact, the opposite is true. Many property owners actually experience a decrease in turnover or vacancy rates after implementing a smoke-free policy. And the majority of landlords with smoke-free policies say that they plan to keep those measures in place. Today we’re going to clear the air and set the record straight! Let’s look at a few facts about smoking, and see how implementing non-smoking measures can directly affect the profitability of your property. Quick Facts About Smoking Cigarettes have a tarnished reputa-
tion, and for good reason. Smoking is the leading cause of preventable death in the United States, and numerous studies have linked smoking with illness or death. More than 12 million premature deaths over the past 40 years have been attributed to smoking. Smoking isn’t just harmful to smokers; it’s dangerous to nonsmokers as well. Each year, approximately 50,000 non-smokers in the U.S. die from exposure to secondhand smoke. Non-Smoking Policies and Landlord Liability Many property owners are hesitant to implement non-smoking policies, because they are concerned that it will open the door for discrimination lawsuits. But it’s important to note, that there is no constitutionally protected “right to smoke.” Smoking isn’t protected under law, and building owners are legally free to limit, or ban smoking in their buildings. This means that you are free to make your properties smokefree if you wish without any worries about discrimination lawsuits. For Landlords: 5 Benefits of Going Smoke-Free
In a survey conducted by Smoke Free Housing NY, 97 percent of landlords who have made their properties non-smoking are happy with their decision. Here are a few reasons to consider making your properties smoke-free. ● Your Units Will Be More Appealing to Potential Tenants Public opinion surveys show that the overwhelming majority of tenants support smoke-free apartments. Nonsmoking properties are an attractive option, and many renters view them as a desirable amenity. ● Lower Vacancy Rates Smoke-free policies do not have a negative impact on tenant retention. In fact, going non-smoking often lowers turnover or vacancy rates. Residents in non-smoking property are in no hurry to leave –they don’t want to give up their clean air! ● Lower Clean Up and Renovation Costs Going smoke-free can lower cleanup and renovation costs. Landlords who own apartment complexes estimate that it costs anywhere from $500 to over $8,000 more to rehabilitate an
apartment that has had a smoker in the space over a non-smoker. Expenses involved with cleaning, priming, painting and replacing burnt carpet and countertops all add up significantly. ● Lower Risk of Fire In the U.S., cigarette-related fires result in millions of dollars in property damage and healthcare costs each year. Smoking is responsible for 1,000 fires every year resulting in between 700 and 900 deaths. ● Lower Liability Risks While smoking isn’t protected by law, non-smokers with breathing difficulties or smoke allergies do have legal protection under both the Americans with Disabilities Act and the Fair Housing Act. Property owners with smoking units are opening themselves up to increased liability. It wouldn’t be hard for a tenant to bring a lawsuit based on the landlord’s knowledge of a dangerous condition: secondhand smoke transfer, and their failure to take action to reduce exposure for their residents. ● Possibly Lower Insurance PremiSmoke-Free to page 18
Page 18 Dayton from page 14
can't, according to NAI Everest: space. The company reports that the new suburban developments typically provide larger unit sizes with more storage space for residents who want to downsize from bigger suburban single-family homes. These suburban developments are also, in their own way, catering to those who prefer to drive less. NAI Everest says that many of the new suburban multifamily developments are located on or near public transportation and near community focal points such as retail centers or suburban downtowns. Not enough affordable options Dayton from Oak Grove Capital says that he’s not surprised at the demand for multifamily units in the Twin Cities. Minneapolis/St. Paul, he says, has a lot to offer residents and businesses. “We have a very diverse economy here,” he said. “There are so many educational, art and employment opportunities here, so we are seeing a lot of migration coming into the market. The new developments really are catering to pent-up demand from people who are electing to be renters by choice.” It’s fair to wonder if developers are adding too many multifamily units to
Minnesota Real Estate Journal
the area. Is the Twin Cities supply of apartment units about to outpace demand? Dayton doesn’t think so. “For now, I think the additions are at an appropriate level,” he said. “We are at low vacancy levels still. There is continued demand for new units. There is a lot of new construction throughout the downtown area, by the stadium, by Wells Fargo’s corporate headquarters. The unemployment rate here is low. We’re going to continue to see strong employment growth in Minneapolis and St. Paul, which will help fuel the need for new apartments downtown.” But how difficult is it today for renters to find affordable units in downtown Minneapolis/St. Paul? Dayton says that this is the real challenge for today’s Twin Cities’ multifamily market. New apartment units often come with rents in the $2- to $2.50-asquare-foot range, Dayton said. That can make rents too high for many here. Some developers are adding what are called micro-units – very small units – to their buildings to lower the average monthly rents of their developments. But those units really are tiny, and aren’t always the right fit for workers who want adequate space with their urban experience. Dayton says that many workers need
Smoke-Free from page 16
ums Due to lowered risk of fire, insurance companies will sometimes offer lower premiums for buildings that are smoke-free. Ask your insurance provider about lower rates for implementing smoking restrictions. ● Higher Resale Value Research suggests that smoke-free buildings may have increased resale value –an important consideration, especially if you plan to sell your complex in the future. Should You Go Smoke-Free? A non-smoking policy is relatively easy to implement, since courts and legislation across the country have paved the way for smoking bans in rental units. Because it’s recognized that smoking is not a constitutional right –it’s never been easier for property owners to implement smoking bans. to find apartment units that rent for $1,000 to $1,200 a month if they want to spend just 30 percent of their incomes on rent each year. Those apartments are out there, but they are
May 2015
Organizations like Americans for Nonsmokers’ Rights (ANR) provide landlords with helpful information and resources that make it easy to incorporate no-smoking clauses into policies. The ANR also has a handy list of state-specific non-smoking resources at the bottom of the page –a great resource for landlords who are looking for relevant and helpful information on implementing non-smoking initiatives in their area. If you already have tenants occupying units, it may not be possible to immediately implement smoking bans –depending on your lease agreement and state laws. However, by phasing in these measures over time, and instituting no smoking clauses into tenant leases when new occupants arrive, you’ll be able to reap the rewards of smoke-free housing, increasing your property’s profitability, and helping your renters to breathe a bit easier.
growing increasingly rare. And such rents are even rarer with new apartment units, Dayton said.
May 2015 NAIOP from page 12
whom I work, and the variety. I enjoy solving problems, helping our clients accomplish their goals and getting things done. Building a practice from scratch is a challenge but it’s also a fun thing to do. Q. You headed development in the region for one of the largest investor/developers in the country, and, in fact, led the successful development and lease-up of The West End, one of the largest mixed used projects in the Twin Cities in recent years. Wasn’t that a lot to walk away from? A. Duke gave me a great opportunity and I am very proud of what our team accomplished in The West End and our other Twin Cities projects. The West End was a challenging problem to solve and it was great to be part of a tremendous public/private team effort to pull it off. Briggs & Morgan has also given me a great opportunity and I’m excited about our future. Q. Has development changed in some way to make it less attractive or interesting as a lifetime career? A. I believe a development career today is as attractive as it has ever been, especially in this market. Capital is plentiful and relationships between developers and cities seem to be strengthening and becoming more collaborative. The West End is a perfect example--we could not have accomplished what we did without the active participation of the city Q. What do you see as the emerging issues in real estate law? A. Nothing much has changed in real estate law since the time of Henry VIII. However, there are important issues facing our industry that need attention. Potential warranty liability has chilled condominium development. Also, the recent eminent domain legislation went too far. If the pendulum had earlier swung too far in favor of cities, it has now swung too far in the opposite direction. There are worthy development projects that developers will not pursue because of existing eminent domain rules. Q. How did your time “in the trenches” as a large scale developer and property manager influence your views of the commercial real estate industry and the changing laws and regulations affecting people who hold those positions and their companies? A. I have developed a greater appreciation for the challenges commercial property owners, developers and managers face in striving to provide the companies that employ Minnesota workers with cost-effective space in an increasingly competitive marketplace. As a public policy wonk myself, I have also developed a tremendous amount of respect for the people who work on public policy initiatives affect-
Minnesota Real Estate Journal
ing our industry side by side with NAIOP-- BOMA, MNCAR, MSCA, the Minnesota Chamber of Commerce and other chambers, as well as legislators at the Capitol—creating solutions to strengthen our local economy, create jobs and provide cost-effective space for Minnesota’s employers. Our market needs these people. Q. Now that you’ve moved on and can be an objective observer, is it more difficult and costly to develop in Minnesota, compared with other states?
A. It is significantly more difficult and more costly. Duke owns and develops commercial real estate in 21 markets so I had the opportunity to compare our costs against those in many other markets. In addition to high real estate taxes, our climate, energy codes, municipal exactions like park dedication fees, and other special fees make it more expensive to construct a building here than it is to build the same building in many other markets. These higher building costs and taxes result in higher rents and operating costs for our business tenants,
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crimping their ability to compete with companies located in other states. Q. What does the future look like for commercial real estate investment and development here in Minnesota? A. That depends on the level of job creation and the future of Minnesota’s economy. If we grow our economy, the commercial real estate industry’s potential here is huge, and its future will be very bright.
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Minnesota Real Estate Journal
May 2015
From the NHL to commercial real estate, NorthMarq’s Trebil still a competitive spirit by Dan Rafter, Editor
MREJ: You came back to Minneapolis and started working for NorthMarq in 2002. Did any of the skills you picked up during your hockey career help you in commercial real estate? Trebil: There is something about the competitiveness. I think that is part of why I have had some success and why other athletes have had some success. There is a competitive spirit to commercial real estate. The harder you work, the better things turn out. That was the philosophy when I was playing hockey and it’s the same for what I am doing now.
A
fter graduating from the University of Minnesota, Dan Trebil pursued a career in the NHL, playing for Anaheim, Pittsburg and St. Louis before calling it quits. He then found commercial real estate, and he discovered that his new career offered its own rewards. Trebil, managing director of the Minneapolis office of NorthMarq Capital, recently spoke with Minnesota Real Estate Journal about the challenges and rewards of building a career in commercial real estate.
Minnesota Real Estate Journal: What led you to commercial real estate after your hockey career ended? Dan Trebil: I went to the University of Minnesota where there wasn’t a real estate program to speak of. I wasn’t even on a business track at all in college. But after I graduated and while I was playing hockey, I started buying duplexes near the university. I had those as rentals. The idea was to grow that portfolio into something bigger. My hockey career ended before I had chance to amass the portfolio I would
Dan Trebil have liked to have developed. So I then went to work in Denver for a guy there who was selling apartments. I told him that I would work for free if he let me go to meetings, if he helped me learn the business. He was great. He handed me his list of clients and told me to figure out what people were up to. He told me to generate some business. That was a great experience. It got me used to picking up the phone and calling people I didn’t know.
MREJ: What do you find satisfying about commercial real estate? Trebil: I do like the idea that the harder you work, the more successful you’ll be. There is a direct correlation between success and hard work in this business. I also like the tangible aspect of it. I like that you can drive down street and see what you are working on. And there are some great people in this business, a lot of interesting people in this industry. MREJ: Are there any projects that you’ve worked on during your career that you are especially proud of? Trebil: I get excited about all the deals I am working on. As of late, though, I have had the chance to work on some projects in the North Loop area of Minneapolis. That neighborhood has taken off with the arrival of the new Twins stadium. I had lived there at the end of my hockey career for a year or so in one of the first condo projects in that area. Since that time, the neighborhood has come a long way. It’s been fun to be back and do some business there. I loved living in that neighborhood.
MREJ: What traits do you have that have helped you build a successful commercial real estate career? Trebil: I consider myself a hard worker. That is a key. I am also strong analytically. Those are probably the two big reasons for the success that I’ve had. MREJ: What advice would you give to people just getting their start in this business? How can they build their careers? Trebil: When I look back, the most beneficial thing that I ever did was picking up the phone and calling people. I felt like an idiot most of the time. Of course, the odds are that the people I was talking to didn’t give my questions a second thought after I hung up with them. It’s important to not be shy about reaching out and connecting to people. Even if you feel that you might have some ignorance, don’t be afraid of it. The best education is talking to people who are in the business. I learned an incredible amount from them. MREJ: What do you like to do when you’re not at work? Trebil: When I retired from hockey, I didn’t spend much time in the rink for years. I only recently started playing again with some other dads whose kids play hockey with one of my daughters. It’s fun to throw a group of guys together and have fun on the ice once a week. I also coach my kids’ soccer and hockey teams. I have two girls, so that keeps me busy. And when I have time, I do throw in some golf, too.
May 2015
Oppidan From page 1
seeing the housing stock improve nicely. Then there's the lake. Excelsior is like a front door to the lake. You are seeing empty nesters settle in Excelsior. You are seeing younger families there. It's a diverse mix of a community that is now taking off quite nicely." The highlight of the new development is a Kowalski's Market grocery store. This store is just about finished, and is scheduled to open in the middle of the summer. Oppidan will move its corporate offices to the upper level of the retail and office building by the middle of July. Miyabi Japanese Asian Bistro and M the Art of Hair salon, both of which are located on street level, will open their doors in the summer months. "The Mason Motors site was full of potential when we purchased it, and it's incredibly rewarding to see our vision coming to fruition," Ryan said of the new development. Oppidan bought the former Mason Motors building and adjacent property in 2012. Steele Fitness became the first tenant here in the early months of 2013. Soon College Nannies +
Minnesota Real Estate Journal
Tutors, SportClips and YogaFit joined the development. That part of the project, a building of 8,744 square feet, remains fully occupied today. Oppidan is now searching for three new tenants for about 4,000 square feet of remaining space in the retail and office building on the site. Ryan is especially excited about the Kowalski grocery store. Groceryanchored retail developments have been thriving. This makes sense: People need to eat whether they are thriving or struggling economically. And grocers attract a steady stream of customers. This helps the retailers that surround a grocer. The Kowalski store will offer ready-made meals and organic produce. That's a big selling point today. "The grocery business is changing so much," Ryan said. "To have a smaller, more neighborhood type of offering with high-quality produce and meat -- yet in a smaller footprint -- is very inviting. The organic play is an important part of this industry, too. The Kowalski organization is a leader in that field. The city is fortunate to have them as part of the community. We think it is going to be a spectacular fit."
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Merger From page 1
ly. Midwest Real Estate News and other publications first reported on the possibility of a big merger in late April. It remains to be seen how the merger will impact the Midwest. Cushman & Wakefield and DTZ already have a large reach in this part of the company. DTZ already impacted the Midwest commercial real estate landscape with its earlier purchase of Cassidy Turley. That name, long part of the Midwest real estate scene, has now disappeared. After the merger is complete, John Santora, the current chief executive officer of North America at Cushman & Wakefield, will become the company's chief operating officer and chief integration officer. Tod Lickerman, now the global chief executive officer of DTZ, will become president of the new Cushman & Wakefield. "The combined company will truly represent the best our industry has to offer," said Edward Frost, president and chief executive officer of Cushman & Wakefield. No big deal such as this happens by accident. It takes plenty of work to hammer out the details. Law firm Milbank, Tweed, Hadley & McCloy advised Cushman & Wakefield throughout the merger process, with corporate partners David Zeltner and Alex Kaye leading the way. "We are excited to be advising Cushman & Wakefield on this transformative transaction, which is a significant milestone in the company's illustrious history," Zeltner said in a written statement. White said that the new company, while certainly a global power, will suc-
Brett White ceed because of the strength of its local brokers. That will be the case in the Midwest, where the new company will now compete against the likes of CBRE and JLL. "While breadth and depth are important to serve clients, it's not just about size," White said. "It's also about local expertise and deep customer service, which are strong traits of Cushman & Wakefield and DTZ, and ultimately what will differentiate us going forward."
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Minnesota Real Estate Journal News from page 8
and Mayo Clinic, the hotel offers visiting guests convenient services, including a free hourly shuttle to both properties. Titan reports that CLT Investments has immediate plans of enhancing the hotel’s exterior and interior. “The Rochester area has a strong hospitality market largely driven by the presence of Mayo Clinic,” said Thomas. “This puts hotels, such as the AmericInn & Suites, in high demand for southern Minnesota.” The sale of the AmericInn & Suites marks the second hotel transaction secured by Thomas in 2015 and the fifth in 14 months.
MARCUS & MILLICHAP ARRANGES THE SALE OF A 9,426-SQUARE FOOT RETAIL PROPERTY Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Markgraf Commons, a 9,426-square foot retail property located in Woodbury, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $1,475,000. Adam "AJ" Prins, Matthew Hazelton, and Mike Marzinske, 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. Speaking with Mr. Hazelton, “The center is 100 percent occupied and has a balanced rent roll. Interest in the property was driven largely by its close proximity to many single-family homes, and the high-rent big box anchored retail to the north.” Markgraf Commons is located at 1125 Woodbury Drive in Woodbury, Minnesota
NEW SENIOR HOUSING DEVELOPMENT OPENS IN INVER GROVE HEIGHTS Stevens Construction Corp., a fullservice, Minnesota-based general contractor, is pleased to announce the recent opening of Hillcrest Pointe Senior Living in Inver Grove Heights, MN. An affordable, senior housing facility, Hillcrest Pointe is designed for adults age 55 and over who meet the program’s income guidelines. Owned by the
Dakota County Community Development Agency, the project sits on a beautiful 5.7 acre site at Cheney Trail and Cahill Avenue. The 3-story, 66-unit, wood frame building features spacious one and two bedroom apartments. Amenities include community room with kitchen, sitting areas, library, laundry facilities, emergency call systems, heated underground parking and walking trails. The 106,040 square foot project finished ahead of schedule in just under one year. Project is designed by Minneapolis-based Insite Architects.
NAI Everest Signs Five-Year Contract Extension NAI Everest is honored to announce it has extended its contract with NAI Global for an additional five years. The company is headquartered in Minneapolis, MN and its President is Gina Dingman, CCIM, whom sits on the Board of Directors of NAI Global. “Gina and her team embody the synergistic model that NAI promotes throughout its 375 offices around the globe,” said Jay Olshonsky, President of NAI Global. “The NAI Everest Office was the #1 referring office of outbound assignments in November 2014, and has been an invaluable asset to the NAI brand.”
Dougherty Mortgage LLC Closes $2 Million HUD 223(f) Loan for Westgate Townhomes In partnership with the Minnesota Housing Finance Agency, Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $2 million HUD 223(f) loan for the refinance of Westgate Townhomes, a 37-unit affordable multifamily rental townhome property with a Section 8 HAP Contract, located in New Prague, Minnesota. The loan was underwritten by the Minnesota Housing Finance Agency for borrower New Prague Westgate Townhomes LLC and assigned to Dougherty Mortgage LLC to close and service the loan. The principal of the borrower entity is Southwest Minnesota Housing Partnership. Westgate Townhomes is a newly renovated, smoke free property offering private entrances, neutral décor, off street parking, and a playground.
CBRE ARRANGES $36,875,000 CONSTRUCTION FINANCING FOR THE CENTRAL PARK WEST MULTI-FAMILY DEVELOPMENT 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 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. CBRE’s Minneapolis DSF group of Murray Kornberg, Doug Seylar, Joel
May 2015
Torborg, Scott Larson, and Ben Bastian helps provide investment and advisory services to meet the financing needs of real estate owners ranging from private investors to large public entities.
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 News to next page
May 2015
Minnesota Real Estate Journal
News from previous page
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
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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.”
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