Mrej May 2017 by REjournals

VOLUME 33, NUMBER 5

May 2017

InterContinental hotel set to open at MSP Airport in summer 2018

By Liz Wolf

ome summer 2018, the Minneapolis-St. Paul International Airport will have its first on-site hotel when a 291-room InterContinental hotel opens. The 12-story, luxury property will connect directly to MSP Airport’s Terminal 1- Lindbergh via an

enclosed sky bridge to Concourse C. The high-profile project was made possible by a partnership between Minneapolis-based Graves Hospitality – a developer of high-end hotels -- and Boston-based real estate investment firm Intercontinental Real Estate Corp. The hotel was designed by Minneapolis-based RSP Architects and is being built by Burnsville-based PCL Construction.

“It’s the first and I think it might be the last hotel at the airport,” said Jim Graves, chairman of Graves Hospitality. He describes making the project work on a “postage-stamp-size site.” “At airports, the property is extremely valuable and hard to find… and you have to make the most of every square foot of property,” says Brian Ryks, Hotel to page 12

Colliers report: Traditional restaurant chains face a challenging 2017 by Dan Rafter

onsumers are spending plenty of time and money eating out. But where they are eating when they do dine out continues to change. Colliers International highlighted this trend in its recently released first-quarter retail report for the Minneapolis-St. Paul area.

Colliers says that in the Twin Cities — as in most Midwest markets — higher-quality fast-casual restaurants are expected to thrive, while many more traditional sit-down restaurant chains are expected to struggle. Colliers pointed to such chains as Applebee’s, Ruby Tueday’s and Buffalo Wild Wings as examples of traditional sit-down eateries that are expected to have a sluggish year in the Twin Cities. The reason? Colliers says that diners are increasing-

ly choosing faster, more affordable and healthier options when dining out. And the old-school chains don’t necessarily fit in with these desires. As Colliers says in its report: “The competitive and ever-changing nature of the restaurant retail landscape is forcing the retail giants of the past to reinvent themselves as newcomers in the market.” As an example of the woes of more traditional Chains to page 19

May 2017

Minnesota Real Estate Journal

Contents

MAY 2017 • VOLUME 33, NUMBER 5

INTERCONTINENTAL HOTEL SET TO OPEN AT MSP AIRPORT IN SUMMER 2018 COLLIERS REPORT: TRADITIONAL RESTAURANT CHAINS FACE A CHALLENGING 2017

RETAIL REDEFINED: WHAT’S NEXT FOR RETAILERS?

WHICH COMMERCIAL BUILDING PAYS THE MOST PROPERTY TAXES IN THE MIDWEST?

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Departments PEOPLE

NEWS

Minnesota Real Estate Journal (ISSN 08932255) Copyright © 2017 by the Minnesota Real Estate Journal is published for $85 a year at 12 times per year by Jeff Johnson, 13700 83rd Way North, Suite 206, Maple Grove, MN 55369. Monthly Business and Editorial Offices: 13700 83rd Way North, Maple Grove, MN 55369 Accounting and Circulation Offices: Jeff Johnson, 13700 83rd Way North, Maple Grove, MN 55369 Call 952-885-0815 to subscribe. For more information call: 952-885-0815. Periodical postage paid at Maple Grove and additional mailing offices. POSTMASTER: Send address changes to Minnesota Real Estate Journal, 13700 83rd Way North, Suite 206, Maple Grove, MN 55369 ©2017 Real Estate Publishing Corporation. No part of this publication may be reproduced without the written permission of the publisher.

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May 2017

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THE EXCELSIOR GROUP HIRES BRANDL RADOVITSKIY AS VICE PRESIDENT As Vice President for The Excelsior Group (TEG), Brandl Radovitskiy is responsible for leasing at 10 West End and West End Office Park, in addition to assisting with acquisitions and development. She brings nearly 16 years of real estate experience to her role. Prior to joining TEG, Brandl was Director of Leasing with Carr Properties in Washington, D.C. where she oversaw the leasing of its 5MM SF portfolio. Prior to that, she was Executive Vice President with RFR Realty in New York City where she led marketing, branding, tenant relations, leasing, and construction efforts for 1.1MM SF at 375 Park Avenue (the landmark Seagram Building) and 390 Park Avenue (the landmark Lever House). In addition, Brandl worked as a Leasing Manager with The Durst Organization where she oversaw leasing of 1.7MM SF of its portfolio and was involved in the balance of the 13MM SF Midtown office portfolio. Brandl was also involved in launching the leasing and marketing of One World Trade Center (3MM SF). Further, Brandl spent the initial 9 years of her commercial real estate career in brokerage initially with Cushman & Wakefield and subsequently with Newmark Knight Frank where she specialized in both landlord and tenant representation. Brandl is a graduate of New York University and holds an MBA from the New York University Leonard N. Stern School of Business

Jodi L. Johnson Joins Moss & Barnett Moss & Barnett, A Professional Association, is pleased to announce that Jodi L. Johnson has joined the firm’s business law, employment law, and real estate teams. Having worked for many years as corporate counsel, Jodi recognizes the importance of integrating legal advice with a client's overall business objectives. Jodi’s employment law experience includes advising clients and litigating in the areas of discrimination, wrongful termination, wage and hour disputes, non-compete/solicitation agreements, drug testing agreements,

harassment, workplace violence, and executive compensation. In her real estate practice, Jodi counsels clients on acquisitions and dispositions, development, condominium conversions, leasing, financing, and dispute resolution. She has done substantial lease work and has advised on several significant acquisitions and dispositions on behalf of owners and developers. Jodi received her J.D., magna cum laude, from William Mitchell College of Law, and her B.S. from St. Cloud State University. “We are excited to have Jodi and her dynamic practice join our team,” said Thomas J. Shroyer, Moss & Barnett’s Chief Executive Officer.

Diversified Real Estate Services, Inc. Names Ryan Bauer, MAI as Partner Diversified Real Estate Services, Inc., a leading commercial real estate appraisal firm in Downtown Minneapolis announces Ryan Bauer, MAI is partner in the firm. Ryan has been appraising with Diversified since 2002 and has appraised properties in several states, including Minnesota, North Dakota, South Dakota, Wisconsin, Iowa, and Florida. Ryan has a Bachelor’s of Science Degree in Finance from the University of Nebraska. He also serves on the Board of Directors with the North Star Chapter of the Appraisal Institute.

Ryan Companies US, Inc. Promotes Mike Ryan to Executive in Charge of its North Region Ryan Companies US, Inc. announced today the promotion Mike Ryan to Senior Vice President – North Region Market Leader and executive in charge of its largest business unit (North Region) based in Minneapolis, MN. “Mike has distinguished himself as a solid business leader and strategic thinker in growing our Ryan A+E group over the last seven years,” said Jeff Smith, National President of Ryan Companies. “Now we are asking him to broaden his scope to include leadership of all of our services under our North Region business unit. We are confident in his ability to take this group to the next level, fully integrating Ryan’s collective insights from early design and financial strategy to building

and asset management. Mike has the whole package and a wonderfully broad perspective to bring to our customers.” Mike has served, and will continue to serve, as the President of Ryan A+E and leader of Ryan Companies’ national architecture and engineering practice. Mike grew that practice to achieve record volumes and led a large talented group of professionals who created innovative design solutions for Ryan Companies customers across the US encompassing a wide range of project types including: office, mixed-use, housing, senior living, industrial, healthcare, sports and more. His most recent project experience includes leading the design of the largest LEED Platinum project in Minnesota's history (the Wells Fargo Downtown East corporate office project in Minneapolis), serving as Project Executive for CHS Field (a 7,000 seat outdoor ballpark in Saint Paul); playing a key role in the Aurélien residential tower in Chicago; and filling the Design Leadership role for Ryan Companies’ Downtown East five block mixed-use development that includes 1,100,000 square feet of office space for Wells Fargo, a mix of new apartments and retail, a new urban park, a 5level parking ramp and skyway connections to the new US Bank Stadium. Mike has also played a leadership role in supporting a number of project solutions for Ryan Companies customers including work for Cargill, Target Corporation, Whole Foods, University of Saint Thomas, and Wells Fargo. Mike holds a broad educational, professional and community service background including a Bachelor in Architecture degree from Notre Dame, a Master of Science in Real Estate Development from Columbia University in New York, and six years of work experience for Robert A.M. Stern Architects in New York. Mike also serves on the Board and the Executive Committee of the Minneapolis Downtown Council, previously serving as the Chairman of its Development Committee for implementation of the Minneapolis 2025 Plan. Mike is a member of the Young President’s Organization (YPO), serves on their Twin Cities board, and also serves on the Notre Dame School of People Section Continues to Page 21

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News Dougherty Mortgage LLC closes $8.7 million Fannie Mae loan for Villa Creek Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed an $8.7 million Fannie Mae loan for the refinance of Villa Creek, a 161-unit market rate apartment property located in Farmers Branch, Texas. The Fannie Mae 10-year term loan has a 30-year amortization schedule and was arranged through a partnership with Old Capital Lending and Dougherty’s Minneapolis and Vienna, Virginia offices for borrower DCP 2835 Villa Creek Drive, LLC.

Metro Group Real Estate and CPM Companies Arrange the Sale of a 58Unit Apartment Property Metro Group Real Estate and CPM Companies are pleased to announce the sale of Twin Place Apartments in Minneapolis, MN. Jerry Lindeen of Metro Group Real

Minnesota Real Estate Journal

Estate and Daniel Oberpriller of CPM Companies had the exclusive co-listing to market the property on behalf of the Seller, a private investor. The Buyer, a private local investor, was secured by Mr. Lindeen. This is the second time Mr. Lindeen and Mr. Oberpriller have been involved in the sale of Twin Place Apartments since the Seller purchased the property in December 2014. At the time of that sale in 2014, Mr. Lindeen represented the Seller and Mr. Oberpriller represented the Buyer, the current Seller. CPM Companies has been managing the property on behalf of the Seller since its acquisition and has been investing in property improvements while increasing its gross potential income. Speaking with Mr. Lindeen, the property consists of two buildings with 58 one bedroom apartment units and an extra land parcel located on the 2300 block of 16th and 17th Avenue South in the Ventura Village neighborhood, near the Franklin Avenue Light Rail Station, of Minneapolis. The final sale price of the property was $3,701,500 and closed on April 27th, 2017.

Dougherty Funding LLC closes $15.1 million loan for Residence Inn- Grand Avenue Dougherty Funding LLC has closed a $15.1 million construction loan for a tobe-built 102-room limited-service Residence Inn by Marriott to be located in St. Paul, Minnesota. The 0.94 acre site has been assembled from multiple parcels in downtown St. Paul on Grand Avenue and is located adjacent to the Children’s Hospital and Allina’s United Hospital, with close proximity to the Xcel Energy Center, St. Paul Convention Center and the W. 7th St. Dining District. Included in the project is the preservation of a firehouse that is the City of St. Paul’s oldest remaining municipal building (built in 1871). The financing was arranged for St. Paul Hotel Ventures, LLC and Dougherty Funding serves as lead lender and servicer for the loan.

Ryan Companies Collaborates with City of Edina and Neighborhood

May 2017

Groups to Re-vision Greater Southdale Area Luigi Bernardi, president of Edinabased Arcadia, LLC, and Ryan Companies US, Inc., a national development manager, architect and design builder based in Minneapolis, are pleased to announce their collaboration in a project that supports the re-visioning of the Greater Southdale Area in Edina, Minnesota. Initial work for re-visioning the Southdale district began in early 2015 as part of Edina’s long-term planning policy. At that time, the City convened 16 Edina residents for the Greater Southdale Work Group. Comprised of neighbors and business and civic leaders, they were tasked with developing guiding principles for the district. The group began with an overall plan of integrating the district’s existing assets – including health, retail, residential, senior living, corporate offices and gathering spaces – and anchoring them to more people-focused, pedestrianfriendly neighborhoods. In addition to this much-needed connectivity, plan

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details also included green spaces and pocket parks mixed with distinctive and thoughtfully designed homes, restaurants, retail and offices. From there, the group developed nine guiding principles that would provide standards for the area’s future design and development. With the principles in place, Mic Johnson, FAIA, design principal, Architecture Field Office, was retained by the City to lead the work group in translating the principles into a holistic, sustainable planning vision for the district. The process resulted in a new paradigm for Edina that builds on the Southdale area’s existing assets and encourages walkable, connected, mixed-used and architecturally varied developments. The vision plan will be presented to the City Council and will provide guidelines for 2018 through 2028. “There is a lot of neighborhood, business and city support to create a vibrant, forward-looking and accessible district,” said Mic Johnson. “The Greater Southdale Work Group’s nine principles – supported by the vision plan – provide Edina a framework for 2018 and beyond. It allows for a healthy mix of

Minnesota Real Estate Journal

building heights, densities and uses, and creates a public realm that promotes a walkable, healthy and safe environment.” Johnson anticipates that the nine guiding principles will be incorporated into the City’s 2018 Comprehensive Plan Update. In following the City’s plan and the work group’s nine principles, Bernardi and Ryan are proposing a mixed-use owner-occupied residential project for the corner of France Avenue and 69th Street near the heart of the Southdale district. Lifelong Edina resident Bernardi grew up in the Cornelia neighborhood; he recently completed the wellreceived senior living and care development, Aurora on France. Bernardi and Ryan have been meeting with and listening to Edina neighbors and groups to discuss the project called Estelle Edina. “I grew up just a few blocks down on France Avenue, and am excited about the vision that so many people have for this district,” says Bernardi. “The City’s plan, the work group’s nine principles and vision, and the feedback and ideas from area neighbors have informed our design. Our goal is to give the corner of

France and 69th a community feel walkable, accessible and livable.” Anchored on France Avenue and across from Galleria, Estelle Edina will be home to luxury residences—the first of its kind in Edina in 10 years—six brownstones, and 12,000 square feet of neighborhood retail, including a signature restaurant at the corner of France and 69th. The existing Bremer Bank and BMO Harris Bank will open new spaces in the project. The project will establish a standard for enduring design, quality construction and extraordinary amenities. Estelle’s slender, architect-designed, 24story residence utilizes a narrow floor plan to keep its profile unobtrusive. Deco-inspired step-backs give the slim stone and glass building a sophisticated yet timeless demeanor that adds distinctiveness to Edina’s skyline. Each home in Estelle will be a corner residence with only four homes per floor on lower levels, reducing to two per floor on upper levels, and one penthouse, for a total of 82 homes in the first building and 70 in the second, which is phase two. All the generously-sized

May 2017

homes will feature expansive windows, high ceilings, sumptuous finishes and heated, outdoor living-rooms. In addition, six brownstones are planned along a quiet interior motor court with plantings and trees. The front entry stairways lead up to the three-and-a-half story brownstones; each with generous decks that look out to a private backyard. Residents will enjoy underground parking, a pool and green roof. Estelle gives Edina residents who are seeking a new owner-occupied and maintenance-free option the ability to stay in Edina, while freeing up existing homes for families interested in joining the community. Additional project partners include John Kraemer & Sons and Lakes Sotheby’s International Realty. The entire Bernardi/Ryan project also supports the City’s plan of dividing the district’s “superblocks” into smaller parcels such as walkable tree-lined interior streets, plazas, green space and generous setbacks from France and 69th. Rather than street-hugging sidewalks, the project introduces walkways at least 20 feet from the roadway with 10 feet of plantings next to buildings. For exam-

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ple, at the “hard” corner of France and 69th, the project design offers a welcoming, aesthetically pleasing solution set further back from the busy street that includes a public plaza, a fountain surrounded by seating, and generous plantings adjacent to a locally-owned, signature restaurant with patio seating. The restaurant would be one of four mixed-use opportunities in the first building. “Thank you to the Greater Southdale Work Group, neighborhood residents and the City of Edina for their continued ideas and input as we plan this exciting, transformational mixed-used project,” said Carl Runck, developer, Ryan Companies. “Our intent is to support the district’s vision. We are passionate about creating best-in-class streetscapes and owner-occupied residences that the citizens of Edina will be proud of.” Ryan Companies will serve as Estelle Edina’s development manager, architect and design builder.

Minnesota Real Estate Journal

Schafer Richardson Sells 24,000 Square Foot Office Building in Northeast Minneapolis Mike Olson of Schafer Richardson, Inc. successfully sold the building located at 416 East Hennepin Avenue for $1,800,000. The 24,000 square foot office property was constructed in 1900, and is located in the heart of the vibrant Northeast Minneapolis neighborhood. The private buyer plans to renovate the existing structure and may move his business offices into the property, once complete. “This is one of the remaining parcels ready for redevelopment in the Northeast neighborhood and it has a lot of potential due to its location. There is so much investment taking place in this area and the buyer wanted to take advantage of that,” commented Mike Olson, the Schafer Richardson agent responsible for the sale.

Davis expanding Hazelwood Medical Center in Maplewood, Minn. Based on strong leasing activity, the Minneapolis-based firm is developing the facility to its maximum capacity of 148,000 square feet for HealthEast and other medical tenants Davis of Minneapolis is taking a phased development approach to the Hazelwood Medical Center in Maplewood, Minn. The firm first developed 82,000 square feet but based on strong leasing activity, is now developing the facility to its maximum capacity of 148,000 square feet. After starting development of an initial 82,000 square foot phase of the Hazelwood Medical Center last fall, Davis is now expanding the building to its maximum capacity of 148,000 square feet to meet growing tenant demand. The firm expects to open the facility in October. The medical complex is located on a nine-acre site at 2945 Hazelwood St., west of HealthEast’s St. John’s Hospi-

May 2017

tal in the St. Paul suburb of Maplewood. Owned by Davis, the facility will enable HealthEast to consolidate many of its healthcare services and specialties into one convenient location. Officials at Davis, a Minneapolisbased healthcare real estate development, property management, brokerage and investment firm, said the expansion is necessary because of strong leasing activity. Mark A. Davis, Principal of Davis, notes, “We started with 82,000 square feet with the intention of adding more space in two subsequent phases. The initial space will allow HealthEast to relocate many of its services there, providing an integrated one-stop healthcare destination. We’ve been very pleased with the increased interest in the facility, which has enabled us to obtain signed leases from a number of additional high-quality healthcare providers so we can fully develop out the project.” News to page 20

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Minnesota Real Estate Journal

May 2017

Hotel From page 1

executive director and chief executive of the Metropolitan Airports Commission (MAC). Graves Hospitality worked closely with the MAC, which operates the MSP Airport. “I think they’ve done a very nice job of accommodating a very significant hotel of nearly 300 rooms.” Major Milestone The hotel was commemorated in early May when the concrete foundation was completed and a “concrete handprint ceremony” was held at the construction site. While Graves Hospitality initially pushed an aggressive building schedule and hoped to have the hotel open by the time Minneapolis hosts the 2018 Super Bowl, the project is now scheduled for a summer 2018 opening. “It definitely is a very complicated, complex project; no question about it,” says Ben Graves, president and CEO of Graves Hospitality. The deal required approval from the Federal Aviation Administration (FAA) and a long-term ground lease for the real estate under the hotel. (Under a 75year ground lease agreement, Graves

will own and operate the hotel and pay rent to the MAC.). “We don’t do these things for a single-purpose event,” Ben Graves says. “This is a building we’re putting there for sure for the 75 years that we have the lease and possibly even longer than that. We’re building it for the future

and not for a single event.” “With the type of investment that we’re putting into the project, we needed a longer-term lease than the FAA had on their books,” Jim Graves adds. “The FAA would only allow a 50-year lease. We had to go through the federal bureaucracy to get that lease extended.

That set us back about four or five months, but at the end of the day, this is going to be there for a long time, and we thought it would be right to do it right and we needed that extension.” Jim Graves says the hotel itself is about a $100 million project, and Hotel to page 14

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Minnesota Real Estate Journal

May 2017

Hotel from page 13

“when you add the sky bridge on top of that and a few other things, at the end of the day it’s probably a $130 million project.” Why the InterContinental hotel brand is a good fit “One, is they have good distribution around the globe,” says Jim Graves. “Obviously, they have very good brand equity. They’ve got some of the best hotels in the world. “[Two,] they provided us flexibility to design the building that was indigenous to our area,” he adds. “They allowed us to do some of our own interior designs that were more indigenous to Minneso-

ta. We want to be very, very sensitive that this is a Minnesota destination and when people land and come into the hotel they get a sense that ‘Hey, we’re in a different place. We’re not just in any corporate-type hotel, but we’re actually in Minnesota.’” Exterior finishes include stone and

wood encasing a glass curtain wall. Local material used on the project includes Kasota stone and Cold Spring granite. InterContinental Hotels Group (IGH) officials also say the hotel is a good fit. “We are very enthused to be working with Graves Hospitality and IntercontiHotel to page 22

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Minnesota Real Estate Journal

May 2017

Retail redefined: What’s next for retailers? by Andy Gutman, Farbman Group

t a time when the retail industry is changing so rapidly, and retail real estate realities are shifting at an unprecedented pace, commercial real estate professionals are striving to set their sights on what comes next. Those who want to remain competitive are working hard to be proactive, and to think both creatively and strategically about not only what next year looks like, but also what the next five to 10 years will look like. The challenge, however, is that making accurate predictions becomes even harder when the pace of change is so remarkable that the contours of the retail real estate landscape can look radically different just a year or two later. Overcoming that challenge means developing a clear understanding of both why and how retail is redefining itself—and what major social and economic trends are driving that process.

Andy Gutman With a steady stream of headlines announcing store closings and consolidations, the narrative that brickand-mortar retail is struggling—perhaps even failing—in the face of competition from online and mobile shopping has grown stronger in recent years. While that may be hyperbole, it is clear that brick-andmortar environments need to change. Owners, operators, developers

and architects who want to accommodate the growing influence of the Millennial demographic and find new ways to appeal to consumers who increasingly demand more experience with their retail need to rethink some long-held assumptions. They need to find new ways to make brick-and-mortar environments more compelling and engaging, and introduce more lifestyle elements into the retail equation. What follows are some of the trends that are making that happen—and that commercial real estate professionals should consequently be paying very close attention to. Renovation, redevelopment and reuse As online retailers like Amazon continue to expand their reach and offer new services (such as sameday service through new distribution centers, and the promise of drone deliveries in the not-too-distant future), many traditional retailers will be forced to either adapt or shut their doors.

Some retail formats will be particularly challenged—traditional enclosed malls have been (and will likely continue to be) one of the hardest hit by this online competition. As struggling malls close and others undergo renovations and redevelopments, the question of what to do with defunct or underperforming properties becomes more urgent. In some cases, a renovation can be transformative, adding a new residential or entertainment component, introducing new dining options and finding new uses for underutilized space. In fact, with so much retail space available and more coming on the market, I expect to see the creative reuse trend continue, as well. In some cases, a former mall or retail center could become a source of inexpensive office space. Ford, for example, has put some of its business units into the former Dearborn Mall in Michigan. While the cost and access to amenities are pluses, questions remain about the viability Retail to next page

May 2017

of this model. At a time when brands and businesses are looking for chic and unique office spaces, a repurposed mall might not be exactly what the doctor ordered. Entertainment and experience Entertainment is one of the fastest-growing retail segments, and entertainment anchors have helped to revitalize and reinvigorate struggling centers. From luxury cinema experiences, to high-end bowling, golf and even indoor skydiving, entertainment is a popular and profitable proposition these days. Sports and fitness concepts are especially popular—dovetailing with a Millennial appreciation for a healthy and active lifestyle. Empty anchors are well-suited for healthy and active concepts like fitness centers and rock-climbing facilities, and new activity-based entertainment concepts are proliferating. There is a social element to many outdoor and entertainment retailers, and brands are finding new ways to use their own space (as well as adjacent open green spaces) to capitalize on that. From yoga in the park, to hikes, gear tutorials and

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use center.

shopping to on-site pickup an easier and more efficient process.

other special events, opportunities to provide consumers with even more experiential opportunities are becoming increasingly popular. Dining and drinking New dining options and creative new bar, café and restaurant options are proliferating, filling space vacated by other retailers and creating a critical mass of restaurants that can greatly expand the local and regional appeal of a retail center. Chef-driven restaurants, farm-to-table concepts and local/independent operators are on the upswing, and the explosive growth of the fast-casual segment has prompted the increase of new, and in many cases more premium fast-casual offerings. Food is arguably the driving force in retail development today, and some estimates project the amount of GLA devoted to it to increase by an eyeopening 150 percent in the next few years alone. Dining is an inherently experiential process, and the activity and energy of outdoor dining, open kitchens and new and emerging creative concepts can add an enormous amount of value to a retail or mixed-

Technology and transition Millennials aren’t the only ones who utilize technology as an integral part of their everyday lives. The near universal availability and adoption of tech conveniences and the growing power of social media platforms as an essential channel for marketing and communications means that retail and mixed-use projects that don’t embrace technology are setting themselves up for failure. Integrating more tech into the actual project itself—interactive touchscreen maps and navigation; changing billboards and signs; targeted and personalized promotions that pop up on a customer’s phone when they walk into a store—not only makes the shopping experience more seamless and convenient, it does so in a way that encourages shoppers to engage with the space around them. In the process, a passive experience becomes more active and experiential. At the same time, more retailers are experimenting with new ways to make the transition from online browsing and

Community and creativity The more a retail or mixed-use development can become connected with the surrounding community, the better its chances to flourish. Serving as a community resource for celebrations and special events is a great place to start. Open spaces and common areas can be used for weekend farmers’ markets, and underutilized spaces can be made available for local entrepreneurs, seasonal vendors and pop-up shops. Offering up gallery and studio spaces for local artists, musicians and designers is an excellent way to strengthen ties with the community and add some experiential flavor to a retail center. As some retailers adapt and evolve successfully, and others fall by the wayside, these are the trends that are helping to redefine the nature of retail and influence the future of commercial real estate. Andy Gutman is president of Southfield, Michigan-based Farbman Group.

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Minnesota Real Estate Journal

May 2017

Which commercial building pays the most property taxes in the Midwest? You might be surprised. by Dan Rafter

e all know that commercial real estate is key for the economies of cities across the country and Midwest. After all, these buildings sometimes shell out huge dollars in property taxes each year. How huge? You might be surprised. The Commercial Cafe Web site recently ran a list of the commercial buildings that paid the highest amount of property taxes each year. To little surprise, the top payer was in New York City, the General Motors Building, which paid out more than $71 million in property taxes last year. But you migt be surprised to discover how many commercial buildings in the Midwest pay out a huge amount of property taxes each year, too. In face, the 13th biggest payer of property taxes in 2016, and the first commercial property not in

New York, is located in the relatively small community of Byron, Illinois. Thatâ&#x20AC;&#x2122;s the Exelon-Byron

Nuclear Generation Station, which paid out more than $36 million in property taxes last year.

The Willis Tower in Chicago â&#x20AC;&#x201D; formerly known, and forever known to some people, as the Sears Tower Taxes to next page

May 2017 Taxes from previous page

— paid more than $28 million in property taxes in 2016. That ranks it as number 28 on Commercial Cafe’s list. It’s also the first office building on the list that isn’t located in Manhattan. When it comes to retail, the Minneapolis-St. Paul market boasts the property that pays the most property taxes each year. That is the Mall of AMerica in Bloomington, Minnesota. This sprawling shpoping center paid more than $30 million in property taxes last year, far ahead of any other retail property on Commercial Cafe’s list. Looking for the Trump International Hotel & Tower in Chicago? That one didn’t make Commercial Cafe’s list of the top-100 property tax payers.

Minnesota Real Estate Journal

Chains From page 1

restaurant chains, Buffalo Wild Wings is closing two of its PizzaRev restaurants in the Twin Cities area, one in Edina’s Centennial Lakes development and a second at Knollwood Crossing in Hopkins. Both of the locations, part of the Buffalo Wild Wings chain, opened just three years ago. Of course, the struggles faced by traditional restaurants doesn’t mean that even popular fast-casual chains won’t face challenges in 2017 and beyond. In the Twin Cities market, for instance, fast-casual restaurants are now facing an upcoming minimum wage of $15. This, Colliers reports, could mean a boost in menu prices, which could impact business.

PizzaRev locations in the Twin Cities are scheduled to close this year.

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Minnesota Real Estate Journal News from page 10

Dougherty Mortgage LLC closes $15.3 million HUD 223(f) loan for Olive Branch Townhomes Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $15.3 million HUD 223(f) loan for the refinance of Olive Branch Townhomes, a 176-unit multifamily affordable housing property located in Batavia, Ohio. The Sponsor of the project is Dominium Development & Acquisition, a developer and owner of multifamily properties. The project was constructed in 1996, and Dominium took over ownership and management duties in early 2015. All 176 units are restricted to residents earning 55% or less of the Area Median Income. The HUD 223(f) loan has a 35-year term and amortization schedule and was arranged through Dougherty’s Minneapolis office for borrower Batavia Leased Housing Associates I, LLLP, a Minnesota limited liability limited partnership.

KR Signs Purchases 2.14 acre site for expanded operations in New Hope, MN KR Signs has purchased a 2.14 acre site in New Hope, MN where they will expand operations into a 24,928 SF industrial space located at 8801 Bass

Lake Road. KR Signs is known for their top quality location specific signs, banners and interior displays. As an industry leader in the Twin Cities market, their philosophy for growing their company has remained simple; hire exceptional staff, use state-of-the-art equipment and strive to provide exceptional customer service. As part of their growth philosophy, KR Signs wanted to align their overhead costs with a more stable and controlled ownership structure, allowing them opportunity for planned expansion and production efficiencies. Ron Tyler and Keith LaRonge, CoOwners and Presidents of KR Signs, have been partners for the last 12 years. “As our business model continued to grow, we became increasingly interested in purchasing a facility, rather than renting. Dan Friedner and Jay Chmieleski with Colliers worked relentlessly to provide us with a number of options that would allow us to expand our operations,” says Ron Tyler, Co-Owner and President of KR Signs. Still located in the Northwest Twin Cities, KR Signs will move from their current location in Blaine to their new facility in New Hope within the next month and plans to have their operations up and running soon after. “Market timing served KR Signs well in their recent acquisition. We were happy to help them find a facility

that gives them the opportunity to own and will continue to strengthen their business goals,” says Dan Friedner, Vice President, Colliers International | Minneapolis-St. Paul. Dan Friedner and Jay Chmieleski with Colliers International | Minneapolis-St. Paul represented KR Signs in the completion of the transaction.

The Opus Group begins building 61,000-square-foot sciences building at Iowa’s Northwestern College The Opus Group has started construction on a new 61,750-square-foot Health and Natural Sciences building at Northwestern College in Orange City, Iowa. The building will serve as the new home of the school’s biology, chemistry and nursing departments. The project will bring new lab spaces to students in the health and natural sciences majors, including simulation suites for nursing students to learn how to address real-world scenarios in replicated hospital and clinical settings. Additional classrooms will include moveable tables and exam rooms to allow for hands-on training and flexible learning and testing environments. The building will also have energy efficient mechanical and electrical systems, including a specialized cooling system that makes ice overnight when utility rates are lower, and then uses the ice to cool the facility throughout the

May 2017

day. The building is scheduled for completion in the summer of 2018. Opus Design Build, L.L.C. is the construction manager for the project, HGA is the design architect and Cannon Moss Brygger Architects is the architect of record.

Cushman & Wakefield NorthMarq provides site selection services at no cost to provider of respite care for terminally ill children Crescent Cove, a nonprofit organization that provides respite and a comfortable setting for children with terminal illnesses, has begun renovating its new facility in Brooklyn Park, Minnesota. The Cushman & Wakefield NorthMarq team of Paul Donovan, Jaclyn May and Jeremy Striffler worked with Crescent Cove for nine months, providing site selection and advisory services to Crescent Cove at no cost. Crescent Cove was founded in 2009 with a mission to offer care and support to children and young adults with a shortened life expectancy, as well as their families. The Brooklyn Park facility will be the first children’s respite and hospice care home in the Midwest, and just the third such home in the United States. The property, on Twin Lakes, has six rooms for children, as well as large, open gathering areas, a hydrotherapy bathing room, a family suite and a room for integrative therapies. Gerhardt Gliege of Cushman & Wakefield NorthMarq will manage the project, which will culminate in Crescent Cove opening this October.

May 2017

Minnesota Real Estate Journal People to page 4

Architecture Advisory Council. Mike will be reporting to Collin Barr, Regional President for Ryan Companies. Barr had previously served in this same North Region Leadership role since 2006 and will now provide executive oversight to both the North Region and Midwest Region of Ryan Companies. Mike Rodriguez was also recently hired by Ryan Companies to be Vice President of Architecture and Engineering stepping into the primary leadership role for Ryan A+E in Minnesota. The North Region of Ryan Companies is based in downtown Minneapolis where they recently moved into the first floor and a half of the four-story Millwright Building at Downtown East. The North Region is the largest of Ryan Companies eight regional business units with annual volumes consistently in the $500M range. The North Region delivers project solutions in the Twin Cities metro, outstate Minnesota and across the US, often following its customers with their office, industrial, retail, healthcare and senior living projects to selected locations across the US. Recent work for the North Region includes a specialty health center for Park Nicollet in Maple Grove, corporate HQ remodels for Cargill, 3M and Toro, a new HyVee grocery store in Brooklyn Park, 222 Hennepin Whole Foods Market and apartment project, multiple Grand Living senior living projects, an industrial build-to-suit for Mills Fleet Farm in

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WI, and several national distribution center projects.

Cresa Minneapolis hires industry veteran as senior advisor Jon Bonkoski is the new senior advisor, project management, with Cresa Minneapolis. Bonkoski brings 13 years of project management experience to his new position. During this time, he has worked with a variety of health systems, hospitals, clinics and ambulatory centers throughout the Midwest. He has also partnered on collegiate and professional sports facilities, hospitality projects, industrial jobs and corporate office projects.

Minneapolis’ Liberty Property Trust names new leasing representative Adam Bray of Minneapolis’ Liberty Property Trust has been promoted to leasing representative. Bray is now responsible for leasing the company’s Minnesota portfolio, which is made up of more than 2 million square feet. The portfolio consists mostly of Class-A industrial properties and a small percentage of office space.

Grandbridge Real Estate Capital closes $9 million loan for 221,000-squarefoot industrial property in Minnesota Grandbridge Real Estate Capital

Bituminous Roadways, Inc.

651.686.7001 www.bitroads.com

recently closed a $9 million first mortgage loan secured by a 221,000square-foot multi-tenant industrial property in Rogers, Minnesota. Brett Olson and Dick Riley with Grandbridge originated the transaction. Grandbridge arranged financing of the permanent, fixed-rate loan through Nationwide, an insurance company correspondent. The five-year nonrecourse loan features a three-year period of interest-only followed by a 30-year amortization.

RJM Construction takes on expansion plan for Minnesota community center RJM Construction has been selected by the city of Shoreview, Minnesota, to complete its community center’s expansion plan. The project will add 5,000 square feet to the Tropics Indoor Waterpark and a 15,000-square-foot addition adja-

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cent to the center’s existing gymnasium. New amenities will include a zerodepth shallow-water splash pool, floorto-ceiling windows in the pool area, an outdoor plaza, eight family changing rooms, new group fitness rooms and new multi-purpose meeting and activity rooms.

Page 22 Hotel from page 14

nental Real Estate Corp. on this new-build InterContinental hotel, which will be an outstanding addition to the brand,” said Joel Eisemann, chief development officer, The Americas, IHG, in a prepared statement. “We look forward to continuing to grow our partnership with Graves, which has a reputation for developing and managing great hotels.” Amenities at the hotel The hotel will have its own TSA security checkpoint, and the sky bridge will offer guests direct and easy access to their flights. “We’ve got the sky bridge going across to Concourse C, which will make it very accessible,” Jim Graves says. “We’re going to have our own TSA, which is critical. When you’re staying with us or visiting the hotel from the airport, you can come and go right through our own security checkpoint within the hotel. That’s really going to be a plus and that isn’t very typical. We may be in a very few minority [of hotels nationally] that actually has its own TSA checkpoint within the hotel… We thought it was critical to make it seamless for our guests.”

Minnesota Real Estate Journal

The hotel will also feature two restaurants and a penthouse-level “observation bar,” where people can have a drink while watching airplanes take off and land. It will also have views of both downtown Minneapolis and St. Paul. In addition, the hotel will have a business center, a fitness center, worldclass spa, meeting and event space, a ballroom and its own dedicated parking. MSP Airport improvement plans The hotel is being constructed as MSP is undergoing a five-year, multiphase expansion and improvement plan designed to accommodate the growing number of travelers at MSP. Improvements include a new front entrance, a 5,000-space parking structure, expanding the size of arrival and departure facilities, adding four new gates at Terminal 2-Humphrey, and adding new restaurant and retail shops. Roads around the airport will be reconfigured and a separate lane will be created for hotel traffic. On-site hotels are hot amenity at airports “The premier airports in the world have hotels that are connected to them,” Ben Graves says. “For instance,

Denver just put in a hotel connected to their airport. Detroit just did a Westin. Essentially, it’s an amenity that’s very important for travelers. In addition to that, the cool thing about the Minneapolis-St. Paul Airport is we’re located right in the heart of the community. You might go there for dinner. You might go there to have drinks at the Sky Bar that’s on the penthouse level or you might go there for a wedding or bar mitzva or fundraiser, because it’s really going to be part of the fabric of the community on the Bloomington strip and interface with the airport as well.” Bloomington/Mall of America/Airport hotel submarket is dynamic “There’s a lot of activity out there,” Jim Graves says. “When we look at a property we always look at how can we position ourselves to take advantage of the market, and obviously being connected to and being part of the MSP was critical to our decision. We think we have a unique position being right on the campus connected directly via sky bridge and having adequate parking for all of our guests. We’ve got a really good strategic position and it’s good to be within proximity to the Mall of America, because on weekends that will be a great attraction. And we’re

May 2017

very close to both downtowns, so we can do a lot of business with both cities and it’s a central location.” It all came together In past years, the MAC has been skeptical of on-site hotels. “I know there has been discussion for many, many years about a hotel at the airport, and I’m just so excited that the project is coming to fruition,” the MAC’s Ryks says. “Airports used to be seen as utilities where you just show up and get on an airplane and spend as little time as possible in the facility, and you’d return and do the same thing. That has changed where airports are really also about hospitality and ensuring that it has the amenities to accommodate the passengers. “When you drive into the facility, it’s going to be a really new, nice impressive icon as you’re approaching our airport, and we’re very proud to be working with Graves Hospitality and the InterContinental brand and being able to partner on this project.”

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